Wednesday, June 20, 2007

Mississippi Leads Nation in Subprime Mortgage Lending

The Mississippi Business Journal reported that Mississippi leads the nation in subprime mortgage lending according to a study by the Mississippi Economic Policy Council (http://www.mepconline.org/images/admin/spotedit/attach/4/Subprime_Mortgage_Lending_Fact_Sheet.pdf):

Almost 40% of all homebuyers in Mississippi receive mortgages from sub-prime lenders, a rate higher than in any other state. Additionally, homebuyers buying in predominantly African American communities are more likely to receive a sub-prime mortgage, a new study shows.
An analysis by the Mississippi Economic Policy Center also finds that sub-prime lending to homeowners in Mississippi increased dramatically over the last 10 years.......


The study examined data made available through the Home Mortgage Disclosure Act and the U.S. Census Bureau to analyze mortgage loans from 1997 to 2004. Among the findings:
o Nearly four in 10 conventional home loans in Mississippi in 2005 were sub-prime, nearly double the national average.
o Fifty-six of Mississippi's 82 counties had sub-prime lending rates of more than 40%.
o Nearly two-thirds of conventional home loans made to African Americans were sub-prime.

....."
http://www.msbusiness.com/article.cfm?ID=4857

I've seen several other studies and there is no question that Mississippi is one of the leading states in terms of subprime mortgages and mortgage delinquencies as well. However, there are several things to keep in mind about this so-called study.

This study, along with similar ones, has no access to credit scores due to privacy laws. The mortgage lending industry is primarily credit score driven. What type of program a borrower qualifies for is usually determined by the credit score. If a borrower wants to qualify for 100% mortgage with no down payment, then a certain minimum credit score is required by all lenders. If a borrower has a credit score that is considered to be not that good, such as below 600 in most cases, then the borrower can usually qualify for only subprime mortgages, which carry a higher rate to reflect the higher risk.

What would validate the study would be if there was access to the credit scores. If the credit scores of the average borrower are lower, than the figure of %40 would not be a surprise. If the credit scores are higher, then it could probably be concluded that predatory lending has occurred.

Another factor the study ignores is licensing. The study covers 1997-2004. Until 1999, there was no licensure in Mississippi for mortgage brokers. It was still a couple of years before the appropriate department could be created, guidelines issued, personnel hired, and audits of mortgage companies conducted.

Before Mississippi required a license to be a mortgage broker , anyone could be one. I personally know of cases where brokers were working out of their homes. One ran his shop out of the back of a dry cleaning store he owned, one ran it out of his butcher shop (no lie), and another was a cab driver who was doing mortgages on the side. There was no continuing education requirements nor minimum knowledge required. There was no requirement for a minimum level of experience. Anyone that wanted to be a mortgage broker could be one provided the lenders would allow him to submit loans. Too often, quick buck artists would enter the industry that had minimal, if any, experience, would sign up with only subprime lenders, and rack up the fees by putting even borrowers with good credit in subprime mortgages. Licensure forced many of them to leave the industry.

It is without question that alot of abusive practices occurred before licensure. While such practices still take place, licensure has cleaned up the mortgage industry in Mississippi substantially. There were more than a few quick buck artists in the pasts who have since either left the industry or have been prosecuted by the authorities.

Mississippi has also had a problem with mortgage fraud. This is a list of all the mortgage fraud cases in the last several years: http://www.mortgagefraudblog.com/index.php/weblog/C41/.
Typically these brokers that commit such fraud rip off both the lenders and the borrowers. Most of the cases listed that did not involve flipping, were from the pre-licensure era, which supports my contention that the reason the %40 figure might be high and not valid anymore is due to the time period covered by the study.

Another factor to be considered is that in a poorer state, the level of education is lower, and that includes knowledge about sound financial practices. People too often pay rent with cash or to a private individual. Most "prime" lenders require either 12 months of cancelled checks or a line on the credit report for rent or mortgage payments. A verfication of rent is never accepted from an individual due to the higher risk of fraud. Since too often people pay rent with cash, they are not able to show a capability of making a housing payment. This means that they usually qualify for only a subprime mortgage.

I'm not saying this study is completely invalid. However, there are some flaws in it and several factors that were not explained properly. Fannie Mae and Freddie Mac have been very aggressive the last three years in offering low (if any) down payment "my community" programs to borrowers through mortgage companies that allowed lower credit scores and mortgage insurance premiums. These programs, along with continued enforcement of the licensure laws and the current shakeout in the subprime mortgage lending industry (resulting in a tightening of underwriting practices) means that the percentage of Mississippians who have supbrime mortgages will probably decline in the future.

Update:
This is a pretty ignorant statement on MEPC Website: "While not all subprime loans are predatory, all predatory loans are subprime."

Oh really? A mortgage company can gouge a borrower for fees just as easily on a prime loan as a supbrime one, especially on refinances where the closing costs are rolled into the loan. This tells me that no one who worked on this "study" has a working knowledge of the mortgage industry. I know plenty of local ethical mortgage professionals who could have proofread their study if they had been asked to do so. Apparently even that limited form of peer review is not used in this particular ivory tower.

By the way, after looking through the MEPC website, no email addresses are given. Guess they don't want to be bothered after they issue their proclamations from the ivory tower.

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Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).


Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

Donna Ladd of The Jackson Free Press will give several classes on learning how to write. Smearing, writing without factchecking, and reporting only one side of a story will be covered. A donation to pay their taxes will be accepted and she will be signing copies of their former federal tax liens. Ms. Ladd will give a dramatic reading of her two award-winning essays (They received The Jackson Free Press "Best Of" awards.) "Why everything is always about me" and "Why I cover murders better than anyone else in Jackson".

In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.


In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

Trollfest '09 is a pet-friendly event as well. Feel free to bring your dog with you and do not worry if your pet gets hungry, as employees of the Jackson Zoo will be on hand to provide some of their animals as food when it gets to be feeding time for your little loved one.

Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.


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Trollfest '07

Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

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