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Interesting times in lending 2007-2012

Posted by Rona Fischman October 23, 2012 05:43 PM

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Because I am approaching my 1000th entry, I am waxing nostalgic for the entries I wrote when I was brand new to blogging here at BREN. It was June 2007. Subprime mortgages were starting to fail all around us. Real estate times were tense. Then -- horror of horrors -- the interest rates went up.

I wrote:

OK, breathe...Mortgage rates are up from 6 percent to 6.75 percent. What does this mean to someone who is thinking about buying a home? First: look at the numbers. The higher rate increases a mortgage by an extra $50 per month for every $100,000 you borrow. How many hundred thousand are you borrowing for you home? Do the math. That extra $250 a month in interest on a $500,000 loan costs about as much as paying $40,000 more for the home. Depending on what you are borrowing, this could be the straw that breaks the camel’s back. Are you that camel?...

I have been writing here through some “interesting times” in real estate. I began writing here at BREN just before all heck broke loose in the financial markets due to commoditized real estate debt. Subprime mortgages were on everyone’s mind as the house of cards fell down around investors, worldwide. I didn’t fully understand the financial market end of this until I read the details collected by Michael Lewis in The Big Short. I still recommend that book.

What I did understand was mortgages. I watched as my clients were offered more “creative” mortgages as the real estate bubble inflated. Friends, family, lenders and other agents encouraged buyers to get deeper in debt than was generally recommended. As an agent, I counseled against going out on a financial limb; most of my clients listened.

Here at BREN, I explained subprime mortgages, mortgages in general, and watched as Fannie Mae (FNMA) changed their rules in reaction to the way-to-liberal lending of the previous years. There was a period of too much restriction in lending as the mortgage market tightened up. There are also lending problems in Massachusetts, specifically because of our somewhat unusual condos that have been converted from two-family and three-family houses. As these lending changes occurred, I kept BREN readers informed.

Along with the restricted lending came some consumer safeguards. Attorney Vetstein and I kept the readership informed about changes to disclosure rules regarding the Good Faith Estimate. As it turns out, the GFE has helped consumers. I also wrote about changes that are afoot to further improve lending practices through the CFPB.

It has been a dynamic time regarding lending. I tried to count how many entries I wrote on lending in the past five years. I lost track at sixty-five. I think it is more like eighty (some being repeats.)

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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