There is a "trust deficit" in the housing market today, according to FHA Commissioner Dave Stevens, speaking at a Mortgage Bankers Association conference on loan servicing in Washington DC today.
We've talked plenty on this blog about lack of consumer confidence in housing, mainly in the context of falling home prices. His point, though, is that loan servicing is just as much to blame.
Stevens told the conference that you cannot understate the "reputation challenge" facing the mortgage industry, as echo boomers who should be buying new homes but now choose to rent. This generation has been hearing all sorts of stories about troubled borrowers unable to reach their banks, paying on mortgages that have already been foreclosed, Robo-signers sitting in tiny cubicles pushing papers, or the latest about JP Morgan Chaseovercharging members of the military on their home loans. It's not an enticing market to enter, no matter what generation you're assigned.
Today FDIC Chairman Sheila Bair proposed a foreclosure "claims commission" to deal with borrowers who were wrongly foreclosed upon. She suggested it be "modeled on the BP or 9/11 claims commissions" and that it be funded by servicers. That went over like a lead balloon in the room full of mortgage bankers, and Bair knew it.