Uh huh.....

Oct. 25 (Bloomberg) -- Home lenders are making it tougher to get loans as investors step up demands for refunds on defective mortgages, damaging the housing market, executives said today at an industry conference.

The damage came when the "industry" made loans they knew couldn't be paid back.  Now, as is the usual practice, they're trying to blame it on someone else - in this case, the screwed investors.

"This industry has to stand up and say, 'Enough is enough,' " Ron J. McCord, chairman of Oklahoma City-based First Mortgage Co., said during a panel discussion with lender executives at the Mortgage Bankers Association's annual conference in Atlanta, drawing applause from the audience. "We're trying to be out here lending to help this recovery."

Suck eggs *******.  Your "industry" trashed the housing market in the first place with your practice of predatory lending and intentional asset-stripping.  Now some of the people you screwed with blatant lies in their disclosures are coming after you.

Frankly, I think you're lucky they're using the courts and not the nearest lamp-post.

"We all know we signed up for reps and warranties, but I don't know if we thought we signed up to be an insurance company," he said, speaking on the panel with Chamberlain and McCord.

Uh, care to square that with Citibank's chief underwriter?  You know, the guy who said under oath the following?

60% defective loans in 2006, 80% defective in 2007: Citibank's former chief underwriter, who testified under oath that management was fully aware they were buying and selling trash.

Or how about Clayton?

Clayton, which was hired to do audits, revealed that about half of the loans did not meet standards, and that about 30% had "level three" disqualifications - that is, there were no mitigating circumstances that could merit an exception.  They would be "put back" into the pool - and had to be "selected" three times before being "out".  The odds of that, if you were sampling ten percent?  It's 10% to the third power, or about 1 in 1,000 that the loan would not wind up in the pool.

This isn't about being an "insurance company."  It is about lying to people.  The investors seem to think they've got a good case, and so does their new lawyer....

Patrick, 50, is "fearless and tenacious," said Dan Cogdell, a Houston criminal-defense lawyer who said she is capable of pit bull-like aggressiveness "if the need be." If she succeeds in getting Bank of America to settle, it may trigger more calls for buybacks in the $1.4 trillion market for so-called non-agency mortgage securities, which lack government backing.

Bank costs from repurchasing mortgages in such securities may total as much as $179.2 billion, including expenses related to suits against bond underwriters, Chris Gamaitoni, a Compass Point Research and Trading LLC analyst, estimated in August.

Nearly $200 billion eh?  That's what I'd call "material."  It's also more than the excess capital available in these institutions, which means we are indeed playing "Bet The Company."

The FDIC needs to step in now and "resolve" these institutions.  When Bair said yesterday that this needs a "Global Solution", she wasn't kidding.  It does.  The solution is found in Dodd-Frank, and it involves taking all of these banks into receivership and cramming down their debt into equity, clearing the bad loans.

Oh, and let's not forget folks - behind these first mortgages are a whole lot of HELOCs and other Seconds, and nearly all of those are being held on bank books at 95 cents on the dollar - when in truth if the first is underwater and forecloses, they are worth zero.

I have seen no honest discussion from any of these institutions as to the dollar amount of these loans on their balance sheets and a breakdown of how much alleged "value" is behind a first that is both underwater and has at least a 30-day late on it.

Under any reasonable accounting any of those loans that are behind a 30-late should be considered "doubtful" and those behind a 60+ delinquent and underwater first should be written down to zero, as the percentage of those loans that cure are, for all intents and purposes nil.