mortgage

Consumer groups must be getting bored with the current foreclosure fault-fest. A recent article on Women’s eNews© claims that advocacy groups including the Consumer Federation of America believe that gender bias in mortgage lending is “quite common.” According to Allison Stevens, the author of the article, “The government currently screens for disparities based on race and ethnicity, but not on gender, making it difficult to assess precisely how widespread this type of discriminatory lending is.”

Um, has this woman ever seen a 1003 mortgage app? And what part of “Information for Government Monitoring Purposes” does she not understand? It’s all right there, Part X, that gathers ethnicity, race, and sex information for monitoring lender “compliance with equal credit opportunity, fair housing and home mortgage disclosure laws.”

So that takes care of the government monitoring question. Now, how about approvals — are women getting bounced for simply being women?Don’t think so –underwriting is largely done with programs like Loan Prospector and Desktop Underwriter; those computerized suckers don’t give a rat’s, uh, tail what the applicant’s gender is, but they do like to see enough income to make a payment and a few months’ reserves.

Finally, lenders are businesspeople and discrimination is simply bad business. If someone qualifies for a full-doc prime loan, why on earth would anyone quote them an Alt-A or subprime deal? Unless they only sell subprime loans or hard money? LOs can price in a decent profit regardless of the product offered, but would be far more likely to lose the deal to the guy down the street (or the next URL) by pricing higher than warranted. To make the assumption that gender discrimination is “common,” the logical conclusion is that it is also “common” for women to work with lenders who only offer subprime products, that it is “common” for women to forego shopping for a good deal (like that will ever happen), and that it is “common” for women to be less intelligent or discerning than men (don’t get me started here).

One of these groups took a 2006 government report and interpreted the data to conclude that women as a group pay more for mortgages than men with similar credit scores. But the government did not in fact conclude that the disparity was due to discrimination by lenders. As we all know, credit is only one part of a loan application. It’s an unfortunate fact that women in this country as a group earn less than men, particularly those whose career is interrupted by family obligations. And it’s no secret that nearly half of American marriages end in divorce and that it’s the woman who takes the brunt of the financial hit. Spousal support has become an anachronism, and child support is often unreliable and inadequate. Additionally, women are disproportionately represented in service industries which are characterized by low job security and minimal benefits.

So you have a single mom, re-entering the workforce (maybe she gets credit for her new income, maybe she doesn’t until she’s been on the job a couple of years), and she gets child support the underwriter can’t count unless the applicant’s been receiving it — on time — for a while. She will in all likelihood have a harder time getting a mortgage than her ex.

And that’s a crappy deal. And it should be changed, but not by insulting women, saying that we are too helpless and dumb to get loans without special protection. Gender discrimination and income disparity isn’t about lending — it’s about life.

There’s a couple of things I want to talk about today. First, which I was surprised to hear, in church on Sunday one of our regular standing prayer petitions was about the mortgage crisis. We were asked to pray for all the people involved. I guess what surprised me was the fact that this has been so far reaching. I remember last year hearing that the financial markets overseas, in particular the Nikkei, had fallen as a result of what was going on over here. I think that was the first indication to me, after working in Sub-prime for 18 years, how far reaching this thing is. Being a very grounded Catholic it blows me away that this may start infiltrating America’s pulpits. That should tell us how big this thing is.

The other thing that blew me away was something that Robert Ashby talked about in his post this morning. That Bear Stearns was sold for $2 a share or $236 million to JP Morgan. Last week they were worth over $3 billion or about $35 a share and $160 a share just a year ago!

Some analysts are concerned about how JP Morgan could have done it’s due diligence in 3 days. And whether or not the shareholders, of which apparently 1/3 are employees, will go for the deal. Some think they may have gotten more had Bear decided on bankruptcy.

The other thing analysts want to know is what is going to be the bottom line of the total mortgage mess. Right now we’re at $200 billion and some analysts say we’re probably at rock bottom now. Still others say it’s going to go to $400 billion and others say $600 billion before it’s all over. But what’s clear is that we’ll need 2-3 more quarters of earnings results before it’s determined what the total bottom line losses will be.

I’m too young to remember the details of the savings and loan crises but this is got to be getting close. I’ve mentioned in previous posts that close to 100,000 have lost their jobs as a result of this not to mention the people who are going to lose their homes or give them back (which I wrote about last week.)

