I have seen more stories this week about the role of mortgage brokers in the housing bubble than I really wanted to see. It seems the mortgage brokers are getting most of the blame for the housing bubble burst than anyone else. This hardly seems fair.
The truth is that yes, there are some bad players in this industry...just as there are in ALL industries. However, from the way the mortgage brokerage business is being protrayed in the media, you would think that anyone who has to do with mortgages is a crook. I'm happy to say that this just is not true. As with anything, people should work with professionals that they trust or have been referred to.
If you want to know what is really going on in the world of real estate, there are several contributors to the current market pullback. First, the Fed lowered interest rates drastically early this decade to combat a coming recession. This allowed payments on larger homes (and their corresponding larger mortgages) to become affordable to many people. They have now reversed that course in the last18 months.
Next, to take advantage of the increased amount of potential customers, banks and lenders in general relaxed the requirements necessary to qualify for many loans. This includes those pertaining to credit score and down payment. Over the course of time this meant that people with very little in assets and who manage their credit poorly got into loans that they can no longer afford. As some of these borrowers are having trouble making their payments, the lenders are tightening their requirements.
The mortgage brokers come next. While being part of the chain of events, they are not as responsible for the downward spiral as they are being protrayed! Mortgage brokers are facilitators to market products. The only way that a market sustains a product is for there to be a demand for it. Since the brokers neither created the low interest rate environment nor the products being offered, the brokers are not the cause of the problems. They are just an easy target. As we mentioned there are always bad apples out there and these type of brokers can make an already risky loan even worse! More and more brokers like these are getting squeezed out of industry every day and we will all be better off for it. Even with this being the case, lenders are the ones that provide the rules and they need to do a better job of policing what brokers they use and the loans they run though them!
So next time you hear that the mortgage brokerage industry is "evil" , "corrupt" or "the cause of all the real estate market's problems", just remember that they are just the most visable link in the chain and are not necessarily the #1 cause!
Your comments are welcomed.
Brought to you by Professional Mortgage Group, Inc. of Columbia, Missouri.
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