March 1 Letter from Congress to HUD

[Steve Hodgdon]

There's a letter from 45 Congress members to HUD stating concerns about recent sales of notes to the big players.

The letter states concerns that "speculators" don't put neighborhood stabilization at the top of the their priorities. Of course not, hedge fund buyers are primarily focused on returns for their investors. Often foreclosure and liquidation produce the highest returns.

The letter cites one "bad actor" in particular. But infers that practices that concern them are across the board.

Who speaks in defense? Who protects our livelihood? I come from the unsecured debt space. Owned a collection agency for decades and saw the CFPB launch a full attack against debt collectors, payday lenders and other businesses where they disapprove of the morality of the industry. Lawsuits skyrocket, E&O insurance triples, banks withhold services as basic as checking accounts.

90+% of all the loans are owned by a handful of funds. Loans that come to the tertiary market are fraught with the same issues I saw in credit card collections. Incomplete files, no record of prior disputes, slow response to requests for missing documents.

We play in a very fragmented market, therefore don't have ready ability to speak as one voice

Loan sellers, gurus, and brokers abound. Small investors without experience are stumbling in the dark chasing magical yields. I sat in a seminar where the educator advocated tricking the borrower to answer the phone by "spoofing". Simply a Federal criminal offense.

We play in a very fragmented market, therefore don't have ready ability to speak as one voice. There is no policing or best practices. The unsecured buyers have the DBA, collectors, the ACA, payday lenders, FISCA and OLA. Still they fight an uphill battle to keep businesses that benefit the economy from being closed down by the CFPB, FTC and other regulators.

The March 1 letter from Congress is a warning shot to HUD to clean up the market place. What would happen to the tertiary market if suddenly larger buyers stopped selling because of pressure from the regulators? Can't happen? It did on several fronts in the credit card world.

Would you financially support a trade group and lobbying effort? Would best practices and accreditation help preserve the marketplace? I'm in this business because it is just too difficult to make a living as a collector anymore. Let's not make this the next dying market.

What say the old time experts?

[Peter Lange]

The Seller Finance Coalition (http://www.sellerfinancecoalition.org/) is working Washington to introduce some legislation to reduce the impact of the Dodd-Frank bill on seller financing. Given their success in gaining traction in DC on seller financing, it seems the issues you note could be on their radar as well. Maybe @Bob Repass can comment.