As I’ve said before, the one’s who are in it for the long haul are the one’s who will survive. We have a tremendous opportunity right now to help as many people as possible either buy and finance a home (buyer’s market) or refinance existing mortgages to get them out of their current problem loan. Let’s make sure, regardless of what the media is saying, that we focus on the opportunities. There are some great opportunities for marketing here. We could do seminars for homeowners explaining what we as experts see their options as, or seminars for Realtors to show them how we’re positioned for success and where we see the opportunities.

Finally, I wanted to let everyone know about a couple of new products I have on the horizon. One is going to be a free download PDF of a tele-seminar I did a couple of weeks ago with Steve Beecham of Hometown Mortgage in Alpharetta, GA. Steve has consistently been in the top 5 of producing mortgage brokers in the state for several years, and continues to do so in this market. He shares some of his secrets on the call which will be transcribed into the PDF. Look for that in a couple of weeks.

The other product I’ve just released is a DVD titled “Secrets of Sales Power” which can be found on the site and the big news is a 90 Day coaching program that I’ll be launching in a few weeks. I’ll keep you posted as we get closer.

There certainly is a lot to be concerned about and a lot to pray for. Let’s go forward with the optimism and hope that we can serve our areas and be beacons of light for this great business.

According to an Article on Forbes.com, Bank of America and other credit card lenders are putting their customers’ feet to the fire–even those who have always paid on time, even those whose credit ratings have not declined. Forbes attributes this abuse of power to the recent wave of mergers and acquisitions which have concentrated the bulk of industry muscle into the hands of a few huge firms. Many thousands of B of A (MBNA) credit card holders have been informed that their rates will be adjusted sharply upward — as high as 28%.

The bank, bless its cold dark heart, allows its card holders to “opt out” of the increase — by paying off their balances and not using their cards. Amazing that they can get away with this. Imagine if mortgage lenders did that — arbitrarily raising the rates of borrowers several points, then telling them that they can “opt out” by paying their mortgage in full — no problem, let me get my checkbook!

For oft-maligned mortgage lenders this presents an opportunity, a chance to be the good guys. Card holders who no longer want to be subject to the tender mercies of their lenders have an option. Think — if you could get a credit card at a lower rate, a rate than is either fixed and cannot change, even if your credit does take a hit, or a rate that is variable and moves with a legitimate financial index rather than the fortunes of the lender and its desire to wring an extra bit of profit from good customers — wouldn’t you grab it and dump your money-hungry card issuers in a heartbeat?!

Well, mortgage lenders have the equivalent of that credit card, in the form of home equity loans, HELOCs, and cash out refinances. Even no equity mortgages, while not as easy to find or be approved for, carry rates lower than many credit cards. For borrowers with good credit who are being asked to pay 28% or pay off their balances, we lenders can offer them the opportunity to give their card companies the finger and save money too. And we should take it — I know I have a white hat lying around here somewhere……

Boy do the presidential wannabes love to throw the F word around while slamming the mortgage lending industry and blaming us for all the economic ills of the world. And the F word I’m talking about isn’t what you think. It’s FRAUD. In one presidential debate last night I heard the word FRAUD a dozen times and then I stopped counting because I had to go throw up. To hear these guys (and gals) speak as they have in recent debates you’d think that the entire lending industry made it a mission to take down scores of innocent homeowners and blindside Wall Street. Yes, we are evil incarnate and have devoted our lives to perpetrating FRAUD on the unsuspecting public.

I could dismiss the commentary and mindless blaming if the presidential hopefuls’ proposed solutions didn’t demonstrate an appalling lack of knowledge of the mortgage industry and a complete disregard for free markets.

First, they repeatedly and mistakenly assume that if people can’t or don’t make their mortgage payments that the lenders must have ripped them off, fast-talked them, or committed FRAUD in some way. And that industry profits are proof that lenders are driven by greed and FRAUD. Enough already. Nearly all of the borrowers in default received required disclosures and their loans were originated in accordance with federal and state laws. The instances of FRAUD or predatory lending in the news have been isolated cases involving a handful of bad apples. Every industry has them, and enforcement of existing laws should be sufficient to curtail their activity.

Second, nearly everyone running for the top job in the US proposes freezing rates and dictating what lenders can charge subprime borrowers. Naturally, if lenders can’t charge rates high enough to compensate for serving the subprime market they will just stop lending there–effectively barring subprime borrowers from home ownership. The 85% of subprime borrowers who successfully managed their mortgage would not thank their representatives for this I think.

Finally, there is something seriously wrong with proposed bailout schemes that reward subprime borrowers who skip payments by dropping their rate while punishing responsible borrowers by leaving their rates unchanged.

Which brings up a whole slew of F words: FOOLISH, FRIGHTENING, and FAILURE.