Bush Right: Mortgage Industry IS Complex, That's Why The Mess


I want to thank President Bush for clearing up a few things this morning at his news conference: 1) that the mortgage industry is, “a more complex industry than we’ve had in the past” and 2) that “we shouldn’t bail out lenders, and so, in other words, that we shouldn’t be using taxpayers’ money…”

Well lets take those comments and put them next to the news of yesterday, which was that the Treasury Secretary, Henry Paulson, added a new proposal to his “freezer rate” plan:

Current law allows states and localities to issue tax-exempt bonds only to assist first time homebuyers or homebuyers in designated distressed areas…Today, we are proposing to allow state and local governments to temporarily broaden their tax-exempt bond programs to include mortgage refinancings; if enacted, this will reduce the cost of innovative mortgage programs and allow these programs to reach more struggling homeowners.

So when you start talking about tax-exempt bond programs, you start talking about taxpayer money, am I right? And here’s my other question: how are we not bailing out the lenders on this? If we’re bailing out the borrowers, well that in turn bails out the lenders, saves them from having to foreclose on all these homes at far greater expense.

All this talk of revamping Fannie and Freddie ? Well that’s just a direct line to Countrywide because they’re the only people buying Countrywide’s loans right now. There is simply no credit market out there except F and F, and so if we raise the loan limits or raise the portfolio caps, then we’re just raising the amount of money that lenders like Countrywide can make.

Yes, this is a far more “complex” industry than we’ve had in the past, and that’s precisely why we’re in the pickle we’re in, because it got so complex that not only can no one understand it comprehensively, but no one knows how to fix it either, and I’m talking right up the food chain. Why haven’t we gotten any “details” on the Paulson plan, like how to designate which borrowers fall into which category, who gets the freeze, who gets the refi, who gets diddly? Because they just don’t know how to do it.

Oh, I know they’ll come up with some parameters at some point, but whatever they are they will likely be replete with loopholes and exceptions, and everyone and their brother will be looking to find one. Because if there are two things I do know for sure, it's that this industry is more “complex” than it we’ve had in the past, AND, given the chance to "screw" the government, most people will.

Questions? Comments? RealtyCheck@cnbc.com