Comments on: The Subprime Meltdown

By: Elisa Wu

Elisa Wu — Sun, 28 Feb 2010 09:59:59 +0000

Frankly speaking, the 0% down is the problem. It’s not safe for both bank and consumer; Maybe we should just go back 1985, think about the old way to do the loan.

By: Ross Palmer

Ross Palmer — Fri, 31 Jul 2009 02:20:36 +0000

Again, this is still going on from last year, but the underwriting requirements have been even stricter now than ever before. Although this is unfair for those people who did not know what they were getting into, people who have never had a loan that have not been responsible in the past shouldn’t be allowed to obtain a loan. If you have bad credit and no money down, you have no business buying a home, wait until your ready. Lenders are no longer giving out money like they used to, they are stuck with the loan and the consequences, which is better for everyone involved in the long run. For the borrowers with great credit and DTI, that are still being denied… not as fair.

By: Melissa Morgan

Melissa Morgan — Sun, 21 Jun 2009 05:29:04 +0000

Lets tighten credit but not to the other extreme. A lot of lenders are basing their decisions today on fear and their existing portfolio to where they are lending to very few and spending their time trying to get the bad off their books. They are not lending the money that they all received.

We need to go back to basics. I also go back to 1985. My job was to look at peoples lives on paper and decide whether I felt they could and would repay the mortgage. Underwriting to 28/36 ratios with no such thing as a credit score. Buydowns were a hot item used for qualifying higher. That was about as fancy as it got.

By: Joe Dahleen

Joe Dahleen — Thu, 14 May 2009 18:56:18 +0000

Companies that provide the most transparency process will thrive in this market. Those who provide more education about the process with thrive in this market. Those who put the best interest of there borrowers above the profit will thrive.

But loans will still be made even though the tighter underwriting guidelines and debt ratios limits. But that will not help those who are stuck with mortgage balances higher than the current market value. It will not help those who qualify, make there payments on time each and every month because the Loan to Value is way too high. They won’t even qualify for a loan modification because they are doing the right thing by making there payments on time.

The HVCC appraisal policy and rules are great for appraisers but the consumer is now paying more for appraisals.

I believe the industry has done a much better job taking on these issues recently and the ultimate conclusion is that it will be a much better business coming out of this meltdown.

By: Raylene Ramos

Raylene Ramos — Thu, 23 Apr 2009 22:05:57 +0000

If the loan industry had the same regulations as it did in the 80′s we would not be in this mortgage mess. Furthermore, if the industry would have stayed with fixed rate loans only, we would not be in this mess. Making it easier for risky consumers to get into their dream home by offering adjustable rates, interest only, no money down, etc’s, is a temporary high for them.

By: Mary McGraw

Mary McGraw — Wed, 22 Apr 2009 00:15:15 +0000

I;m also glsd that we are getiing more honest people in the business today.

By: Mary McGraw

Mary McGraw — Tue, 21 Apr 2009 23:02:11 +0000

This is why so many people are lossing their homes because they didnt understand what they were getting into and that was a real shame. I’m glad to see that things are changing so that doesn’t happen again.

By: Terry Birkland

Terry Birkland — Sat, 04 Apr 2009 00:19:51 +0000

I have never orginated a loan so I am bewildered by much of what I am reading. Could someone really get 100% financing with no documentation and a poor credit score? My first home cost $8,500 in 1959, I put $1,500 down and got a 5.25% mortgage through Seattle Mortgage Co. I worried whether or not I would be approved. What is the right loan/credit standard that promotes growth but will stand up to the ups and downs of the market? Maybe subprime loans should be segregated and limited to high risk investor/lenders who can afford to lose or profit but not take everyone down with them when the maket dips.

By: William Platts

William Platts — Fri, 27 Feb 2009 18:38:59 +0000

The sub-prime meltdown was not needed in my opinion. It was greed run amuck and this was not just tied to the mortgage industry, it ran straight across the board; cooking the books was apparent in all parts of American business, Wall Street ran out of control, a war was created partially out of greed, it was just everywhere. It was capitalism gone nuts.

