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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: kris b who wrote (53317)	2/10/2006 2:08:15 AM
From: shades	Respond to of 110194

thehousingbubbleblog.com The Washington Times continues its look into the mortgage business. “Home-financing offers come from an army of mortgage brokers estimated at 250,000 nationwide, many operating outside the reach of banking regulators. They have become the principal source of home financing in the US. In years past, banks and savings and loans provided most mortgages, but their share of the $2.8 trillion market dwindled to less than half in recent years, according to Harvard University.” “The number of unscrupulous brokers offering ‘junk mortgages’ has multiplied with the housing boom and advent of Internet financing in the past five years, said David Levine of a mortgage information service. Their advertisements ‘are designed to hit consumers where they are most susceptible, their wallet.’ They are often successful, because many consumers never see or understand the fine print, that explains what a bad deal the mortgages can be, he said.” “The brokers who offer such mortgages often have no licenses or formal training and may have just recently graduated from high school or college. They are essentially salespeople for whom there is no downside to the risky debt propositions they peddle.” “All this was made possible by an evolution of the mortgage market away from banks and thrifts, which in years past had to follow conservative credit guidelines laid down by regulators. The mortgage companies have been able to bypass the regulated banking industry by tapping into a plentiful source of funding for the loans, private and international investors. ‘The declining importance of bank deposits as a funding source for mortgages has largely driven the structural shift,’ William C. Apgar of the Harvard center said.” “It is now routine to approve loans that cover 100 percent or more of a home’s value and require up to 60 percent of a borrower’s income to make debt payments. Recently, several wholesale lenders announced that they would offer 100 percent loans to people who just emerged from bankruptcy.” “Brokers and real estate agents intent on clinching a home sale and mortgage financing have been known, among other things, to pressure home appraisers to ratify inflated prices on homes in overpriced markets, according to the Chicago-based Appraisal Institute. ‘Brokers are immune from the potential adverse consequences of both failing to match the borrower with the best available mortgage and failing to provide accurate data to underwrite the loan,’ Mr. Apgar said. ‘Both affect the odds that the loan will default, which can have devastating consequences for the borrower.’”