The vast majority of all who tried to be brokers in 2003-2006 are out of business. I’ve never seen a business where so many workers made so little, usually less than minimum wage and had to quit. Turnover was incredible. Competition was fierce. If you could qualify a client for a conforming loan you would, before the next guy took your prospect.

But the vast majority of subprime borrowers didn’t qualify for conforming or FHA due to bankruptcies, foreclosure history, collections and judgements, or debt ratios. The people who claim that many subprime borrowers could have gotten conforming or FHA loans are totally in fantasyland. Give me the data to prove that. Most brokers first tried to get clients qualified for conforming, Alt A or FHA loans so they wouldn’t lose the prospect. Most explained to the borrower why they only qualified for subprime and explained that they better fix credit and refinance within two years or they would face big payment increases. Nobody predicted such a huge increase in interest rates or a collapse of housing values that prevented them from refinancing even if they had fixed credit.

Don’t blame the brokers. They sold what was on the menu and what clients wanted. Underwriters determined who would get those loans. Even subprime loans weren’t that easy to get qualified. Brokers spent their lives trying to find a lender to accept a loan. Blame the geniuses who designed the subprime loans which are obviously guaranteed to blow up if a borrower can’t refinance. Blame the Fed for keeping interest rates too low too long, trapping millins of subprime borrowers, and then increasing them to much too fast and holding them there even as they told Congress what a disaster was going to happen.

Guess what? The subprime disaster is a minor shot across the bow in what will become a debt Pearl harbor. Starting in late 2008 through 2010, four times as many prime and Alt-A ARMs will reset for the first time as there were subprime ARMs. That happens before the market can clear the subprime foreclosure inventory. Very few of the prime credit ARMs can be refinanced either, since many will be upside down, and lending guidelines have stiffened to where many no longer quality for the loan they originally got. So what will happen? If interest rates stay where they are for a few years, it won’t be too horrible, but, if they go up at all in the next two years, it will be an economic disaster, since increased interest payments will drain all discretionary consumer spending. Many prime ARM borrowers will try to sell or get foreclosed while the economy is mired in a recession. Many banks and investment banks are already teetering on the brink, and can’t even recognize many current loan defaults or they’d lose their charters. As the prime ARM crisis unfolds they will fail in droves.

In the next few months as nothing improves in housing or the economy we’ll begin to hear the Fed will explain to Congress what a prime ARM disaster is about to happen. Lawmakers and polititicians will rail against mortgage brokers (who will barely exist at all at that point), and propose more laws to regulate brokers and advertising, require more disclosures, restrict profits, and unprecedented enshrinement of restrictive lending guidelines into statutes. They’ll authorize hundreds of billions of dollars to save investment banks and commercial banks in the name of economic stability. They’ll propose and pass tax breaks for businesses, new tax credits for future buyers of homes and for those who can manage to hang on to theirs. But there will be absolutely nothing whatsoever done to stop foreclosures for the citizens who are losing their homes, their equity and what’s left of their credit rating. Oh, and did I forget to mention, absolutlely nothing will be done to regulate the terms of ARMs, most importantly the margins and rate adjustment limits, which everybody on earth agrees was the actual cause of the problem. How can I predict that? Because that’s what ’s already happened in response to the subprime crisis.

Actually, I agree with you. The purpose of this blog article is to point out that FHA Secure will likely not help as many people that need help, and will likely not help as many people as the administration believes it will help.

In fact, I believe nothing that our government can do at this point will help the majority of homeowners facing foreclosure.

From housingwire:

“The U.S. Department of Housing and Urban Development said late Friday that it will begin mailing letters this week to hundreds of thousands of at-risk homeowners, as part of a campaign to drum up refinancing activity for FHA-backed mortgages.

In particular, the effort appears to target FHASecure applicants. The recently-announced program — intended to target delinquent and defaulting subprime borrowers — has been less effective than originally hoped.”

read more:

http://www.housingwire.com/2008/02/11/fha-launches-letter-mailing-campaign-targets-at-risk-borrowers/

b. borrowers shopped for these loans, they wanted them, in 2005 my company did not originate subprime loans, and borrowers ask for them all the time, when we began to originate them the fish jumped into the boats. THEY just wanted to be approved, in america there is a huge push for homeownership the borrowers just wanted to join the club.

c. they had bad paying habits then and have the same habits now, that’s why they can’t get better loans. So the question to pose is who’s fault is that? Should we blame the banks? or the folks who made their payments late (before the adjustments even began, 75% of subprime loans have late payments before the first adjustment)

d. SUB prime pays bankers/brokers about the same as FHA. they have about the same pull through rate from application to close. Most subprime borrowers could not do the credit standards for FHA, or did not have the 3%.

finally

e. this is a natural correction of the market, it got to loosey goosey out here in loan land. Weather you bought mortgage paper, or took out the loan it was a gamble with certain profits to be gained, no one promised that you would profit by an increased value of your home, a lower rate later, or an investment free of risk.

I guess i am just tired of hearing about all of those folks who didn’t pay their bills on time, or bit off more then they could chew. When you have bad credit it is more expensive to borrow money, why shouldn’t it be???

When you lend to people who don’t pay on time sometimes you loose your investment, why shouldn’t you???

When someone pays on time who had bad credit the banks (who bought the loans) make exorbident intrest fees why shouldn’t they, they are the ones who took on the risk.

Moral of the story?

HOME OWNERSHIP IS A PRIVALAGE, NOT A RIGHT!

if you have good credit, and funds in the bank, buy investment properties, the next few years promise many more RENTERS!

Check with HUD/FHA because I believe that there is a new Bond offering that would allow you to by-pass those costly audits. You basically purchase the Bond (in advance) and that would actually cover any audits… I’m told that it actually saves thousands of dollars…

Have a great day…
-Danny