Paul Wylie’s First Blog Post
Mortgage product “suitability” is a topic that has surfaced often over the last year as more and more borrowers have become delinquent and are defaulting at high levels. Delinquencies and defaults are higher on “non-traditional loan products”. “Non-traditional “ can mean any loan product other than a fixed 30 year or 15 year fully amortized loan with full documentation and a down payment provided by the borrower. Currently some states and certain federal regulations currently impose partial responsibility on lenders’ shoulders.
I believe all loan products are potentially good loan products in the right hands much like a chainsaw is a good tool in trained hands and potentially very destructive in a child’s hands. “Non-traditional loans” have risk and potential reward. The question remains who best can determine “suitability”. The borrower, the lender, or the government?
In the world of investments, in particular with riskier investments, the federal government has established income and/or net worth that the investor certifies prior to being allowed to make certain high risk investments. This process defines a high risk investment, qualified investors, and requires the investor to certify their qualifications. This simply standardizes what a high risk investment is and who can make it. The same could be done for residential loans.
Thank you,
Paul Wylie
Please checkout http://www.paulwylie.com