NormanCI

Fannie Earnings Preview: Expect a Dividend Cut

As a licensed mortgage broker in Florida for years I had been shaking my head in bewilderment at the offers being sent me by lenders.
They seemed to feel that a rate increase compensated them for the extra risk involved with low or no down payments, poor credit and no proof of income.
This was obviously nonsense as the credit market has now found out.
20 years ago there was the RTC bailout of Savings and Loans, but no lessons were apparently learned.
Here are lessons one, two and three for any bankers who may be reading:

1. The yield doesn't matter if you're not going to get paid anything.
2. Never follow other lenders into stupid loans just because you don't want to lose market share.
3. If you give a teaser rate loan and you know perfectly well the payments are going up in a couple of years, make sure your borrower's income is enough to cover THOSE payments, not just the current ones.
Duh!