Staying Alive--and SANE!
I fondly recall the image of John Travolta combing his hair while walking down the street to the Bee Gees 'Staying Alive' in Saturday Night Fever. That movie was really about a street smart guy using everything at his disposal including very fancy footwork to win against the odds. To identify with such a caricature is what it feels like to be a mortgage broker today. We are the creative, the resourceful, the get it done folks you know will find a way if anybody can.
However you may be affected by the horrible news going down in the financial world--I would like to stand in support of some very committed mortgage professionals I call my colleagues. While it is sad for us to watch our lenders (some very decent folks) one by one close their collective doors...it is obvious from where we sit that the biggest of our esteemed banks have been doing (to quote today's newscaster) "really stupid things!"
It is very hard to imagine what was going through the minds of certain Walll Street Executives to allow the downfall of their own companies. How our regulators allowed this to happen we may never know. It is apparent that the main elements of our delicate financial 'mobile' (to simplify: bonds, stocks, and mortgages) are wildly swaying against a backdrop of paranoia and fear (inflation). Today's 4% inflation rate is double the standard comfort level of the Fed so something's gotta give and soon. The volatility and unpredictably of the market seems to have thrust everyone into over-correct mode...like closing the barn doors after the horses are gone.
Mortgage brokers welcome better professional standards. Unfortunately, the congressional effort to date has been aimed at mortgage brokers, and not all loan officers. During an era of deregulation which began in 2000 allowed lenders to package and resell paper and resell paper until the ink began to fall off, literally! The sad truth is that investors got roped into mortgage backed securities that were anything but secure.
Most mortgage brokers had no idea any of this was going on. We were charged with offering home mortgages under the program guidelines the investors created and banks funded.
As a result of the new regulations, our lives and the extent to which we must verify every detail of your loan application has become much more complex. Expect to be bombarded with paper. I understand in any crisis there is often a corrective swing of the pendulum in reaction against the previous situation. The pendulum will return, sanity will prevail, and perhaps we can save a few trees on your next application. Right now, we are all getting better biceps just lifting your file out of the cabinet.
The purveyors of all this paperwork are the main investors: Fannie Mae and Freddie Mac, now in conservatorship. They are the purchaser of the lion's share of mortgages. They dictated how loans were underwritten and then sold. Their own barn doors are gaping as they race to tighten their guidelines. Understand that banks also protect their risk by requiring Mortgage Insurance. AIG, one of these mortgage insurance firms just received $85 million by the Federal Reserve Bank to the prevent "disorderly failure".
Fannie/Freddie and the new Housing Bill have created a raft of guidelines to protect consumers. Beware the First Time Homebuyer tax deduction: you have to pay it back over 15 years! Just why raising the FHA down payment minimum from 3% to 3.5% is an advantage is a mystery to me. Oh and FHA, Fannie and Freddie is also introducing new risk based pricing (translated, higher rates) that will benefit the banks, not consumers.
The trend of in recent years has been an uptick toward non bank mortgages. Mortgage brokers, at last count, close approximately 60% of the home mortgages in the United States. Naturally, banks have a lot more lobbying power than brokers because they are organized financial institutions who buy the loans that brokers close.
Come January '09, your bank will more stringently control the appraisal process to determine what your home is worth. Previously it was our role in assessing your borrowing capacity, to provide an impartial third party report from a licensed local appraiser who knows the area and its market conditions. It is my humble opinion that your home will be deemed to be worth whatever your bank is willing to loan you. It is likely that the person appraising your home may be sitting at a computer screen on the other side of the country!
Some prominent leaders (including ex-Fed Chairman, Greenspan) feel that Fannie Mae and Freddie Mac have become so large and corrupt they should be dismantled. New management are charged with a clean sweep. And who will be paying for the broom? Tax payers will fund these changes with higher taxes, fees and interest rates on everything from our mortgages to our credit cards to our insurance fees deductibles. It is unknown how or how long it will take 'us' to rebuild our national coffers -- now in multi trillion dollar debt. By all accounts our total federal debt is also grossly underestimated due to the subterfuge on Wall Street.
While many local brokers have exited during these turbulent times, please look kindly on those of us working hard to earn your trust and close your loan on time! Hopefully, our local economies will recover stronger than before and learn something from this. Please support your local mortgage professional who, like you, contributes to the well-being of your community.
