Who do you believe has the most responsibility for investigating and regulating the mortgage lending and servicing industry operating in the Great State of California?
- California State Attorney General – they’ll protect what’s closest to home. (71%, 82 Votes)
- Federal government – they have the most power. (18%, 21 Votes)
- Mortgage lenders and servicers themselves – they’ve learned their lesson and will now behave. (10%, 12 Votes)
Total Voters: 115
‘Twas the season of giving when California Attorney General (AG) Kamala Harris sued government sponsored entities (GSEs) Freddie Mac and Fannie Mae (Frannie), just a few days before Christmas.
The California AG filed the two suits not long after having seceded from the national negotiations which were underway between the Big Banks and a number of state AGs concerning the mortgage and foreclosure crisis. Harris claimed the agreement under negotiation was not suitable for Californians, and behold, the suits against Frannie followed a couple of months later. [For more information about California’s secession from talks with the Big Banks, see the October 2011 first tuesday article, Secession of Californian proportions, catalyst for change.]
The lawsuits demand Frannie (which owns over 60% of the mortgages in California) answer a set of 51 questions related to their handling of foreclosed properties and ask questions regarding Frannie’s role in the marketing and selling of mortgage-backed bonds (MBBs). The questions seek information to aid the AG’s ongoing investigation of foreclosed properties and the mortgage servicing industry, specifically as to whether practices were in violation of California law. Frannie was petitioned to answer the questions back in November of 2011, however the mortgage lenders refused to respond, citing the federal law prohibiting state jurisdiction over federally regulated agencies. Harris refutes that preemption argument, claiming California has the right to pursue investigations and recover losses Frannie caused because the properties in question are subject to state law. [Click here to see the questions posed to Freddie Mac and here to see the questions posed against Fannie Mae.]
first tuesday take: Call it bold, declare it daring and hail it, oh so Golden State. At long last, someone has declared their interest in picketing on behalf of homeowners (even though it is at the court house rather than the branches of the associated culprits). The rentier class is finally under attack by the homeowner’s representative: California’s AG. [For more information on how the California AG has previously addressed the mortgage and foreclosure crisis, see the May 2011 first tuesday article, Presenting the Mortgage Fraud Strike Force – at whose service?; for more information about the rentier class, see the September 2011 first tuesday article, Rentiers and debtors: why can’t they get along?.]
Federal authorities on the defense are rejecting the California suit by reverting to the usual shield – states must keep their noses out of federal business. It’s true. Frannie is a federally-owned institution and thus regulated by the federal government. But the cause of the suit isn’t concerned about state versus federal jurisdiction. Stuff and nonsense about states rights versus federal rights deflects from the real issue at stake.
Let’s rephrase the character names to make this clearer. Replace “state” with “primary users” and “federal” with “secondary users” and you have the issue of the suit being this: the rights of homeowners and investors versus the rights of builders, government agencies and speculators. In the buildup to the Millennium Boom, homeowners and investors (the primary users of real estate, and thus the best users) were crowded out and tossed to the gutters by builders, government agencies and speculators (the secondary users of real estate) addicted to maximizing profits off of filling houses based on risky schemes.
These lawsuits against Frannie are about understanding who gained (Wall Street Bankers) and who lost (negative equity homeowners) in the mortgage frenzy leading up to the housing crisis – not about which toys belong to California and which belong to the federal government. [For more information about the interests and rights battled over in real estate, see the January 2010 first tuesday article, Homebuyer beware: the real estate game lacks fair play.]
We have long tried to explain the public role of real estate brokers and agents as the gatekeepers of real estate. Well dear California brokers and agents, gaze in awe and scribble some furious notes, because there was most definitely clear gatekeeper action going on for your homeowners in how Harris and her team defiantly took on Frannie. Now respectfully offer collective support. [For more information on how brokers and agents can advocate in the interest of their clients, see the November 2011 first tuesday article, Damage control: restoring public trust in real estate professionals.]
RE: “Kamala Harris sues Fannie, Freddie demanding answers” from Mercury News