What Went Wrong[By Ray Newby]
Oh Yes...it's a time of goodwill and cheer!
With the holidays comes a bit of stress and anxiety. Some of those factors are money, buy, buy, buy, and some are time, more, more, more. It's tough to just sit back and take it in and revel in the spirit. A cup of cheer will sometimes help. So that's what we're going to try to give you today...a symbolic cup of cheer.
But first the grinch doeth cometh.
Rate Is Low, like most in the mortgage business has gone through many changes this past year. Some have been disappointing. We've had to do layoffs and downsizing. We've had to change our view of what to expect and how to get to the end game. For the last three months the fall out from programs not being available has been nothing less than shattering. Because of the mammoth exodus of lenders, many borrowers have been left in a financial lurch with no where to go. There just weren't any programs for them. And good or excellent credit didn't matter...everyone suffered. So, as we pick ourselves up from the ruins of loan fallout, dust our selves off (more like taking the boot prints off our necks) and start to recover, we must look at business differently.
First, and this is truly sad. Many of the programs that best served the client are indeed gone. Where we were able to deliver programs when the credit score was in the low 500 range, that range is now about 620 as a starting point. And that simply means many folks who need financing, need to consolidate or get cash out, now can't. They haven't changed, the world did. And they will and do suffer the fallout.
And many people are blaming mortgage brokers for the "bad' loans on the market that "drove" people into foreclosure.There's even federal legislation in the works to hunt down the preparator and rid the world of their evil influence. The great thing is that you don't have to know the facts to have an opinion. And because there are people loosing their homes...well there must be someone to blame...and we've got to get them. The truth is a bit different...
In the past when someone bought a home and didn't have a down payment, needing 100% financing, they were given temporary loans designed to be refinanced in about two years into better rates and terms as the homeowner established a payment record and equity. There was nothing wrong with this system as it worked for tens of thousands of people and allowed us to experience the highest rate of home ownership in history. So what happened...what went wrong?
The housing market is what happened. As everyone and their cousin decided they could be the next Donald Trump, everyone bought one, then two, then three homes. We were rolling in profits and our future looked bright. Nothing could go wrong and to the devil with all those doom and gloom people who said it would all end. And them one day it did end. Rates started up, fewer people could afford the increase, demand changed, and everyone stated to dump those wonderful investments. The result was as predictable as Britneys' bad behavior...with less demand (buyers) the price started to drop. And all those good folks who bought homes with 100 % financing now couldn't refi to better rates because they were up side down on their home...and they started walking away and foreclosures were everywhere.
So the newspapers picked up on the term "sub-prime" and "teaser" rates and pretty soon the world was awaking to a new villain. And isn't that always the way to make us feel better...blame someone...especially those evil lenders who made us take these terrible loans. Much like the cartoons from the past where the helpless maiden was strapped on the railroad track waiting for the on coming train, we could see the disaster and we blamed the conductor.
But the conductor isn't the villain. And neither is the mortgage professional or lender. In both cased they are responding to the needs and expectation of the client. Loan programs are created because of demand. And lenders did their job and provided the public with ways to borrow and get the home they wanted. Then, when it falls apart, through no fault of the lender, that is exactly who we blame,...amazing. Were these the programs some how exotic, mystifying or filled with ambiguities. No. All of the programs had been available for many years and were widely used. So what happened...again, the market. When values tumbled so did equity and so did the lenders ability to refi a person out of what they had to what they expected.
And who takes the big loss? The lender will have to write off the huge loss on each home that is in default. And if you haven't noticed many are going out of business. And not because of bad decisions or poor management...but because of the changing market. And that's o.k. No reason to feel sorry for them. But there's no reason to blame them either. They did a great job of getting folks into homes. And for many borrowers...the hard work and diligence of those lenders and brokers have made a huge positive difference in creating wealth.
Ray Newby is a mortgage broker and real estate investor with over 30 years of experience in the industry.
