by Pamela Marron
8 years ago, our current administration inherited a financial crisis that this country has not experienced anything close to since the Great Depression. When it occurred, it was visibly seen in the collapse of the housing market. Initially, problems were blamed on an unscrupulous mortgage broker industry until it was learned that the banking industry had an equal amount of blame.
Almost every loan originator I know was negatively impacted by the housing crisis. They were either losing their homes or their income and in many cases, both. All of us saw this coming but complacency set in after years, not months, of the housing market going up. Conversation slowly dissipated as the housing market heated up and more jumped in. But, when the crash happened, it was fast and mammoth.
Many of us are taking notice of similar signs again as we see housing values increase quicker than normal market appreciation. Flippers have become the norm and are challenged when appraised values don’t meet increased asking prices of homes. This time it can’t be blamed on the lending company. Even though the process can be frustrating, appraisals are now done by third-party appraisal management companies (AMC) who lenders and realtors have no communication with until after the appraisal is completed. Ultimately, this policy seems to have tempered an explosion of skyrocketing home values, requiring consistent data to go to an arms-length third party arbitrator who can change value when warranted.
Additionally, due to the qualified mortgage (QM) requirements put in place by the Consumer Financial Protection Bureau (CFPB), almost all sellable mortgage products no longer have prepayment penalties, negative amortization, balloons and interest only options. Prior to the housing crash, these negative options were mostly explained to consumers as “rare to happen” but ultimately became a main problem for so many homeowners who were negatively affected.
There’s still great anger at the current administration for policies put in place meant to protect the consumers and the housing market. Many say those measures went too far and stalled the progress of the housing market and ultimately added more cost to the entire mortgage process. Others say it could have been much worse if these safeguards were not put in place, and that the inconveniences placed upon our industry needs to be adapted to. Yes, policies can be streamlined. Yes, we have had to deal with unintended consequences not realized often until policy is in place. But the depth of problems that the housing industry faced during the last eight years was unprecedented. Drastic measures were necessary immediately to stop the bleeding.
I know that many in both mortgage and real estate industries have opposite views of the above. What is real is that over the last eight years, more people than ever realized had hardships never-before experienced that resulted in a downward spiral in their lives, and for their children, extended family and ultimately entire communities. To add to frustration, dealing with housing issues seemed to come to a standstill months before general elections, a topic that no political candidate wanted to touch.
Please don’t tell me this won’t happen again with this new administration. Instead, those of us in the mortgage and real estate industries need to make the time to speak to each other’s industries about what worked and what didn’t and to connect with agencies that can help when needed. Good practices need to be expanded on and policy that provides equal benefit to the mortgage industry and consumers must prevail. WE need to be the first stewards of our industries, and without prodding.
Pamela M. Marron, Florida Licensed Mortgage Broker NMLS#246438