Since the Mortgage Market turned sour, many people have said that Mortgage Brokers may become a thing of the past.  Their reasoning is that most loans are going to fall in the conforming i.e. Freddie Mac and Fannie Mae category.  Because most of the loans will be conforming why do we need Mortgage Brokers?  Why not just go to a bank and get the same loan?  Well, I have been getting emails from a guy by the name of Josh Fuller, from the Company Plan B.  One came over yesterday that has a great outline of the problems facing Mortgage Brokers today.

The 8 Most Dangerous Trends Facing All Mortgage Brokers Today

1. Tighter Lending Standards

·        Zero down loans, stated income, FICO score below 600 are out

·        Borrowers now need a down payment, verified income, bank reserves and a FICO above 700

1. The Subprime Dilemma

·        Subprime mortgages (ARM's, interest only loans, and other "creative financing" deals) made up about 25% of all mortgages, they total about $2.5 trillion and according to Moody's, about half of these loans are at risk of defaulting

·        About 2 million subprime borrowers with adjustable-rate mortgages are at a risk of default or foreclosure

·        The Federal Reserve estimates that subprime mortgage losses could reach $100 billion

·        Former  Fed Chairman Alan Greenspan, admitted "while I was aware of a lot of these practices were going on, I had no notion of how significant they have become until very late, I really didn't get it until very late in 2005 and 2006"

1. Home Sales Are Down

• The National Association of Realtors says home sales will hit a five-year low this year
• Nationwide, sales were down over 9%
• Los Angeles County saw a 50 percent year-over-year drop in sales last month
• In 2002 there were only approximately 2.1 million homes for sale at a given time, now the figure has risen to 4.6 million, a phenominally high number

1. Home Appreciation Is History

• Nationally, the median average sales price decreased 0.56% compared to last year
• Since the early sixties when experts began tracking this data, there has never been a year when the national median average price decreased
• In August, the worst real estate recession in 16 years turned even uglier than most people realized

1. Loan Demand Down

·        Low buyer confidence has resulted in less buyers, thus less applications

·        Experts estimate 156 major U.S. lenders have "imploded"

·        Countless small and medium-sized mortgage lenders have gone bust due to rising defaults and delinquencies

·        It is estimated that more than 50,000 mortgage industry workers have lost their jobs and the number continues to grow

1. Interest Rates On The Rise

·        Rates may push rates up to 10 percent to curve inflation in the upcoming years

·        If the US Federal Reserve were to keep the inflation rate between 1 and 2 percent in coming years, it could be required to force interest rates into double digits, (Fed chairman Alan Greenspan warns in his memoir)

·        Global macro pressures will take over and devalue the dollar, eventually forcing rates back up again, with even more bad debt to pay off

·        Experts say low interest rates in the early part of the decade have laid the foundation for current problems in the housing/credit markets, which will lead to higher rates 

1. Global Recession

·        Rising oil, the war, a weakening economy, the deterioration in housing, rising interest rates, big deficits, a weak dollar, and a volatile stock market;  all have the potential to trigger a worldwide recession

·        The world's investment banks are to reveal a $30 billion loss from bad debts

1. Repercussions Of The Real Estate Slump

·        Experts feel a continued real estate slump with a record bust is expected due to high leverage, credit tightening, and the massive amounts of ARM's that will be reset over the next year of two, which will cause higher monthly mortgage payments for many people who simply can't afford it

·        Foreclosures will skyrocket, and they are already hitting record highs in the speculative markets, in California defaults are at a 10 year high

·        Lenders began foreclosing on as many as 345,135 Americans' homes in the second quarter, according to the Mortgage Bankers Association.

·        Fed Chairman Bernanke warns mortgage defaults are going to get worse and they pose a very serious risk to the economy

                                                                                                     ----8 Trends by Josh Fuller

Your mortgage partner for life,