2008: Lending Practices in Review

An Opinion on Big Banking and Lending in America

For quite a while now, I have been writing articles regarding the mortgage and real estate industry. Just recently I decided to publish them, superseding the apprehension that I may spark controversy with my realistic and unbiased views on the industry and the big players in the sector. As a caveat to this article: this is my honest and humble opinion; this is not to be taken as a factual statement, and is being protected by the right to free thinking and right to exercise free speech and press in any form, be it verbal, written, or via internet.

I have always harped on the fact the big players, such as Countrywide, have always done business the wrong way and have ultimately led us to the turmoil we are in now. Why so? Good question. Well, to point out a few interesting facts:

1. Big players originated the business of selling mortgages, on a grand scale, to Wall Street and other investors. You see, the lending industry began with the concept that you walk into your bank, they know you, you know them, they like you, you like them. Based on the relationship they would lend money. They did so because it was a personal and caring relationship. However, this all changed when the fork in the road was presented. The big players decided to take the road not quite traveled. Subsequently, the lending industry transformed from serving the clients' best interest to serving the lenders' best interest, who now sells mortgages. These big players began selling mortgages wrapped up in pools to investors overseas, who simply believed the high rate of return on these pools of money (hence the concept of global market). This leads to my next point.