An Untold Story

The losses the lending industry is suffering is well documented with the blame game of who's fault it is played across the airwaves continuously. The reporters and commentators talk of loans people signed knowing they could not repay them. This is difficult to accept as a critical part of the loan process is for a bank to check the borrower's ability to repay the loan. That has been the case ever since the banks have been around which is a very long time. Therefore just stop blaming the borrowers for signing and blame the banks.

When the banks were handing out cash left right and center, they were not really very careful about who represented them. Mortgage brokers sprung up from the woodwork. Suddenly your friend, or your cousin or friend's friend was a loan officer and he had the best deals and could get you into any home. Borrowers were part of a buddy network and deals were signed in cars. Borrowers did not always read the documentation. Loan officers would snap the deal before returning to the day job. In such small mortgage brokers offices, to which some of the blame goes too, loan officers were not necessarily correctly supervised.

In addition the web blossomed with online lending which all to often was not much better and the sub prime industry exploded.

To make things worse the top lenders felt the need to compete on the retail level and all sent out representatives to cover the high street/ neighborhood shops. And deals were done.....

Deals where the cost of the loan was significantly higher with numerous junk fees and points on the closing statement which may have varied from the truth in lending statement . Fees that went to pay for your friend's commission, broker's commission, the offices they occupied, the secretary and all the donuts and coffee they consumed.

The borrowers could have gone to a professional loan officer represented by an established company where there would have been no superflous points and typical fees. But many did not and simply trusted a friend. The real crime of the lending industry is that these loan officers did not actually know what their client was signing either.

One more offense is that many of these borrowers were low income buying in urban gentrifying neighborhoods.

Observation of the neighborhoods shows numerous closings of such pop up mortage brokers and your friend is now hosting tuppaware parties for extra cash.

If these brokers were doing the right thing back in the hay day they would still be turning loans over today.