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....
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
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
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:
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
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.
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.
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