Comments on: Should We Dump Toxic Loans On The FHA? http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/ The Unofficial Guide to FHA Loans & Mortgages Sat, 21 Nov 2009 10:03:33 +0000 http://wordpress.org/?v=2.6 By: Peter G. Miller http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-540 Peter G. Miller Wed, 24 Oct 2007 19:17:19 +0000 http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-540 Evan -- I think that fraud is a big part of the mortgage meltdown -- but the problem we have is fraud by whom? The borrower? The loan officer? The lender? Loan documents are touched by a lot of people. As to underwriters, if they get a stated-income loan application where earnings are not checked, they lack the basic tools to determine if a loan should or should not be approved. A computerized or drive-by appraisal isn't as good as a physical appraisal of the property. In essence, with toxic loans you don't need underwriters because they have little to do. The question about guns misses the point. Borrowers depended on lenders for advice and counsel -- lenders who control the flow of information making independent evaluations impossible, lenders who say they want to help borrowers but run from fiduciary relationships. Evan –

I think that fraud is a big part of the mortgage meltdown — but the problem we have is fraud by whom? The borrower? The loan officer? The lender? Loan documents are touched by a lot of people.

As to underwriters, if they get a stated-income loan application where earnings are not checked, they lack the basic tools to determine if a loan should or should not be approved. A computerized or drive-by appraisal isn’t as good as a physical appraisal of the property. In essence, with toxic loans you don’t need underwriters because they have little to do.

The question about guns misses the point. Borrowers depended on lenders for advice and counsel — lenders who control the flow of information making independent evaluations impossible, lenders who say they want to help borrowers but run from fiduciary relationships.

]]> By: Evan Hodge http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-539 Evan Hodge Wed, 24 Oct 2007 18:53:02 +0000 http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-539 In regards to the post that suggested to go after the underwriters that underwrote the "toxic" loans, blatant fraud is one thing and if that were the case then so be it, but underwriters are trained on how to spot fraud and what signs to look out for. Fraud is not what has led our nation into this credit crisis of increasing foreclosures. A combination of depreciating values and zero down payment negative amortization loans has. Question: Did these same borrowers that are now facing foreclosure have a gun pointed to their head when they were signing their loan documents? In regards to the post that suggested to go after the underwriters that underwrote the “toxic” loans, blatant fraud is one thing and if that were the case then so be it, but underwriters are trained on how to spot fraud and what signs to look out for. Fraud is not what has led our nation into this credit crisis of increasing foreclosures. A combination of depreciating values and zero down payment negative amortization loans has.

Question: Did these same borrowers that are now facing foreclosure have a gun pointed to their head when they were signing their loan documents?

]]> By: Peter G. Miller http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-120 Peter G. Miller Mon, 27 Aug 2007 08:29:10 +0000 http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-120 Dan -- Thanks. You raise a good question. Underwriters are supposed to assure that loan applications precisely match the requirements of individual mortgage programs. Once loan programs standards were reduced, underwriters had very little to check -- how can an underwriter contest a borrower's "estimated" income? What proof can be demanded with a stated-income loan application? And besides, if an underwriter holds up a deal a mortgage loan officer will be out a big commission. As bad and maybe worse has been the practice of placing borrowers in subprime loans when they clearly qualified for a lower-cost FHA mortgage. Dan –

Thanks. You raise a good question.

Underwriters are supposed to assure that loan applications precisely match the requirements of individual mortgage programs. Once loan programs standards were reduced, underwriters had very little to check — how can an underwriter contest a borrower’s “estimated” income? What proof can be demanded with a stated-income loan application? And besides, if an underwriter holds up a deal a mortgage loan officer will be out a big commission.

As bad and maybe worse has been the practice of placing borrowers in subprime loans when they clearly qualified for a lower-cost FHA mortgage.

]]> By: Dan Michaud http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-119 Dan Michaud Mon, 27 Aug 2007 04:46:46 +0000 http://www.fhaloanpros.com/2007/08/should-we-dump-toxic-loans-on-the-fha/#comment-119 You hit the nail right on the head. What about going after all the underwriters (trained to watch for fraud, by the way) who approved the toxic loans in the first place? Great article! You hit the nail right on the head. What about going after all the underwriters (trained to watch for fraud, by the way) who approved the toxic loans in the first place?

Great article!

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