Americans: When do you think this mortgage mess will be over (not the housing mess, striclty mortgages)?

Question

Hi everyone...what I'm talking about is how wishy washy the mortgage bankers are being with regards to requirements/documentation. Many good buyers are not getting financed, after getting the runaround by the underwriters. Also, investment home loans seem almost impossible to get financed. Will there be an end to this?

Answer 1

The mortage part of the credit and housing problems is probably cresting right now as we speak. Most of the problems will be settled before the end of 2008.

Many of the firms that made severe mistakes are either (a) going belly-up (a minority of the smallest, most-leveraged ones) or (b) putting aside massive reserves and/or marking down the value of their questionable mortgage paper. In fact, by the end of 2008 I think we'll see that some of these firms (Citibank for example) have written off TOO much and will thereby turn an on-paper loss now into an on-paper gain later.

By the end of 2008, the only people that will have difficulty obtaining mortgages will be the same ones that shouldn't have had them in 2005 or 2006. Heck, that's almost true now.

Lest I sound like a pollyanna, though, I should point out that the housing repercussions will last quite a bit longer.

Unlike some others, I give Bush's rescue plan very little 'credit' for impact on the credit markets. It will do some limited good on the housing side of the equation. It will also lead to increased moral hazard, and to people expecting the government to bail them out of future expensive mistakes.

Answer 2

There's no longer a mortgage mess. A few years ago there were too many people who should not have loans who were given loans with not enough explanation of the pitfalls of said loans.

And these buyers didn't have the sense to ask why they could now qualify, and afford, the payments on a $400K loan when 6 months before they would have problems qualifying and affording the payments on a $250K loan. It was called an Adjustable Rate Mortgage, or ARM, and many people were not informed of what would actually happen when the Rate Adjusted. Then, when it happened, nobody could afford the payments.

Now, it's dumb to get an ARM, since the rates are higher than a 30 year fixed anyway. Also, if you have decent credit and a decent job, you can get a loan for anything that is truly affordable to you.

This is why I say that there is no mortgage mess right now.

To address your added information - I think you need to chat with another broker or lender. I have no problems with my clients getting financing for properties - whether investment or principle residence.

Case in point - have a young couple, 21 and 23 years old. Servers in a restaurant. Credit scores over 700. Modest income. No co-signers. Purchased a new home at $190K with less than $200 down (their earnest money deposit of $1,000 was almost entirely returned). Used a national lender and were fully approved. Interest rate of 6%. The loans are out there.

If I were to get a loan for an investment property, I've always expected to put 20% down on the property. I can get a loan with only 10% down, but why would I? It's not smart money to leverage that far - if the housing market drops, and I need to get out, I need to have a buffer. Plus, with the 20% down, I'm almost assured tha I'll have a positive cash flow. That's just smart.

Hope that all of my rambling helps.

Answer 3

wow what a bunch of yahoo answers, these are the worst i have seen on this site. speaking from 10 years of experience as a mortgage officer and title manager i believe we have another 24 months of the immediate mortgage crisis to get through. arms will keep adjusting and those that bought these items have at least another 24 months to run from the start of this mess. as i have stated b4 i have close approximately 1000 loans over the last 10 yrs in my name alone and only 1 was an arm, once i explained to the consumer what they were, how they worked, and the possible worst case scenario over the length of the loan i had only one customer override my advice and demand the arm loan. SO WHAT DOES IT PROVE, EDUCATION and INSTRUCTION IS WHAT IS NEEDED. MORTGAGE PROFESSIONALS WHO CARE AND ARE WILLING TO SPEND THE TIME AND TEACH THE CONSUMER, NOT THE SCAM ARTIST WHO IS LOOKING TO MAKE A QUICK BUCK. WE DO NOT TEACH MORTGAGE FINANCING IN SCHOOL AND THIS IS A MUST IF WE ARE TO AVOID THIS PROBLEM IN THE FUTURE. not only for housing, but car buying, credit cards, and personal loans. most folks dont realize that financing of any type interest comes first, payments are based on the number of days in a month, borrowing today the clock starts today not 30 days from now when u make the first payment. SILLY CONSUMERS, YOU ALREADY OWE MORE ON THE 30TH DAY THEN YOU BORROWED, BET U DIDNT REALIZE THAT ONE. GEE GO TO PAY OFF A MORTGAGE AND YOU OWE MORE THAN THE MONTHLY STATEMENT SHOWS. LOL, WONDER WHY???? SAME THING WITH A CAR. and i guarnatee you most attorneys have no clue what a libor rate is that is used to figure an arm rate. UNTIL WE EDUCATE OUR POPULATION ON FINANCING OR GET SIGNED INTO LAW THE FACT THAT THE CONSUMER HAS BEEN SHOWN IN FIGURES WHAT THE WORSE CASE SCENARIO CAN BE, AND HOW FINANCING REALLY WORKS THIS PROBLEM WILL CONTINUE , and it must be signed by the consumer saying they have been told, shown, and they understand what could and how it could happen. Its not just a mortgage problem but an overall financing problem because no one really understands how the game is played and the ramifications of what interest is all about.

