Average Credit Cards with Great Rates

When will the nation’s property values begin to appreciate again? This is the $64,000 question that real estate professionals, investors, and mortgage professionals would like to know. The truth is nobody can accurately predict the return of the real estate market.  Like everyone else, I can’t predict the end of this crisis either, but what I can do is tell you what will have to happen to facilitate that change. The answer is quite simple: America must reinvest in herself once again. Without an investment, real estate is as worthless as the Dollar is today.

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What caused the mortgage crisis? If you ask most consumers they will say, “Greedy mortgage brokers that made bad loans to good people”. Perhaps they did play a part in the chain of destruction that America is in today, but they were only one link in a very long chain. The truth is, the mortgage crisis was facilitated by consumer demand, ignorant politicians, spineless banks, and yes, the small brokers and lenders.  All of these institutions lacked the “moxy“ to stick to sound underwriting principles in the face of tough competition spurred by escalating property values and a good economy.

I give you the anatomy of a mortgage.  There used to be three types of mortgages: Government (FHA); Conforming (Fannie Mae and Freddie Mac); and private subprime lenders, which were mainly owned and funded by the larger banks, operating under a different a name. Each one of these lenders established guidelines that outlined the terms in which they would “buy” the loan from the small brokers after the loan closed. Every program had a different set of guidelines that catered to a different segment of the market. That market included people with good or bad credit, and consumers that could or could not prove their income.

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In today’s market banks and mortgage lenders are being extremely cautious about which loans they approve. Real estate values are dropping and foreclosure rates are rising, and many banks are dropping out of the mortgage business all together. Gone are the days when banks could sell their loans on Wall Street, reload, and do it again. Banks are now faced with the reality of having to actually hold on to their loans like they did in good ole days. This means that they want to make sure that the loans they make at this time are good loans that will pay them back on time.

Nowadays, it seems like all we ever hear about, in reference to mortgage brokers, are the bad brokers; the ones that make headline news and are carted away on TV in handcuffs. What these stories fail to report, is that the bad mortgage brokers make up less than 1% of all the brokers that are licensed in America. In fact, it has always has been the mortgage brokers that have advocated for tougher licensing guidelines, not the banks. They have always argued that by tightening licensing guideline they can eliminate the ‘bad brokers” that give legitimate brokers a bad reputation.

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It seems like every day we read about another mortgage company being taken down for fraudulent activities. As the market tightens, banks have begun raising their standards for those people that can qualify for a mortgage. This affects the many mortgage companies and brokers that made their living by helping people who were turned down by traditional banks get mortgages.  Those days are gone, smaller mortgage companies and brokers are now are forced to sell the exact same products that they larger banks are selling.

This basically means, that in most cases, consumers aren’t any better off using a broker than they are walking into a regular bank.  Don’t get me wrong, smaller brokers and mortgage companies still offer a personal experience that the larger banks can’t offer. The smaller brokers will work harder on your loan and know which banks to place your mortgage with. However, for the “plain Jane” consumer, who has great credit and plenty of equity, there really is very little incentive for them to use a broker any longer. This segment of the market was a huge part of the smaller mortgage companies business. Unfortunately, when business tightens, this tends to force the rats out of the wood-work, and that’s why we decided to write this article.

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