RE: "QM Fails to Deter Bank from Offering IO Loans" RE: "QM Fails to Deter Bank from Offering IO Loans"

BRENT CALVER: I am glad that a major bank is stepping up and not running for the hills. As Karen Mayfield pointed out, these are safe loan products for customers (borrowers) that understand what they are getting. (Image: Fotolia.)

RE: "Face It: FHA’s the Only Game in Town for Subprime" RE: "Face It: FHA’s the Only Game in Town for Subprime"

FRANK PREVITE: Absolutely, right on. FHA is the only game for low-credit score borrowers. Unfortunately, the comments about stringent regulations [are] also true. We estimate that nearly 40% of all Americans will not qualify for a mortgage loan. (Image: Fotolia.)

RE: “Industry Still Attractive to New Salespeople" RE: “Industry Still Attractive to New Salespeople"

GARY HEINECKE: Sounds good when the average loan is 300k and much higher. Our average is low 100k. Been turning away anyone below this. All of a sudden too many companies telling us they will pay us 2.5% to 2.75%. (Image: Fotolia.)

RE: "Industry Still Attractive to New Salespeople" RE: "Industry Still Attractive to New Salespeople"

JOE: I'm not sure that I agree with the prediction that 2014 will see a drop in mortgage volume of 30% and 60% drop in refinance volume...Many, many industry analysts (do a Google search) are predicting an upturn. (Image: Fotolia.)

RE: “Wholesalers See Lots of Opportunities in QM Market” RE: “Wholesalers See Lots of Opportunities in QM Market”

(ANONYMOUS): The DTI will be the killer as there just are not enough qualified borrowers out there. Prices will drop until that underwriting threshold is met...This is what my 27 years "in the trenches" experience tells me. (Image: Fotolia.)

RE: “A Brave New World for Mortgage Servicers” RE: “A Brave New World for Mortgage Servicers”

JEFF: Yes, most borrowers know when their payments are due, but not all. One spouse might not know of a missed payment, as may other co-owners of property where only one of two borrowers is living in the home and supposedly making the payments. (Image: Fotolia.)

A Reader Backs Interest-Only & Other Observations
A company's decision to commit to offering the loans despite new rules that increase their liability resonates with one reader. More reactions to recent stories follow.
Comments (2)
The great danger of Bank of the West (and most likely other lenders) reinstituting IO loans is pointed out in Ms. Mayfield's statement that "these are safe loan products for customers (borrowers) that understand what they are getting".

The problem is that the vast majority of people who were given IO loans on their principal place of residence were never advised that this type of loan was never meant for primary residences. Instead they were sold a bill of goods that promised they could refi in a few years based on their increased property value.

Not only did they not understand what they were getting, they were convinced by the "professional" on the other side of the desk that everything would be sunshine, lollipops and roses when homeowners were in fact being set up to fail. Under such circumstnaces, IO loans are anything but safe.

Were IO loans restricted to the professional house flippers they for whom they were designed and the bank required to invest its own money and retain ownership rather than bundle them into oversold Mortgage Backed Securities, then the IO loan could be viable. No such restrictions exist however, especially since they fall out of the realm of QM, and history has shown that the greed fueled obsession with fast and easy additions to the bottom line will drive the lenders and brokers to abuse the tools at hand once again as they did during the bubble.

Posted by Tim T | Wednesday, January 08 2014 at 10:06AM ET
Tim, I/O is a great option for the appropriate borrower. We now qualify borrowers using P and I so there is no advantage from a qualification perspective, this is a change from the mid 2000's.

As always, an I/O loan makes sense for many borrowers with uneven cash flows and tax situations. Additional equity may not be a borrowers top priority as many other investments make more sense in a low interest rate and rising marginal tax rate environment.

Just as a glass of wine with dinner is very nice, a box of wine everyday is not so nice. We don't need to ban all wine.

Posted by Frank D | Wednesday, January 08 2014 at 10:38AM ET
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