How Has the Mortgage Industry Changed Since the 2008 Crisis?

Mortgage professionals who have been in the game for a while will remember the “old days” of lending when there was a saying in the industry, “All you need is a pulse to get a mortgage.” This was before the bubble burst and the financial industry came crashing down, shocking most average Americans but likely surprising no one in the lending business.

“Today the mortgage industry is suffering because first time home buyers are STAYING in their homes for 15+ years rather than reselling to upgrade after 3 years. This bottle neck is causing a shift in managing expectations for sustainable business growth.” Says Sharon Tsao, CMO, Contemporary Staffing Solutions.

The Mortgage Industry Prior to 2008

Before the crash of 2008, mortgage lending was a bit like the wild west. When it came to evaluating the fitness of a borrower, credit scores and debt-to-income ratios were more “friendly suggestions” than guidelines. Add to that the rise of mortgage farms that were selling variable-rate mortgages to risky borrowers who often did not understand the terms, and voila – you had the makings of a financial disaster.

Thanks to the loose standards of the early 2000’s, home ownership boomed, which looked good on paper but there was a crisis brewing beneath the surface. Millions of Americans simply couldn’t afford their loans. Home values had become inflated during that time, so when the market tanked and home values took a nosedive, those same Americans found themselves underwater on their loans.  The Great Recession had several other causes and mitigating factors – including loose secondary market practices – but flooding the market with unqualified buyers ultimately paralyzed the American economy for nearly a decade.

The Mortgage Industry After The Crash

After the bubble burst, the US government stepped in to try and stabilize the economy through a host of new regulations and guidelines.  Those guidelines and regulations have changed the face of the mortgage business. Gone are the days when borrowers needed “only a pulse.” Now minimum credit scores must be adhered to, employment history must be provided, and there are debt-to-income ratio limitations.

Not only have lending guidelines tightened, but so have the rules and regulations on training mortgage originators. They are now required to attend a 20-your mortgage education course (with additional hours required in some states) and to pass an ethical lending exam. Additionally, they must take continuing education courses to remain current on changes in laws and guidelines.

Are You Making Money In This New Environment?

These tighter restrictions mean that banks must work harder to remain profitable in the mortgage business. Gone are the days of “easy money.”   If your bank, mortgage brokerage or investment firm is looking for talented mortgage professionals to help you win and keep profitable customers, contact the expert recruiters at Contemporary Staffing Solutions today.