He also tauted home ownership as the great accomplishment of his administration. Even though a lot of those people weren't good candidates for home ownership.
I was an appraiser for 5 licensed years but was one before that too.
Home ownership spurred I believe has a lot to do with the dot.com boom that delivered the surprise to Clinton of a balanced budget he did not predict nor aim for.
As a lender then, I was swamped daily by faxes from all sorts of what we call "Wholesalers"
Let me explain the home loan business by laying the industry out. This is not told to the public unless you happen to read industry reports.
First the customer. This person owns property. I want to simplify this to all reading it here.
Customers are rated by credit scores. Who wants to loan to a dead beat? So lenders who talk directly to customers, me for example simply take those faxes and read what they tell us. IF we have top rated customers, we select from the lists, wholesalers who offer the best interest rates. But how do we make our incomes. We put in effort to tally up our expenses, all of them, labor and other overhead, and add in a profit. If we run a wonderful business, we scale down the loan points to keep our customers happy. But if we charge too little, we can't pay rent or expenses to our staffs. So customers protect themselves by shopping around. They will select the best deal for their own self interest. We do the loans. We also shop wholesalers who allow us to get top deals for our clients. Those in our business who wont last long **** the customers. So they end up closing up shop. Wholesalers also limit the profits we can make. Sure some customers end up fucked. But all in all the customers normally do a good job defending themselves.
When I was an appraiser, I was in loan businesses that were shady. It took me months to finally see they were super bad. They would not tell me the actual costs to customers but at times the customers would tell me and most did not.
I would see though first hand that the loan sharks would close up shops. And after I opened my loan firm, sometimes the shady ones came to me to hire them. I did not of course. As an Appraiser, the further up lenders would hire me to check out some lenders appraisers. I would report to them facts. Naturally the lenders also viewed my appraisals by standards with their effort to ensure my work was reliable and accurate.
My aim here is to explain to all of you from the inside out. So you will be more knowledgeable about how the lending industry really works.
Now since this is getting long, let me finish up. Customers decide if they will pay bills on time. And as lenders use ratings, the worse the customer, the more interest and loan points they will pay. This is because the lenders of all categories know ahead of time what profits they must make. They bet on customers to go broke. So the higher rates they charge save the lenders from going broke. Lenders profits are not on only keeping loans on their books. They want to market some loans to others who will keep them. Such as pension funds. Insurance firms buy loans. If they collect money monthly from customers, they may want to keep home loans on the books for a lot longer time than wholesalers do.
Wholesalers are not visible to the public normally. If they become giants, some do get to be known. To be a wholesaler, they too need funds. So for them to set up in business, the industry may force them to first have super huge amounts of credit and millions in worth or they can't be wholesalers. Even me as a Lender to the public had to have plenty of net worth so the wholesalers trusted me.
Anyway why don't banks make many home loans as others do. Banks have accounts that will pay them a lot more is why. Car loans for example. If you want a boat, you do not go to me. You go to your bank. Banks will loan the super prices of yachts. My firm would never have done that. When i owned a machine shop, my source of loans was banks. But even machines have special lenders who loan to machine shops or auto dealers.
Hope this helps all who care.
