Stories are passed down from generation to generation and fit within a family’s culture. The stories are now part of his grandchildren’s psyche.

But every family culture is different, so let’s be social scientists and look at US culture. Our media is placing ads out there from corporations whose sole job is to return a profit to shareholders. I don’t see a change coming anytime soon that would remove “capitalism” from American culture. Therefore,

AT SOME POINT IN THE FUTURE…..

Either loan originators will be told by a regulator (state or fed) that you cannot make that loan, and your competitor also won’t be able to make that loan.

OR

The industry itself will decide that some loan originators, based on higher levels of competency, experience, and prescribed ethical duties, will be allowed to help that consumer and some won’t.

IF LOAN ORIGINATORS ELEVATE THEMSELVES INTO PROFESSIONAL STATUS, then what you would say, is “I cannot make this loan for you because based on my experience, knowledge, and based on my high ethical duty to put your interests above my interests, purchasing this home (or refinancing for the sixth time) will cause you financial harm.”

Said in a more graphic way: If your client want’s to jump off a cliff, you would not let them. Your high ethical standards would dictate not helping them and certainly not making money off their financial suicide.

Most loan originators who read this might think that conducting business in this way would mean earning less money, but actually the opposite is true, you will be able to charge more for your services because the consumer will value you higher for your honesty.

There are some loan originators who already do work in this way, and those clients probably thank them for the brutal, honest, and compassionate wakeup call.

Does the Realtor just not sell the house to the racoon?
Does a loan originator tell the client, “you are reaching into a trap.”

This is the tricky part with our current system. I do warn clients if they are reaching into a trap. My concern is that if I refuse to do the loan, they will wind up somewhere else and it will most likely be with an unethical lender. As I mentioned, clients with “racoon” mentalities are easy to “trap” or take advantage of. They’re too hungry.

Does the government do a “3 strikes you’re out” program if a consumer continues to need subprime financing?

There are only a couple subprime lenders that I work with. I’ve selected these companies because I like their underwriting and products. There are many many other outfits that will lend to just about anyone with an intererest rate to accompany the risk. I just won’t go there.

I’ve had clients who did not have a debit card because they could not manage a checking account yet the feverishly wanted to buy a house (zero down, interest only, 2 year fixed with a 2 year prepay). I don’t blame anyone for wanting “the American Dream”, however I see many consumers taking responsibility for their finances. These clients could not see why I had any concerns. I told them we should develop a plan to help them budget, manage a debit card or checking account and improve their credit. I have not heard back from them. They could have gone somewhere else for their financing because I did have a loan program that would work, this was a case that I just could not bring myself to do the loan…crazy, huh? Did I discriminate because they could not manage a debit card and checking account? Most lenders call for bank statements with zero down financing…I have one that does not call for it or any seasoned funds for the closing costs. I had the program and did not do the loan.

Jillayne, the story your Dad tells of the Great Depression, that generation is different than the generation of today (in general).

I’m not just blaming consumers, the blame also falls on the mortgage industry and media as well.

Lending products have become so varied and the language used in documentation is hard for a lot of people to understand so consulting should be a demand on the institution that is issuing the loan. Michigan does not require loan originators to be licensed and yet they have the ability to guide customers in directions that may make major plays in their life, how good the consulting is no one can really say because there are no requirements other then the federal fair housing and normal disclosures. Washington State has just put licensing into play and may have different state laws, so I think that there is some room for improvements on a Federal level there.

On the other hand as far as gauging suitability while still being fair and non discriminatory, maybe some of the old factors that use to be used should come back into play. Like time and experience. 20 some years ago when I went to buy my first new car, the lender put terms on me based on the fact that I had never made a major loan before. A rank, as a number not based on anything other then my age really and ok today we see the same thing taking place in many States where if a person is certain age they are not allowed to drive with so many people, at a time of the day, or other allowances.

While I use the driving experience as an example, what I am really asking is what happened to the type of loan that a person could qualify for based on experience and history. I guess that it will just come down to be just spin on Washington D.C.’s part but if they do put pressure on the lending institutions to make changes I hope that they do not decide to use a color code system for suitability risk.

Nice analogy. Sometimes people haven’t developed the cognitive ability to realize that what they desire is a trap. Want a good excuse to see a movie analogy? Go see Alpha Dog for a great example of how a group of young adults makes some decisions without fully pondering all the possible consequences.

As the world currently exists (before Barney Frank signs anything new) If one of Rhonda’s clients wants an “unsuitable loan” that looks like a shiny thing in a box, what does a loan originator (or Realtor for that matter, the agent selling the consumer the house) do?

Does the Realtor just not sell the house to the racoon?
Does a loan originator tell the client, “you are reaching into a trap.”

Is it the job of government to tell a consumer they can’t have the shiny thing, or is it the job of the corporation, or is it the job of the consumer to develop his or her brain……or is it just the subtle balance of all three and maybe more that I have failed to mention.

Teach me something, EconE. I’m a sponge and you’re the professor.

I use this analogy because with our “consumer is king” mentality that is pervasive throughout every socioeconomic level in our society…we lust after those “small shiny objects” and grab for them not realizing what the ultimate “cost” will be. We as humans *should* be able to grasp the concept that many of these small shiny objects are things that we should really pay no attention to…just as the raccoon should have paid no attention to that object in the box.

Maybe we’re just really no smarter than raccoons in some aspects.

Oh…yeah…and I learned about the raccoon thing in Yosemite from a park ranger as a child.

Damn straight Ardell…not only are they not buying lattes…they are not buying 40″+ flatscreens, $200+ jeans with the matching $75 t-shirts, Blahniks (sp?) or all of the other “luxury” goods that so many people deem necessary these days.

Dining out actually “is” a luxury for many of these people from other cultures. It used to be the same within America…but hell…we kissed those values away long ago…all in the name of “efficiency”…first it was the T.V. dinner…now…most of us are so lazy that eating out is the way we live…we no longer “make meals”…rather we “go get dinner”…yet we all want a Viking range and a Sub-Zero fridge…we don’t even put them to use…but they sure look pretty don’t they?

There is true value in real estate…however…the ones in this day and age that will be able to afford it are going to be the ones that eschew all the useless “small shiny objects” with TRULY trumped up values.

We’re like raccoons.

I had to “front” my Mom’s mortgage when my Dad died because they didn’t believe she could pay it. She can squeeze a dime harder than anyone I know and even though she’s been on Social Security for many years, she has more money than all of us LOL

Sometimes it does take a co-signer if they tighten things up again. That’s how we used to do it. I co-signed with my Mom. They thought I was a man and Lyn and Ardell were husband and wife, so they approved it Back then there were points taken off for women borrowers.

Only one person represents the buyer in ALL things…the real estate agent…now if they would just stop delegating their duties, and if States would just stop downgrading their duty to the public…we could back on track!!

Brokers are looking for less liability, and cutting out all of the stuff we get the big bucks for! and when the client doesn’t need that level…the agent needs to scale the fee to the service. Because the fee is for the whole nine yards…not the cover your butt version.