New estimates and projections are released… some 2.4 million homeowners are in danger of losing their homes. Critics are pointing their fingers at who is responsible - here are the main targets.
Mortgage brokers
The charge: Brokers steered borrowers to loans they couldn't afford.
The huge increase in mortgage originations, including a spike in refinancings, during the first half of the 2000s, attracted a flood of new mortgage brokers into the industry. Despite a lack of experience, many were soon earning six-figure incomes.
When business slowed near the end of 2005, brokers had to find new ways to churn out deals. "Clients started to get harder to come by and the brokers started shaking the trees a little harder," says Allen Hardester, director of business development for mortgage broker Guaranteed Rate. Some very poor risks who would have been blown off during better times, got loans.
Years of out-sized home price increases delayed the day of reckoning but when markets stopped their run-up in 2006, it left many borrowers unable to make payments. And the more recent the loan, the more tenuous is seems to be.
"Subprime 2006 loan originations are going delinquent much more quickly," said Bob Visini, vice president of marketing for First American Loan Performance. But mortgage brokers have come in for an unfair amount of criticism, according to Harry Dinham, president of the National Association of Mortgage Brokers .
"It's the lender's money," he says. "They're reviewing the loans. They put loan programs out there and it's the mortgage broker's job to sell the programs."
Bottom line: Were mortgage brokers always careful about matching borrowers with affordable mortgages? No way. But lenders made the ultimate underwriting decision.
Appraisers
The charge: Inflated appraisals put home buyers in immediate jeopardy.
The appraiser's job is pretty straightforward: Put an objective dollar value on a home. But according to Thomas Inserra, CEO of Zaio, an Internet-based appraisal service, inaccurate appraisals have become one of the substantial contributing factors to subprime's problems.
When a property is valued much higher than its actual worth, a borrower could owe more than the home would fetch on the open market. Inaccurately high appraisals also fed the rising home prices, which, by making homes less affordable, ensured that more borrowers would default on loans.
In a stagnant housing market or if prices are actually declining, owing more on a home than its value removes one of the safety nets. It makes it impossible for owners in trouble to tap home equity; there isn't any.
Bottom line: Appraisers don't bear the primary responsibility for all the bad loans, but more accurate appraisals could have lessened the severity of the problem.
More to come in the following days.......................
No I have not... just been in the game for 26 years and see what most are like. Yes there is blame that is the borrowers as well. That is covered theoughout my posts and research.
Posted by: Ron | April 10, 2007 at 09:27 PM