Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Sunday, July 16, 2006

PSA from a Mortgage Broker...


My name is Steven Krystofiak, President of the Mortgage Brokers Association for Responsible Lending. www.mbarl.org

I have a letter in a word document form that highlights the risks of the current loan industry unrealized by regulators and economists alike, mainly due to stated income loans.Email me at contact@mbarl.org if you want me to send you a copy.

~ Steve Krystofiak

13 main points in the letter are;

1. Stated income loans are associated with fraud, and started to become popular in 2002.

2. Banks originate these loans because they are profitable and then sell them to reduce their risk.

3. Fraud is encouraged by the banks

4. Stated income loans help no one.

5. Exotic loans originated with stated income are now causing foreclosures or forcing homeowners to refinance into negatively amortized loans.

6. Stated income loans are why home prices have skyrocketed. They have caused a large demand in the US housing supply.

7. Banks have sold their loans and have already made their profit. Investors will soon realize stated income loans are too risky and stop purchasing them.

8. Almost anyone can get a stated income loan for $950,000.

9. Stated income loans cost consumers hundreds of dollars a year because of higher interest rates.

10. Stated income loans allow tax cheats to purchase homes easier.

11. Stated income loans are not always faster than fully documented loans.

12. Appraised values are often inflated. Underwriters are basing their decision on inflated home values, inflated incomes and inflated assets. The only “real” number is the FICO (credit) score. This is why underwriters have become focused on FICO scores.

13. Rules are not enough, they must be enforced.

1 Comments:

At 7/17/2006 09:39:00 AM , Anonymous tom stone said...

i only disagee with point #4,stated income loans can be appropriate for some self employed people who take advantage of all the legal deductions available to them.at a guess,this would be about 5% of borrowers.

 

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