St. Louis Real Estate - What the Hell Happened to the Mortgage Industry?

Everybody out of the pool! The St. Louis Real Estate Buyer pool that is. When the mortgage industry finishes shaking out, the pool of qualified buyers will certainly look different than it has for a lot of years. Sellers better start putting the pencil to the paper and re-doing their home value calculation to get the pricing correct. There is mounting pressure to shrink the “buyer pool” and it’s working! Shrunk the pool

What the Hell Happened? by Chris Scheer, First Integrity Mortgage

As the dust of the collapse of the 10th largest mortgage company in the United States starts to settle http://money.cnn.com/2007/08/03/news/companies/american_home.reut/index.htm the mortgage industry is being faced with its greatest change in lending policies in years. As fast as you can hit send/receive, investors are sending out e-mails with changes for their product guidelines. Rate locks are being cancelled as investors realize there is no one who wants to buy the loans that they want to sell. . . or if they want to buy them. . . they don’t want to buy them for the price the investor has agreed to pay the originating lender.

So what loans are changing and disappearing? It is the liar loans. For years the mortgage industry has fed its growing appetite for originations with increased products for people who don’t make the taxable income needed to qualify for the home they wish to purchase or refinance. Now I am not saying that some of these people don’t have the cash flow to handle their obligations, but what I am saying is that they don’t declare taxes on that income or they are self-employed and find ways to write off expenses so that they don’t have to pay taxes. It's raining!

What happens when a self-employed person has a rainy day?

They start robbing Peter to pay Paul and then their mortgage and other obligations become jeopardized. The same has happened to the mortgage companies that make these loans.

Countrywide, the self proclaimed largest lender in the United States has now fallen on the same woes as the rest of the industry, http://www.iht.com/articles/2007/08/17/business/mortgage.php

The entire industry has been built upon the hope that there never will be a rainy day. Now that it has started to rain we can watch as the poorly built straw houses wash away. When it is all over what will be left is a base of traditional lending values, income, assets, collateral, credit and equity. In the meantime, for those wanting to borrow, that don’t have all of the previous 5 keys, you will pay a significantly higher interest rate than the market if you can find a loan at all.

Chris Scheer can be reached at chrisscheer@stlouisrealestatevoice.com

Anyone out there have a “mortgage nightmare” they would like to share with us? Comment away. . .