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Mortgage Matters
Host: Typin’ Todd, an NBKC mortgage executive
Welcome to Mortgage Matters, National Bank Of Kansas City’s blog on the different types of mortgages, real estate market, and other financial matters. Give us your feedback and ask Todd questions.
Flying from Quantity to Quality
Posted: Tuesday, April 08, 2008
The mortgage business is changing. Slowly but surely the adage "less is more" rings louder and louder. Lenders are "flying" to quality rather than quantity. Quantity worked when home values were strong. When the collateral is strong and increasing in value, then it is very difficult for lenders to get hurt. House appreciation was the rule nationwide. Now house appreciation is the exception.
What does it mean when the industry moves from quantity to quality? I believe in this case that quality has multiple meanings. Quality means credit, collateral and financial wear with all. These are the basics of good lending. In other words, lending to folks that actually can afford to be in debt and actually plan on paying you back on time. This premise is the basis for our entire banking system in America. Yes, it is time to get back to the basics.
Home appreciation is not a right. Home appreciation is not something that you plan or should expect to build into your net worth. Maximum leverage of an asset is not good business, especially when it may be a person's only asset. The emphasis on quantity has been hurting the American consumer. It may be painful but the move to quality will help the American consumer. Like shedding a few pounds it might be painful at first, but this entire mortgage crisis will make America even stronger.
What does it mean when the industry moves from quantity to quality? I believe in this case that quality has multiple meanings. Quality means credit, collateral and financial wear with all. These are the basics of good lending. In other words, lending to folks that actually can afford to be in debt and actually plan on paying you back on time. This premise is the basis for our entire banking system in America. Yes, it is time to get back to the basics.
Home appreciation is not a right. Home appreciation is not something that you plan or should expect to build into your net worth. Maximum leverage of an asset is not good business, especially when it may be a person's only asset. The emphasis on quantity has been hurting the American consumer. It may be painful but the move to quality will help the American consumer. Like shedding a few pounds it might be painful at first, but this entire mortgage crisis will make America even stronger.
What do you think?