The mortgage business just happens to be an arena that a majority of Americans participate in one way or another. Its also very visible when it comes un-done because people loose there homes. For Americans this is tragic to have happen. It gets people talking, government trying to take action and critics have a field day in the media. Blame, Blame, Blame. When it should be action, action, action to create a mortgage environment that this could never happen again in.

We got the blame, but the $billion dollar question is does our industry have what it takes to pick itself up and make a safe and fair place for all to do business? Or, do we wait for government to mold our work arena into what they envision as a safe and fair arena of business? I hope the government option is not the one we go with!

By: Teresa Tait

Teresa Tait — Sun, 08 Feb 2009 01:20:06 +0000

When I first started in this business ( 6 yrs ago) I was shocked at the never ending amount of subprime loan programs. Having purchased 5 homes with regular conventional financing, I could not believe that these clients were able to purchase homes with 500+ credit scores and no money down, and stated incomes. There was simply no investment nor incentive for them to stay in their homes if anything( job loss/illness)in their lives should change. If I could see then that this was a problem, what exactly were the Lenders seeing? Short term profits and nothing more.All of this needed to correct itself and hopefully all of the changes coming and LO Licensing will provide a much needed professional platform for the entire industry.

By: Vladislav Baydovskiy

Vladislav Baydovskiy — Mon, 02 Feb 2009 05:15:04 +0000

Like your self I have started in the business while back. From that time on, i have seen the lenders guidline relax to point of no return. When I heard from one lender that they are offering 100% stated neg am, i thought that this is the sighn that things have went too far. As long as corporations were making record profits, and the default rates were low, nobody cared! So corporations were driving it futher and futher, so see how far this thing can go! Now we have to go to reality, and only approve the loans, that actually have a good prabability of repayment.

By: Laurie Morgan

Laurie Morgan — Wed, 28 Jan 2009 23:27:45 +0000

Jillayne, having a similar background in lending I was amazed to see wholesale lender after wholesale lender come through our office asking for loans. Each week the traditional underwriter in me thought WOW some of this stuff is crazy, these people will never pay and why should they they have not demonstrated any credit worthiness.

At the time I worked for a broker who pressured us to earn a minimum amount of fees each month to keep our jobs. I resisted predatory lending which was practiced by several of my co-workers. I made a choice to sleep at night and not get involved is putting people into homes they could not afford and had already proven (with looking at their credit report)they would not likely pay.

Credit scoring came out in the early 90′s as a statistical probably the person would file bankruptcy. Credit scoring was the start of non traditional documentation. The Bank (Seafirst at the time) sold this product (in automotive financing) as an Auto approval system. People with scores above a 700 were auto approved and no documentation was required. When I saw this happen in the housing industry I about choked. It’s one thing for a $250.00 car payment to go bad, it is a totally different thing to default on your home.

I think it will be a good exercise for the new folks in the lending industry to actually learn that you can’t approve a loan based on credit score and the ability to fog a mirror.

This is just my own take on the situation. One thing I would like to see is the Realtors taking a step back and not commenting on a lender’s guidelines or referring to “their” special lender. Realtors have no idea how lending works, and sometimes I’d like to ask for their share of the commission which is often 3 times what mine is.

By: Beth Damery

Beth Damery — Wed, 28 Jan 2009 23:09:40 +0000

I wish I had a crystal ball to be able to see into the future but since I don’t I will keep plugging away and digging in my treasure chest of past clients and following new leads to originate good solid loans available in todays market that will fit my clients needs. I am hopeful, as Neal mentioned above, that we will not see much higher rates in 2009 so the housing industry can lead the economic recovery in America.

