Subprime loan woes will ruin everyones good day.

The slogan for all of the candidates for public office from dogcatcher to President of the United States should be the same one used in the past. Maybe you remember it.

IT'S THE ECONOMY, STUPID!!!!

Because it is the economy that will determine the next political trend. The next congress and president will have to stop the bleeding that is going to start a.k.a. recession. Just today a major investment analysis company has stated that the second or third quarters of this year will reflect recessionist numbers.

Soon there will be no advantage for anyone to get a loan through a mortgage broker. The powers that be seem to think that Yield Spread Premiums which are paid to the brokers were the reason for the 'credit crisis' and the 'subprime meltdown'. Nothing could be further from the truth. Unscrupulous practices by some mortgage broker employees and borrowers caused the 'problems'.

But why did those problems occur? There are several reasons.

1) Greed. Loan officers were told by their brokerage managers that they can make as much as they want and they loaded the interest rate up which increases the Yield Spread Premiums by as much as four or five percentage points. They were also charging 'origination fees' and high processing fees. What kind of money would that be? Well, for a loan of $100,000 five percent in Yield Spread Premiums is $5,000 dollars plus a processing fee of $900 and Origination of two percent makes a profit of $7900 for one loan.

2)Fraud. Loan officers not able to make the numbers work for the borrower would make up numbers and even falsify documents to make the numbers work.

3)Untrained personnel. There is no national standard for training loan officers or brokers. NONE. There is no ethical training or guidelines either.

4)Borrowers impatience. Most borrowers don't want to spend the time reading the documents they have to sign at the origination of the loan and at the closing of that loan. If more had taken time to read the documents there would be less of a 'resetting interest rate' crisis.

The best thing we can do is to make sure that all of our legislators on every level know that Yield Spread Premiums are not the problem. Greed and training could solve most of the problems. The Yield Spread premium, used correctly, makes the cost to the borrower lower. There should be a cap on the amount of money charged to the borrower or seller in conjuntion with the Yield Spread Premium.