I have had a number of friends, colleagues and critics make the comment; “Dave, it’s obvious why you want the recent proposed bail-out by the Fed and Treasury to take place – you are the CEO of a national mortgage lending platform”.  Such a simplistic assessment of my position in the current financial markets is troubling and I truly believe that we should educate ourselves on the markets and more specifically the multi-trillion dollar global money-supply-chain that makes up the whole of the mortgage lending and financial industry.  

I would respectfully ask my readers to allow me to spend a little time on this topic to point out and defend the company I manage, PRMI, and the amazing people that it employs.  

First and foremost, PRMI will only stand to benefit indirectly from the proposed 700 billion dollar government mortgage asset bail-out as all Americans will, if Congress can accomplish this much needed action. Furthermore, PRMI is, and always will be, a Retail Mortgage Platform – not a Wall Street Wholesale Platform making and designing risky mortgage securities. PRMI chose to abandon Sub-Prime lending and banking two and a half years prior to the collapse of this product line (over three and a half years ago). Even when our organization did provide such products, PRMI did so following the beliefs of two chief disciplines. First, regardless of relaxed market guidelines, PRMI did, in fact, properly underwrite and deployed “best lending practices” relating to the decision making of all approved and completed loans. Second, PRMI always maintained, at that time, a very small volume budget for said products, which fell below 10% of our overall lending volume.  

PRMI simply read the writing on the wall. We felt that the product did not fit our estimation of responsible lending practices and we ultimately chose to abandon the product on a lending basis as it became way too aggressive. Our business has always been predominately focused on “A paper” lending with a strong competency and practice in government and agency lending programs. At the time, it was very obvious to us that we simply needed to focus on our core business practices and competencies – Retail Prime Lending.   

PRMI will not directly benefit from the proposed bail-out, as we do not have loans on our books to be sold into this new “government pool of money” that will ultimately be temporarily funded by the American tax payers. Being that PRMI has always followed proper lending practices, rules, guidelines, warrants and regulations of its oversight entities, including the Federal Housing Administration (FHA), Veteran’s Administration (VA), Fannie Mae, Freddie Mac, Gennie Mae and major mortgage investors (such as Citi, GMAC, SunTrust, Chase, Wells Fargo, etc.), a request will not be made to the government by any PRMI executive for any sort of aid or release of stuck mortgage assets. In addition, PRMI is made up of professional mortgage loan originators that have the ability to originate, process, approve, and fund mortgages utilizing our warehouse banking capabilities – then sell the “payment ready” mortgages into the Secondary Markets.  We only choose certain product types and take certain lending risks when we consider its value proposition to our customers. 

It is essential that Congress acts fast to adopt the proposals made by the Fed and the Treasury. This is not simply a bail-out that will result in an altruistic sacrifice by the great citizens of America with no return or trade in its mechanism; one that will only benefit Wall Street “fat cats”, banks and their CEOs, and special interest groups. The proposal is to utilize tax payer dollars to “un-clog the pipe”, stabilize the banking industry and ultimately allow money through lending to flow more freely to stabilize American households and businesses that are being choked off by the limited lending options available to them.  

In addition, the proposal calls for the very banks that essentially benefit from the bail-out to suffer redemptions by diluting their stock equal to the “net-loss” recognized by the Treasury. In turn the Treasury will return the money to the American citizens after it succeeds in its effort to stabilize said banking platform. It is much more like a huge loan made by the public – and it is designed and intended to save the public. 

We need to stop pointing fingers and act immediately! We are all in this together. Every single citizen of the United States of America has an interest in the stabilization of our economy, banking system, GDP and property asset values. A catastrophic meltdown in our financial systems can only result in massive unemployment and the one-two punch of deflation / inflation in all the wrong places. Every citizen in every class will be affected in numerous ways, from losing value in some areas of life and paying more for essentials. We’re at the “T in the road”, the blinker is signaling a “right hand turn”, but we now seem reluctant to accelerated into the turn. Fear and uncertainty are dangerous enemies that must be stomped out and we need to make the “right turn” – now.