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Here is One Reason Why

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Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
Could have summed it up in one word GREED. Where were the protectors of the public trust when this took place??


NO ONE under 45 should be making economic decisions of that magnitude.
 

DonRico

Senior Member
Joined
Nov 26, 2002
Professional Status
Certified General Appraiser
State
South Carolina
It just points out the fundamental problem. You have untrained, unregulated brokers pushing commision-based products. Their paychecks varied depending on what they could get away with.

The borrowers either by design or by stupidity gave falsified income statements to qualify for these products. How many of these borrowers are now saying "we didn't know what Stated Income meant" or "we didn't understand the teaser rate" How disingenuous can they be.

Once the loan was closed, the broker sold it off in a hurry. He has no ties to the mess he's created. This junk was packaged into a bundle called a Collateralized Debt Obligation or Structured Investment Vehicle. Sounds solid enough....but there was no way to tell the exact percentage of solid loans to absolute junk. Rating Agencies seemed to just rubber stamp the things.

There's certainly enough blame to go around. I just hope that the appraiser doesn't take the brunt of it.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
The article mentioned $80 billion of actual subprime loan losses.

Very strange and very interesting that such a small loss could create such havoc and destruction among mortgage lenders, not to mention Wall Street brokerage houses, mortgage insurers, and investors.

Who knew? :shrug:
 

Lobo Fan

Elite Member
Joined
Nov 28, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
I got involved in one where the MB told the borrowers that if they could make the payments for 6 months it would improve their credit score enough to get them another loan at a much better rate. They struggled to make the payments and after 6 months discovered that the MB had forged documents showing an additional $5,000 per month from a home based business, that there was a huge pre-payment penalty, and this is where I got involved, that their house was only worth $115,000 after I had appraised it 6 months earlier for $185,000.

The $115,000 was supposedly based upon a drive by which they could never actually produce. These people's house payment was about 75% of their take home pay and it was going to go up.

I suggested that she get an attorney on this one or maybe ACORN. I never did hear how it all came out. My lawyer told me to stay very far away.

Anyway, MB make used car salesmen look good.

Totally commission driven with no clue or thought about the consequences of their actions. The a-hole on this one probably was salesman of the month.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
The Fed, rightfully, is coming under fire for not requiring income verification before allowing these loans be made and Standard & Poor, et al are catching it, again rightfully, for giving these exotic derivitives and hedges "AAA" ratings when they are at best junk bonds.

Raymond James has weathered the storm because they didn't bite on subprime and because they took apart every lending package and securitized the loans individually....
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
It just points out the fundamental problem. You have untrained, unregulated brokers pushing commision-based products. Their paychecks varied depending on what they could get away with.

The borrowers either by design or by stupidity gave falsified income statements to qualify for these products. How many of these borrowers are now saying "we didn't know what Stated Income meant" or "we didn't understand the teaser rate" How disingenuous can they be.

Once the loan was closed, the broker sold it off in a hurry. He has no ties to the mess he's created. This junk was packaged into a bundle called a Collateralized Debt Obligation or Structured Investment Vehicle. Sounds solid enough....but there was no way to tell the exact percentage of solid loans to absolute junk. Rating Agencies seemed to just rubber stamp the things.

There's certainly enough blame to go around. I just hope that the appraiser doesn't take the brunt of it.

I don't think it can be summarized better than this, highlights, bolds are my emphasis. Now will laws be passed to cure this? They are in congress right now. Only time will tell.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
untrained, unregulated
what's to train? A phone monkey and a computer form. They learn pretty fast. I mean an honest person wouldn't have ever thought of fabricating someone's income statement to include money they didn't make, or a host of other frauds they performed. "Training" has nothing to do with it. "Ethics" and severe "punishment" meted out to miscreants will improve the mortgage profession... As my daddy used to say, "You can teach an old dog to roll over and play dead if you hit him with big enough two by four."...of course, that is a permanent fix and exactly what we need.
 

Lloyd Bonafide

Senior Member
Joined
Jan 15, 2006
Professional Status
Certified Residential Appraiser
State
California
The Fed, rightfully, is coming under fire for not requiring income verification before allowing these loans be made and Standard & Poor, et al are catching it, again rightfully, for giving these exotic derivitives and hedges "AAA" ratings when they are at best junk bonds.

The ratings companies should take a large part of the blame, but I don't think the Fed had anything to do with subprime loans that were made by non-bank lending companies, and then sold on Wall Street.
 
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