Mortgage Loans and Scapegoats

As a mortgage broker in Tampa Bay, I’ve said it again and again, many factors contributed to the housing market mess. While placing home buyers in ill-fitting mortgage products and lending to others with reckless disregard for the risks they brought to the closing table are definitely two of the factors, they are not the only ones. The subprime mortgage market and the mortgage brokerage industry have really become the whipping boys and have definitely taken the brunt of the blame.

Unfortunately, a good number of recipients of “A Paper” loans have: skidded into foreclosure status, visited the back alleys of strategic foreclosures, most heartily contributed to the tidal wave of homes that hit the market, and are largely responsible for the Nightmare on Elm Street shadow foreclosure inventory that lurks around the corner with Freddy Kruger.

In 2005, the cure rate (the percentage of loans that have fallen behind in payments and then restored their good standing), was 85% for borrowers that were 30 days late in making their payment. In 2010, per Amherst Securities, that cure rate is below 1% for those over 90 days late; a significant drop.  Statistics also show that a big chunk of the home owners that have “not been cured” have credit scores of over 660!

But at the time, these then home buyers had great credit and six figure incomes. However, a whole lotta house can’t be supported when you’re pushing your way through your company’s front doors holding a box full of the stuff from your desk. The job losses suffered by people across the economic spectrum fueled the foreclosure fires as surely as the subprime loans squirted the essential kerosene.

At the end of the day, the restoration of a firm employment foundation for Americans is going to satisfy the stock market and the real estate market and keep the roofs over our heads.

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