Quote:
Originally Posted by Cletus Miller
Is anyone with any knowledge of the real estate finance industry surprised by this? It's much the same thing in commercial finance, but the servicer/agent's rights are much more clearly set out, most of the time.
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It's another TBTF type of issue. If there was thoughtful paper underwriting going on among residential r/e lenders, we'd have seen a much bigger uptick in consumer spending. The problem is the small banks doing such underwriting don't do many residential mortgages. The conduits for that money are the big banks, and there it's all automated. They can't underwrite the guy who's got bulletproof cash flow, but is stuck with a 680 credit rating because he was a passive partner in a business with his brother in law that tanked, after which his ne'er do well in law defaulted on a couple company credit cards on which he was a co-borrower or guarantor. All they have is some robot at a terminal running quick numbers and saying no to all sorts of decent risks.