By: Mila Usher

Mila Usher — Sat, 03 Jan 2009 17:26:46 +0000

I guess all I can say to that is hopefully we can learn from the past and not repeat the same mistakes. I would also hope that the consumer will research and educate themselves against being taken advantage of, and that the industry is not allowed to bring back certain types of loans.

By: Mike Vandenbos

Mike Vandenbos — Wed, 31 Dec 2008 06:14:35 +0000

Systemic solutions should involve “best practice” implementation in all areas of our industry…originating, escrow, secondary market, etc. I think the clarion call to change should come from leaders in the industry who have demonstrated integrity and who are above reproach. Our industry is looking for leadership and confidence and those who have earned an upstanding reputation need to continue stepping up and persuading all of us to a higher standard.

I have really benefitted from this ethics course by reading all of the blog entries and being compelled by Jillayns format of questions and dialogue. The greatest resource we all have is each other and it would be great if we all embraced a “blue ocean” mindset that promotes a systematic approach, not to out-perform the competition in our industry, but to create new market space or “blue ocean”, thereby making the competition irrelevant regarding the future of our industry.

By: Bartholomew Henning

Bartholomew Henning — Wed, 31 Dec 2008 00:13:03 +0000

Right now it is very interesting to see things written a couple months ago. Here we are, six months after this article was written and most of it stands true. I would be interested to see when interest rates go up,up, up, however. The tightening in lending has surely hit, but rates are almost at an all-time low. When will that change. As for the rest of the article, it is pretty obvious what happened, and any well tuned mortgage professional should have seen it coming.

By: Kent Kiser

Kent Kiser — Tue, 30 Dec 2008 22:24:36 +0000

The way you could go and get any loan product with no money down no credit and no reserves was simply idiotic. I was absolutely taken back with the onslaught of products that got anyone in a home.
I still believe that a calculator used by some of the borrowers in advance of hasty buying decisions could have relieved some of this pain.
I watchede from the wholesale side as some of the largest lenders made good loans but bought alot of bad ones. That is where most of the problems seemed to occur.
Stockholder pressure is a very menacing thing to deal with…

By: Benjamin Bergsma

Benjamin Bergsma — Tue, 30 Dec 2008 19:45:20 +0000

I think that the brokers has nothing t do with th meltdown, I was caused by the major lenders such as WANU and Indybank, Their need for greed drove them to this point and beyond. The major lenders did not give the brokers or the LO’s the necessary training or deucation to inform the consumer.

By: Mark Johnson

Mark Johnson — Tue, 30 Dec 2008 17:33:33 +0000

Mark Johnson
509 457-1944 Fax
510-LO-44600

I have been doing mortage loans for about 15 years. Both for banks and for mortgage companies and also for mortgage brokers. I have seen a huge change in the past few years. Underwriting was relatively appropriate in the early to late 90′s. Then in the early 90′s with the advent of the 80-20′s and then the NINA type loans and then with the option-only type loans and the relaxed underwriting guidelines it is not hard to see what has happened and why. It is unfortuneate that now the pendilum has swung the other way and now underwritng is too stringent. I am hoping with the new professionalism of Mortgage Banking that the guidelines return to a more appropriate level like that of the 90′s.

By: Yoshiho Takamoto

Yoshiho Takamoto — Thu, 25 Dec 2008 20:54:26 +0000

Since I am still new to this industry, when I join the mortgage industry, I had to get the license to be a LO. Therefore, I do not know the relaxed standards, bubble-run up years. I personally do not have experience to compare now and before but I do hear from ex-LOs that it used to be great, any loan would have gone through…etc. From the time I join this industry, I have come across many “ex-” mortgage people. In a way, I am glad I do not know the “golden years” of this industry because it’s always easy to go from “poor to rich, hard to easy” but very hard to be “rich to poor, easy to hard”.

