When Mortgages Made Sense

When I started in the mortgage industry 16 years ago, there was no automated underwriting systems! We did not have the MTA's, stated no income no asset loans. Credit Scores were not even a factor yet. We actually had to use our brains to put a loan together. It amazes me what has transpired and part of me feels like I have wasted all of these years. "Greed" has played a very large part in what has happened in our industry! I personally watched upper management get richer and richer! Their influence certainly did not help the situation. There are still some of us left that truly are in this business to make a difference! And yes most of our consumers do not have the financial savvy to know what they are getting into. Its a loan officers job to properly explain the procedure. To give them that warm and fuzzy feeling! Unfortunately, with the programs and products out their, the income potential a loan officer has, they just sell the most expensive loan they can with the most amount of premium in the rate. I posted here today to basically say, not all of us are greedy lenders, some of us actually love what we do and wish that things would get tightened up a bit. Those who truly are good at their jobs will make it through! Since 2006, 210 mortgage lenders have shut their doors! There will be many more to come and those who survive, hopefully will be the companies, the consumer can go to and get the TLC they deserve!

The problem with buying houses for most of the Americans really is similar to their eating practices. Americans eat too much, and Americans also want huge houses. And the market and the builders follow that, adding some extra (for the extra cost, of course).
In my family there are only three of us (parents with one child), so we don???t need a lot of space, especially since we were used to European standards. :) But, when we started looking to buy a house in the USA, we were very disappointed to find out that in new construction or in newer nice suburbs, only huge (2000 square feet and up) houses were available. It???s not that we could not afford that much, but it???s just a waste of money and a huge impact on the environment (think of all extra heating and cooling). We were fortunate to eventually find a nice new house of about 1400 sq.ft., but now it looks like we???ll have to move to a different state (job related), and I???m afraid we???ll have the same problem again.

The real problem is that most consumers don't have the financial savvy to know that they are being robbed by the mortgage companies. Even with a low 30 yr fixed rate, they will pay for the house 2 or 3 times in interest. We should be utilizing Mortgage Checking Accounts like Australians have been using for almost 20 years. Aussies save over $100,000 in mortgage interest and pay their homes off in 7-10 years by simply combining their checking accounts with their mortgage accounts. This would not only save new homebuyers, but many of those who are at risk of losing them in the next few years.

Historically, the consumer level has always been a cash cow for banks, then the banks lose the money in the big deals. This has been true for at least 100 years (according to an English banker I got to talk with). What makes this interesting is that the typical "balanced" discussion has greedy banks versus ignorant or untrusworthy borrowers. All of this is silly if you look at this instead as a game like football. There you have a clear set of rules any clod can understand : buying a house should be about the same. clean and clear. There still is plenty of profit to be made with a three point spread for the bankers; and plenty of equity to be built up by the homeowners. And all of this can be had through a stable economy (which might be the real catch).

When I was a child, home-ownership was a privilege that brought ties to neighborhoods. People oftentimes lived in those homes until their death, oftentimes passing on the home to their children. Now, you can drive across America and see big, sprawling homes occupied by one or two people. Unless you have 5 kids, who needs a 10,000 sf house? Even then, there are parents who have raised kids in homes with much less square footage. Home buying today seems to be geared solely towards optimizing one's capital gains. People hopscotch from larger home to larger home to satisfy that insatiable appetite for captial gains. Who envisioned that a 3-bedroom, 2-bath home would cost more than $500,000? There's enough blame to go around, blame sub-prime borrowers, blame unscrupulous lenders, but the real blame is greed. Some people, like myself, just would like a place to call their own; to feel connected to the community. I don't have much faith that common sense lending will return as the law of the land, as Mr. Greenstein envisions.

When I was a child, home-ownership was a privilege that brought ties to neighborhoods. People oftentimes lived in those homes until their death, oftentimes passing on the home to their children. Now, you can drive across America and see big, sprawling homes occupied by one or two people. Unless you have 5 kids, who needs a 10,000 sf house? Even then, there are parents who have raised kids in homes with much less square footage. Home buying today seems to be geared solely towards optimizing one's capital gains. People hopscotch from larger home to larger home to satisfy that insatiable appetite for captial gains. Who envisioned that a 3-bedroom, 2-bath home would cost more than $500,000? There's enough blame to go around, blame sub-prime borrowers, blame unscrupulous lenders, but the real blame is greed. Some people, like myself, just would like a place to call their own; to feel connected to the community. I don't have much faith that common sense lending will return as the law of the land, as Mr. Greenstein envisions.

I don't think most people can rent an apartment for 28 percent of their income, much less purchase a home. That change alone could have a larger effect on the housing market than the whole sub-prime mess. I think the amount people pay for housing has as much to do with varying rates of inflation as with irresponsibility in loan financing. For instance: I doubt the author would advise that people should only pay the same percentage of their income for health insurance that was normal in the 1960's. This would quickly result in Emergency Room's being the primary care provider for the nation. At the same time, a consumer item like a power saw or a referigerator would sell today for a price similar to the 1960's dollar value without adjusting for inflation.

28% OF A SINGLE PERSONS INCOME OF 70,000/YR, WOULD'NT BE ABLE TO BUT A 1 BEDROM HOME IN THE SLUMS.

I understand that guidelines need to tighten without elinination of loans for the self employed borrowers. I have always thought automation could be a problem. But if they the banks and investors do not loosen up the monies borrowers need to refinance or buy a home, then all the reform will be to no avail. The industry is scared of its own shadow. Scared of the rules they made. Now even full documentation is not good enough. Something must give. We need to look at the whole picture, lower rates won't give borrowers the ability to obtain loans that investors are affraid to purchase.