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I started my employment in the consumer residential real estate mortgage lending industry forty-five years ago; I've been an eye witness to four (4) serious housing/mortgage lending 'corrections' during this time period. Industry historians and those veterans, who have been around for a similar period, all know what happens next... and it's good! Our business is cyclical - up and down in an approximate 10 year cycle.

The correction in the fall of 1998 all but wiped out the 'subprime' lending sector and brought Fannie & Freddie and their 'conforming' products to their knees; only their ambiguous Government backing saved them at that time.

Today the media touts the fact that something like 150 Banks have failed recently, which is nothing like the several thousand which collapsed resulting in the entire secondary market (it was mostly thrifts and banks at that time with FNMA and FHLMC picking up no more than a small market share) being severely hammered in the late 1980's and early '90's.

The pounding in the late '70's when we had double digit rates was the mildest of the four, as I recall.

Today's situation is different in that the Federal Government has engaged a strategy to take over the entire mortgage lending business (among other industries as well), and operate them - which suggests they think they know how; clearly they don't as I detail below. We've now got tiny, nearly insolvent, undermanned, with dangerously outdated technology, in way over-their-head FHA at 40% of the market (instead of the tiny slice they're accustomed to) with delinquency of at least 90 days increasing (up 20 basis points in just the past two months) even as their portfolio increases, Fannie Mae & Freddie Mac controlling the rest, and no secondary/securitization market to speak of (which would propel us out of this mess in a matter of a couple of months once the Government stops stifling its revival).

Utilizing the TARP funds as designed would have fixed that in a heartbeat. Today nearly 5% of Fannie Mae Single-Family Loans are 90+ days late and this serious delinquency rate is rising. The government-sponsored enterprise has $2.8 trillion in conventional loans. Prime real-estate-owned filings shot up 15 percent from the second quarter. Plus this serious delinquency rate does not even include loans in private-label securities held by Fannie! Congress is at this time debating re-regulation to EXCLUDE Fannie and Freddie - what a colossal mistake. By providing them with unlimited capital support over the next three years, not fixing them, and on top of that the CEO pay, 10 additional executives at the two companies are eligible collectively for $30.1 million in compensation for this year. And some people say let the Government take care of us! Baloney!

Every single person in the consumer residential real estate mortgage lending community knows a new regulator and/or re-regulation, more statutes, etc. are far from necessary. The current Government administration in Washington DC has somehow still not yet realized aggressive enforcement and harsh punishment is what's required, and has been for some time. They've been severely negligent for sure. They continue to pursue this major Consumer Protection Czar type legislation, when they should get out of the way, and let the mortgage industry rebound and take off like gang-busters as it has always done - the longer they're in the way - the more delayed the turn-around will be. 2010 could be a tremendous year, time for the pendulum to swing back:-)