Answer 4

There is no mortgage mess. It's as easy as ever to get financing on a home. FHA, Fannie Mae, Freddie Mac are buzzing along and refis are closing. The only mess is the media misinformation.

Thumbs down all you want but it happens to be true. Those people losing their homes never should have had them in the first place. The mortgage brokers that are still open and thriving are the ones that did not get involved in that mess in the first place. If you have average credit you can get good 30 year fixed financing, as you always could. It's just that people were greedy. Again, there is no mortgage mess, just closed a 5.75% 30 year fixed in 18 days. Easy as pie. When people stop believing the nonsense and start buying again it will correct. All it will take it seems is for the media to tell the sheep it's time.

Want a loan, go get one, if you qualify.

Edit:
As I stated before, getting financing is no harder now than it was before for qualified buyers. This business of a "credit crunch" just isn't true. What has changed is the value of homes and that is what makes it more difficult to get loans, especially refi's. It has nothing to do with the mortgage industry, it has to do with falling housing values.

Answer 5

I sure hope it'll be soon! I've only made $8500 in commissions this year..and if it weren't for the fact that my husband makes quite a bit of money, we'd be out on the street. Even though its technically a "buyer's market", a lot of potential buyers just can't get the financing. It seems to be a lose/lose situation *sigh*. My broker and I were discussing this yesterday afternoon, and HIS predictions are that this "low" will come to an end about half-way through 2008. This means AT LEAST another 6-8 months of here-and-there transactions...but at least it wont be YEARS.

Answer 6

The "mortgage mess" is already over so long as consumers are concerned. [Unless the government prolongs it by some sort or moratorium on adjustments, foreclosures or some such]. There's a new paradigm of lending standards & that's that for the foreseeable future.

So long as the mortgage lenders & financial investors in mortgage backed securities, are concerned, their part of the mess will take a year or two or three until the shakeouts, institutional failures, bankruptcies & forced mergers are over.

Depressed housing prices & individual & developer bust outs will last for several years.

Answer 7

I think we are just seeing things return to normal. Normal means having to put money down on an investment home or proving income when putting no money down on a home. Lending guidelines got out of hand. I saw things like no money down, investment, no income verification loans. That's crazy. Now it's back to normal. The banks and the borrowers that really shouldn't have gotten into these loans are paying for it now. But really, I haven't seen any change at all on the standard mortgage programs that have existed for years.

Answer 8

When loans are approved on the ability to repay not just on the notion of reselling it to a large investment institution.

Answer 9

It will be over about 5 minutes after they start sending people to PRISON for predatory lending practices, and not a moment before. The S and L crisis of the late '80's ended immediately when they started sending those soft white boys to prison to ride the pokey train.

Answer 10

The percentage of mortgages in America that are effected by the current "crisis" is very small -- way less than one percent. The crisis is in resolution as we speak. President Bush's recent actions were positive. I look for a resolution by mid-2008.