[quote=patientrenter]”One of the better suggested reforms I’ve heard would require loan originators (who often act as servicers, as well) keep some skin in the game on the mortgage for a period of x-years after the loan is made. If the underwriters had to hold the loan longer, they’d underwrite more conservatively.”
If it would cause home loans to be underwritten more conservatively, then it won’t happen.[/quote]
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Unless they were required to have their own, personal money involved, it won’t make a difference.
Clawbacks and other forms of “keeping skin in the game” won’t work, because by the time the loan defaults, the originators/servicers will have made their money and can simply file BK or go out of business.
Even if they withhold some portion of the commission, as long as they make **any** money on the front end, they will push through as many loans as possible.
Quite frankly, I don’t think we should have originators or servicers in the process at all, and there should be full transparency from the origination point to the final lender. We should have one internet site where (final) lenders list their rates and product types, and customers can choose from there.
Yes, this will probably mean fewer loans and higher rates, which is exactly what we need in order to avoid another “foreclosure crisis.”
