I totally agree that an Option ARM when used correctly was a good financing vehicle.

As Ken, pointed there were people that thought their homes were an ATM, hence they may not have the financial skills to handle the option ARM or any mortgage for that matter.

As real estate agents we should as much as we can to explain the pro’s and con’s of loan programs that are out there or that our clients are considering – we have to be educators, not just salespeople.

Agree that most brokers really want their agents to stay away from talking about mortgages. A large part of this is that most agents don’t have a clue about loan products. I have talked to more “experienced” agents that after 30+ years in the business still don’t know about mortgages then ones that do.

Personally we get very involved with the financial side of the business, but not every client is willing to talk about it with us (that is when the privacy thing is a real issue). Even with educating buyers about mortgage products including the risks and advantages of these products, and telling them not to put themselves into a position to be mortgage poor, not every client listens. Wish they all did, but you can only lead a horse to water as they say.

Pretty sure we agree that an agent should educate their clients, naturally after educating themselves. What I was taking issue with is I just don’t feel an agent can ever make a client take a loan product therefor how can the agent be “responsible” for their clients choice.

I have heard over the years, many of the Buyers tell me that the lender was selling the ARM loans with the idea that if the payment got too high they could always refinance to a fixed rate or just sell the house (in the days leading up to this market). At which point I would tell them that that works unless the market goes flat (like if world war 3 starts), or if the loan programs end.

I know a lot of Brokers tell their agents to stay out of areas like financing and inspection, but I think if you take the fiduciary obligations seriously you have to offer advice based on your experience and expertise. I think there is more danger of lawsuit by not sticking your nose in. The privacy act only means you need their permission to look at their credit and income.

If you can make money without getting involved, more power to you. I have been selling for 22 years. I have a lot of clients on their 3rd or 4th house. I won’t let anyone make mistakes with their loans, at least not with out hearing what I think about it!

There have been more then a few times that people surprise me with the type of mortgage they take out. When we are out looking at homes they are talking about a 30 year fix and then at the closing table I find out they switched loan products to an ARM. They make the decision, not the agent.

Maybe I am missing something and the type of promises you are talking about go beyond what we see in our market.

Nice discussion and you are right that the homowners should have known better. ARMs a very beneficial loan programs, even the Option ARM. I just did a post on the demise of the Option ARM on my own blog (Death of the Best Loan Program Out There) talking about the exact reasons you mentioned and how they have eliminated the Option ARM from most (if not all) lenders’ portfolios. Ken hit the nail on the head as to why most homeowners are facing foreclosure with his last comment.