Comments from an Originators Desk

The web is full of commentary on the state of mortgage lending. There are hundreds of websites and blogs addressing the issues the mortgage and housing industry. The intent of this blog is to be a consolidator of sorts, pulling interesting factoids from sites, blogs and traditional news outlets I feel are relevant while adding my own personal opinions.

As a Loan Officer for a Mortgage Bank I see how changes in lending affect borrowers everyday. The national news media and some websites have blown the problems with lending way out of proportion. A careful read of some blogs and websites is sufficient to determine if the authors actually have experience with lending or are just grabbing an opportunity to jump on a soap box and complain.

Dispelling a myth:

It should be no surprise, those loan officers that did well in the frenzied real estate market up to the middle of 2008 that relied on sub prime and Alt A products for loans are either 1)now out of the business or, 2) trying to figure out how to analyze a borrower's fianancial statements. This has led to some to even suggest that lending has become so restricted that "no one" can get a loan. The fact is that the majority of potential borrowers can qualify for a loan. The issue is that the reliance on the above mentioned products created a set of expectaions that are impossible to meet now. Lenders that said, " send it in, we will get it done" led borrowers and their RE Agents to believe that it was enough to want a loan to be approved.

To a certain extent the baby has been thrown out with the bath water with respect to the removal of some loan programs. From my perspective a No Doc loan on a primary residence for a borrower with a 800 FICO and 35% 40% down represents little risk of default, yes even in a decling market. The reason is simple a credit score that high shows that borrower manages their finances very well and has done so for a significant period of time. The second reason is that anyone with that amount of skin into the game is highly unlikely of defaulting. For the record, Stated income loans were the stupidest thing ever devised on the planet apart from the Edsel.

Qualify to buy -- Just because there has been a return to some of the "old time" underwriting standards doesn't mean everyone is shut out. It means that the individual, and the lender, a borrower selects for their mortgage needs had better set reasonable expextations with the borrower and the agent right up front. There is still aconsiderable amount of flexibility in mortgage lending. However, it is not smoke and mirrors any longer. Its based on verifiable facts.