Saturday, May 07, 2005

Mortgage Industry "Pushed" To Lower Standards

As MarketWatch documents, it's all out in the open now. "Lenders are facing increasing competitive pressures, and the need to maintain and increase loan volumes may be driving the push to looser standards. 'The structure of the loans has really changed. What you're doing is leaving a lot more risk on that borrower,' said Brown, of the FDIC."

"Mortgage lenders kind of get caught in the middle saying, 'Well, you want us to push homeownership, so we're trying to create products that will help some more people to get into the house, but on the other hand you're really going to nail us when some of those people go delinquent and go into foreclosure, so what do you want us to do?'" MBA economist Doug Duncan said.

"For now, lenders are opting for a system that results in more loans to more consumers." Who is "pushing" you Mr. Duncan? And is it any surprise the industry "opted" to take the money and run?

"'A lot of times [homebuyers] come in and they attempt to get a more standard, plain-vanilla product, but because of their debt-to-income ratios, because of their work history and their employment status, they're led to these products because we as a lender are not able to approve them' otherwise, said Dave Herpers, with Amerisave Mortgage."

"It's not so much the customer is asking for these products off the bat, but rather are being led there based on their current circumstances."

"Getting more people into homes 'is the right thing to do from a policy perspective, if you do it correctly,' said Frank Nothaft, of Freddie Mac. 'That's always the big if.'"

9 Comments:

At 9:42 AM, Blogger John Law said...

good link I found on silver-investor.com

http://www.bullnotbull.com/bull/Article55.html

Sign of a Pop: Housing is Everywhere. The Great Transition, Part III

 
At 9:53 AM, Blogger John Law said...

no doubt the lendes are trying to make the numbers.

 
At 10:18 AM, Anonymous Anonymous said...

what a b/s "general" statement:

"'A lot of times [homebuyers] come in and they attempt to get a more standard, plain-vanilla product, but because of their debt-to-income ratios, because of their work history and their employment status, they're led to these products because we as a lender are not able to approve them' otherwise, said Dave Herpers, with Amerisave Mortgage."

I am currently in escrow with the wife. We demanded from our mortgage broker that we wanted a 30-year fixed since I am anti ARMs, I/Os, are anything else "creative." Well guess what, the banks tried very hard to get us into I/O's and ARMs! It was not about our debt to income ratio since we well qualified for a fixed but, it was more about them NOT wanting to provide a "traditional" mortgage. We still got our 30-year fixed but, if I got a dollar for each time I had to say "NO!" I'd probably own this house outright. It's obvious the banks/lenders make more money on these "new" type of loans. I was floored to find out how hard we pushed away from the traditional fixed.

 
At 11:18 AM, Anonymous boulderbo said...

not to be rude, but there are more than a few of my clients that should not be in the business of buying a home in the first place. we discussed this yesterday; the loan products being offered have gone well past the threshold of good reason. a poor history of paying bills on time, little or no income and no equity or savings. let's lend you a half million, interest-only, adjusted monthly with a negative amortization. if you overlaid the charts for home prices, interest only mortgages, neg am mortgages and silent seconds, they would all match. anybody on the inside knows the score and it's not gonna end pretty.

 
At 11:25 AM, Anonymous Anonymous said...

To the 10:18 anon - thanks, that's what I suspected. Cute how Herpers says "they're led to those products". Yeah, they're led to those products. Of course "WE" didn't lead them to those products. It the sinister, invisible forces of poverty.

 
At 12:30 PM, Blogger Ben Jones said...

10:18 anon,
Thanks for the excellent and timely first-hand account to go with this post.

Boulderbo,
Thanks for the input, good insight. This late in the housing cycle the industry is negligent in opening up these loans. It will harm those who can least afford it.

 
At 1:46 PM, Anonymous Bud Hovell said...

Hey, Ben ...

With all due respect, your comment that the "industry is negligent in opening up these loans" seems to me unduly kind.

I would say the industry is engaging in fraud of its own (or other) stockholders by approving zero-equity loans almost surely destined to fail soon, and in wholesale quantities.

If someone else will kindly provide the rope, I'll gladly tie the knot and strop the horse!

 
At 2:00 PM, Anonymous bob r said...

...there are more than a few of my clients that should not be in the business of buying a home in the first place.

Shame on you, boulderbo! Don't you know that we must get home ownership up to 100%? Otherwise, how will all those real estate agents and mortgage brokers earn a living?

 
At 4:04 PM, Blogger Greenlander said...

"What you're doing is leaving a lot more risk on that borrower,' said Brown, of the FDIC."

I'm tired of these idiots saying this. These "new" types of "creative financing" put the risk on the financial system. A person who put down 20% has taken a lot of risk; they could lose their whole down payment. Someone has put 0% down has taken no risk at all! The financial system eats the loss if the bloke doesn't make the payments.

 

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