This Months Newsletter

The Effects of Easy Money

Start of the Lending Industry.

In the Eighties, lots of changes began influencing the lending industry and things have been rapidly spinning ever since.

Credit scoring was new and experimental. Computers became a big part of the changes. Software would do a lot of the work allowing loan processors to be more productive. Lending became easier.

Reformation?

Mortgage lenders needed to regain the lost market share and looked to the internet to make that possible. Fees dropped and thus the loan officers were paid less. Some left the to form their own boutique brokerages where they did not have to split their income with their company. Others left and went to the Sub-prime market. Wall street loved Sub-prime because investors in mortgage backed securities earned higher rates of return. Sub-prime kept growing followed by Alt-A and A-minus. (Borrowers that did not meet standard underwriting guidelines or the property didn't. Sub-prime was easier money, both for the mortgage industry and for borrowers.

Today's Problem!

Sub-prime borrowers began to default on their mortgages and the wheels began falling off Sub-prime early in 2007. It looks like things may come to a screeching halt for that sector of the market........

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