Here are questions you’ll either see raised or have yourself, over the coming weeks, as the subprme mortgage loans story makes it way through the media (courtesy, Holden Lewis, Mortgage Matters):
* Who is responsible for this subprime mess: lenders, mortgage brokers, warehouse lenders, investors?
* Where does the money come from that fuels the mortgage industry, and how does it flow and where does it go?
* Should Congress and federal regulators impose a suitability standard so that loan officers and mortgage brokers must decide whether a loan is in the applicant’s best interest?
* How will the subprime meltdown affect home sales, construction employment, home equity withdrawal and the overall economy?
* What’s the role of appraisers in the subprime debacle?
* Who is pointing fingers at whom?
* How should regulators prevent people from getting into bad loans while not hurting people who already are in bad loans?
One thing I fear we’ll see is the media confusing “subprime lending” with “predatory lending”. Predatory lending would be a situation where lenders took advantage of poor or uneducated borrowers. Subprime lending wasn’t like that – many of those who borrowed were middle-class, looking to buy more home than they could have … or should have.
The fear everyone should have is that the discussion of subprime lending will lead to over-regulation. Plenty of people with less-than perfect credit took out loans over the past several years and are happily paying the higher prices. If they couldn’t get these loans, they’d never be able to buy.
If we turn off the credit spigot, this thing could get out of hand and have dire consequences, later this year.
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Updated: 1st Q 2018
