Hard to believe that ten years ago, I began my mortgage career at Mortgage Master Service Corporation, the only mortgage company I've been employed at. Back in April 2000, we didn't have subprime mortgages. My options for clients were conventional, FHA or VA mortgage loans. We still process, underwrite and fund a majority of our loans since we are a correspondent lender. Back then, we could broker other products to banks, such as the option ARM to Washington Mutual or World Savings–in my ten years, I never originated that product. We had paper rate sheets that were faxed and photo copied. We worked with so many lenders back then that the daily rate sheet was about half inch thick!
I did my first "sub prime" mortgage in June 2002–an 80/20 with First Franklin. I'm proud to say that my clients did everything right and were able to refinance out of the product once the two year prepayment penalty was over. They also didn't have to deal with declining home values. I had only learned about First Franklin because this couple had brought their good faith estimate to me from another lender who had FF written on the estimate.
Mortgage Master was late to the subprime scene and I believe we were more on the conservative side compared to what other lenders were willing to do. I was against stated income loans–I think I only did one stated income…I would rather have a borrower be able to qualify with a "no income verifier" and to put the onus on the underwriter to determine if the borrower qualified rather than have them enter an income on a loan application. The one borrower did make the income, she did not have complete documentation. It's kind of ironic that the only stated income loan I did was a jumbo mortgage that closed in the summer of 2007–when subprime died along with the jumbo market. (I was so relieved when that transaction closed watching lenders retract programs with very little notice).
What isn't said about those five or so subprime years in the mortgage industry is how the bank and wholesale lender sales reps would line up at our doors for a chance to review our "reject" piles. It was amazing. They would review a file with you and in minutes, write up how the loan was to be submitted and how to price it. The bank/wholes rep would tell the mortgage broker how to structure the subprime loan in order to get a loan approval. Thinking back…the bank who blamed the mortgage meltdown on mortgage brokers offered 107% financing adjustable rates (or fixed) on purchases "back in the day"!
A real low point for me was in the summer of 2006 when I met with a young couple who were referred to me by one of the real estate agents I worked with. They did not have a checking or savings account because the husband could not manage having a debit card. Their credit report revealed collections for bounced checks (also documenting the husband's issues)…if it weren't for bad credit, they'd have no credit at all! I offered to council them on repairing their credit and encouraged them to get a bank account and to practice making mortgage payments to a savings account for 2 years. I wanted them to become good enough to be an FHA borrower. The real estate agent was FURIOUS with me. She told me that it was not my job to council borrowers, that if I had a program available it was my job to give it to the borrowers. The real sad part is that there WAS a program available. With their low credit score (high 500's) and no bank account, a lender would do 100% financing. It was sickening! This couple was predestined to fail. They had all ready pr oven to be financial failures and needed help BEFORE buying a house. I was so thankful they decided not to proceed since the rate was higher. That real estate agent and I no longer work together.
I'm surprised when I look back at my businessthat I didn't do more subprime loans–only because it really felt like I did. I think that's because of all the counseling I did–offering different plans (including working on what ever was causing them to be "subprime" and obtaining a mortgage later). Many consumers were their worse financial enemy–wanting a home they couldn't afford at any cost. I did have borrowers who wanted to do OVERstated income loans, which I refused to do and I'm sure they went down the street to the next mortgage broker who is now footing the blame for originating that mortgage.
Because of situations like this, consumers will find more paperwork in order to qualify for a mortgage and yes–they now have to qualify and provide supporting documentation. The guidelines are still tightening and Congress will create more reform which will ultimately give the consumer less freedom of choice with their financial options. I find this concerning. I believe that consumers should be able to make educated decisions about their financing. Perhaps first time home-buyers should be required to take classes before they can obtain a mortgage.
Loan officers began to be licensed in 2007in Washington State (mortgage originators who worked for banks were excluded). This is actually one of the reasons why I began blogging in late 2006. With the passage of the SAFE Act, mortgage originators across the country will be licensed (if they do not work for a depository institution–otherwise, they're just "registered"). At the beginning of the licensing process, Washington State had approximately 13,000 mortgage brokers. The last figure I've heard is that we now have less than 4,000. Overall, this is a good thing–we had a lot of "bad actors" in the industry or individuals that jumped in for a quick easy buck. That "buck" isn't so easy anymore! DFI has been active in cleaning up unsavory mortgage originators and with national licensing, they'll have to go work for an institution that does not require licensing.
I'm glad the subprime era is gone and I hope it doesn't come back. I am concerned where the mortgage industry is going and I do plan on sticking around for at least another ten years…assuming our Congress doesn't suffocate correspondent lenders and mortgage brokers which would kill competition for the American consumer.
I love helping people with their mortgage needs. My business continues to be 100% from referral, returning clients and folks who read my blog. I thank you so much for your support.
PS: Something else that's changed in the last 10 years is my picture and last name. I'm 10 years older and happily married. In fact, today is our wedding anniversary too–no foolin'!