The robo-gate fiasco is more about faulty internal processes on the part of overwhelmed loan servicers than it is with the securitization of mortgages, a panel of key secondary market executive agreed at the Mortgage Bankers Association's (MBA) convention in Atlanta.
They also said the quicker lenders and investors address the problem, the better off they'll be.
That some employees signed off on thousands of foreclosure notices a month without reading the documents or checking them for errors was "not indicative of securitization," said Ginnie Mae President Ted Tozer. "It comes out of servicing volumes lenders were not equipped to handle. The process as designed is correct, it's just that servicers were so overwhelmed by volume that they couldn't handle it."
Charles Haldeman, chief executive officer at Freddie Mac, said the problem with what has become known as robo-signing is a "function of numbers."
Comparing the onslaught of foreclosures that has followed the housing market meltdown to the 100-year flood, Haldeman said he "can't imagine any industry being prepared" for the flood of problem loans. "It would have been wasteful, it would have been unreasonable to be prepared" for them.
Fannie Mae President Michael Williams told the convention session that lenders, investors and servicers need to review their processes quickly so stalled foreclosures can move forward before they become a drag on the housing market. Then, after the crisis is over, he said they can "step back and take a more measured approach" to making sure nothing similar happens again.
But Haldeman, the former CEO of Putnam Investments who came to Freddie Mac 18 months ago, said a "federal response" to the robo-signing problems might be appropriate.
So far, the Obama administration has resisted calls for a federal moratorium on foreclosures in the wake of robo-signing revelations. But while conceding that federal responses "usually slow things down," he said one dictum from on high might be more palatable to the mortgage business than 50 different ones from 50 state attorneys general.