Posted on 03/02/2007 4:27:05 PM PST by BurbankKarl
Federal bank regulators announced a crackdown on loose lending standards on subprime home mortgages, as two major lenders struggled to cope with losses and regulatory problems.
New Century Financial Corp., one of the nation's largest subprime lenders, announced that it has been informed of a federal criminal inquiry into its accounting and trading in its securities. New Century also said that a failure to obtain waivers from lenders could prompt its auditors to warn of "substantial doubt" over its ability to remain in business.
Another big lender, Fremont General Corp., said it plans to stop making subprime residential loans and is in talks with various parties aimed at selling that business. Subprime loans are those for people with weak credit records or high debt in relation to income.
A proposed policy statement released Friday by regulators comes after rising defaults already have rattled investors and forced subprime lenders to be more cautious in extending credit. Subprime loans are those for people with weak credit records or high debt in relation to income.
"There seems to be a growing realization that not everybody can buy a house today," said Scott Stern, chief executive of Lenders One, a St. Louis-based cooperative for mortgage-banking firms. Lenders will have to tell some borrowers to save for a down payment, he said.
(Excerpt) Read more at online.wsj.com ...
Goodbye CA!
"Would you like to sample my subprime cooking tonight?"
It's too late. The time to fix things like this is before it all collapses, not after. At this point there is nothing to do but let the companies that engaged in this behavior fail.
I have been a bank credit analyst/officer for 20 years and have no sympathy for these clowns. The ethical standards I learned a long time ago still stand - giving someone a loan they cannot afford is bad for them and bad for the bank. Modern technology and every other advancement in service delivery do not change the basic principles of sound lending.
I have walked away from job offers from banks with "relaxed" credit standards and even left an employer who was becoming too aggressive. I could not look at myself in the mirror to shave every morning if I knew that I had harmed a customer by deliberately granting more credit that they could repay and cost them their business, their home and who knows what else.
Excellent post RebelBanker! All we needed to save all those thousands of people who will lose out would have been some ethics. Thank you for pointing out that most long time mortgage officers do have ethical standards and are proud of them.
Your words give me some heart that the crash, in taking down the clowns, will leave us some real quality left still doing good business. Thanks.
We old-fashioned fuddy-duddies in the lending business tend not to make headlines, but we are still here to safeguard your deposits and make sound loans. The bank where I received my training traced its ancestry back to the first bank chartered in Maryland in 1797; it had been bought out and merged into larger holding companies several times, but there was still an institutional memory and tradition to remind us why we were in business.
I often joke with my co-workers by asking them, "What's new and exciting?" When they respond, "Nothing," I remind them that we are bankers and that exciting is NOT good in our business ;-)
>>Goodbye CA!
Execution Reprieved!
http://www.freerepublic.com/focus/f-news/1794840/posts
Subprime lending has been around for years, and for years provided a necessary product - extend credit to people with overall good ability and willingness to pay, but were just a bit high-risk for Fannie and Freddie.
It became a "free-for-all" and that's where the problems started. Subprime lending became "lend to anyone who can fog a mirror" and like the kid in the 4th grade class who acted up, ruined it for a lot of decent people who DO deserve a chance at home ownership.
There's a big difference between:
-a couple with 10% down, a 32% total debt to income ratio, perfect rental history but a 594 credit score due to some past mistakes their credit report shows they've already made great strides in correcting
-and-
Joe Blow who can't prove his income, has $54 in debts and can't even pay that on time, has never rented...
"Federal bank regulators announced a crackdown on loose lending standards on subprime home mortgages..."
See how timely and useful government regulations can be?
"Federal bank regulators announced a crackdown on loose lending standards on subprime home mortgages..."
See how timely and useful government regulations can be?
I'm still more comfortable with someone with a 550 credit score and a 12% debt ratio than someone at 660 with a 55% debt ratio too...I still don't get how people making $50,000 a year survived as long as they did with $400,000 mortgages.
I hate credit scores. I look at actual performance and reasons for someone having good or bad credit.
BTW, the most common reason given for having a worse credit score than expected is catastrophic medical expenses. I ignore past collections, etc. from medical providers.
I work for a broker (don't shoot me) but I agree.
A credit score can be a guide, but only part of it. I too have seen medical bills pull a score down 100 points. Although as a broker I can't control what our wholesale lenders do, my comfort level is based on ability to pay, mortgage or rental pay history and overall profile moreso than score.
I even have no issue with stated income loans in the right circumstance - primarily self-employed people, but again, it's based on performance.
Home ownership isn’t a right, it’s a privilege like owning a car.
We’re renting our vacation home to a woman who lost hers in a fire. She knew repairs were needed but couldn’t afford them. Why she had no insurance is beyond me, though.
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