Even though the Miller, Watt, Frank Mortgage Reform and Anti-Predatory Lending Act may be viewed by some politicians as a way to prevent another foreclosure crisis, blaming the mess on predatory lenders who “Duped” consumers into bad loans doesn’t paint a fair picture of the entire story.
In a testimony given by U.S. Representative Bradly Miller on May 6, 2009, mortgage brokers who originated sub-prime loans between 2004 and 2006 were accused of putting borrowers in toxic loans that paid higher commissions vs other loans that they may have qualified for.
Pay close attention to minutes 5-6 of as Rep. Miller clearly states that borrowers did not ask for these types of loans.
While I agree with Rep. Miller that many originators during the boom years may have compromised their fiduciary responsibility to their clients in exchange for larger commission checks, I don’t believe that all mortgage borrowers were duped into loans that they didn’t want.
If you were to conduct a search on any mortgage forum’s archives during the years 2004 – 2006 for the phrase “sub-prime,” you’ll find pages of ugly loan scenarios posted by originators looking for programs.
Day out of BK, < 600 fico, 100% No Doc, No Assets, No VOR, Multiple Properties, Interest Only…. the list goes on.
Quite honestly, it is nice not having to know about every new exotic mortgage that 19 competitors down the street are offering. It was utter chaos trying to keep up with clients and real estate agents who expected creative lending options so that they could consume more real estate.
Thinking back on those crazy financing years, most of the borrowers that I knew were asking for anything that would get them into a house, regardless of the future implications.
I’m wondering if an organization will step forward and take responsibility for leading borrowers to believe that they would be millionaires within 2 years of their rate adjusting due to the massive equity they would gain.
Basically, we all have to take a little responsibility for participating in the notion that everyone in America should be a homeowner.
I’m not a fan of this new H.R. 1728, especially since it portrays mortgage brokers as the only instigators. But, it is hard to argue against a bill that presents better lending standards for our industry.
Either way, originators need to get involved in this discussion so that we can battleback our reputation.
Updates on H.R. 1728: Mortgage Reform and Anti-Predatory Lending Act
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Mortgage Originators have been giving a black eye since the boom years. I agree that some of it is deserved but in my opinion to completely swing one way or the other is always a mistake. You make consumers into lemmings that blindly walk into a situation that is absolutely disgusting.
Although the mortgage originator or any other professional involved in the purchase of your home/refinance etc has a fiduciary responsibility to act in your best interest, the buck doesn't stop there. Consumers are ultimately responsible for their own financial well being. Yes its true some were duped into loans that weren't to their own benefit, most knowingly signed on loan documents knowing full well they were taking a gamble with the market.
Agreed.
Sept 30 1999 New York Times, I don't remember the reporter, however the article is available. It spoke of President Clinton's desire that all people should get a home loan. It spoke of how he asked and pressured Fannie and Freddie to open up their standards to less qualified borrowers. This was the beginning of the great society version of how we should do lending. It all started there and further in 2004 when congress repealed the restrictions on leveraging. Yes the bankers knew better, but they were working with and competing with the government agencies, Fannie and Freddie. Wall Street stepped up to a low interest rate environment that had little profit potential and blew it up. This was all at the desire of Barney Frank and company, to expand credit standards and loosen requirements. The notion however to lend without prudence, was the lack of skin in the game. This has now changed.
will this Anti-Predatory Lending Act help the borrowers in any way? If a borrower is in dire need of money he will borrow money even from a predatory lender. Is not it?