I dialed into a press conference today held by U.S. Congressman Brad Miller, a Democrat from North Carolina. He wanted to share his views on the suits filed by the Federal Housing Financing Agency (FHFA) against 17 banks over recovery on fraudulently misrepresented subprime mortgages. FHFA is seeking to cover losses on approximately $200 billion of mortgages purchased by Fannie and Freddie prior to their takeover by the government in the summer of 2008. Taxpayers have already covered $140 billion of FHFA losses from these bad mortgages and the amount is expected to go much higher.
The topic is pretty far afield from my regular Muniland content but I had met Congressman Miller several times on Capitol Hill when I lead Riski, the open source financial reform project, and I’d always been very impressed with his forward-looking efforts on the housing crisis. Once you are around Congress for a while it’s easy to see what special interests various members of Congress are promoting. Congressman Miller seemed genuinely independent and interested in America as a well-governed and fair nation. Sad to say these are not common traits on the Hill.
Congressman Miller is not new to the mortgage issue. In March 2007 he penned a letter to Forbes magazine about the scourge of predatory lending and its devasting effect on families:
The recent spike in defaults in subprime mortgages has caused a hiccup in the markets, but it is catastrophic for families now facing the loss of their home to foreclosure. Most mortgages help families build wealth, and the equity they build in their home becomes the bulk of their life’s savings. Predatory mortgages steal wealth from homeowners. Predatory mortgages are most often refinances.
Predatory lending and fraudulent home loans are the bulk of the assets that make up the securities that FHFA are disputing and that have frozen the financial system. This glut of bad loans has weakened the economy as families lost their homes and equity; neighborhoods have empty properties; and banks are stuck with billions of dollars of unsold properties on their books.