Real estate agents complain if their mortgage banker or broker is unable to find an underwriter or program that will accept their buyer for a loan, whether it be a credit issue or income or other qualification. The pressure on the lenders/brokers is never ending. If they don’t get that one done, they won’t likely get another deal from that agent.

If the sale that seemed wrapped up can fall apart at the last, everyone suffers. So, the agent or the borrower simply dumps the one lender and looks for another that will get them approved for a loan… no matter what the cost, unfortunately. It is rarely a consideration from any of the three parties (Buyer/borrower, real estate agent or lender/broker) whether that home buyer should be put into that loan or that home in the first place.

It is all in the name of more business, making the borrower happy by achieving the American Dream’ and doing one more deal. Is anyone looking objectively

at the financial risks to the borrower and have the guts to tell them so. Most often, not ☹
So all this over the last few days leads to the question about all these so-called creative and exotic loans. Should they or shouldn’t they be regulated and controlled much more than they are today. By all means possible!!! I would say more than half the borrowers that are placed into these programs shouldn’t have been and of those, probably half didn’t understand the details or the risks.
So, what is the problem? Is there one? What do we do? Good question. The Banker/broker needs to write loans to make a living and they are most often only paid if they write loans. There are twice as many loan officers, mortgage bankers and brokers in the business that there should be for the amount of ‘true’ business there is to be had.

The real estate only gets paid and feeds his or her family if they close real estate deals, and most all Americans want to be homeowners anyway possible; and there are arguably 50% more agents in the business than there needs to be as well. The economy needs and relies on homeownership to flourish, and it is as fragile these days with a global economy and its pressures as it has ever been. It is a dilemma we won’t soon answer.

In closing, I would predict the following: The lending community will feel the results of these exotic loan programs in ways we have never seen since the S & L crisis of the 80’s; and they will be held somewhat responsible; quite possibly by litigation and class action suits.
The economy as a whole will continue to stay steady, but the real estate and home construction aspects will feel the impact of rising consumer debt, foreclosures and defaulted loans for years to come.

Unless we see the similar ‘bail-outs’ that have come in recent decades as the stock market booming and then the real estate markets and home values booming, that have saved the consumer more than once, the debt issues are going to come haunting us over the next few years.

Will we see recession? That is the ‘crystal ball’ no one wants to look into and predict; but these next few years will be interesting to watch. With the quickly growing economies over-seas, the economy may survive just fine. There are more consumers coming into the marketplace globally than ever before. That may be the steadying grace. As for housing, we will have to take a wait and see.