In 2008, my life changed forever. The devastation in the real estate market hurled direct consequences into my innocent 14 year old life that I never could have fathomed. I remember my father talking to my mother during dinner and telling her that their portfolio took a really big hit, and that they weren’t very liquid. Our family vacation got cancelled. I recall being particularly mad. Each year one of my siblings was allowed to invite a friend to join us on vacation. This was my year. I had no idea how dire the situation really was.
As the months passed on, my self-employed father’s business was turned upside down. Although my father was too proud to say it, aside from a once a quarter gig, he was unemployed. He works in the entertainment industry as a musician. Prior to this time, he had seen a lot of success. He raised six children, and owned a nice big house. As America’s wallets grew thinner, luxury expenses were the first costs cut from the American budget. Having musicians play at parties is a luxury, and so the industry that my family relied upon for our stability was one of the first of many to be decimated. In December of 2008, the Federal Reserve decided to step in and dramatically reduce mortgage interest rates to help struggling homeowners. My parents were thrilled. They hoped this might be their opportunity to have some relief. Sadly, when they spoke to my sister, they soon learned that their 7.5% interest rate would not change. Our home value plummeted so sharply that the mortgage my parents had been paying on for years was 20% higher than the home was worth. Hard decisions had to be made. My parent’s plan to retire was pushed back about a decade. My family clawed through the years. It was a tough road to recovery, but we’ve survived it. The Lending Industry My older sister worked as a mortgage banker in 2008. Prior to the market crash, the lender she worked for would often lend money with very loose underwriting guidelines. Her company often issued what industry insiders often called “NINA” loans. NINA stands for “no income, no asset” verification needed. Clients who were self-employed simply could write a letter estimating their income, assets, and get a mortgage. To me, it did not make sense that a mortgage company would take on risk without ensuring that their clients won’t default. My sister explained that …show more content…
The government intervened, and created new regulations to protect investors. Suddenly, the mortgage lenders and their bankers had much stricter accountability for the loans they issued. Consequences to the lenders and the bankers varied from fines to serving time in prison. In response to this, the mortgage Lenders began tightened lending guidelines. Simply put by my sister: “A client who I could have issued a $500,000 mortgage loan to only one year prior I could only approve for a $200,000 loan today.”
Conclusion
If we do not learn from the mistakes of the past we are doomed to repeat it. I hope the experiences and lessons learned through these tumultuous times will be firmly embedded in our public consciousness. In this way, our actions will reflect constructive approaches to solving problem that may stem from the economy and market forces. In this writer’s opinion, the future looks brighter, possibly better than it has in almost a
As the months passed on, my self-employed father’s business was turned upside down. Although my father was too proud to say it, aside from a once a quarter gig, he was unemployed. He works in the entertainment industry as a musician. Prior to this time, he had seen a lot of success. He raised six children, and owned a nice big house. As America’s wallets grew thinner, luxury expenses were the first costs cut from the American budget. Having musicians play at parties is a luxury, and so the industry that my family relied upon for our stability was one of the first of many to be decimated. In December of 2008, the Federal Reserve decided to step in and dramatically reduce mortgage interest rates to help struggling homeowners. My parents were thrilled. They hoped this might be their opportunity to have some relief. Sadly, when they spoke to my sister, they soon learned that their 7.5% interest rate would not change. Our home value plummeted so sharply that the mortgage my parents had been paying on for years was 20% higher than the home was worth. Hard decisions had to be made. My parent’s plan to retire was pushed back about a decade. My family clawed through the years. It was a tough road to recovery, but we’ve survived it. The Lending Industry My older sister worked as a mortgage banker in 2008. Prior to the market crash, the lender she worked for would often lend money with very loose underwriting guidelines. Her company often issued what industry insiders often called “NINA” loans. NINA stands for “no income, no asset” verification needed. Clients who were self-employed simply could write a letter estimating their income, assets, and get a mortgage. To me, it did not make sense that a mortgage company would take on risk without ensuring that their clients won’t default. My sister explained that …show more content…
The government intervened, and created new regulations to protect investors. Suddenly, the mortgage lenders and their bankers had much stricter accountability for the loans they issued. Consequences to the lenders and the bankers varied from fines to serving time in prison. In response to this, the mortgage Lenders began tightened lending guidelines. Simply put by my sister: “A client who I could have issued a $500,000 mortgage loan to only one year prior I could only approve for a $200,000 loan today.”
Conclusion
If we do not learn from the mistakes of the past we are doomed to repeat it. I hope the experiences and lessons learned through these tumultuous times will be firmly embedded in our public consciousness. In this way, our actions will reflect constructive approaches to solving problem that may stem from the economy and market forces. In this writer’s opinion, the future looks brighter, possibly better than it has in almost a