Jack M. Guttentag The Mortgage Professor

rick4615@sbcglobal.net - Saturday, January 5, 2008, 4:53PM ET  Report Abuse

• Overall: 1/5

There is another option that this so called mortgage professor has not mentioned, that is an FHA Mortgage. This is the mortgage that most of the people who are in a subprime mortgage should have been put in to begin with. FHA does not use credit scores as a determining factor, but uses the borrowers last 12 month pay history and a strict debt to income ratio to qualify borrowers. Most of these loans are fixed rate loans although 3/1 and 7/1 ARMs are available. Most banks will be FHA approved lenders. Most of the people in Subprime loans recieved the loans from a mortgage broker who probably was not an FHA Approved lender. Also the lending industry sold the clients on how bad mortgage insurancwe was. now we have this. It is the smart people who make the rules who are to blame for the mess we are in. They were looking for short term profits in lue of long term consequenses. You could see it coming when you make a loan for a client with no money down, self emlopyed for 1 year, and no real way to prove income. Would you make this loan?

Yahoo! Finance User - Thursday, December 20, 2007, 12:12PM ET  Report Abuse

• Overall: 4/5

The fed are thinking that if they stiffen the guidelines on lending This will all go away. In some sort of way yes that would be correct but if no one can borrow money even the ones who can afford that mortgage payment, than they will not be helping the situation but instead making it worst and definitely plunging us into a recession.

vegas_ac_mkts - Saturday, December 15, 2007, 6:59PM ET  Report Abuse

• Overall: 1/5

subprime is not a race. when you are of higher risk then the mkt should charge a higher cost to borrow. hence, it behooves subprime borrowers to pay bills and save more to get a cheaper loan. a few other pts: 1) the govt plan is far from bailout and i dont believe they care about homeowners. they are trying to smooth out the BKs so the financial system can digest the mess 2) it really doesnt matter if the rates are fixed for a short period because the assets are way overvalued. anyone accepting this deal when the mkt value of the home is much lower than the purchase price will become an indentured servant to banks and investors. slavory is back in America. 3) its easy to prevent this going forward. appraisers and lenders should abolish market comparables in underwriting loans. they should calcuate owner's total cost (capital cost -- interest on entire purchase price, insurance, tax, maintenance) per month and compare that to low to high average market rent for a similar size home. if a buyer wants to pay more than the mkt rent then they should put up more equity. you dont own when its cheaper to rent -- the rule for 99% of properties out there. you would be surprise how overprice homes are if people did this analysis. at the bottom of the RE cycle you will see prices such that landlord investors can buy and rent the property out at a reasonable return but not at this moment. its a myth that foreclosures are forcing prices down to abnormal levels. now that prices are falling there is no reason to own when you can rent cheaper. right now mkt comp method is comparable to blodget calling AMZN fair at 500 because EBAY is trading at X multiples. idiotic. 4) education is primary issue. we failed to educate people on common sense finance in high school: rent or buy, power of compounding, etc 5) the only people i feel bad for are the young people who do not understand finance well enough and was forced into the mkt because of rising prices. its a decade killer for them if they hold on to their homes at bubble prices. 6) personally i am glad the nation has stopped plowing resources into homes. its an unproductive asset and ultimately a bad investment asset over the long term (as we are beginning to see). there is no shortage of land or homebuilders willing to build more homes. when the demographics turn as boomers retire, this will become evident. 7) many people are still way too optimistic about RE rebounding -- the NAR is a total joke. there are not an army of buyers representing significant latent demand for homes. its idiotic. everyone owns a home already and the few who are renting and waiting to buy are FEW not MANY. 8) credit environment is not even tight yet: we are going back to normal underwriting criteria from easy credit. in 1991, they wanted 90% owner occupancy for condos plus 30% down with full documentation to underwrite a conventional 30yr mtg. is that the case now? hardly. its going to get worst before getting better and everyone's time frame to recovery is way off. RE is long cycle asset -- long booms and long down turns.

hollen_paul - Friday, December 14, 2007, 2:15PM ET  Report Abuse

• Overall: 1/5

Totally misses the real problem. Lack of regulation in the mortgage markets. This is an inept government double whammy.

Alicia H - Thursday, December 13, 2007, 11:22AM ET  Report Abuse

• Overall: 5/5

i am in search of a mortgage for my property here in cleveland.The article has given me a better idea of what is up in the industry. Thanks