No.  I don’t think I’m some kind of genius, and I’m not trying to say that I was the only person who saw what was happening before everything hit the fan.  But I did know it was going to hit the fan.  And I also knew that it was going to be devastating.  Before you ask, yes I did say so.  And no, basically nobody listened – except the other seasoned lenders with twenty-odd years in the business who were saying and thinking the same thing.  You would be surprised just how un-satisfying it is to know something bad is going to happen and then see what you predicated come true.

Yes, I’ve been in the mortgage business since 1983, and that experience has a lot to do with why I thought what I did.  But in addition to that, I was on the board of directors (for 6 years,) and was the chair (for two years) of the Home Loan Counseling Center.  While living in Stockton I was a part-time instructor at San Joaquin Delta College in Stockton, and along with several other mortgage professionals I helped start the mortgage certification program at California State University, Stanislaus.  I was also an active member of the San Joaquin Mortgage Association, and was their president in 1993.

Currently I’m an adjunct instructor in the Real Estate department at American River College, I teach the finance section at the Real Estate Training Institute for the Sacramento Association of Realtors twice a year, and I’m an active member of the California Association of Mortgage Professionals here in Sacramento.  I was one of the first certified trainers for “Don’t Borrow Trouble” launched in 2003 by Freddie Mac; its objective was to “create a nation of educated homeowners who seek advice, understand their financial options, and know how to avoid the mortgage pitfalls that could ultimately lead to foreclosure.”  (OK, so they dropped the ball a bit those first few years – but they had the right idea.)

What irks me to no end is what I see and hear today about how those bad mortgages caused this problem, or how those awful mortgage brokers caused that problem.  I have never heard anyone come close to what the root causes of the problem were. And to add insult to injury, the same people that swore up and down that there was no problem are the same ones tasked with fixing it!  For the most part, all they are doing is making it very difficult to get a real estate loan, and punishing those of us who were trying to do business the right way in the middle of all the insanity.  The crooks and incompetent idiots that invaded my industry are, for the most part, gone now.  They’re back to selling aluminum siding and used cars, or working some telemarketing scheme.  The really sad thing is that the people who really suffered the most were the buyers who did it right.  That’s why I was compelled to write this series of articles.

What follows are five chapters that each explain a little bit about what happened, or how the pieces fit together.  The first one explains what a sub-prime mortgage was, how it fit into the spectrum of mortgage products, and how it got screwed-up.  The next one explains how the investment banking industry provided the gasoline for the fire.  I defend the role of the mortgage broker – somewhat – in the next section.  The last two I attempt to explain how and why different mortgage products benefit different situations and what role the mortgage professionals plays in making sure the borrower understands their options and makes a well-informed decision.

Next:  What is a  sub-prime lender