There are no lending guidelines unless they are enforced and banks are made to adhere to them. This is another part of the cycle right now. Here is what is happening:
Alot of smaller lenders are trying to pad their portfolio's so that they can get bought out by the bigger banks…Bear Stearns, Deutsche Bank, i.e. Every subprime lender is positioning right now for acquisition.
In the interim since originations are down they are getting even more aggressive in hopes to have good numbers on the books to raise their valuation. In turn, getting a higher premium for shareholders.
After this phase of the cycle and when the private investors start to really look at the quality of these loans and the NOD's start to rapidly increase, they will stop buying the mortgages and will demand a safer investment or lower LTV note to factor in falling prices.
This is when the banks due to demand will be forced by the private investor to tighten guidelines. Our government is a joke when it comes to this. Hell, it was Allen Greenspan who pushed the ARM to the American public to begin with…..you think he doesn't know about Option ARM's?
The question we should all be asking ourselves is who will be the scape goat when the proverbial stuff hits the fan and people can't afford their new reset payment next year.
Then they can't refinance because they bought with 100% financing in San Elijo Hills, and now the place, due to short sales and developer's fire sales on the final phases to get rid of the inventory appraises at 125% LTV. Anyone, want to invest in these loans?
The scapegoat will be us, the taxpayers….
It's all one big cycle and system. If you can figure it out you can make alot of money in life.
