Mortgage lending and the real estate industry have been blamed for starting this terrible rescission that we’ve been suffering in for the last year or even longer. All you’ve had to do is look at the T.V. or read a newspaper.

It’s a fact that the real estate industry influences a giant segment of our economy. Mortgage lending has a great impact on the real estate market. Two things really triggered the fall of mortgage lending.

First was when Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) found themselves forced into a sort of receivership.

The second was when the secondary market in mortgage lending fell apart due to it’s funding and handling of sub-par mortgages.

Let’s keep this in plain English with no technical, financial mumbo jumbo. So here’s that explanation again.

First, after Fannie Mae and Freddie Mac had their hands tied due to poor management, much of the nation’s mortgage funding was crippled.

Second is a little harder to explain. Back in the ’80’s a new form of mortgage was created that allowed people with less than normal salary, lower than normal credit or other weak factors to be approved for mortgages. Though they are referred to as sub-par loans, I always called them “grey paper mortgages”.

Lots of bad things are said about these “grey paper mortgages”, but I made quite a few mortgages to people who would never have qualified for any other form of lending.

And I hate to say it, but this “the end justifies the means” thinking was part of the industry’s downfall. I know I kept writing these mortgages (with all the others) right up until my health forced me to quit in the mid ’90’s

In the last few years the “grey paper mortgages” we wrote were starting to default. Along with these poor loans the industry had to contend with other different forms of lending such as ARM’s (adjustable rate mortgages), poorly written Jumbo loans, loans with balloon payments, many loans with negative amortization and a host of other strange or different forms of lending.

The more the mortgage industry wrote of these off colored loans, the more it created a situation filled with nothing but gloom and doom.

As the defaults started to climb to the trillion dollar mark everything started to fall apart and lending came to a standstill. MORTGAGES WERE DEAD!

This could have been the end to a very sad story, but mortgage lenders are a very tenacious group. Though they were silent for a while, slowly and quietly they began to creep back to life.

With no great fanfare, advertisements began to make a new appearance. Influenced by low rates that finally dropped to levels I have never seen in my 30 years of banking, there was finally a reason to refinance or start thinking about buying that new home.

The market was starting to come back!

Now this is a great thing for all of us that want or need new mortgages, but let me stress a few of things that you really need to be mindful of as you go out mortgage shopping. Probably 90% of those looking for mortgages really need just a plain old 30 year fixed rate instrument.

Don’t get enticed by all the bells and whistles that can be attached to your loan. I’ll write other articles this year to explain different types of loans, but with rates as low as they are now, I can see no reason to get off the path of great, old fashion, plain 30 year mortgages. The only variation you really need to look at is rather you want FHA, VA, or some form of conventional product.

It’s a great time to make your new mortgage loan. Good luck in your loan hunting and I’ll see you later with more information.