Tuesday, August 14, 2007

The Mortgage Market Crisis

The current situation for mortgage lenders has everyone buzzing. A lot of people I've worked with are losing their jobs, but many are not losing their senses of humor. When we sent well-wishes to a person we knew at a recently-belly-up company, he e-mailed back that we shouldn't worry about him -- said he was cooking up a tupperware pyramid scheme and would be calling us to invest with him once he got it going.

But jokes aside, part of my job is to attract new clients. The other day I told my boss that it doesn't do us much good to find people who want to buy a home if we don't have any loans to offer them. And he pointed out that we still have plenty of loans -- for people who qualify -- just like the old days. Which is true. In fact, interest rates on regular conforming loans have been decreasing, and it's likely the Fed will cut them again in September, if not sooner.

The hardest part of working through such a volatile time though is that we have people who are supposed to close on a home they've purchased, and their loan programs have disappeared. We get notice daily (and sometimes hourly) of investors who are changing their guidelines or discontinuing loan programs or even closing their doors. And while you might think it's for his own good that the investor, who (on paper) is clearly over-extending himself, can no longer purchase his property, he has a plan and believes he's making a good investment. And as his mortgage advisor (as opposed to his mother) it isn't pleasant to tell him, sorry, it's not going to happen now.

Over-extending oneself can be a good (if risky) way to create wealth. I'll write more about that next week.

Whenever you fall, pick something up. – Oswald Avery

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