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Many mortgage firms around the U.S. spend a great deal of time and money focusing on the needs of veterans at this time of year. Even with lending volumes falling dramatically, the industry still goes the extra mile to say thank you to veterans in a number of different ways, from building homes for wounded warriors to other forms of appreciation and assistance.
The folks at Bloomberg, however, decided to celebrate Veterans Day with an attack on the mortgage industry that reads like it was written a decade ago. Instead of recognizing the many changes in the mortgage industry since 2008, Bloomberg seems intent on ignoring the facts. The article uses a handful of anecdotes to smear mortgage lenders like United Wholesale Mortgage, Mr. Cooper and Freedom Mortgage.
The authors paint the mortgage market today with the same brush as the market that existed at the time of the great financial crisis 15 years ago. The thrust of the article, “U.S. Veterans Got a Mortgage Break. Now They’re Losing Their Homes,” is that evil mortgage lenders are trying to take homes away from veterans.
The article states that mortgage servicers are denying veterans loan forbearance authorized during COVID. The only problem is that this statement is completely false.
“Rosado was one of about 445,000 military veterans who took advantage of a Covid-era mortgage program, which gave borrowers a year without mortgage payments,” the authors state. “Now, she and others are finding their lenders would rather foreclose than let them pick up where they left off.”
In fact, the COVID-19 Veterans Assistance Partial Claim program expired in October 2022. The program was a temporary measure to help veterans return to making normal loan payments on a VA-guaranteed loan after exiting forbearance. The borrowers in the Bloomberg story were left behind because of inaction by Congress and incompetence of the Biden Administration, which refused to press for a program extension.
A partial claim allows a Veteran borrower to either resume their regular payment or achieve a sustainable level of payment reduction when combined with a loan modification. In most cases, the servicer reduces the monthly cost of the loan payment by putting the missed payments in the back of the loan, to be paid when the house is sold or refinanced. This preferred method of resolving loan forbearance allows the homeowner to keep a low-coupon loan and get a lower payment.
Last year, the mortgage industry called on the VA to accept partial claim requests for at least 15 months after termination of the COVID-19 national emergency, but the Biden Administration refused to act. The Mortgage Bankers Association noted in October 2022 that “action by Congress is necessary to authorize the VA to establish a permanent program.”
The Bloomberg report does not mention the fact that the Biden Administration shut down the partial claim program for veterans, but proceeds to attack the mortgage industry as though loan servicers would somehow benefit from foreclosing on a homeowner. This is the same tired falsehood that was popular among progressive activists after 2008, but it is as untrue today as it was then.
In fact, keeping the homeowner in the house is always the first option of the industry, first and foremost because mortgage lenders have incorporated the COVID-era process for handling delinquent borrowers into the standard toolkit. The Bloomberg article failed to state that the FHA and USDA have partial claim programs, which are funded and operate today.
But the real problem with the report is that it reflects a political bias against the mortgage industry. Of course, the Bloomberg article features the usual pejorative references to nonbank lenders, “shadow banks” as the authors and members of the Biden Administration like to call them.
“Nonbanks, sometimes called shadow banks, don’t take deposits and are subject to much less regulation,” the authors reveal breathlessly. “They figured out they could make a profit lending to not-quite-prime homebuyers.”
Somehow the article manages to at least thank nonbank lenders for focusing on underserved communities. “John Bell, who manages the VA’s home-loan program, praises the role nonbank lenders have played in the VA mortgage business. ‘Thank goodness we had some of these nonbanks that raised their hand and were wanting to get into the business when banks backed out,’ he says.”
The article suggests several times that mortgage servicers somehow benefit by foreclosing on a veteran, when in fact the opposite is the case. Not only do mortgage servicers routinely lose thousands of dollars on a government loan foreclosure but these cash expenses are not reimbursed.
Moreover, if there is any cash surplus after the home is foreclosed, then the benefit goes to the investor that holds the mortgage note, not to the servicer. If the home owner sells the house before a foreclosure, then the net proceeds go to the homeowner. In both cases, the mortgage servicer is frequently out thousands of dollars in expenses related to loss mitigation that are not reimbursed.
The key lesson to be taken from this unfortunate situation is that there needs to be a consistent experience for all borrowers in government insured loan programs. At present, veterans do not have access to the same forbearance options as borrowers in FHA and USDA programs, in part because the VA historically has not had a robust partial claims programs to reimburse servicers.
The Bloomberg article on the handling of COVID loan forbearance for veterans is an unfortunate example of how American journalism has become compromised by progressive politics, often by ignoring or twisting the facts. The authors started with a premise, that mortgage servicers want to take the homes of veterans, then assembled a lot of subjective anecdotes into a hideous collage of falsehood and innuendo.
The truth of the matter is that commercial banks have largely abandoned veterans, who rightly view a VA loan as a benefit for their service to our country. Instead of reporting on a serious structural problem in the VA loan program, Bloomberg played progressive politics.
By ignoring the complex facts of government lending and pandering to the pro-consumer agenda, the authors did a serious disservice to veterans and the mortgage industry that serves them.
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