Fly on the wall at MBA Conference

At the Mortgage Bankers Association's annual conference this year, sandwiched between the featured speakers, Sir Richard Branson, founder of the Virgin Companies, who spoke on Monday morning, and U2 lead singer Bono, who spoke Tuesday morning, there was a little talk about mortgages.

The session on subprime mortgages got my attention. So what were the lenders telling each other about the subprime crisis?

Thomas Cronin, vice chairman of Clayton Fixed Income Services, a research company for the industry, told bankers in the afternoon session Monday the subprime crisis, as reported by the press, is "a little bit out of proportion.

But he went on to say bankers made mistakes and should have seen it coming. Delinquent subprime loans were bubbling beneath the surface for a couple years but were masked by ever-rising house prices.

"How many in this room think you had something to do with it?" Cronin asked his audience of mortgage bankers. No hands went up. "The truth is, most of us had stuff on our shoes," he said. Nervous laughter.

Cronin went on to list the various mistakes, including lenders' complacency, ignoring the risks of many borrowers, and the "disconnect" between borrowers on Main Street and the investors on Wall Street who purchased these subprime loans.

What got the biggest laugh was when Cronin said, "We're shocked -- shocked -- to learn buyers and brokers always tell the truth." He was apparently alluding to the fraud that regulators have identified as a factor in the industry's downturn.

Cronin finished his talk by repeating the definition of insanity many attribute to Albert Einstein: "doing the same thing over and over again and expecting different results."