In a bold statement underscoring the precarious state of the nation's mortgage market, 52 industry executives sent an "open letter" to the government'stop six money managers.
"We the undersigned write to you regarding the urgent need to develop national standards for originating, selling and servicing mortgage loans," the letter begins. "The private residential mortgage securitization market is frozen as to new issuance. The housing market is suffering from a dearth of credit, which is causing a serious lack of confidence among potential homebuyers."
The letter was sent to the heads of the Federal Reserve, the FDIC, the Treasury Department, the SEC, the FHFA and the Comptroller of the Currency.
Not only does it demand a "gold standard" for what exactly constitutes a residential mortgage, but given the, "ongoing litany of revelations pertaining to inadequate servicing, lost loan modification documents, and improper foreclosures which reveal significant problems in the mortgage servicing industry," it makes eleven separate recommendations designed to protect not just borrowers but investors as well.
Referring to "misaligned incentives and tranche warfare," in the securitization market, it demands appropriate action to maximize the net present value of the mortgages for the benefit of all investors in a securitization rather than the benefit of any particular class of investors."
What's striking is the slightly desperate tone of the letter, as the housing and mortgage markets teeter between a double dip and a lengthy flat lining recovery…all in the face of historic new regulation and restructuring.
"The chaotic situation in the mortgage market today demands immediate action to ensure all parties are treated fairly and to restore the confidence needed to support a recovery in real estate markets and the entire U.S. economy."
If you think there was a lot to talk about in housing this year, just wait.