As I talk with my closest friends in the mortgage industry, and we reminisce about all of the old "EXOTIC LOANS" that used to be available, I think about how there is truly no common sense whatsoever in mortgage lending.
If you turn on any channel today, there is another news flash about the latest effort by the Obama Administration to save borrowers who are in trouble. There is also plenty of focus on saving banking with various forms of what is ultimately socialized or government controlled banking. Of course if you want to know who to blame... the media will help you out with that one too. All the blame is falling squarely on the "EVIL MORTGAGE BROKERS"
Let's not forget who really created this problem... Institutional Lenders, Borrowers .... and Government
This is a clip of what lenders USED to tell borrowers:
LENDERS used ABSOLUTELY NO common sense WHATSOEVER when creating such loans as:
NO DOC loans
NINA loans (That is not SPANISH for "Little Girl" but an acronym for No Income No Asset)
NINJA loans (NO...THIS IS NOT A LOAN SPECIALIZING IN BORROWERS WHO WERE ALSO MARTIAL ARTISTS! THIS IS A LOAN THAT REQUIRED NO INCOME, NO ASSET, AND NO JOB VERIFICATION!)
These loans met with the approval, and often times the urging of the government, to get more people into homes!
ARE YOU SERIOUSLY KIDDING ME? NO JOB? IF YOU ARE STUPID ENOUGH TO THINK YOU WERE GOING TO GET PAID BACK - YOU DESERVE TO GO BROKE!
So now... we are in a financial pickle...
The Government has promised us that our TRILLIONS of tax dollars are going to save the world, and will thaw the frozen credit markets....
Meanwhile SUNTRUST mortgage today announced to borrowers that they will not pay brokers do an FHA government insured mortgage for borrowers UNDER a 720 credit score. So these same people who have taken over 1.5 Billion in TARP Money (and yes the same idiots who wrote NINJA loans) are going to penalize a borrower with perhaps a 680 credit score (or perhaps a bit lower) who may have NEVER missed a payment to ANYBODY in his/her life, has a good paying job, has saved a down payment, and perhaps even has some more money in the bank based on a scoring system that inherently flawed and can be easily manipulated.
I have looked at THOUSANDS of credit reports in my lifetime and I can tell you there were many borrowers with 720 plus credit scores who really didn't deserve it. I have seen college students where the only credit they have is the students loans they have not yet begun to pay back, with scores over 720. Then there were multitudes of other borrowers with MID 600's credit scores with NO derogatory credit, no late payments and more cash in the bank than most people I know. Many of them with several mortgage loans pais on time with ZERO late payments
Credit scores were always meant to be a guideline, not a hard and fast rule, or an exception to common sense.
Nobody wants to apply common sense underwriting to lending anymore. These lenders were FOOLISH to create mortgage products that were damned to failure before they even funded. Now they are going to be even more foolish by failing to put GOOD loans on their books to offset the troubled assets they now hold
They don't have to worry about fixing their portfolios... we will bail them out, and then they will look down their noses at the very taxpayers that have footed the bill, and say no thank you to many worthy borrowers.
Ralph D. Nudi