What is happening to sub-prime?

By
Mortgage and Lending with AMERICAN AFFORDABLE HOMES

The sub-prime market is going down due to bad loan officers placing people in loans that they couldn't afford. If a person loses their job then of course they couldn't afford to pay their bills anymore but if nothing has changed since you originated the loan then the person couldn't afford the loan from the beginning. It is the loan officer's job to analyze the client's potential to pay their bills and if they are good at their job then it will be a piece of cake, but if they are just out for a dollar then of course they will place anyone into anything. I am a person that has a substantial clientele in the sub-prime market and fortunately I have no foreclosures because I  have went the extra step to ensure I am doing good deals and coaching my clients the entire way(far after the loan has settled). I am happy the market has changed and we can clean up the industry of the impostors and we will have the respectable individuals who do good work still standing....

Comments (11)

Gary Smith
Agent Marketing Today - Commerce Township, MI

Jonathan,

This will really shake out Realtors too. Nice subject.

Mar 30, 2007 10:52 AM
Inland Empire Real Estate Short Sale Pro
InlandHomeFinder.com - San Bernardino, CA
InlandHomeFinder.com
I agree.  If you are a true professional at what you do you will thrive in all market conditions.  It's all about providing a great valuable service and adapting with the times.
Mar 30, 2007 10:57 AM
Michael Hutchins - Consumer Advocate, Chicago
Michael Hutchins Ent. - Chicago, IL
Bravo Jonathan!  I couldn't agree more.  Great post!
Mar 30, 2007 10:57 AM
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Wholly incorrect, Jonathan.  A loan originator does not have a fiduciary responsibility to the borrower.  If I'm wrong, show me the contract that says he/she does.  An originator has a responsibility first to the lender to make sure that the borrower is providing the requisite documentation to fund the loan.

In fact, if you interject your personal opinion and dissuade a borrower from applying for a loan which he is qualifies, you violate the Fair Credit Act.  Until exclusive brokerage representation is granted to originators (much like a buyer's brokerage agreement with Realtors), borrower representation will never be met.

Realtors...this may sound good on paper but it is legally incorrect.  An originator does a client a disservice by dissuading a qualified applicant from getting real estate funding 

 

Mar 30, 2007 11:01 AM
Michael Hutchins - Consumer Advocate, Chicago
Michael Hutchins Ent. - Chicago, IL
Brian I think your missing Jonathan's point.  And he said nothing about persuading his clients either.  Jonathan should be commended for looking out for his customer's best interests by coaching them.
Mar 30, 2007 11:07 AM
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

I see where you're going, Michael and I understand the point.  However, he indicts loan officers as the sole problem for the subprime meltdown and that is wholly incorrect.  The originator is not supposed to "underwrite' the file just originate it.

I am all for the consultative approach to selling mortgage products.  I've closed over 1600 loans so I do understand that you need to take care of your clients.  The mere suggestion that an originator caused the subprime meltdown is irresponsible.  It suggests that you are deliberately slamming your competitors for negligence.  In this case, negligence can't be assessed because there never was any fidiciary capacity.

I know it's pretty heady stuff but we, in the industry, must take charge for these problems.  Blaming our competition is NOt going to do it.  Reworking the origination process will

Mar 30, 2007 12:13 PM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jonathan,

Welcome to AR. I hope you have thick skin.

I find your post repugnant. Brian Brady and I may disagree on "fiduciary" but not about how a client deserve to be treated. 8 out of 10 of those sub-prime clients succeed if we are to believe the head lines. Who appointed you to tell them that they can't have a house?

If your fiduciary lies with the lender, why did you do business with them, they wrote the loan program that led to their failure! The applications you denied the lender might have been enough to keep them profitable, after all 8 out of 10 succeed!

If your fiduciary lies with the applicants, you failed 8 out of 10 of them and denied all of them a chance at success.

As usual Brian and I come to the same point: you didn't serve anyone. All of which makes your misguided finger pointing all the more offensive.

On the other hand. We blog to discuss ideas, and you've got my attention. Your expressed concern for your clients puts you in with the best here on AR, we don't always agree, but we always welcome sincere people. As you're new let me suggest, you subscribe to Brian Brady, Jeff Belonger, and Mac Blasi, and Eddy Martinez then comment, comment, comment we all learn from each other and so do are readers.I quoted from your blog in:

Educated By Sound Byte

If we all agreed one of us would be unnecessary, and we'd miss you.

Bill

William J Archambault Jr

The Real Estate Investment Institute

http://www.reii.org

Mar 30, 2007 02:23 PM
Anonymous
JONATHAN WRIGHT
i think some people have taken my comments to heart; it is interesting to why but nevertheless I never once point the finger at competition or turn clients away. I am saying it is our duty to qualify clients for what they qualify for and i we go stated then it should be stated and not inflated. My company has a contract between the buyer and the brokerage outlining our duties and assisting them with their financial decisions and assisting them with sound advise about their credit falls under financial adviser. I am a financial adviser as well as mortgage banker and I am totally against some of the tactics I have witnessed from companies that have submitted loans to New Century and other companies that have went out of business. Some good people lost their employment because of the over saturated market of loan officers inflating clients income. Thus why you see the stated programs being taken away from the market; if I was incorrect then they wouldn't be investigating so many institutions and loan officers. Here in DC we just had a loan officer given a prison sentence of 26 years for fraud, so my comments remain true and if they don't apply to certain individuals then don't take it personal..... 
Mar 31, 2007 07:03 AM
#8
Larry H Morris
Directors Mortgage - West Linn, OR
Larry Morris, NMLS 150073

SO what do they "qualify" for? I can get a DU approval on a full document file with decent credit at 65%? This loan is then supposed to be rubber stamped by conforming lenders. This loan has just as much chance for foreclosure as a "stated" income loan.

I've only had 1 loan that I know of that went into foreclosure. It was an Alt A 100% financing No Doc loan with a 700 credit score. Borrower's income was hard to document and needed her fiances income to make it work. He got injured during the move and subsequentially lost his job.

To me, the biggest issue on teh subprime arena has to do with the ability to charge a large orgination fee and receive several point YSP. This is both a lender and orginator issue.

 

Apr 09, 2007 11:07 AM
JONATHAN WRIGHT
AMERICAN AFFORDABLE HOMES - Sterling, VA
I totally agree with you Mr. Morris; some lenders programs are destined to fail. Some situations aren't by no means the results of a client not truly being qualified but the results of the clients unfortunate situation. When those files are audited, the originator will not have any fault in that matter and the industry most likely wont take a turn because of those unfortunate cases. But when you have a large number of over stated income cases where some being so overstated that criminal charges are placed against the originator then we start to see a problem and see a change in the industry. Of course the lender isn't going to share the blame if their program was destined to fail, they will just kill the program.
Apr 09, 2007 11:33 AM
Larry H Morris
Directors Mortgage - West Linn, OR
Larry Morris, NMLS 150073

Jonathan, I agree that many originators have "so overstated" incomes that they are "criminal". However, I also know that lenders have the means to determine whether or not an income is "reasonable". Whether or not they have done their due diligence is questionable. We have seen just as much greed from the lender side as we have from the orginators.

As far as I'm concerned, most of the loans where the income was so overstated as to be criminal should never have been funded...especially if the employment was w-2. While it's harder to judge for self employed, there are still steps a lender can take to lessen their risk.

Bottom line, money has been to freely loaned with minimal checks and balances. The system is not broken, but it does need adjusting.

Apr 09, 2007 04:00 PM