From the New York Times:
New Rules for ‘Exotic’ Loans
By BOB TEDESCHI
IS the era of the “exotic” mortgage near an end?
Some analysts say the answer is yes, thanks to a new set of lending guidelines set forth by federal agencies that oversee many of the biggest lending institutions in the United States.
Late last month, the Federal Reserve and the Office of the Comptroller of the Currency, among other agencies, issued new guidelines for marketing and underwriting two types of “exotic” loans: interest-only mortgages and adjustable-rate mortgages with payment options.
…
Mr. Mukri and others pointed out that the new guidelines do not apply to many lenders, whose operations are so localized that they are covered only by state, not federal, laws.The Conference of State Bank Supervisors, an industry group representing those who oversee state banks, said it would adopt similar standards, but since most states have not yet codified these regulations, industry analysts said prospective borrowers should approach nontraditional loans carefully because some lenders remain free to ignore the new guidelines.
But now that the federal regulations have been adopted, fewer borrowers will probably choose exotic mortgages, said Howard Glaser, the principal in the Glaser Group, a mortgage consultancy in Washington. “Most borrowers will still be able to get a loan,” he said. “It’ll just be a more conventional loan.”
I mistakenly posted this to the open comment thread.
“But now that the federal regulations have been adopted, fewer borrowers will probably choose exotic mortgages, said Howard Glaser…”
Mr. Glaser has it wrong. People weren’t so much choosing exotic mortgages as being chosen for them. Any fool the banks and brokers could get to sign onto one of these hideous beasts they did. The fact that the person signing was clearly an idiot and couldn’t afford to pay it back didn’t bother them for one second.
Back to Basics??? Almost fell of my chair when I read that one!!!!! Enough to give anybody in this industry a panic attack!!
“Most borrowers will still be able to get a loan,” he said. “It’ll just be a more conventional loan.”
Mr Glaser,Mr Galser,
Most borrowers???? Do you mean most qualified borrowers??? You are wrong, the subprime market would be toast. Okay, the flippers are gone, the subprime will be history with this, the 2nd home,”investment purposes”, is finished!!!!
That leaves qualified buyers, seems like the market for these convential mortgages has fallen off a cliff, the drop is deep.
Don’t be too hard on Glaser Bob, I think he’s right about people qualifying for a loan.
The loan they qualify for won’t pay for a backyard shed in NJ, but they’ll qualify for it.
Lindsey.
LOL!!!!
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