The mortgage industry has gone through some a major overhaul recently, and there is more to come.  The latest shoe to drop is the 100% financing / zero down mortgages.  Not all of them are extinct, but don’t look to Fannie Mae or Freddie Mac to guarantee one.  Now these mortgages are deemed a risky lending practice as house prices fall in many areas.  Now they are deemed risky?  That’s like gunshot wounds being deed risky now.  Old milk?  Risky now.  Driving with your eyes closed?  Research has shown that to be a risky behavior now, and should be avoided.  But back when home prices were escalating out of sight, and many buyers were digging through their car seats for down payment money it wasn’t risky then?  Creating “qualified” mortgage clients out of thin air and a wink wink and putting them in programs so far over their heads they could not see past the pre-payment penalty to come up for air was not risky?  Making extra dollars from these people with elevated interest rates - because golden nuggets like 100% financing don’t come without a price - only to make more money on their necessary and eventual refi’s did not put the client at risk?  Oh and the parting gift - you lose your house.  We’ll explain negative equity and its dangers some other time, dear client.  I must be really out of touch because I just can’t get my head around this one.

Now of course, I am obligated to say that not all 100% financing mortgages went sour.  For some people it made sense to keep the cash in the bank as money was historically low to borrow.  If a house was purchased at a not so over the moon price and it still has equity, then it worked out for the best.  My issue is with the segment of mortgage lenders who preyed upon unsuspecting dreamers who wanted a piece of the American Pie. 

Since January, banks have reported $146 billion in losses on U.S. mortgage securities.  Many of the mainly sub-prime lenders are out of business now and I could not be happier.  Something about sowing and reaping should be inserted here.  The mortgage lenders I have been fortunate enough to call my peers have not counseled clients into this mess.  For some it meant losing a deal, but I think they’d trade that for a sound night’s sleep anytime.   

So now the government is determining that the very poison which greased the mortgage wheels for years is, in fact, toxic.  Thanks.  Now if you’ll excuse me I have some knives to juggle.

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