How could I (or any broker) know that subprime lenders would be closing or misstating losses? I’m glad that you’re pointing out the seriousness of this matter–I agree with you there. However, it’s not always the big bad broker’s fault. Regardless of what type of mortgage someone has (or even if they don’t have a mortgage), people need to be more responsible with their credit and finances.

Wow, 16 messages and no one has connected the dots between the problems in the subprime market and your willingness to put “Mr. & Mrs. Subprime” into a loan that they have no hope of servicing once the rate reset kicks in. Guess what folks, we have met the enemy and it is us – brokers putting clients into loans that are bound to default on barring some prodigious rate of HPA or some sudden income windfall (and remember these subprime loans usually reset in two years). Yes, I know you are only selling loans that are approved by the lenders. But this wink-wink behavior of everyone in the mortgage food chain is putting over-their-heads borrowers on a course for a train wreck two years down the road and is at the root of what is causing the mortgage industry headlines everyone is reading.

Well folks, enjoy the easy subprime fees while they last. In a day not too far into the future, you are going to have to qualify borrowers at the fully indexed rate *after* the interest rate reset. At that point, you will be left with a dramatically smaller market of people who can actually service what they have signed up for. In the interim, think hard about how much you want to push the envelope with these loans. The foreclosures are starting to pile up, hearings are starting to be held in Congress, and before this is over more than a few brokers are going to be doing the perp walk. A lot of people will have their credit ruined and lives turned upside down, and the powers that be will be looking for scape goats. Imagine yourself under oath in front of the TV cameras before you make that next loan.

The slowdown in real estate is seriously affecting the mortgage market with some suggesting a meltdown…

As far as lenders go, some only do “a paper” loans (requiring a certain credit score and/or amount of equity/down payment). Many lenders will do both. There’s also “alt-a” and a wide range of other types of loans and lenders for those borrowers who do not fit into the “a paper” category. I believe a correspondent lender or broker would offer a larger selection. Many banks have products that are subprime too and/or would refer you to one of their “sister” companies that offer these types of loans.

I agree with Ardell in that I would not go directly to a subprime lender (or a lender who only does b-paper or lower). Just last week, I had a client close on a purchase who believed she was subprime from the lender (bank) she was working with. We were able to close her loan easily as “a paper” which saved her substantially on her interest rate. Had she gone directly to a “subprime” lender, her rate would have been even higher than what the bank was going to provide her.

I’m chiming in on cb’s question.

One of the worst things I saw was a doctor who was referred to his friend’s lender without knowing that the lender could ONLY do Sub-Prime. It was two days before closing when they got their Good Faith Estimate and saw the high APR. I don’t want to say I looked at that GFE even though they weren’t my client. Don’t want to start another is it OK for Ardell to peek at something, for a non client, discussion.:)