Unscrambling the Mortgage Mess
August 15, 2007
Hardly a day goes by that the news media does not have a scary headline about the current state of the lending industry (or profession, whichever you prefer).
Subprime has become a buzzword, with a bit of confusion as to what exactly a subprime loan is. The common belief seems to be that a subprime loan is a loan made to a borrower who otherwise could not qualify for the loan necessary to purchase the desired property. The question asked: What standards did the mortgage broker use to approve the borrower? I am not a lender and do not know the answer. What I do know is that in the past 6 or 7 years, lenders have come out with a myraid of new loan types. They saw their task as finding a loan type to assist a would-be home buyer to purchase a home.
It seems that with so many different loan products and an explosion of newly formed morgage brokerages, borrowers sometimes were hoodwinked. Apparently there was no rating system to separate the good guys from the bad guys.
I was reading the Inman Blog last week and came across a guest post that suggested a way to choose a lender. Ask the lender if they are FHA approved. FHA lenders go through a rigorous audit. They have their own credit history checked along with the busines itself. They must establish and file a quality control plan and provide pictures of the brick and mortar facilities.
After reading this blog, I went to our local lender, and confirmed that not only did the above apply, but that had to have an annual audit. To be an FHA-approved broker or banker, the business must go above and beyond the minimum standards of the industry. A lender that has been in business for 15 years established the practices the FHA approval required. They have maintained their status as an FHA approved mortgage broker.
As a borrower, it is important to be able to trust the mortgage agent who is assisting you through the loan process. Even though you are not wanting an FHA loan, ask if your broker is FHA-approved. You can then be more confident that you have received the information you need to select the loan appropriate to your situation.
Hardly a day goes by that the news media does not have a scary headline about the current state of the lending industry (or profession, whichever you prefer).
Subprime has become a buzzword, with a bit of confusion as to what exactly a subprime loan is. The common belief seems to be that a subprime loan is a loan made to a borrower who otherwise could not qualify for the loan necessary to purchase the desired property. The question asked: What standards did the mortgage broker use to approve the borrower? I am not a lender and do not know the answer. What I do know is that in the past 6 or 7 years, lenders have come out with a myraid of new loan types. They saw their task as finding a loan type to assist a would-be home buyer to purchase a home.
It seems that with so many different loan products and an explosion of newly formed morgage brokerages, borrowers sometimes were hoodwinked. Apparently there was no rating system to separate the good guys from the bad guys.
I was reading the Inman Blog last week and came across a guest post that suggested a way to choose a lender. Ask the lender if they are FHA approved. FHA lenders go through a rigorous audit. They have their own credit history checked along with the busines itself. They must establish and file a quality control plan and provide pictures of the brick and mortar facilities.
After reading this blog, I went to our local lender, and confirmed that not only did the above apply, but that had to have an annual audit. To be an FHA-approved broker or banker, the business must go above and beyond the minimum standards of the industry. A lender that has been in business for 15 years established the practices the FHA approval required. They have maintained their status as an FHA approved mortgage broker.
As a borrower, it is important to be able to trust the mortgage agent who is assisting you through the loan process. Even though you are not wanting an FHA loan, ask if your broker is FHA-approved. You can then be more confident that you have received the information you need to select the loan appropriate to your situation.
posted by shirley harry at 7:39 AM
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