| Mortgage lending and the real estate industry have | | | | forms of lending such as ARM's (adjustable rate |
| been blamed for starting this terrible rescission that | | | | mortgages), poorly written Jumbo loans, loans with |
| we've been suffering in for the last year or even | | | | balloon payments, many loans with negative |
| longer. All you've had to do is look at the T.V. or read | | | | amortization and a host of other strange or different |
| a newspaper. | | | | forms of lending. |
| It's a fact that the real estate industry influences a | | | | The more the mortgage industry wrote of these off |
| giant segment of our economy. Mortgage lending has | | | | colored loans, the more it created a situation filled with |
| a great impact on the real estate market. Two things | | | | nothing but gloom and doom. |
| really triggered the fall of mortgage lending. | | | | As the defaults started to climb to the trillion dollar |
| First was when Fannie Mae (Federal National | | | | mark everything started to fall apart and lending came |
| Mortgage Association) and Freddie Mac (Federal | | | | to a standstill. MORTGAGES WERE DEAD! |
| Home Loan Mortgage Corporation) found themselves | | | | This could have been the end to a very sad story, but |
| forced into a sort of receivership. | | | | mortgage lenders are a very tenacious group. Though |
| The second was when the secondary market in | | | | they were silent for a while, slowly and quietly they |
| mortgage lending fell apart due to it's funding and | | | | began to creep back to life. |
| handling of sub-par mortgages. | | | | With no great fanfare, advertisements began to make |
| Let's keep this in plain English with no technical, financial | | | | a new appearance. Influenced by low rates that finally |
| mumbo jumbo. So here's that explanation again. | | | | dropped to levels I have never seen in my 30 years of |
| First, after Fannie Mae and Freddie Mac had their | | | | banking, there was finally a reason to refinance or |
| hands tied due to poor management, much of the | | | | start thinking about buying that new home. |
| nation's mortgage funding was crippled. | | | | The market was starting to come back! |
| Second is a little harder to explain. Back in the '80's a | | | | Now this is a great thing for all of us that want or need |
| new form of mortgage was created that allowed | | | | new mortgages, but let me stress a few of things that |
| people with less than normal salary, lower than normal | | | | you really need to be mindful of as you go out |
| credit or other weak factors to be approved for | | | | mortgage shopping. Probably 90% of those looking for |
| mortgages. Though they are referred to as sub-par | | | | mortgages really need just a plain old 30 year fixed |
| loans, I always called them "grey paper mortgages". | | | | rate instrument. |
| Lots of bad things are said about these "grey paper | | | | Don't get enticed by all the bells and whistles that can |
| mortgages", but I made quite a few mortgages to | | | | be attached to your loan. I'll write other articles this |
| people who would never have qualified for any other | | | | year to explain different types of loans, but with rates |
| form of lending. | | | | as low as they are now, I can see no reason to get |
| And I hate to say it, but this "the end justifies the | | | | off the path of great, old fashion, plain 30 year |
| means" thinking was part of the industry's downfall. I | | | | mortgages. The only variation you really need to look |
| know I kept writing these mortgages (with all the | | | | at is rather you want FHA, VA, or some form of |
| others) right up until my health forced me to quit in the | | | | conventional product. |
| mid '90's | | | | It's a great time to make your new mortgage loan. |
| In the last few years the "grey paper mortgages" we | | | | Good luck in your loan hunting and I'll see you later with |
| wrote were starting to default. Along with these poor | | | | more information. |
| loans the industry had to contend with other different | | | | |