This blog is created by Jay Orr. I have been in the mortgage business for 21 years. Over these years I have seen high rates, low rates, credit without FICO scores, traditional products, exotic products and NOW the retracement and elimination of the "crazy" product mix that has gotten the mortgage arena in a large mess.
Fannie Mae has long since been the frontrunner in defining products that are sound. For instance, Investment property has always required 10% downpayment from the purchaser. This makes sense. This "input" of funds from the buyer minimizes the risk of the buyer walking away from that property. Primarily because if he/she walks away from the investment he/she loses the 10%. This financial "involvement" has long kept investment owners in the game and continuing to make the payments.
Well then came along the G word. Greed. Everyone from Wall Street down to main street saw the enormous amounts of money that could be made originating and selling residential loans. The greed prompted "players" to create and distibute more and more exotic loan. These things are now gone daddy gone.
Now we are back to the basics. Alot of the loans created including 100% investor loans are NOT good products. There is too much risk. Any bump in the road with anyone(tenant, landlord) why not jump dump the property. No money involved. So the moral to the story, Greed is not really that good. It promotes unfounded aggressiveness.
From here we go back to what seems to be needed for the industry. A little common sense. This will allow the market to correct itself and be more reasonable. I am glad this transformation is under way. I do hate to see people lose their homes. But the reality is that the subprime market got too loose and the subprime loans were only band-aid loans by nature. They were misused by everyone.
Now we go back to reality lending. Your thoughts and comments are welcome.
Jay
