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What to do with Sub-Prime Borrowers?

Mortgage and Lending with Cumulus/Ann Arbor Radio

All this news about the sub-prime mortgage woes has everyone running for the hills and sending away what could end up being good business in the end.

Yes, if you watch the news all we hear about is how the sub-prime mortgage market is killing our housing market, (just take a quick look at http://www.mortgageimplode.com/ and see how many sub-prime lenders have gone out of business)putting increased pressure on an already struggling market.  An obvious problem is with the reduction in sub-prime loans available is we have somewhat limited our market for purchases & refinances; especially on the lower end of the market.  CNN reports today that the housing market is under tremendous pressue with the loss of these sub-prime loans; http://money.cnn.com/2007/05/01/news/economy/homesales/index.htm?postversion=2007050110.

Does this mean that we should turn down these potential borrowers?  Heck no!  Our job is to educate and assist people in the home purchasing/refinance market.  All this means is that we are going to have to work harder to educate and assist our sub-prime borrowers to elevate them to conventional mortgages.

There are many programs availabe to consumers with poor credit; credit counciling is a great tool not only to assist your borrowers in getting a home but in also lowering all their other borrowing costs in the future.  Were we really doing any service to customer's with poor credit putting them into homes they could not afford?  No, the fact of the matter is we have gotten lazy and instead of educating our customers we were just offering them the easiest loan where they would qualify.

That being said, are there any better referral sources for us than when we assist a customer that is sub-prime and educate them to get them into a conventional mortgage?  Personally, these customers are my most loyal.

So don't turn down the sub-prime borrowers, let's educate them, work with them so that if and when they can afford a home we're not putting them into something they can not afford.

Traditionally the housing market is most directly related to jobs and real wages.  What has happened to our market is not as much a function of sub-prime mortgage woes as it is home prices have gotten too expensive as compared to real wages.  This means we were due for a correction, sub-prime woes or not. 

Wages are increasing and when we see home prices come back in line with real wages we will see our market start growing again.  Some people predict this to happen next year, I think by the end of the summer we will start to see better numbers.

If you are a Realtor and have sub-prime borrowers that need a good education on credit/mortgage approval I would be happy to assist them.

Make it a great day.


Jim Hood, American Home Mortgage

866-648-8231 x1004; Jim.Hood@americanhm.com

Jacob Morales - Arizona Mortgage Planner
US Bank - Scottsdale, AZ
Good bloggin Jim. It is truly refreshing to see so many other mortgage professionals who are dedicated to educating consumers and practicing responsible lending. Nice job!
May 01, 2007 06:05 AM
Alan Lacey
Alan Lacey- - Grand Rapids, MI

This is the solution, but how many companies and loan officers have the capital and talent to learn a new process focused around consultation, education and follow up rather than closing. Will this change to the market last long enough to cause a real shift in who is in the industry? Think about the trends of the last 5 years all were about immediate gratification and closing skills the refi boom, the option arm, and the subprime purchase market. None of these things required consultative selling, none required a long term commitment to the client just getting it done.

I hope that the economics and skill challenges push out the bottom end of the market, but how many good companies have become lazy and will suffer  with the rest. I will be interested to see what happens. 


May 03, 2007 03:29 AM