There is so much hoola-bala about the current manufactures shake-ups and outs in the sub-prime market... Everyday I hear people talking about the big accident we are going through. It is a crisis; but it also is mortgage-lending returning to mortgage- lending, as we once knew it.
Someone once said the only constant thing in our manufactures in "change", and yes we are looking a lot of it. Convert is good.
I will probably date myself with this record but for those of us who were selling mortgages before the Internet played a factor, before reputation scoring and before sub-prime lending we all survived. That is, those of us that worked.
There were times when interest rates were 18-20%, (and that was before my time) but I was colse to when interest rates were 10%, I was purchasing a house at the time and was thrilled to get below 10.00 I was able to get 9.50% -- 30 year fixed conforming.
The market and the manufactures have been so good for so long, many Loan originators don't know:
What it's like to buildings a file so the borrower will qualify.
How to analyze a self employed borrowers tax returns so they can go full doc.
How to verily work with Fha/Va programs, State Bond programs.
These things of the past were solid, stable business practices.
We didn't have lie-to-me loans (stated self employed programs let alone stated W2 wage earner programs to 100%). We did have some stated programs available but with lower Ltv's. We didn't have no ratio programs to 100%, N/O/O programs stated to 100%. We had programs that our borrowers had to fit into or they didn't qualify for the loan. If their ratio was too high, they had to pay off some of there debt or we grand them on an arm product.
We still have:
40 and 50 year amortization.
Interest only products.
97% Full doc purchases.
Down-payment assistance programs
Fha loans with 97% purchase
Va is still 100%.
Reverse mortgages.
We need to focus on what we do have available to our borrowers.
I think the same is to be said for the slower real estate markets. Some markets were just insanely overpriced and sooner or later the carpeting was going to pulled out from under. Well the time is now. A home can only appreciate at 50 - 100 -150% for so long. So many rode the wave and prospered, now the market is fighting back.
The reality of it is, that some market areas, are looking at home offers advent in at 25-20% below list price. The buck has to stop somewhere and yes it has slowed down. Reality check has hit. Is the glass half full or half empty, depends on how you see it. Are the homes verily declining in value or are they verily being priced where they should have been? Depends whose eyes you are looking through, the sellers or the buyers. Real Estate sales is all about what the market will bare, what someone is willing to pay for like properties. I learned that way back. I don't think that this appreciation factor is to be blamed on appraisers. They didn't inflate the property, the buyers and sellers did. The appraisers used the available comps to decree value.
Did the Realtors cause this roller coaster effect, not really; again it was the timing of all things. The Realtors could not have listed the properties over inflating them unless buyers were standing in line to purchase them at these higher prices and appraisers were able to comp them.
Home prices in my understanding will decree out in most areas, in some areas, some people will take a loss for their properties but over the whole Us as a country it will stable out shortly.
It wasn't the loan officers that created the potentially, easy to default buyers, it was the media, the government, the lenders and all the ridiculous loan programs available to many truly unqualified home buyers. It was so easy to put someone into a home, that didn't qualify. Just use a 100% stated program...some of these programs allowed low reputation sores, late payments, judgments, and crazy stuff.
We as loan officers were merely doing our part in pre-qualifying borrowers. We are unable to make reputation decisions, we are unable to tell someone they don't qualify for a loan, we must submit these loans and process them. If they qualify for a agenda it is our job to put them in it. Regardless of either we think they can make these payments 3 months from now. So we did our jobs, to a inevitable degree.
One of the things I learned from training to teach classes at the Imba was that a stated loan was only supposed to be used when the borrowers truly made adequate money but couldn't show it on paper, possibly they had a lot of write offs on there tax returns, possibly they had a second job paying cash...whatever the case might be those were the ones who were supposed to be stated loans. Personally, I think stated loans took a lot of the ill and stress off the loan officer, the processor and the underwriter in analyzing self employed tax returns. If the borrower didn't fit this scenario they were supposed to go no ratio and show no earnings and possibly pay yet a slightly higher fee.
I will ask the question, "How many loan officers knew this, understood this, and even cared to use it?" My guess is probably 99.9% went stated.
I still think we have many programs available to us. It is up to us to learn how to use them properly. It is up to us to network again, the phones aren't ringing. It's time to join associations, make presentations, call on builders, accountants, attorneys and yes, even Realtors! It is time to reinvent lending, as we knew it in the past.
My wish to you...Is make it the best year you have had yet. Work hard, but work smart.
The Reality of it All - The Sub-Prime Lending Hoola-Bala