Atlantic blog: Are the Negroes responsible for the state of the economy?

Before you call the NAACP on me; this is the actual title of a post by Ta-Nehisi Coates. So there. Actually, check out his main page today, he had some good things there, including a reader's comments about "uppity".

FoxNews.com; always the voice of reason (!!?!) seems to know what brought Wall Street down; "Reckless Mortgages". By greedy, unethical, all-for-nothing insiders? Um, no. The article asserts that it was not unfair and deceptive practices either; but rather, allowing those with less than perfect credit and minorities to buy homes. It goes on to say that all of these (undeserving, it seems to imply) new homeowners artificially boosted the values of homes, by increasing demand.

Now, I can talk about this from first-hand knowledge and experience. I have been a mortgage lender for over 12 years. I am the first to admit that there have been plenty of unscrupulous, greedy, manipulative "brokers" and lenders out there. And almost all of them are gone, now. But we're seeing, finally, that the corporate forces behind these actions, (Ameriquest was one of the first major mortgage companies to fall, hard, with severe predatory lending penalties and class action lawsuits.) are in large part responsible for creating a mentality of nothing-to-lose lending.

However, these companies were also responsible for creating a culture of entitlement. Within the last year, Fannie Mae and Freddie Mac began drastically tightening their lending guidelines, most of the time because of pressure from the mortgage insurance companies. The MI companies have been cutting back and are the ones that eliminated, completely, all conventional 100% ("no money down") financing. And they're still making changes. But even with the "mortgage crisis" being a main staple of the nightly news; I still had customers that were seriously ticked that they couldn't finance 100% with extremely low credit scores. So, in a way, raising and raising the minimum credit score and eventually eliminating the programs completely mean, if they ever are restored, that they may be appreciated a bit more.

I have a major issue with tying "little to no verification of income" together with risky/bad credit. NEVER have seriously low credit score borrowers not had to verify their income. As an example; with conventional lending, I cannot think of a time that the lowest credit score available for "convetional low-doc", which was Fannie Mae's "stated" income program, was lower than 620. For those that aren't familiar with credit scores; 620, for years, was the cut off for "standard" (which was the highest tier, they had lower scores risk-priced, with the worst tier being over 4 times the monthly premium as the standard category).

Also, "conforming low-doc", what Fannie Mae did, was NOT a "no doc" loan. In many cases, "assets/reserves", (liquid funds; checking, savings, 401k, etc) had to be documented. A true no-doc loan, with most lenders, has always required a pretty high score. In addition, with most lenders (and I did not ever do business with Ameriquest, WaMU, HSBC, etc), a w2'd job had to be verbally verified, and self employed had to have verification of such from an accountant, business license, etc. So sure, that gave LOTS of leeway, but at the same time, the loans all required the income to be reasonable for the job.

Now, there were plenty of lenders that were the true "sub-prime", doing 2 year adjustable rate loans with THREE year prepayment penalties (pure evil, something I would NEVER have done, ever), that pushed borrowers debt-to-income ratios (the percentage their total payments were to their gross incomes) to unbelievable heights. But as the post by Ta-Nehisi Coates from the Atlantic points out;

People have to be responsible when they sign their names.

I could easily take up 5 pages with my opinions on all things mortgage. So tell you what, post your questions here, or Email me! your questions or comments and I can address them. Whew. Thanks for listening. LT