one solution is to have continuing liability for a portion of the loan to the originator... so a mortgage broker brings a deal to the bank & the bank retains liability for maybe a portion of the loan (and has to set aside reserves) when they package & sell a portfolio of loans. this then blows back on the lending dept, appraiser, etc. one problem has always been that mortgage brokers can exert extreme pressure and then if things go bad, they say that "we just placed" the loans... it seems to me we had less problems when there was more portfolio lending - that is when the bank made the loan & stuck the deal in their value (or wherever). regular people dont realize how much fraud and fakery there.... even down to rents /lease rates getting juiced, vacancy & collection loss under-estimated, expenses under-guesstimated (and too low cap rate)... you juice the NOI, you jucie the debt-service coverage & juice the loan amount & LTV. add that to extended prices and it could get Fugly. so someone looks at the loan & thinks, "hmmm, 70% LTV", when in fact its considerably higher.
As much as I hate over-regulation, the mortgage brokerage business should be regulated so that they can be held accountable. They should have to be bonded and liable for ommissions of fact or egregious lies used to obtain mortgages for clients. Fines than expulsion. Gets rid of the cheats and quick buck artists. Bottom line though is anyone who was mislead by one of these hucksters has no one to blame but themselves.
buying a home for $325k that used to cost $475k, is like buying wm for $5 when it used to be $30. does it mean it's a bargain? there are places where you can still get a good investment. look for cash flow first and foremost. many of the places that dropped 35%+ are still not a good deal yet due to excess inventory.
You got it QQQ, when one is a portfolio lender all that crap for the most part gets caught because they scrutinize the file before lending. I specialize in private money/hard money and there are a lot of times when my money is riding right along with the investors. I will not do a loan if it's a loan I wouldn't do personally myself. Considering the hundreds of loans I put together for investors there was only 2 properties that had to be walked away from due to lack of equity. QQQ I took alot of heat over the past 4 years because I wouldn't do some loans that was trying to be pushed down my throat. I am so glad I stook to my guns and my ethics and thats why I am still around today!!! My investors are still taking home a 12.25% yeld on their trust deed investments through me. Also, the fraud that was going on in the industry was rampant. I can tell you some stories of what people try to pull over on us.