09/11/08
An open letter to US mortgage lenders, their government regulators, insurers, secondary market partners, their rating agencies and investors in mortgage-backed securities;
I have been actively licensed in the real estate business for over 38 years, of which 25 were spent as a private practice appraiser focusing on complex residential properties.
During the course of my career I have developed proprietary algorithms that:
1) Present realistic risk/return scenarios for RMBS investors 3 to 5 years in advance
I respectfully submit that to the extent we delay implementation of these (or some very similar) risk management
procedures is the extent to which we extend both the duration and severity of the market contraction for real
estate and mortgage banking. Left unaddressed, these problems have the very real potential to collapse the entire US economy.
The current lack of liquidity in the mortgage pipeline will inherently result in increased mortgage interest rates
for home buyers. Increased rates will exacerbate the decline in property values. As
values decline, internal or external auditing procedures for those institutions or investment funds
whose portfolios include mortgage-backed securities will force re-evaluation and heavily discounted liquidation of these
securities, further accelerating erosion in the real estate market.
This destructive vortex can be reversed. However, it will require the participation of large market players
whose management and boards appreciate the unique opportunity to implement these patented risk modeling tools
and recognize the high cost of delay.
I invite you to review the 14 minute Flash presentation found at the link immediately below and welcome your
questions regarding licensing or risk consulting.
Robert Rothstein
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