BluefoxToday blog : Mortgage industry dealing with more challenges

Mortgage industry dealing with more challenges

The federal government has been quite aggressive in the past few months in infusing money into the financial system in order to turn the tide on the still deteriorating housing industry. One of the key goals of this was to assist homeowners facing foreclosure find a way out of their mortgage payment problems. The capital, however, was given to the banks in good faith, without enforceable regulations to make sure they would comply.

Sure enough, it appears that many lenders have found better uses for the funds than help struggling borrowers. For one, it's nice to get the taxpayer to take care of a balance sheet that sags under the weight of under-performing mortgages, acquired without careful analysis of their soundness. Hoarding cash also gives them the opportunity to grab a failing bank or two when nobody is looking. There are other ways to make money work.

To deflect light from these objectionable actions the bankers are now saying that federal regulators are demanding they must meet certain capital requirements. Supposedly that prevents them from fulfilling their mission to help turn around the messy real estate market. Maybe so.

The weak housing industry got the entire economy in the pickle to begin with and it can lead it out of the gloom, too. With the right moves the financial sector and its regulators together should be able to come up with policies that would make a lasting difference. But what has happened so far is much less than what could've been done. The banks obviously are shirking their responsibility and missing now on setting up a path to long-term prosperity. The government with its regulatory power clearly has difficulties finding the right mix of answers to get any type of a meaningful recovery started.  

The bottom line, a fresh approach is needed in the decision-making process where it matters, government or private.


Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 8 commentsEsko Kiuru • December 28 2008 03:47PM


IMO, the housing industry is the backbone of our economy.  I do not believe that the national economy will recover until something is done to help all of the home owners who are trapped in their homes without the ability to sell. 

Time for the blame game is long past, although it's quite irresistable.  Something needs to be done to help home owners now.  We will not see a recovery until housing recovers. 

Folks aren't going to spend money if they don't know where they'll be living.  The retailers are casualty of the housing disaster.  The auto industry is a casualty of the housing disaster. 

We still have another year or two of mortgage resets and foreclosures.  It's not going to get better anytime soon, IMO.

We'll see.


Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley,, MD & VA Homes and Real Estate) over 10 years ago

Hi Esko,  The Feds made some very bad early moves and now lack popular support for continued bailouts.  Wall Street got a load of money with no strings attached.  The auto industry got - well, you know !

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) over 10 years ago

Esko I agree, we will probably not get out of the economic mess unless the housing market turns around.  The banks have had plenty of opportunities to do it, now it is time to look in a different direction.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 10 years ago


Without healthy housing our economy keeps staggering along, you're right about that.

Posted by Esko Kiuru over 10 years ago


The first bailout allocation to Wall Street seems to be pretty much wasted.

Posted by Esko Kiuru over 10 years ago


Right now a true leadership this economy needs is nowhere to be seen.

Posted by Esko Kiuru over 10 years ago


I warned the only way to get money to the right hands is thru Agency paper from the fed. I blog it 2 months ago and the WSJ pick it uop and the Fed has started to do in a couple of weeks ago. The Money go to Fannie and Freddie and they buy the mortgages from banks etc.. New origination loans, which puts money into the buyers hands.


Posted by Richard Stabile, Bergen County New Homes Builder Realtor (Re/Max Real Estate Limited) over 10 years ago


Fannie and Freddie are definitely key players in turning this dire situation around.

Posted by Esko Kiuru over 10 years ago