12 Responses

1. Zendre Strother

   August 14th, 2007 at 8:02 pm

   1

   The industry is to blame. If this industry would require loan officers to be educated past high school, things would get better. You cant give an 18 year old that much power, and expext them to be able to handle it like a true adult college graduate would. This is also why there are so many loan officers on cocaine and crack.
   I myself am a loan officer. I have two degrees (BS and MBA). I make sure that my clients are well educated on their loan when they see me. I make sure that I look out for their interests before mine regardless of how big the payday will be.
   Lenders should stop making it ok for loan officers to get jobs who openly do cocaine and marijuanna (yea I know I cant spell it…I don’t want to be associated with it in any way). These types of people will do anything to get some money and get coked up or cracked out. You cant let them be in control of someones financial future!
   Once the lenders and brokers get smart and make the requirements to be a loan officer just like the requirements to be a doctor, lawer, nurse, scientist, or any other specialty that requires a degree, then this business will get back on track.

   Z

2. Bill

   August 14th, 2007 at 8:09 pm

   2

   I think his answer is BS. He’s trying to blame Wall Street. Guess what? The lenders didn’t have to take their money and loan it to questionable candidates. The blame lies squarely on the shoulders of the lending industry. They have been doing this for YEARS, and have plenty of data, most notably FICO scores to figure out who is a good candidate.

   They were greedy, and didn’t control their loan officers. They are irresponsible in giving out ARM and balloon rate mortgages to people whose income would not rise to the occasion. While the consumer is ultimately responsible for their credit, the banks have no business making up loan terms to fit someone’s current situation just to make a buck when they can see no future income to make up the difference when the rate rises.

   I would like to know how many loan officers informed candidates what their payment would be when the low rate term ended. Not too many, I suspect.

   I think it’s crap and cop out to insinuate that Wall Street “pushed” them to give out these loans…

3. Bert Donahee

   August 14th, 2007 at 8:15 pm

   3

   Who is to Blame?

   I am a mortgage broker and have been in the mortgage business since 1987, and have seen a lot of changes with high rates and loose underwriting.
   During the last 5 years rates have been very very low, with a conventional loan, 30 yr fixed under 5%. Every one wanted a home, the payment was lower than you could rent for and get all the tax deductions. This is when the 80/20 loans came into play, mainly subprime so people would not have to pay the PMI that A paper wanted, and get a 0 down loan and have the seller pay all the cost.. With those loans came the 2-28 & the 3-27. The rates on the subprime loans were under 6% and the 2nd mortgage was in the 7% range. With the 10 yr bond so low at the time, Wallstreet was very happy to get these returns. As a broker when these programs were coming out we could not believe the changes that were going on. Any body with common sense thought this would not last long. If I did not use the subprime loans they would go across the street and use that mortgage company. People with GOOD credit and POOR credit were using these programs, so it goses much farther than thinking only people with poor credit used the subprime. Who is to Blame? You would have to say Wall Street is to blame. They provided the money for these programs and the underwriting guide lines. As brokers we did not make up these programs, we used what was provided to get people in to homes and if we did not then we were losing business. There is much more but this is my two cents worth. It will be interesting to see where this ends up.
   No one ever thought that the housing market would go this way. It is not just the high rates that people are getting after there rate adjustment, it is that the home value has gone down and there is no equity.

   Bert Donahee

4. guy godbooldo

   August 14th, 2007 at 8:28 pm

   4

   stop the balme game , thats ez to do,
   the solution is to go back to 90`s to fixed loans only ,
   the solution to the present subprime,defualts is to , take all the 2/28/3/27 etc that are in trouble , re state their loans fron adjustable to fixe, now they could be sold to investers ,with no fear of payment hiking the owner of of their home ,this will garentee reduction of forcloser rates, and money will move with a flow again , better than blaming, pointing a finger,or worst doing nothing,
   guy g michagan

5. Bill Matz

   August 14th, 2007 at 10:15 pm

   5

   Zendre (#1) is absolutely right. A major factor is massive incompetence and lack of education on the part of loan officers/brokers.

