Are the mortgage lenders worried?
Is it time for mortgage professionals to flee the home-lending business? If you’ve read the newspapers lately, listened to the radio, watched your network news or logged onto the Internet, you’d think so.
A host of mortgage lenders – large and small – have gone out of business. Subprime lenders are under fire for passing out mortgage loans to consumers who can’t make their monthly payments. Housing sales are slow, which means fewer consumers are looking for mortgage loans.
It’s a bad time, then, for all those mortgage loan officers, right?
Yes, but the mortgage pros that I recently interviewed for a story in Metro Chicago Real Estate Magazine, the real estate trade magazine, that I’ve been editor of for the last nine years, say that though things look extremely bad for the mortgage industry now, the current housing and mortgage-lending crises will certainly pass. It’s the way it always works, they say, in the cyclical business of residential mortgage lending.
The attitude of Steve Rogers, a loan officer with BancGroup Mortgage in Buffalo Grove, sums up the attitude of the more experienced mortgage pros I’ve talked to: Yes, it’s bad out there in the mortgage business. But it’s going to get better.
“The market constantly changes. Originators and Realtors either adapt to this or die,” Rogers told me. “The reality is that people need homes. They either rent or they own. Therefore, our clients are buying homes either as owners or investors.”
Ric Rumowski, vice president of mortgage lending with Chicago’s Guaranteed Rate, said that even if legislators enact new federal or state rules regulating how mortgage loan officers do business, the industry will survive. It will simply have to adapt to the new legislation.
“The ability to morph to new restrictions is what will set originators apart from one another and, therefore, increase consumer confidence in the abilities of the people they are working with,” Rumowski said. “Having been in the mortgage industry for 10 years, I have seen this before, and think that originators who can weather the storm will eventually be the ones reaping the rewards.”
Mortgage loan officers, at least the experienced, smart ones, recognize that the industry is now a favorite target of consumer-advocacy groups and governmental committees largely because mortgage lenders went a bit crazy during the housing boom. They relaxed their lending guidelines. They created new products to fit even the most debt- and credit-challenged borrowers. They made loans to people who in no way should have taken on the burden of monthly mortgage payments. It was inevitable that a large chunk of these loans would end in foreclosures and defaults.
The smart loan officers – though they may not say so on the record – even agree that the subprime mortgage crisis will result in positive changes in the residential lending business. The new laws that stem from the wave of foreclosures will create a more structured, calmer lending environment, they say.
So when you’re reading all that bad mortgage news, you can relax a bit. This will pass. And if we’re lucky, when it does the business of originating mortgage loans will make a little more sense.
Tags: Bancgroup-Mortgage, Guaranteed-Rate, lending-legislation, subprime-crisisRelated Stories
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2 opinions for Are the mortgage lenders worried?
marianne
Oct 21, 2007 at 5:39 pm
I believe that subprime lending is a lot like Jessica Rabbit…not bad, just drawn that way. There are companies, like Ocean Capital in Rhode Island, that make financing available for sole proprietor businesses that would not be able to secure financing in the traditional marketplace. We’ve all got to start somewhere and oftentimes a stated income loan is the only means to start one’s business.
Dan
Oct 22, 2007 at 5:50 am
Hi, Marianne:
Thanks for your comment. It is unfortunate that all subprime lenders have been painted as villains. The industry, though, certainly did a lot to hurt itself. The big problem to me, though, seems to be that some people just should not own a home. This goes against the “American Dream” ideal. But until we recognize that renting is a perfectly legitimate option — and that perhaps we shouldn’t be converting countless apartment buildings into high-priced condo complexes — I fear that we’ll continue to see borrowers over-extend themselves, with the help of willing mortgage lenders.
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