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This week, I’m going to overstep my bounds a little bit. That’s ok, I feel very strongly about this. Plus, I don’t work for the CFPB (in theory, they work for me, right?). In fact, I believe we have stumbled upon one of those rare occasions where public relations may be the most important tool in the real estate and mortgage industry’s arsenal as it defends itself from an increasing onslaught of onerous, government-imposed mandates.

You see, if the windup to the launch of the CFPB doesn’t have you nervous yet, then you’re living under a rock, or have a golden parachute awaiting you. Just in case you haven’t watched the news or looked at any remotely relevant news source in the past three months, the kingpin of super-bureaus has launched a large, and well coordinated communications campaign. But it’s not aimed at the mortgage banker, the title agent, the appraiser or the mortgage broker. They’re not doing interviews with the reputable trade publications in the industry or standing on stage next to trade association executives. Instead, they’re on Twitter. They’re blogging. They’re writing op-eds and doing interviews on mainstream TV. While they are meeting with some industry officials, the sense I’m getting is that these sessions come across more as a courtesy. Who’s the target audience? The consumer. The borrower.

Continuing on, let’s have a 30,000 foot overview at the early reaction of the federal government to the mortgage crisis of the past few years. This is one man’s opinion, and perhaps I oversimplify a bit for the sake of keeping this under 10,000 words, but it seems that a few principles are driving Congress, the Fed and the rest of our Weberian nightmare of alphabet soup:

1. Mortgage Brokers are all shifty and conniving thieves.
2. Mortgage lenders are greedy and evil (although, not so greedy as to be allowed to fail when their risks would cause such a result sans government intervention).
3. The GSEs caused this mess.
4. The consumer is ignorant, simple and just plain unable to make an intelligent decision when it comes to buying a house.

Yes, there’s plenty of work to be done on the industry’s end. It is hard for a consumer to read the fine print clearly when it’s handed to him or her at the closing table. There were some bad brokers out there. The GSEs are not blameless. And not everyone really does qualify to buy his or her own home. But instead of addressing and remedying some of these issues in a thoughtful and comprehensive manner, it appears our federal government is using a sledgehammer to “fix” the problem. And they’re going about it in an almost knee-jerk, ad hoc fashion. GSEs caused this? End them. Mortgage brokers duped the consumer? Make it so difficult to practice that it won’t be worth it. Lenders are greedy and evil? Impose a blizzard of conflicting regulations, laws and rules that slow the largest lenders and, more importantly, paralyze or even kill the credit unions and community lenders. Ironically enough, most scenarios, played to their logical conclusion, actually empower the same large entities that had a huge role in creating this mess. Although the government actors have said all the right things when it comes to industry collaboration, I believe it speaks much louder that the Fed blithely ignored multiple requests to clarify its LO compensation rule. I believe we can expect more of the same when the time comes to “fix” the industry.

So how is the industry responding to the apparent effort of the federal government to remake the mortgage industry in its own image, while handing out torches and pitchforks to the masses?

Why, we’re talking amongst ourselves! As we always have! And we’re fighting amongst ourselves. We do that so well, you see…

If you’re still entirely focused on the agency down the street, and what they’re doing to steal your staff, you’ll have much, much bigger problems very soon. And if you’re primary worry is the evil appraisal management company? You’re missing the bigger picture. Fixated on how your underwriter is sticking you again? There’s someone bigger gearing up to do more than stick you.

Folks, I know I’m a PR guy. I’m not a sophisticated economist or experienced mortgage banker. But I do know a little something about a public debate. I know that the speaker who controls the structure and vocabulary of the argument is defending the high ground.

Right now, the mortgage industry is starting this battle—believe me, this will be a battle—from the bottom of the moat. I thoroughly believe that the industry’s willingness to engage the public on this will be the difference between a spirited struggle and a massacre. After all, only the public gets a congressman’s (or unelected bureaucrat’s) attention, and even that happens only when the public is good and loud.

I can almost hear you now. “So what can we do, smart guy? The Feds have more money than god, and the people don’t have a clue as to what we really do.”

Maybe so. Most harried folks outside the industry probably don’t have the time and inclination to ingest a lengthy dissertation on the issue. But everyone is willing to hear (and be motivated) by universal themes. My thoughts? How about “instead of having the government tell you what’s good for you, why not make the choice yourself?”

1. Come together. If the trade groups—and I mean each and every group representing ANY professional who benefits from a mortgage/real estate transaction—can’t come together and work together now, then they are not serving their purpose. Divided, this industry will have the terms dictated to it. One….silo…at…a…time.
2. Propose our own reform plan. This will be difficult. But it’s too late. We’ve helped make this bed, failing to control our own bad apples. The locomotive of regulation and enforcement that is coming is not going to stop on a dime. There are definitely many things wrong with the mortgage process as it is, and it is no longer an option to say “this too shall pass.” But should the solution come from the federal government, or people who understand how the market works?
3. Get the word out. Mortgage brokers make easy targets. The GSEs make easy targets. Lenders and title companies make easy targets. Why? Because they don’t do much to get their value proposition out in front of the common man. When they do make an effort, it is segment or issue specific and inconsistently distributed. If the message reformers are spreading is “eliminate the greedy banks, brokers and title guys,” perhaps the response should be. “Maybe that is the answer. But should the answer be up to the bureaucrats, or the consumer (market)?”

In my opinion, many in our government have had a nice, easy political football land in their laps. By taking a hammer to the industry, they appear to be doing something. They’re saving the puppy or rescuing the kidnapped little girl in a movie. The mortgage industry has allowed itself to be portrayed as a cartoonishly fiendish super villain. Let’s be honest—if the government were really doing this to fix something, it would have allowed the guys who took the unreasonable risks to fail. Yes, there would have been short term pain. Then again, there was short term pain, wasn’t there? Do we really know it would have been much worse than it was? I’m a big believer in the free market, and what’s coming down the pike from DC looks less and less like it.

So are we going to at least be a part of that conversation, or are we going to continue to focus on things that, very shortly, may not matter much anymore?