   Another huge factor is the incestuous relationship between lenders and originators. Lenders have, in effect been bribing originators with high rebates to sell out their clients (into ARMs, high margins, prepays, etc.)

   Killinger’s real dishonesty is in failing to admit that WAMU’s flagship products, the Option ARMs, are probably the prime example of irrational lending over the last 5 years. Except in rare circumstances, there has been no justification to put a borrower into ARMs with a true rate higher than fixed. I have offered 30-year fixed as low as 4% and 20 year fixed as low as 3.375%. The so-called cash flow advantage is a mirage; the true interest cost of the deferred interest has often exceeded 200% (yes, 200%). But outside of a few of us with relevant education, most originators don’t grasp that. Keep in mind that nowhere in the disclosures is there anything that informs a borrower that in the 2d month of that lovely, deceptively-low payment, their loan will go neg by $1000, $1500, or more.

6. Noel Collins

   August 15th, 2007 at 6:31 pm

   6

   I’m amazed here. I’ll be honest I don’t participate on this site much but have been more prevalent over the last few weeks, I promised my DP buddies I’d pay more attention as I find this blog relevant in the current conditions. What I’m amazed at here is the lack of respect for Loan Officers. (I am a marketing director not an LO). What I don’t see when laying the blame on everyone around here is anyone pointing the fingers back at the actual consumer. We spent months putting borrowers lives back together using ARM’s or fresh start loans, debt consolidation etc. How many times did you hear your peers save someone from the debt crunch they were in, get them a good 2yr or 3yr’s worth of low payments all while paying their debts down and giving them a chance to restart their lives, then come back to the game with a higher FICO, better chance to turn their credit lives around and become a positive contributer to the markets and overall health/condition of the economy by following our guidelines. Fat chance, 99% of the credit challenged borrowers took the cash, got new credit cards, maxed them out, bought new cars or even a second home all while gambling that the clearly evident housing (I hate this term) “Correction” was coming. Blame someone but don’t blame one segment of the triangle. Crack and Marijuana are the causes, Jeeez. Common guys, Lenders, Borrowers, LO’s, Lead providers, we’re all in this together regardless of your backgrounds, education and experiences. I do not believe for one minute that someone educated with multiple degress automatically is set on a higher morale compass then any of the others out there. It’s the individual organiazation you work for that dictates the morales of it’s work force. Our shop as an example hires no one who has not proven originations and standards for 3 years before allowing them within our walls, couple that with a AA rating with the BBB which a crappy series of LO’s could destroy in a week and we play the game right. I guess all those coked out, uneducated LO’s bringing down our economy can save it by heading over to the auto dealership lots, increase our competition against the Japanese? Or is that giving the auto salesman a bad name? You tell me.

7. Dee Smith

   August 18th, 2007 at 7:24 pm

   7

   Whoo’s to blame?
   The lenders!
   Lending to people who normally couldn’t get a loan
   Lending to people with no money! “HELLO!”
   Lending interest only. They don’t even have to pay back the money.
   52% Ratios?
   Adjustable rate mortgages they knew the borrower couldn’t pay when it adjusts
   With all due respect, they asked for it!

   God bless,
   DEE SMITH

8. Jeff Evans

   August 21st, 2007 at 10:16 pm

   8

   Not all lenders/originators are guilty of this method of business. Sure those who consider SRP/Rebate the first and foremost priority may fit this category but there are a few of us who have stayed consitent for many years and will for many more.
   God Bless you too

9. Noel Collins

   August 21st, 2007 at 10:33 pm

   9

   Wow did Dee profit from those lenders giving loans to her home buiyers and/or by selling the foreclosure homes to others that needed it. Let’s make sure everyone around understands this was the perfect storm waiting to happen, in the mean time all of you and I were eating Shrimp Salads for lunch every day. We’ve been in business 14 yrs as a direct lender not sure which lenders are to blame, which borrowers are to blame, which Realtors are to blame or which programs are to blame, which brokers are to blame, blah blah blah. Let’s try a new game and take some responsibility for our own actions and stop trying to pin this on one segment of the industry. Seems petty and simple minded. My opinion only.

