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New Vista Asset Management and Fannie Mae market foreclosures

Nov 28, 2007

NAMB says GAO foreclosures study vindicates brokers: Aggressive lending, securitization model led to lower underwriting standardsMortgagePress.comGAO sub-prime The Government Accountability Office (GAO) released a report on default and foreclosure trends in the mortgage industry on Oct. 16. The report, titled "Information on Recent Default and Foreclosure Trends for Home Mortgages and Associated Economic and Market Developments," comes in response to an April 25 House Financial Services Committee request to the GAO to investigate the high number of foreclosures and the sub-prime market. The National Association of Mortgage Brokers praised the long-awaited GAO report analyzing the rash of home mortgage defaults and foreclosures. "This study vindicates Mortgage Brokers by confirming what we have been saying all along," said NAMB President George Hanzimanolis, CRMS. "Mortgage Brokers are not to blame for the meltdown in the sub-prime mortgage market. According to GAO, the problem started with the rise of securitization, resulting in too much liquidity, which led to aggressive practices by banks and other lenders. Taken together, these forces shifted risk from lenders to investors, eliminated accountability and led to a weakening of underwriting standards. Simply put, blaming only Mortgage Brokers or any other one segment of this industry for this complex meltdown doesn't hold water with the facts." The GAO notes in its report that the overall mortgage default rate grew by 29 percent between 2005 and 2007, while the foreclosure rate increased by 55 percent. The sub-prime market accounted for two-thirds or more of the increase in the number of loans in default or foreclosure during the two-year time frame. GAO pointed out a number of factors that contributed to the collapse of the market, including a drop-off in home price appreciation rates and a weakening labor market in certain parts of the country. But it stressed that the easing of underwriting standards and the wider use of certain loan features such as low- and no-documentation loans and higher loan-to-value ratios contributed to default and foreclosure increases by making loans available to borrowers who could not keep up with their payments. "The real tragedy, of course, is that GAO projects more than one million homeowners will experience foreclosure during the next six to seven years due to this combination of circumstances," Hanzimanolis said. He urged Congress to consider the study's findings carefully when drafting legislation designed to make improvements in the mortgage market. For more information, visit www.gao.gov.
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Nov 28, 2007
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