Regarding this subprime mortgage mess, will we learn from this experience?

Question

Or will we go right back to our old habits once the market recovers?

Answer 1

You're looking at it all wrong, my man. The market is just fine. Yes, banks and home owners have learned from this. Home owners who signed on the dotted line to a sub-prime, non A-paper loan with an adjustable rate mortgage without regard to the future, have learned from this. You know... all of the people who have foreclosed on their home in the last 1-2 years. Once their adjustable rate mortgage went up, so did their payment. Many people are on a budget and just couldn't afford the rate increase, thus, causing them to go into foreclosure once 2-3 months went by having not made a mortgage payment. Sad, isn't it.

Which brings me to this "mess" you mentioned. I'm sure you've heard, in the news, about banks filing bankruptcy. Those banks as well as ones who are still in good standing have learned from this. The banks which you read about or heard on the news, which are no longer, held many of the mortgage notes for the many people who have recently foreclosed on their home. When foreclosure happens, the bank may not get all of their money. They might recover the bare minimum of that note, if that much. So when that's happening to hundreds of thousands of their notes, the banks profit numbers fall into the negative. Which is why the government steped in, and not a moment too late- thank God, to lend money to those banks so that our mortgage lending business does not crash.

Those banks are, now, regulating how they are structuring home loans. Not just anybody can get a loan, like it used to be. Banks and their underwriters have become more strict in allowing people to obtain certain kinds of loans. And it makes sense to cut down on their risks.

Now, regarding wether or not banks will go back to their risky business, just depends on them and their willingness to buy so many risky sub-prime loans. Sub-prime loans are still out there and being used, just not as abundant as it was before.

Answer 2

Yes and no. The mess is in my opinion being over stated by the press. The default rate nationally was at .003%, and then when all the ARM's and Interest only loans started to adjust the default rate went to about .007% not even close to what is being over stated in the press. They get their eyes fixed and never tell you the whole truth. So with all the negative misinformation out their the investors in the secuitization market backed away. That in itself is not good for the economy. Yes there will be and have been some major adjustments and yes it was needed for the last 5 years and the industry as a whole is paying the price and this includes mortgage bankers, real estate agents, builders, appraisers as well as the thousands that lost their jobs due to all the negative press that collapced the securitization markets.
People will always need $$.
I am a mortgage banker in TN and KY

Answer 3

The biggest problem that I have seen over the years is incompetent appraisals.

Incompetent appraisals more than anything else caused the crisis back in 1986 when many of the local savings and Loans were driven out of business.

Lenders try to save money on appraisals and give their business to the appraisers who are willing to charge the lowest fees or more recently they have been using software programs that estimate market value of real estate.

Unfortunately the appraisers with the lowest fees are the least competent.

Also, all of the software programs that I have seen have a tendency to estimate about 20 to 30% too high.

The result is that lenders are making mortgages on houses where there is no equity to secure the mortgage.

Purchasers of homes are mistakenly led to believe that the lender''s appraiser will protect them from paying too much.

I have been investing in real estate for over 40 years. I always hire my own appraiser in addition to the lender's appraiser.

I make the contract subject to the appraisal of my appraiser, not the lender's appraiser.

I always insist that any appraiser that I hire must be a Member of The Appraisal Institute.

The Appraisal Institute is the only organization that I have found that has sufficient training and experience requirements to produce a competent appraiser.

State licensure is not good enough.

If lenders will learn to hire competent appraisers they will solve their problem.

If they do not learn to hire competent appraisers we will repeat this mess over and over again for many years into the future.


I think that Strawberry B *tchcake has it exactly right with respect to loan officers.

Answer 4

no, we will never learn. Loan officers are money motivated and greedy in this day and age of the industry, it also doesnt help and any dick jane or larry can be a loan officer if they go take a simple test. so, pretty much if you want ot make alot of money and you arent qualified for anything else, well you can be aloan officer...until there are *real* standards and a govt monitoring, or something similar to BBB that monitors the lending practices of an individual loan officer, it wil lalways be screwed up. FYI, this isnt the first time this type nonsense has happened, nor will it be the last.
Oh, also the banks cant help if the loan officers lie about borrowers to get the deal done...its not all the insitutions fault.

Answer 5

Nothing will be learned, the lenders and the people borrowing only see dollar signs, and anytime somebody thinks they can make a lot of money easy, they will try. Even if it has been proven to fail time and time again, someone will think they are smarter than the rest and will be able to make a bad idea work.

Greed destroys dreams.

Answer 6

I 100% agree with the poster who pointed out that the media is blowing this way out of proportion.

As long as buyers choose not to be informed about what they’re doing and homeowners keep treating their houses like banks (cashing out equity every time property values increase), there will be capitalists hoping to cash in on them.

Answer 7

We learned the Federal Reserve will bail out the money center banks and cut down every tree in the U.S. if they have to in order to print money to solve the problem.

Ben said he would NOT bail out homeowner's in the sub-prime mess. He did NOT SAY he would not bail out his buddies in the banking community, that's exactly what he did.

When every problem looks like a nail, the only solution is a hammer.

Answer 8

Banks are greedy animals. No brains, just greed. So, yes, they will learn not to do the exact same mistake, but will do a similar one in a couple of years again.

Answer 9

this happens all the time, just part of free market economy. there is nothing to learn. things go up and things go down.