Time to stop blaming the housing mess on the interest rate increase!

SoWal Expert

Feb 25, '08 · 3:14 PM4,030

The problem isn't the rates on ARMs, it's that they loaned money to people who couldn't afford the loans to begin with!

Subprime loans defaulting even before resets

It turns out that massive interest rate spikes aren't the problem -- many borrowers couldn't afford these mortgages even at the low, introductory interest rates.

By Les Christie
February 20 2008

NEW YORK (CNNMoney.com) -- For months, we've fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates.

What's happening is even worse: Many of these loans are defaulting well before their rates increase.

Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood.

Defaults are spiking well before resets come into play thanks to the lax lending environment of the past few years. Many borrowers were approved for mortgages that they had little chance of affording, even at the low-interest teaser rates.

full article: http://money.cnn.com/2008/02/20/rea...g_pre_resets/index.htm?postversion=2008022010

Edited Feb 25, '08 · 3:16 PM

Replies

Beach Fanatic

Mar 2, '08 · 8:10 AM#27

So essentially mortgage brokers are highly compensated secretaries; no value-added, no responsibilities to the client. Just the kind of job that can be suitably substituted in the way that travel agents were replaced with Travelocity and cashiers were replaced with self-checkout counters.

This sounds like an answer straight out of your hero Dubya's mouth. Either you are ignorant or trying to put your own version of the truth out there.

SoWal Insider

Mar 2, '08 · 9:14 AM#28

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SoWal Insider

Mar 2, '08 · 3:45 PM#29

This sounds like an answer straight out of your hero Dubya's mouth. Either you are ignorant or trying to put your own version of the truth out there.

So what are the "responsibilities" of a broker?

To collect and verify employment information from the borrower.
To collect and verify income information from the borrower.
To ensure the home is appraised.
To prepare and submit the loan package to the underwriter.

You stated, "Brokers do not lend money or make lending decisions. Brokers submit loan applications/packages to wholesale lenders."

Is it fair to say that the underwriters should assume that the loan package was a true and honest representation of the applicant's financial standing--isn't that what they pay the broker to do? (Not to mention offering juicy increases in YPS for upselling to lenders.)

I'm not saying that "Jose the Strawberry Picker" isn't guilty when he claims to be an Executive VP with Smuckers...but one simple phone call by the broker would have found out otherwise. :idontno: