FHA and Investor Specialist

I just was thinking about how 2 of my favorite subjects, mortgages and baseball, have two very similar scandals in the sense that there were guidelines that were not enforced while there was a reward for not following the rules.  I read the book Freakonomics about a year ago, so here goes my attempt to correlate to very different subjects and how they allowed abuses of the sytem to happen with a skewed reward/punishment system.

In baseball, there is a Union with a collective bargaining agreement that said there should be no steroid or amphetamine testing.  The drugs were prohibited but there was no drug testing. The reward for hitting a baseball 10-20 feet further takes one from making loud outs and having warning track power to earning millions of dollars a year, making it very lucrative to break a rule not being enforced. 

The mortgage arena has a secondary market system, that was increasingly determined to purchase loans with stated income.  Loan Officers were told that stated income loans were not to be abused, but there would not be a 4506 test utilized and limited due diligence testing on stated income files.  On the other hand, it was increasingly lucrative to close these loans and be known as the guy/gal who got deals done.

In both cases, the athletes and loan officers are clearly wrong for abusing the system.  But isn't it also the sytems fault?  I think in baseball, we are finally beginning to see that and as the secondary market continues to correct itself, we will see more controls put into place as well.

Michael Byrne

www.mortgageprosforum.com