Texas Home Loan Officer: “Entirely Too Easy” to get Bad Credit Mortgages

Margie Fisher is branch management loan officer for Republic Mortgage Home Loans and owner of B4Closure of Tyler, Texas.She said the terms of bad credit home loans “made it entirely too easy for people with than less than perfect credit and no cash to get into homes.”

Lenders that will emerge from delinquencies the best are the ones whose business is diversified - ones who mix the more stable prime loans with their subprime loans.

“The lenders that specialized in subprime-only loans are the ones that are going to hurt the most because they don’t have the good loans that they can fall back on,” she said.

How did the industry get into this problem?

Ms. Fisher said she believes part of the problem is the way U.S. citizens seem to view credit. More people are letting their credit score slide through defaults on payments. And many seem not to care.

For one, Ms. Fisher said, it is too easy to get a credit card.

“Somewhere along the line they’ve been taught that give it back to your credit card company (let the balance go into default and to collection) and in a couple of years your credit score will be high and everything will be alright again,” she said. “That attitude is what has caused part of our problem right now.”

Greater options available for subprime loans, available for the past couple of years, have made it possible for almost anyone to qualify for a mortgage.

A few decades ago, it was standard procedure to put a 20 down payment on a home, Ms. Fisher said. The offering of the new, creative ways to establish financing, in hindsight, was probably not very prudent lending.

As a result, lenders have begun offering fewer options for people with questionable credit, although it is still possible for those with less-than-stellar credit to receive home loans.

“Probably 70 percent of those really high-risk lenders are no longer offering that product any longer,” Ms. Fisher said. “They’re now requiring down payments, higher credit scores.

“But, yes, there are still some programs out there for people with less-than-perfect credit. You’re just not going to be able to combine the no down payment, really, really bad credit, adjustable rate payoffs and ARMs all into one loan,” she said.

“A [mortgage lender] might look at one, ‘We’ll take the credit, but we want you on a fixed-rate loan and we want you to make a down payment,’ or ‘We want the down payment and we’ll take the less-than-perfect credit,’” she said. “They’re going to want one or the other.”