What? Foreclosure increases and fraud-- THE LENDER'S FAULT?!?!?

Recently award-winning author and debt collection expert Michelle Dunn posted a blog entry about the current adverse changes in the mortgage market, laying the blame of the current challenges in the mortgage industry squarely on the shoulders of the mortgage lenders!

Ms. Dunn went on to explain in no uncertain terms that the looming spill-over (some of which has already spilled over) into other lending areas is all caused by over-zealous mortgage lenders trying to capitalize on over-eager lenders ready to bite off more house than they could chew.

Well Ms. Dunn, I cannot let your post go unanswered. As a Mortgage Planner I have been in the trenches over the past several years, doing my best to recommend that borrowers consider not what they qualify for, but what they can afford when considering a mortgage payment. But I am only one man and at 5' 10 1/2 " not even a very tall man. There's only so much I can do.


In direct response to your blog post.... I in large-part agree.


There has been huge demand, both from borrowers and from the secondary markets where mortgages are sold. It has been a feeding frenzy! In a(nother) phrase, it's been out of control. As the lender, there should have been a greater deal of control over making sure that individual borrowers really had the ability to repay -- especially borrowers who had demonstrated that it was often a challenge for them to repay even a much smaller loan. Too loose also were guidelines on which stated income and asset loan programs had no check and balance system.

And now the lending industry is reacting once again -- no longer to demand but the lack thereof. Now suddenly no one wants to buy many of the loans that borrowers want to close, regardless of credit score, risk-factor, down payment, etc. There seems to be no rhyme or reason to the lack of interest in certain types of loans... but, we brought this on ourselves I suppose. With record low interest rates and record high appreciation, the industry gave in and we wound up here.


In all fairness, much of the foreclosure issues were brought on by fraudulent loans that did not meet lender guidelines, but were also due to the things you mentioned -- adjustable rates with an initial rate that was discounted and was sure to go up (and now have gone up), and lax qualifying standards that allowed borrowers to take out a home loan with a payment that was much higher than they could ultimately afford.

Now that we're here, I for one am looking forward to a controlled pace of business. Many of the guideline changes are long overdue -- I just hope the markets don't overreact to the point where well-qualified borrowers aren't able to finance the home they deserve and can easily pay for... we're already seeing some of this and as you mentioned I'm sure it's not over yet. But a right-ing of the market is prudent and the changes are welcomed by those of us who really do our best to look out for the interests of our clients.

Michelle Dunn's posting can be found here: http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=30359901&blogID=293592890&Mytoken=7B52D6EF-E43D-4806-95FF12A75CA7EB1783616320.
In addition to her MySpace blog, she has two Web sites: http://www.credit-and-collections.com/ & http://www.michelledunn.com/


--James Wirth
http://myspace.com/mtgplanner
http://mymortgageplan.blogspot.com