Article Source: http://EzineArticles.com/?expert=Ray_Newby
With the holidays comes a bit of stress and anxiety. Some of those factors are money, buy, buy, buy, and some are time, more, more, more. It's tough to just sit back and take it in and revel in the spirit. A cup of cheer will sometimes help. So that's what we're going to try to give you today...a symbolic cup of cheer.
But first the grinch doeth cometh.
Rate Is Low, like most in the mortgage business has gone through many changes this past year. Some have been disappointing. We've had to do layoffs and downsizing. We've had to change our view of what to expect and how to get to the end game. For the last three months the fall out from programs not being available has been nothing less than shattering. Because of the mammoth exodus of lenders, many borrowers have been left in a financial lurch with no where to go. There just weren't any programs for them. And good or excellent credit didn't matter...everyone suffered. So, as we pick ourselves up from the ruins of loan fallout, dust our selves off (more like taking the boot prints off our necks) and start to recover, we must look at business differently.
First, and this is truly sad. Many of the programs that best served the client are indeed gone. Where we were able to deliver programs when the credit score was in the low 500 range, that range is now about 620 as a starting point. And that simply means many folks who need financing, need to consolidate or get cash out, now can't. They haven't changed, the world did. And they will and do suffer the fallout.
And many people are blaming mortgage brokers for the "bad' loans on the market that "drove" people into foreclosure.There's even federal legislation in the works to hunt down the preparator and rid the world of their evil influence. The great thing is that you don't have to know the facts to have an opinion. And because there are people loosing their homes...well there must be someone to blame...and we've got to get them. The truth is a bit different...
In the past when someone bought a home and didn't have a down payment, needing 100% financing, they were given temporary loans designed to be refinanced in about two years into better rates and terms as the homeowner established a payment record and equity. There was nothing wrong with this system as it worked for tens of thousands of people and allowed us to experience the highest rate of home ownership in history. So what happened...what went wrong?
The housing market is what happened. As everyone and their cousin decided they could be the next Donald Trump, everyone bought one, then two, then three homes. We were rolling in profits and our future looked bright. Nothing could go wrong and to the devil with all those doom and gloom people who said it would all end. And them one day it did end. Rates started up, fewer people could afford the increase, demand changed, and everyone stated to dump those wonderful investments. The result was as predictable as Britneys' bad behavior...with less demand (buyers) the price started to drop. And all those good folks who bought homes with 100 % financing now couldn't refi to better rates because they were up side down on their home...and they started walking away and foreclosures were everywhere.
So the newspapers picked up on the term "sub-prime" and "teaser" rates and pretty soon the world was awaking to a new villain. And isn't that always the way to make us feel better...blame someone...especially those evil lenders who made us take these terrible loans. Much like the cartoons from the past where the helpless maiden was strapped on the railroad track waiting for the on coming train, we could see the disaster and we blamed the conductor.
But the conductor isn't the villain. And neither is the mortgage professional or lender. In both cased they are responding to the needs and expectation of the client. Loan programs are created because of demand. And lenders did their job and provided the public with ways to borrow and get the home they wanted. Then, when it falls apart, through no fault of the lender, that is exactly who we blame,...amazing. Were these the programs some how exotic, mystifying or filled with ambiguities. No. All of the programs had been available for many years and were widely used. So what happened...again, the market. When values tumbled so did equity and so did the lenders ability to refi a person out of what they had to what they expected.
And who takes the big loss? The lender will have to write off the huge loss on each home that is in default. And if you haven't noticed many are going out of business. And not because of bad decisions or poor management...but because of the changing market. And that's o.k. No reason to feel sorry for them. But there's no reason to blame them either. They did a great job of getting folks into homes. And for many borrowers...the hard work and diligence of those lenders and brokers have made a huge positive difference in creating wealth.
Ray Newby is a mortgage broker and real estate investor with over 30 years of experience in the industry.
Article Source: http://EzineArticles.com/?expert=Ray_Newby
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