Shake companies in sub-prime lending market in the U.S. and the United Kingdom before exposing problems that consumers have faith in lenders. Many assume that if approved for a loan or mortgage it means that someone responsible felt they could afford it. Nothing could be further from the truth.

Consumers are wrong about the reasons for many lenders, particularly sub-prime lenders to extend credit to people with less than perfect credit. Lenders are the companies that make money from the loans on behalf of others. An average loan officer is not a financial planner, and provides financial advice. They are trying to get your application check all the boxes must be approved by the mortgage lender so the broker may charge a commission for finding you and generating loan.

The issue of affordability barely enters the equation when approving a loan application. With lenders offering no documentation or self-certification loans may be surprised when a consumer can bend the truth a little in order to obtain the money they think will save a difficult financial situation or the house they want.

The loan authors sell their loans to a loan company that often a package of loans and sell them together in the food chain. It is not unusual for a new loan to go through two or three hands until the land in some bigger fish stock lending.

During the stage where the hope that a sub-prime loan is subject to a review of adequacy what actually happens in many cases is that everyone is looking the other way. The borrower is a little dodge numbers, the lender is pushing the envelope a little bit of everything and is pushed upstream.

Currently in the United States a kind of crisis is brewing in the mortgage market with sub-prime loans going bad faster than milk in the sun. In 2000 approximately 3% of loans originated in the U.S. sub-prime mortgages. In 2006 that figure was only about 13%.

Over the past six years lenders have smelled blood in the water and tried to exploit an area of the lending market which it believes are a lot of money. And I think they were right, if the U.S. economy remains strong and growing.

But with the housing market cooling and loans originated in the last year or so bad going as fast as they are written, some lenders have enjoyed strong growth in the sub-prime market, are finding that up to 19% of the loans are delinquent and in default.

And now, some of the lenders after the sub-prime market have been found insolvent. Waves of these small companies have gone bankrupt, with no fewer than 22 last week to seek protection through bankruptcy.

What makes this situation particularly frightening is that many of these new loans are originated or adjustable interest rate loans and interest rates creep even a little, many are in a situation where they are losing their homes.

The lesson to be learned from this story is that consumers should not rely solely on the approval of a lender. Must ensure that the proposed monthly loan payment will fit within the budget with room to spare.

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Over the past 18 months or so, maybe longer, the mortgage origination industry has seen significant change. Most of our competition is gone, but so are the programs and lenders that provided so much of the money homeowners and homebuyers needed. With those programs gone, we originators are left to re-tool our kit and get out there and keep originating – or quit, I guess.

For me, when it came to re-tooling, I tried everything, and as I became comfortable – there was change. Whether the sources dried up, or underwriting guidelines tightened – whatever it was it seemed like I was constantly re-tooling – and my volume of production slipped by 80%! Because I have been doing this since the late 80’s – I simply had to find a new niche, a new way to grow my business and support my family. What was I going to do?!

When I started in this business, back with thermal paper fax machines (anybody remember those?!), there were really only 2 kinds of loan programs, government or Savings and Loan money. I stayed away from the government stuff, heard it was too hard and took too long and the government limited origination fees to just 1%, so I stayed with the S&L stuff. Now, with S&L’s gone and WallStreet money still not back yet – seems like the old days are here again – with the major focus on FHA loans!

I have seen statistics that expectations for FHA are in the range of growth near 1000% – seems as thought this time, I am not going to miss this wave! So, I read all I could, I even purchased some great training and reference manuals to ensure my understanding – and then I went out to originate. Although the learning curve was steep, I am now back to production levels I haven’t seen since the refinance boom of 5-7years ago. Although the numbers are similar, the revenue is not! Yes, it is true that origination fees are limited, but to encourage the use of these products, seems that YSP (yield spread premium) is what will fuel the economics of this new wave of FHA loan production.

Don’t miss it this time, learn all you can – the guidelines are strict – but with the millions of homeowners needing help our of those payment option arm, and high rate subprime loans pending their next adjustment – there is quite a demand for our services. Remember, there will always be a need for home loans, we as mortgage professionals just need to be ahead of the curve and ride the different waves of the market to serve our clients and earn our living – don’t quit, just do your homework, and ride this FHA wave!

Anyone who is in this business and is not making FHA loans, should learn how to get yourself or your company FHA approved.

To learn how, Download this: How to Get a FHA License

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The Internet has opened new perspectives for the potential homeowner. Person-to-person/peer-to-peer (P2P) lending has become the latest acquisition in cash and investment trends. But is reliable, safe, and what are the consequences of default on a loan obtained in cyberspace?

One of the big movers in the P2P world, Prosper Marketplace (prosper.com), opened its virtual doors on February 5, 2006. A little more than 2 years later, which are the largest U.S. P2P lending market, with loan applications throughout the country. The loans are requested for a wide variety of reasons: the consolidation of the mortgage just to send Johnny to college.

Prosper began with a simple premise: Connecting people with the funds and the willingness to invest with people who need money and were willing to pay interest on them. Add to the area to enable people to explain why it should be the person you invest and you have a system that is, in ideal circumstances, both profit and strangely intimate.

However, Prosper.com currently only allows a spending cap of $ 25,000. For many home buyers, this will not be enough. Therefore, the credit agencies to make P2P lending support to the amount needed for a down payment have emerged to be … or are seeking.

Home Equity Share (homeequityshare.com) is one of those. The idea is that you, the buyer wants to put 20% down on the house of your choice. The problem is that currently have 0%. Or the 5% or 10%, but nowhere near the magic 20%.

Home Enter the capital, which happens to have a person who wants to invest in real estate, but do not want to face the house. They give you the amount you need (via HES), and both agree on how the money is going to return. You could end up buying a share of the investor or the division of profits from a sale.

That is the ideal scenario. In reality, things could be more complicated. P2P online lending remains eliminated. In Canada, EU firms such as Dar (communitylend.com) are being hampered by difficulties regulation. The problem is that we are still waiting to see what is keeping Canadians from the use of P2P networks.

Back in the United States, we are still waiting to see what the ultimate risk factor. Prosper the level of arrears has been as high as 20%. Home equity is still in its infancy and some blogs, as thebankwatch.com have indicated that it is still a large high-risk investment.

However, the risk seems to be all on the side of the lender when it comes to real money. The only risk that borrowers appear to be defaulting on the loan is and the resulting success to the credit score and the kind attention of collection agencies.

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