Creative mortgage financing prior to the subprime mortgage crises was utilized by just about every real estate and
mortgage broker that was doing business during that time. The term Creative Financing to a mortgage lender may
have had a different meaning than to a mortgage broker or real estate broker because they were so many different
financing options available. It seemed then that each subprime lender had unique (niche) mortgage financing
methods and programs (products?) that were specific to and available only through that lender so that you had to
deal with the particular lender in order to take advantage of a specific mortgage program.
There is nothing wrong with trade secrets, but it seemed that when mortgage lenders were continuously trying to
beat each other in the mortgage "market share" game by creating new and more innovative mortgage programs on
a regular basis, something was going to be overlooked or get lost in the race to creative mortgage financing
superiority. Throughout the modern mortgage financing era, conventional mortgage guidelines represented the
standard (conforming) mortgage program that all other mortgage programs were measured against and every
home buyer aspired to get approved for. If it meant scraping together the required 25% (or 20% as it later became)
down payment to get that approval, then that's what was done, but that limited the number of poential home buyers
who could qualify to buy homes.
The number of qualified home buyers increased as the FHA (Federal Housing Administration) mortgage program
played a more significant role in mortgage financing after being enacted by Congress in the mid 1930s. The
program, though limited in the early days, became a reliable source of mortgage financing for the working middle
class and low-to-moderate income people wanting to buy and live in their own homes, because the requirements to
qualify for one of these mortgages were more reasonable for the working class to deal with.
FHA required a down payment of a little over 2% of the contract purchase price and a mortgage borrower was permitted to
use at least 5% more of his/her gross monthly income to cover PITI+RD (Principal, Interest, Taxes, Insurance &
Revolving Debt) than was permitted for a conventional loan. Additionally, if the FHA borrower had one or two late
payments on past debt obligations the mortgage approval was not jeopardized as long as s/he could "reasonably"
explain why the problem(s) occurred and demonstrated a period of consistent debt payments after the occurrence(s).
The FHA mortgage program became more popular as the years passed because more people were purchasing homes and many of those homeowners cherished their homes, kept them in good shape and built equity that enriched their lives and created a better future for their families. There were no meltdowns, no mortgage crises that threatened to destroy everything they had worked for.
One of the FHA requirements that proved to be rather problematic for many real estate and mortgage professionals
during the '80s and early '90s was the appraisal. They were a few maddening issues with FHA appraisals that
caused real estate brokers to seek alternative mortgage programs to finance their sales. One such problem was
property repairs that the home seller was required to make as a condition of the loan closing. Sellers, their attorneys
and real estate brokers contended that they should not be required to complete repairs on a house they were
leaving, but the FHA refused to remove that requirement until recently (late 2008 and gradually into 2010).
The second appraisal problem was a consistently low appraised value as compared to conventional appraisals, but
despite these apparent flaws, a lot of FHA business was done. More sellers sold their homes and more buyers
realized their lifelong dream of owning a home. The most sought after mortgage financing program in the post
subprime era is again the FHA-insured mortgage financing program, and is still the most creative in its application,
having established one set of rules across the board; And the shareholders? All of US.
mortgage broker that was doing business during that time. The term Creative Financing to a mortgage lender may
have had a different meaning than to a mortgage broker or real estate broker because they were so many different
financing options available. It seemed then that each subprime lender had unique (niche) mortgage financing
methods and programs (products?) that were specific to and available only through that lender so that you had to
deal with the particular lender in order to take advantage of a specific mortgage program.
There is nothing wrong with trade secrets, but it seemed that when mortgage lenders were continuously trying to
beat each other in the mortgage "market share" game by creating new and more innovative mortgage programs on
a regular basis, something was going to be overlooked or get lost in the race to creative mortgage financing
superiority. Throughout the modern mortgage financing era, conventional mortgage guidelines represented the
standard (conforming) mortgage program that all other mortgage programs were measured against and every
home buyer aspired to get approved for. If it meant scraping together the required 25% (or 20% as it later became)
down payment to get that approval, then that's what was done, but that limited the number of poential home buyers
who could qualify to buy homes.
The number of qualified home buyers increased as the FHA (Federal Housing Administration) mortgage program
played a more significant role in mortgage financing after being enacted by Congress in the mid 1930s. The
program, though limited in the early days, became a reliable source of mortgage financing for the working middle
class and low-to-moderate income people wanting to buy and live in their own homes, because the requirements to
qualify for one of these mortgages were more reasonable for the working class to deal with.
FHA required a down payment of a little over 2% of the contract purchase price and a mortgage borrower was permitted to
use at least 5% more of his/her gross monthly income to cover PITI+RD (Principal, Interest, Taxes, Insurance &
Revolving Debt) than was permitted for a conventional loan. Additionally, if the FHA borrower had one or two late
payments on past debt obligations the mortgage approval was not jeopardized as long as s/he could "reasonably"
explain why the problem(s) occurred and demonstrated a period of consistent debt payments after the occurrence(s).
The FHA mortgage program became more popular as the years passed because more people were purchasing homes and many of those homeowners cherished their homes, kept them in good shape and built equity that enriched their lives and created a better future for their families. There were no meltdowns, no mortgage crises that threatened to destroy everything they had worked for.
One of the FHA requirements that proved to be rather problematic for many real estate and mortgage professionals
during the '80s and early '90s was the appraisal. They were a few maddening issues with FHA appraisals that
caused real estate brokers to seek alternative mortgage programs to finance their sales. One such problem was
property repairs that the home seller was required to make as a condition of the loan closing. Sellers, their attorneys
and real estate brokers contended that they should not be required to complete repairs on a house they were
leaving, but the FHA refused to remove that requirement until recently (late 2008 and gradually into 2010).
The second appraisal problem was a consistently low appraised value as compared to conventional appraisals, but
despite these apparent flaws, a lot of FHA business was done. More sellers sold their homes and more buyers
realized their lifelong dream of owning a home. The most sought after mortgage financing program in the post
subprime era is again the FHA-insured mortgage financing program, and is still the most creative in its application,
having established one set of rules across the board; And the shareholders? All of US.
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