Sunday, September 09, 2007

Meet the New Fox: Just Like the Old Fox

by Tanta on 9/09/2007 11:37:00 AM

This isn't going to work out well:

Joe Waltuch, the new head of the Nevada Mortgage Lending Division, defended the subprime mortgage industry and downplayed the foreclosure crisis in his first interview.

Although he acknowledged a problem, he said, "You're missing the positive side of all this."

Subprime loans - high interest loans given to people with spotty credit histories - represent just 15 percent of the market, he said. Only 1.5 percent of all mortgages, he said, will end up in foreclosure: "Everybody seems to think we need to protect the 1,500 at the expense of the 98,500 good loans."

"We put a lot of people in homes who wouldn't otherwise be in homes," he said.

The comments were counterintuitive. . . .

It should come as no surprise, though, that Waltuch would defend the subprime lending industry.

He spent seven years as an in-house lawyer for a large subprime lender, with his last position as vice president and senior counsel for regulatory and legislative affairs at New Century Financial Corp., an Irvine, Calif., based subprime lender, once the second largest in the country but now defunct and the target of a criminal investigation.

His appointment, made by Mendy Elliott, who is Gov. Jim Gibbons' director of the Business and Industry Department, has been widely panned by Republicans and Democrats alike.

They're baffled that Gibbons and Elliott would turn to a failed subprime mortgage company official to regulate Nevada's troubled home loan industry.

"It's a terrible appointment. It's mind-boggling," said a prominent Republican in the mortgage industry who asked not to be named , fearing retribution. Republicans are especially bothered, as the appointment follows several flops during Gibbons' young tenure.
Yeah, well, it's "counterintuitive" now. There was a time, oh, a few months ago, when not everybody's intuitions were saying the same thing.

After all we had one Austan Goolsbee, respected academic economist and, I understand, advisor to Barack Obama's campaign, saying this back in March:
[T]he mortgage market has become more perfect, not more irresponsible. People tend to make good decisions about their own economic prospects. As Professor Rosen said in an interview, “Our findings suggest that people make sensible housing decisions in that the size of house they buy today relates to their future income, not just their current income and that the innovations in mortgages over 30 years gave many people the opportunity to own a home that they would not have otherwise had, just because they didn’t have enough assets in the bank at the moment they needed the house.” . . .

And do not forget that the vast majority of even subprime borrowers have been making their payments. Indeed, fewer than 15 percent of borrowers in this most risky group have even been delinquent on a payment, much less defaulted.

When contemplating ways to prevent excessive mortgages for the 13 percent of subprime borrowers whose loans go sour, regulators must be careful that they do not wreck the ability of the other 87 percent to obtain mortgages.

For be it ever so humble, there really is no place like home, even if it does come with a balloon payment mortgage.
It was bipartisan Kool Aid then, and it's bipartisan Kool Aid now. I truly wonder how many business reporters found Goolsbee's op-ed "counterintuitive" back before "the subprime crisis" became everybody's headline.