Monday, May 21, 2007

If Option ARMs Are Outlawed, Only Outlaws Will Have Option ARMs

by Tanta on 5/21/2007 11:45:00 AM

Reuters reports that Angelo Mozilo prefers regulations that prevent bad lenders from offering good products, while allowing good lenders to offer good products to keep the playing field level. Or at least I think that's what this means. Possibly it is just the equally uncontroversial claim that no good lender would suffer from a declining RE market if enough bad lenders continued to provide good products to homebuyers so that they could take a problem off the hands of those sellers who are somewhat tired of the good product they got last year. Alternately, it could mean that Mr. Mozilo is so burdened by regulation that he was unable to stand close enough to the podium, and what the mic picked up was some heckler in the audience. Then again the reporter might be stoned, but I don't know how we'd be able to falsify such a claim. Maybe you should just read it:

NEW YORK, May 21 (Reuters) - Countrywide Financial Corp. Chief Executive Angelo Mozilo on Monday said regulation in the subprime mortgage industry will help crooks while hurting lenders and the housing market.

"It's better for the crooks," Mozilo told Reuters before speaking at a Mortgage Bankers Association conference in Manhattan. "It's only the good people who have to comply. Regulation, in my opinion, has caused part of the problem. When they attacked the pay option and interest-only loans, that really put a dent in a lot of the product, which is perfectly good product."

Mozilo also said current guidelines proposed by regulators will exacerbate problems in the housing market.

"The reason why people can't sell their houses is there is no buyers around," Mozilo said. "And there are no buyers around because they can't get the financing."

Now, I'm sure the Golden Calf got around, at some point in his talk, to defining a "good product." I am willing to bet a substantial sum that the definition could be summed up as "a product that would present no risk to a borrower who did not actually need it."

The crucial context, of course, is that Mozilo is talking to his peers at the MBA, who find such logic compelling. Like that's not a prima facie reason to regulate the pants off them . . .

UPDATE: There's a new version of the story that provides meaningful context in which Mr. Mozilo's remarks may possess greater analytic power. I only hope the Comptroller of the Currency had put his drink down before he read it.