by Patricia A. Allen
When your grandparents or parents wanted to purchase a home in the 60s or 70s, they most likely gave their friendly neighborhood banker or savings & loan a call, or, more often than not, dropped by at the local hometown office for a casual visit with the loan officer they knew personally. After a hearty handshake, they'd leave with either a 30-year fixed rate or 15-year fixed rate loan. If they were not that well known, the loan application would be taken to the Loan Committee who would let them know in several weeks if they qualified or if they didn't. Yes or No answers were given with little if any explanation. If they were homebuyers shortly after World War II, they may have qualified for one of the first upgraded Veterans Administration (VA) loans which were government-insured.
This is the same time period that Savings & Loans began active mortgage financing, initially offering mortgages to their deposit customers and expanding to offer mortgages to the community at large. This created a positive impact, accelerating the purchase of homes.
The Savings & Loans' financial problems were partly created by the good will they initially displayed in issuing mortgages. They had offered fixed-rate loans which they were servicing themselves (you always sent your monthly payment to the financial institution that first granted you your mortgage loan); inflation hit hard in the late 70s and early 80s with the institutions not earning enough interest return on deposit accounts and the relatively low fixed-rate mortgages weren't providing any additional revenue to offset this trend.
As interest rates climbed, the A.R.M. (Adjustable Rate Mortgage) was developed to offset this situation; however, after the initial brief fixed period of the mortgage, homeowners found their interest rate reaching such excessive levels on their mortgage payments that they were faced with losing their homes.
The birth of quasi-governmental agencies began to help assure Americans that they would be able to buy a home and not have to lose it. You know them today F.N.M.A. (Fannie Mae); F.M.A.C. (Freddie Mac), and F.H.A. (Federal Housing Authority), etc. Wholesale 'Investors" developed their own mortgage programs separately from these agencies and evolved into the mortgage banking network of wholesale loan programs available today.
None of these agencies (called the 'Secondary market') originate wholesale mortgages (offer wholesale mortgage loans directly to the public). However, Wholesale Investors may also have Retail Divisions which offer interest rates higher than their wholesale division.
This has caused the world of mortgage lending to become a complex and often mystifying arena; not only to a borrower, but the professional loan consultant is met with the constant requirement of having up-to-the-minute knowledge of a seemingly infinite number of ever-changing variables in mortgage lending. The proper assimilation of that knowledge and the ability to translate these indicators to your needs, largely based upon economic trends, is our job. We have dedicated ourselves to this end. We have been told repeatedly that we do it best. This fuels our desire to exceed excellence in service to you.