Anybody here that's about my age (39) and older will remember the mid to late 90's resi lending as being far more aggressive than the 2000's.
In 1996, at age 19, after working for a large consumer finance lender (similar to TransAmerica), I got in the mortgage business. Times were very different. Handwritten loan apps, no internet and direct mail actually worked. In my opinion, this was when direct mail probably saw its peak. Just before the tech boom. This era also probably caused all the mail fatigue we see today. Direct mail is dead...there once was a time you could count on almost a 1% response rate. By 1998 or 1999 it had dipped to under .25%.
Real estate was absolute shit. On a side note, look at CRE delinquency back then. It was higher than resi lending in 2009+2010 (12 and 13% delinquency!). Nobody had equity, or so it seemed. Before I got in the business many local Thrift & Loans made money selling Gov'y products like FHA Title 1 home improvement loans. LTV didn't matter and could be in 2nd or, yes, 3rd position. With credit scores taking hold as being legitimate, secondary markets came online and so did securitization.
You may ask how a small $20k or $30k 2nd TD could generate enough revenue to support a retail loan office? This was Pre Section 32 (high cost mortgage) disclosure era. Basically there was no cap on fees for owner occ loans. These small deals were getting done with 10 to 12pts on the front and rebates of up to 2pts.
Rolling in to 1996 when I arrived on the scene, lenders like First Plus Financial with Dan Marino as their pitch man and Formula 1 race cars were able to securitize debt consolidation 2nd TD's with Max CLTV's of 125% of appraised value. Loan amounts trippled. Rates were 12-17%. Now we were doing $75k loans bringing in nearly $15k in commissions. Not bad.
By 1997 you could get a 2nd or 3rd TD on your primary residence, max LTV of 135%...loan proceeds for home improvement could be added to your value dollar for dollar. We routinely saw middle class Americans with $50k to 100k in revolving debt.
It all lasted about 5 years. The guys I know that got in the business in 1993 were making $250k. By 1998 that fell to under probably 75k as the secondary markets saw massive default and loan programs were slashed.
This was a nationwide lending frenzy that to me is still unlike anything I've ever seen. Sure, pure loan dollars lent, the 2000's take the cake. As far as underwriting...it was the mid 90's. I knew this type of lending wasn't my calling. By 2000 I was studying for my broker exam and wanted out of residential lending.
A year later I got in to CRE. You may think CRE brokers are scum bags, try resi...good lord.
Thank you for this gem
LoL, no problem. Time flies. Can't believe that was 20 years ago.
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