Just watching the mortgage meltdown that is unfolding is of little surprise to some of us veterans from the mortgage industry. It has been a train wreck waiting to happen.
The ‘NOISE’ being made all over the media and political arena is well deserved… sad to say. That said, it is important to note that it is probably a small percentage of the mortgage industry that have taken advantage of the process to line their pockets that are causing all this turmoil.
The issues are being fully dissected by the press and of course those grand-standing in politics. It is my belief though that the real problems, not just in sub-prime lending but in lending in general, is not being addressed… and maybe purposely.
The meltdown we are seeing today is focused on the sub-prime arena. That market may be just the beginning. It will spread to other types of mortgage lending including the non-conforming markets where the ‘real creative’ programs exist.
When we look deep into the meltdown problem, as usual, the root of the issue is… GREED. Guidelines for many loans have been loose for sure. For us in the business for years have really been amazed by some of the programs introduced over the past few years.
Unfortunately too, the laws and regulations that monitor mortgage marketing, advertising and disclosure have been ‘turning a blind eye’ to all of the consumer ‘bait and switch’ and the disclosure process that probably 75% of consumers could never begin to understand.
We have all seen and heard the ads… “Rates as low as X”. The laws that require an Annual Percentage Rate (APR), although well meaning, are often ignored and even when applied, not honestly quoted, hardly understood or paid attention to either.
Rates and mortgage markets change daily, hourly and every minute, How can we expect the consumer to ever understand something so complex as the mortgage marketplace when only the most brilliant on Wall Street can even attempt to understand it?
We have all heard the saying “when it sounds too good to be true, it probably is”! It most definitely applies to the business of mortgages and interest rates.
Why doesn’t a whistle go off when the consumer hears the ads like ‘no-closing-costs’ and shouldn’t someone ask, “if I don’t pay them, who does?” It is because we have all been conditioned to look for the free-lunch that doesn’t exist. Does the consumer actually believe that the lender advertising the free closing costs is just feeling extra generous that day and all the serviced providers are as well and everyone is doing it for them for nothing? When does common sense kick in?
I am not trying to say that it is the consumer’s fault. As much as it is their finances and they should be as careful as they possibly can be… the mortgage marketplace and the well-trained sales staffs (some crooked as they come) have done a wonderful job of selling consumers into financial time-bombs.
It is my opinion, that the real crooks in the business start with the mortgage telemarketer illegally selling sub-five percent mortgages and who’s income depends upon selling a mortgage product that puts the consumer’s home at risk. The well-known culprits are the very ones we see in the news with lawsuits and now going out of business as well. That is consumer gouging to the highest and yet even among all this media, it continues.
Stay tuned for more on this subject.
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