10. Mike D.

    August 22nd, 2007 at 3:52 am

    10

    Lets keep it short & simple. We are all to blame for the meltdown. From the lenders deciding to initiate exotic loans to shaky borrowers, non qualified people trying to be loan officer in it for the quick buck all the way to the borrowers that knew what kind of loans they were getting into but rolled the dice and crossed there fingers that the housing market will stay steady so they could keep refinancing to live off there equity. Dont forget about the appraisers pushing value to gain business as well.

    I think this is a cleansing period that is pushing everyone out that should of never been in the business from the get go. Over 250,000 people in the mortgage industry changed there profession in 2007. Give me feedback, im down to listen.

11. Mary Ann MacMillan

    August 22nd, 2007 at 2:12 pm

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    If UNDERWRITER has final say and examines all documentation before a loan is approved, Zendra’s suggestion that loan officer get more education is useless. As a real estate broker in two other states, and agent and loan officer in California for over 12 yrs, I have seen highly educated licensed loan officers who were also “realtors”, scam the system big time. I see the problem as resting on the lenders who have failed in two areas - initial underwriting and refusal of good short sale offers. We all knew values could not keep going up. Many who have adjustable loans, and need to refi, can’t get the “value” on an appraisal, and when they agree to sell, on short sale, I have seen lenders refuse very viable offers, only to take back the property, and 6 mos. later put it on the market and sell as less than the short sale offer. Let’s educate the lenders.

12. Rudolph Andreae

    August 23rd, 2007 at 4:18 pm

    12

    This is a Land rush that was set up by the banks for the benefit of thier biggest depositors and hedge funds which raid assets from anything they invest in. And it’s primariry sponsored by RBS. One need only follow the money into the secondary market to see the glut of preposterous loans that were made in order to flush cash into the ecomony.
    Loan officers Proecessors and underwriters would not have originated and closed loans that didn’t pass the review boards of multiple lending houses that either did or didn’t follow fannie mae guidlines by loan bundling practices. Loans in question were primarily insured loans so who do you think lost out?
    The drop in prpoerty value is due to the loss of good paying jobs in my area of of Michigan and the midwestern industrial heartland of the United States. Once again follow the money. More debt by government sucks money out of the economy. The Fed raises rates to control oil induced inflation so there’s less money for gas and consumer goods. The banks set up preposterous conditions for loans knowing they will fail and the mortgage insurance companies start selling mortgage insurance in bigger numbers than ever, as good paying jobs and America’s manufacturing based economy gets shipped overseas to countries and banks that manipulate their currency against the dollar and offer labor at such a cheap rate there’s no possibility of competeing. If you want to know where the money went look at gas oil and big big corporations with world record profits. nuff said Nafta Gafta Banking and outrageous world record profits allowed by big government with no accountability or enforcement of laws. So for those of you who blame the Loan Officers think again. most laon officers are salesmen. They do not approve loans. Most all borrowers were told these were adjustable rate loans and that payments would be going up as rates went up. the loan officer told them the Title Comapny Closers told them. The people who got those loans from me were informed of payment increases and all had reasons like expected pay increases to take the loan. They had faiththat things would be better. What happened instead is that 110,000- Manufacturing jobs that provided good enough pay to make the loan payments have left this area in the last three years. Over the last 5 years we have lost 326,000 manufacturing jobs in Michigan alone. There are only so many Walmarts and that means the whole family has to work there to make the same incomes that were lost. so look at the numbers of Manufacturing jobs Lost to China, Mexico Etc and and look at the number of current folreclosures close to plant closings and lay offs. This represents the folks that just can’t hold on any more and have nothing left to lose. Let that be a lesson to those of you who are driving anything other than a Ford Chrysler or GM or any american made product.
    If it isn;t anamerican company making an american product you don’t buy it you don’t need it.