Subprime... the good, bad and the ugly??
I have to say this post is truly written as a direct result from my reading a post titled "Subprime Mortgages are Back".
I read it, agreed with most of it but the comments are what juiced me to write this. (and as a disclaimer: I am not aware of any Subprime loans originated or pools of debt created by Trump or his organization. His name is synonymous with success, some also associate with greed, but is an entrepreneur and I used this picture solely for display but in no means to disparage his name or brand)
Why do I say that?
Its simple, Subprime mortgages are looked at as some form of disease on our market by some. They are looked down upon as a lesser individual who "doesn't deserve" the loan they are getting. Frowned upon as if they are the reason we have all lost equity and are in the mess we are in. That is absolutely FALSE!
I say false as I have been in the credit industry for over 25 years with 18 of the recent years in mortgage lending. I have run large shops as well as created a wholesale company. I know credit inside and out and I do know where the "stink" is in this entire housing crisis mess and it is NOT subprime mortgages.
Subprime mortgages were created as a tool to aid borrowers who couldn't qualify for a loan, due to tightened credit guidelines, as an option to be able to qualify for a loan. It was never a loan that started as Stated Income Negative Amortization loans (that most were misrepresented). Even to defend Stated Income loans those were initially designed ONLY for the TRULY self employed business owner that made money and had cash flow (which was proven) but wrote most of the income off to mitigate taxes. Those loans performed well and it wasn't until the "GREED" set in from seeing these so called Subprime and the initial wave of real stated income loans that we let the underwriting reigns loose and started digressing further and further until it became nothing short of a joke.
If you could sign your name you were "gold" and APPROVED!
There are TWO sides to every story, however, (sometimes more) and if we try to blindly put everyone in the "same pool or label" without any due diligence of background (of both the client AND the product) aren't we as guilty as a racist? (who puts everyone of color blindly into the same category for intelligence, income, ability, etc)
I know of many GOOD people, who ran into issues from these last 4 years, they pay their bills and have done so without issue for several years now, have a good job, can prove their income and could definitely benefit from a loan if one existed for a borrower that doesn't fit the current extremely tight (over the top) standards.
So do you think this bwr (who otherwise would be identical to the one "we call worthy" without the issue 4-5+ years ago is less deserving or should be looked upon as if they are a disease to our industry? Heavens NO.
What about the buyer who ran into issues FROM THEIR LENDER. Followed along on advice FROM THEIR LENDER went into a loan modification (as that was the flavor of the day the last few years) and then after going into the program, following it and paying "AS AGREED" (all modified payments on time) they get DENIED the modification, their account is now past due and they have to lump sum the past due amount + the next payment due or the foreclosure process begins? Do they deserve to be looked down on?
Since their, lender imposed injury, they have had all accounts paid as agreed. Are they a disease to our industry????
The bottom line of this is simple. DON'T PREJUDICE ANYONE without knowing ALL the facts!!!
There are those who may NEVER fit into today's standards for underwriting guidelines, that would never miss a payment, if given the chance.
I, for one, applaud and also have called for the re-entry of "subprime" (or whatever it is going to be called next) as our market is poised for it and it will be used heavily. If underwriting guidelines are implemented AND USED, and if we verify an applicants ability to pay, then we should not see the errors of our recent past revive.
If stated income and no income loans are brought back... Watch Out! That is likely the trigger of the next wave of repeat from our recent past and we will likely see the same results 1-2yrs of plenty 3-5yrs of pain!
Got an opinion on this?
Please share and forward, re blog or comment. I appreciate all (even haters) if you can validly state your reason for your position and not just blindly rage against mine.
Have a great weekend and EXPECT change to appear. It will happen, it is needed and hopefully it will be implemented with less greed and more due diligence this time!
Image of Gold symbol courtesy of freedigitalphotos.net
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