Deja Vu All Over Again

I AM SURE EVERYONE IN THE MORTGAGE INDUSTRY REMEMBERS THE FINANCIAL MELTDOWN OF 2008. Most of the destruction was done by pools of Subprime loans that all too often were not as represented and simply didn’t perform. The damage was extensive and worldwide. In fact there are still civil cases in our courts and many federal prosecutions of players in that part of the industry that profited at the expense of others.

They say there is very little as short as a business memory and it seems like many have forgotten the financial misery of that financial meltdown a short decade ago. My concern? Well we now have the new “nonprime” segment of our industry which represents the fastest growing portion of the mortgage industry. It seems companies are popping up everywhere within in this new “nonprime” market.

We are told this new industry is not the same as the old subprime industry and is much more responsible with very well defined guidelines. That said I have the watched the products being offered and I am concerned about where this is going. First the products offered were, for the most part, related to individuals with challenged FICO scores with reduced loan to values or to borrowers that just didn’t fit into Fannie Mae, Freddie Mac or FHA guidelines. Then they moved into “bank statement programs” and I have just seen some stated income stated asset programs.

I fear we may be walking down the same road that burned the financial industry to the ground a short decade ago. Yes that are more federal guidelines in place than existed before but I wonder how long it will take companies to work around them. While the loans are not being sold on Wall Street, at least that is what I am being told; foreclosures with folks who can’t make their payments due to these programs will decimate the industry once again.  I truly hope this is not DEJA VU ALL OVER AGAIN. Stay tuned for further updates.