By: Tom Strain

Tom Strain — Tue, 16 Dec 2008 22:40:26 +0000

You hit the nail on the head as to why the mltdown happened and why we continue to see forclosures into 2009. Market adjustments hae to happen it is normal, however this one is more sevcere because of how wide we opened the credit window. You get what you pay for in life. We gave it away, everyone made a lot of money, many home owners were conservative and got low interest fixed loans, but that percentage that took advantage of the system as well as the l.o.’s and wholesale bankers and lenders that let it happen, well shame on them. Yes it was made easy to put questionable loans on the books. Well when you were offered to due something that was not right when you were young- like steal or do drugs, or whatever? what did you do? Its a moral and ethical choice everyone has to make. If you were invovled in doing what was not in your customers best interest and you made money on it. Shame on you and if you are getting blackballed now- well what goes around comes aroun. if set it once I’ll say it again. All l.o and processors need to be licensed and there needs to be self regulated oversight that tracks portfolio performance for those in the mortgage intdustry with comensation. To get us back on track the lower interest rates we see today help. But lenders and mortgage companies need to step up to all people who are traped in these loans and offer fixed modifications where applicable. use the bailout money to get us back on track and stabalize the market. Until we do home values will drop as forclosures continue and a complete collapse of our economy could be the outcome.

By: Neal Eifling

Neal Eifling — Mon, 15 Dec 2008 23:58:45 +0000

It’s the WILD, WILD WEST out there right now. However I don’t believe we will see a large increase to rates in 2009. The economic recovery must start in the housing market. No question about it. Lower rates will not help if your property is underwater and ridiculous Fannie/Freddie fees remain in place. We have to stop the erosion caused by foreclosures. We have to draw people off the sidelines to start buying. YES! YES! And we have to protect the FHA system. If that system fails prepare yourself for another hard hitting final blow. The market correction will eventually work its way through. The question is can we sustain ourselves enough to see it through and become the professionals we are meant to be.

By: beth ward

beth ward — Sun, 07 Dec 2008 21:03:14 +0000

I love this article… yes I am aware of people who have been living for the refi of their home … living with the expectation of them having money … I also know that a friend of mine was a LO and watch her spending to know when to ask for the new refi … I’m glad that things are tight and people really need to pay attention to what they have and whats working. I hope we don’t have a bail out…

By: richard martin

richard martin — Wed, 26 Nov 2008 02:47:59 +0000

Every day it seems new fixes for the ” Mortgage Meltdown ” show up by experts who should have seen it coming but did not, or if they did never tried to do anything about it, more promises of manageing the mess are published. none so far seems to get at the root of the problem.
It seems like just yesterday everybody was cheering on the great Real Estate get rich opportunity Home Buyers were looking to do a fast Refi to pay off credit cards buy another house or new expensive toys and LOs and REs were making incredible commissions then of course reality set in, the bubble burst.
Ultimatly I think there will be a hugh consumer mortgage bailout designed by the experts who did not see it coming, it wont fix the real problem which could be a massive corrective adjustment of wealth moving from the developed countriies of the west to the new developing countries of Asia and with it a more modest menu of expectations for us, designed by the ultimate arbitrator of these things THE MARKET.

By: Theresa Reyna

Theresa Reyna — Tue, 25 Nov 2008 10:14:00 +0000

This MELTDOWN happen because it needed to happen. The market need to correct itself, the home price need it to stabilize, the industry need to start re-examining it’s self better. All of it need to happen.
Greed was the center source of this crisis, for sure. And everyone knew but did nothing to stop it. Now that it did come to a stop, we are all feeling “guilty” for participating in it or we’re trying to justify our past action by saying, “who could’ve predicted this meltdown? not me.” How ever each party want to look at it, it’s now everyone problem. So we all have to wake up and start implementing rules and laws that can guide us to be better LO, better Lenders, better and consciouses borrowers.
There’s going to be time when it’s in the best interest of the borrower that they continue to rent for the next year or two, before getting into a home. We need to tell them that, and not try to sell them into a product that will not work for them in 3 to 4 years.
We all have to start creating a road that will lead us out of this recession tunnel that we have originally participated in building.