ABA Banking Journal - June 2007 - (Page 4)
Editor’s Column WILLIAM W. STREETER Editor-in-Chief Banking JOURNAL ABA USPS-544-030 JUNE 2007 VOL. XCIX, NO. 6 Editorial and Executive Offices: 345 Hudson Street, New York, N.Y. 10014-7115 Phone: (212) 620-7210 Fax: (212) 633-1165 E-mail: email@example.com Internet: http://www.ababj.com Published monthly for the American Bankers Association by Simmons-Boardman Publishing Corp. and copyrighted 2007 by ABA; Edward L. Yingling, President, 1120 Connecticut Ave., N.W.,Washington, D.C. 20036, (202) 663-5000. Title registered in U.S. Patent Office. With the exception of official Association announcements, the American Bankers Association disclaims responsibility for opinions expressed and statements made in articles or advertisements published in ABA Banking Journal. Subprime, whose DO MORTGAGE LENDERS, BROKERS, and all the other players in the mortgage business have a responsibility to make sure people don’t get in over their heads? Not necessarily. Should they care? Any ethical business person would. Subprime lending is not the same as predatory lending. “Subprime” refers to a person’s credit standing. “Predatory” means deliberately preying on people for one’s own gain. It’s clearly wrong. But in the case of someone of sound mind who knowingly agrees to buy something that under certain circumstances may not work out for them as planned, the buyer bears much of the responsibility. With freedom of choice comes freedom of consequences, not all of which are positive. Society sets fences around certain activities and penalizes behavior outside those boundaries. During the “bust” part of a business cycle there’s a great temptation to push out the fences to protect people—often from themselves. But there is much gray space between the fences. One example being how sellers jump on the bandwagon of a hot market. Yet buyers often are often equally willing. This occurs all the time and we’re now seeing the effects of it in the mortgage business. When there’s a lot of money to be made, few people in business will say, “I’ll forego that business.” They might be thrown out if they did. Kudos to those that have the courage to back off in the heat of the moment, but it’s rare. Where this can become problematic is when a boom moves down market, so that, for instance, people who previously gave no thought to owning a home begin to think they can, thanks to relaxed underwriting standards. Afterward, people castigate such practices as “liar loans”—stated income loans. responsibility? “How could a lender be so stupid as to do that?” some ask. You might have asked that yourself. That particular practice may or may not be defensible, but do we need a law prohibiting it? When it comes to home ownership, people— including their elected officials—would rather have lenders opening doors for them rather than telling them no. Further, in attempting to “right obvious wrongs,” lawmakers often fail to acknowledge that a single phrase in a bill—e.g. “Lenders will make a reasonable attempt…”—translates into 500 lines of highly detailed regulations that try to anticipate thousands of possible situations. And so the fences expand and end up hurting more people than they help— through fewer choices and higher prices. This is a key point with subprime loans. The easing of underwriting standards has made it possible for many people to become homeowners who wouldn’t have been able to under traditional guidelines. This is a goal of affordable housing, isn’t it? Some of these accommodations were ill-advised and some worked well only when certain conditions remained stable. But for many people they have been a leg up. Put too many—or too rigid—rules in place and this opportunity will dry up. What would make more sense is to apply existing rules uniformly—to bank and nonbank players in the mortgage space—but also to recognize that in the world that we have, nothing is perfect. Go after the worst offenders, in other words, not the sometimes-messy middle, which, in calmer moments we call “a free-market economy.” firstname.lastname@example.org Weigh in on this subject in the forum, “What do you think?” at www.ababj.com Editor-in-Chief Executive Editor Senior Editor Editorial Assistant Art Director Associate Art Director Art Production Manager Contributing Editors Leslie T. Callaway Lucy Griffin Kenneth Kehrer Lisa Valentine Advisory Committee Jeffrey S. Owen Production Director Circulation Director Publisher William W. Streeter email@example.com Steve Cocheo firstname.lastname@example.org Lauren Bielski email@example.com Andrea Rovira firstname.lastname@example.org Wendy Williams email@example.com Phil Desiere firstname.lastname@example.org Todd M. Blanchard email@example.com Ed Blount Nancy Derr-Castiglione Karen Kahler Holliday Bill Orr Edward L. Yingling Virginia Dean Mary Conyers-Brown firstname.lastname@example.org Tom Leader email@example.com Gus Blumberg firstname.lastname@example.org Subscriptions: Call 1-800-895-4389 or write to: Subscription Dept., ABA Banking Journal, P.O. Box 10, Omaha, NE 68101-0010 Subscription rates: One Year: Commercial Banks/Holding Companies FREE to qualified subscribers in the US; Commercial Banks/Holding Companies (Canada) $35.00; Other Businesses (U.S. & Can.) $50; Foreign (Air Mail) $295 Two Years: Commercial Banks/Holding Companies (Canada) $60.00; Other Businesses (U.S. & Can.) $90; Foreign (Air Mail) $555 Single copy rate: $18 (U.S. & Canada); $75 (Foreign) Reprints: PARS International Corp. phone: 212-221-9595 / fax: 212-221-9195 e-mail: SBPCreprints@parsintl.com. Research: full text of ABA Banking Journal is available on Nexis, a proprietary electronic database http://www.nexis.com. ABA Banking Journal (ISSN 01945947, USPS 544-030) is published monthly by Simmons-Boardman Publishing Corp., 345 Hudson St., NY, N.Y. 10014-4502. Periodical Class postage paid at New York, N.Y. and additional mailing offices. Canada Post Cust. #7204564; Bleuchip Int’l, PO Box 25542, London, ON N6C 6B2; Agreement #41094515. POSTMASTER: Send address changes to ABA Banking Journal, P.O. Box 10, Omaha, NE 68101-0010. 4 JUNE 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html
Table of Contents for the Digital Edition of ABA Banking Journal - June 2007
Grow Your Wealth Management Share
Segment Marketing: Dull, Basic, Do It!
Snapshot: Hint of Margin Relief?
Sleight of Mind
ABA Chairman's Position
Getting Over the $1 Billion Speed Bump
"Naming Right" - worth it?
Top Performing Community Banks
Case Study: Seattle Savings Bank
Case Study: Utah Community Bank
Case Study: Woodforest National Bank
When Lawyers Want the Needle In Your Haystack. Or the Whole Stack
Deposits vs. Investments: Time to Settle this Debate
Punching Through the Media Clutter
Today's Elements, Tomorrow's Branch
Risk Focuses Security Dollars
Sourcing Solution Gives National City Purchasing Clarity
Getting Into Remote Capture? Don't Forget Compliance
To Advertiser/Index of Advertisers
ABA Banking Journal - June 2007