Possibly the most despised financiers in America, the nation's mortgage bankers, widely blamed for playing a central role in the global financial meltdown were whooping it up this week at a glittering annual convention"We're all still here and we're still standing," declared Kieran Quinn, outgoing chairman of the association, who took the floor to a pounding chorus of Coldplay's Viva La Vida. He arrived shortly after a colour guard in full military regalia hoisted a US flag while an opera singer belted out The Star-Spangled Banner.
It reminds me of the coverage of the 'The Predator's Ball' the nickname for the annual conference thrown by Michael Milken for the private equity head honcho's of their day.
The last such event was much the same as the latest Mortgage Brokers Ball (doesn't have the same ring does it). In an environment where Drexel (Milken's firm) was under investigation and the public and politicians were rounding against him and his clients, bold statements were made.
Just like the Mortgage Brokers Ball Milken and others relayed the sentiments that 'we are still here' and it's 'business as usual'. That was the last such Ball as Drexel was, effectively, closed down by the government and Milken went to jail. Insider traders like Boesky and Levine joined him for a stretch and everyone got a little depressed that the gravy train had stopped.
The media rounded on Milken, Michael Thomas of the New York Observer. He had, variously, called Milken 'scum' a 'pig' and, oddly, 'beetle'. Commenting on Milken's impending sentencing he wrote "Whatever Judge Wood gives Mr. Milken won't be enough" and he hoped that life inside - and an introduction to buggery - would help him remember all the other crimes he had committed. 'The prospect of having one's sphincter enlarged to the circumference of the Holland Tunnel by the rigors of the prison social calendar often works wonders when it comes to refreshing memories'. Asked why he hated Milken so much he said "He looks like someone you would like to hate" adding” You don't have to know what a junk bond is to become infuriated by one".
The mortgage boys would do well to look back at this period of history and take some lessons in how things could turn out for them soon.
In a normal year, nobody would take much notice of a gathering of home loan originators. But a noisy group of protestors were on hand to remind the mortgage bankers of their unpopularity. Campaigners outside the conference centre wielded placards reading "grand theft bailout" and "jail greedy bankers - let them rot".
Bill Hackwell of Answer, a protest coalition involved in the demonstration, said: "We wanted to make sure they didn't think it was going to be business as usual as they meet to work out how to cover themselves."
It is clear to all now that unscrupulous lenders gave inappropriate mortgages on customers who could never afford to repay them. The MBA's own figures show that 9.1% of mortgages on US family homes are in arrears - the highest figure since records started 39 years ago.
Although it looked like business as usual at the conference with some admitting errors were made, some in the industry were not prepared shoulder all of the blame.
"There's certainly no lack of blame to be shared around the entire global economy," one said. "To say one industry is responsible for all this is a little simplistic."
His view was echoed by Ted Eric May, managing partner of law firm Sheldon May which specialises in servicing the mortgage industry: "Politicians and the general public are looking for easy people to blame. All of us are to blame. Our society has gone from living within our means to borrowing without restraint."
Inside the conference's exhibition hall stories of reckless lending were discussed. Phillip McCall, a mortgage fraud investigator, cited a case of a warehouse worker who applied for a mortgage, claiming an income of $7,500 per month: "Basic common sense is going to tell you someone in a warehouse is not going to be earnings $90,000."
This kind of application was left unchecked by mortgage lenders, but there is a point for apportionment of blame here. The warehouse worker, by falsely claiming his income was this high, committed fraud. This story is by no means a solitary case, one wonders if those who took out such fraudulent mortgages will be prosecuted.. I very much doubt it.
The last High Yield Bond Conference (the official name for the Predator's Ball) had a record attendance of 3,000 issuers and investors and the mood was optimistic. Milken had said previously that he was 'proud' to be in the High Yield Bond business and talked about raising '$6 out of every $10' to build homes for Americans to achieve their home-ownership dreams.
Sipping a drink as a guitarist played gentle melodies in the conference's foyer, Cary Burch, the chief executive of mortgage software provider LSSI, said mortgage lending was a force for good: "I'm proud to be part of this industry. It's been great to help people achieve their home-ownership dreams."
At least it was only a financial crisis that has come to haunt us from the 80's and not florescent socks and shoulder pads...
Source HF Markets - Online Trading
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