It's my job and my privilege to remain sane amdist the chaos. And that I can do!
Thanks for listening.
However you may be affected by the horrible news going down in the financial world--I would like to stand in support of some very committed mortgage professionals I call my colleagues. While it is sad for us to watch our lenders (some very decent folks) one by one close their collective doors...it is obvious from where we sit that the biggest of our esteemed banks have been doing (to quote today's newscaster) "really stupid things!"
It is very hard to imagine what was going through the minds of certain Walll Street Executives to allow the downfall of their own companies. How our regulators allowed this to happen we may never know. It is apparent that the main elements of our delicate financial 'mobile' (to simplify: bonds, stocks, and mortgages) are wildly swaying against a backdrop of paranoia and fear (inflation). Today's 4% inflation rate is double the standard comfort level of the Fed so something's gotta give and soon. The volatility and unpredictably of the market seems to have thrust everyone into over-correct mode...like closing the barn doors after the horses are gone.
Mortgage brokers welcome better professional standards. Unfortunately, the congressional effort to date has been aimed at mortgage brokers, and not all loan officers. During an era of deregulation which began in 2000 allowed lenders to package and resell paper and resell paper until the ink began to fall off, literally! The sad truth is that investors got roped into mortgage backed securities that were anything but secure.
Most mortgage brokers had no idea any of this was going on. We were charged with offering home mortgages under the program guidelines the investors created and banks funded.
As a result of the new regulations, our lives and the extent to which we must verify every detail of your loan application has become much more complex. Expect to be bombarded with paper. I understand in any crisis there is often a corrective swing of the pendulum in reaction against the previous situation. The pendulum will return, sanity will prevail, and perhaps we can save a few trees on your next application. Right now, we are all getting better biceps just lifting your file out of the cabinet.
The purveyors of all this paperwork are the main investors: Fannie Mae and Freddie Mac, now in conservatorship. They are the purchaser of the lion's share of mortgages. They dictated how loans were underwritten and then sold. Their own barn doors are gaping as they race to tighten their guidelines. Understand that banks also protect their risk by requiring Mortgage Insurance. AIG, one of these mortgage insurance firms just received $85 million by the Federal Reserve Bank to the prevent "disorderly failure".
Fannie/Freddie and the new Housing Bill have created a raft of guidelines to protect consumers. Beware the First Time Homebuyer tax deduction: you have to pay it back over 15 years! Just why raising the FHA down payment minimum from 3% to 3.5% is an advantage is a mystery to me. Oh and FHA, Fannie and Freddie is also introducing new risk based pricing (translated, higher rates) that will benefit the banks, not consumers.
The trend of in recent years has been an uptick toward non bank mortgages. Mortgage brokers, at last count, close approximately 60% of the home mortgages in the United States. Naturally, banks have a lot more lobbying power than brokers because they are organized financial institutions who buy the loans that brokers close.
Come January '09, your bank will more stringently control the appraisal process to determine what your home is worth. Previously it was our role in assessing your borrowing capacity, to provide an impartial third party report from a licensed local appraiser who knows the area and its market conditions. It is my humble opinion that your home will be deemed to be worth whatever your bank is willing to loan you. It is likely that the person appraising your home may be sitting at a computer screen on the other side of the country!
Some prominent leaders (including ex-Fed Chairman, Greenspan) feel that Fannie Mae and Freddie Mac have become so large and corrupt they should be dismantled. New management are charged with a clean sweep. And who will be paying for the broom? Tax payers will fund these changes with higher taxes, fees and interest rates on everything from our mortgages to our credit cards to our insurance fees deductibles. It is unknown how or how long it will take 'us' to rebuild our national coffers -- now in multi trillion dollar debt. By all accounts our total federal debt is also grossly underestimated due to the subterfuge on Wall Street.
While many local brokers have exited during these turbulent times, please look kindly on those of us working hard to earn your trust and close your loan on time! Hopefully, our local economies will recover stronger than before and learn something from this. Please support your local mortgage professional who, like you, contributes to the well-being of your community.
It's my job and my privilege to remain sane amdist the chaos. And that I can do!
Thanks for listening.