Tuesday, August 07, 2007

The Sub Prime Mess in the US

In one of my less successful ventures, I worked/trained as a mortgage broker in Jacksonville FL in the fall of 2006.

I could have predicted everything that is happening now to the US housing market, but, alas I didn't. What I can say is that I don't think even the tip of the iceberg has been touched

For instance, the press is still talking about sub prime new loans. What has not emerged yet is that on a local level mortgage brokers, when getting home-owners to refinance typically induced the homeowner to refinance the entire loan, not just get a second mortgage (since the payoff to agent was much greater in a complete loan refi). "Hey, I kept refinancing a crack user to bankruptcy" was one line I heard from a trainer.

The upshot is that a lot of mortgage brokers, and Mortgage Broking companies, were
taking massive immediate payouts while moving very marginal clients into very bad situations. The only thing that kept the whole near-Ponzi scheme afloat was rising house prices.

That now seems to be over.

No comments: