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Even Mortgage Lenders Are Repeating Their 2006 Mistakes

in realestate •  17 days ago

History has a way of repeating itself.

The lessons of 2006 are long forgotten. It is evident that the mortgage industry is repeating the mistakes of the earlier time period.

Private label mortgage lenders are taking market share away from the large institutions. This causes them to lower their standards.

Here is the mindset.

“I always believed that, if somebody is applying for a loan, we should try to make it for them,”

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They should stop putting drug dealers in prison and put bankers there instead

and how are the rates of mortgage default?

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That's the key piece that's being left out of pretty much every article like this I've seen in the past month. Mortgage default rates have been on a steading decline for 8 years now, including Q2 2018 where it was at 3.25%. Without taking any other factor into play, yes, it's true that private portfolios are taking a larger amount of market share. Having worked in the industry, I know that these are normally programs for people with "different" types of income than your regular W2 income (investment, dividend, s-corp, etc.). They reasonably use bank statements to gauge cash flow in underwriting the mortgage. My point is that these are not "scratch and dent" loans like we saw in the mid 2000's.

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Agreed and we are not seeing the same sort of speculation driving prices up way past what is sustainable, leading up to 2008 people were buying multi family properties where the price was so high that the rent rolls didn't cover the debt service, that's not a good investment! They were hoping to do condo conversions but of course in many cases people don't actually want to pay $200,000 for a shitty apartment.

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