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Yesterday I read an article that National City Corporation, with headquarters in Cleveland, Ohio, is laying off approximately 900 people that work in its mortgage division and is no longer accepting loans from mortgage brokers.

As a quick aside for those readers out there who have never shopped for a mortgage or did not realize there are different types of lenders, we have mortgage bankers and mortgage brokers. A mortgage banker is typically an employee of the bank, “the loan officer” in your friendly neighborhood branch, whereas the mortgage broker is like an independent agent that takes your loan application and sends it to multiple lenders to (supposedly) try to find you the best deal that they possibly can in the market. Mortgage brokers of course charge you a fee to do this service and/or they receive a fee from the lender that makes you the loan.

As the number of foreclosures ticks higher and banks tighten credit standards so fewer people qualify for mortgages, I have noticed an increase in the advertising for non government-backed student loans in the media and especially on tv.

First there were the ads for Astrive, which only caught my attention because they continued to run similar ads with different website addresses. The website address at the bottom of the tv screen always starts with Astrive and then ends in some three-digit number and the usual .com suffix. In the financial world, seeing a company use multiple websites with similar addresses always throws up a red flag in my mind. I am not saying Astrive is a bad company; at this point, I don’t know enough about them. But I am curious why they have multiple website URLs and why they are so similar.

I didn’t think much of the Astrive ads (aside from the various - and seemingly frequently changing - website addresses) because this is the business that Astrive is in. But then I saw a commercial for student loans from Chase Bank. I haven’t seen a commercial for home loans through Chase in quite some time so seeing the commercial for student loans caught my attention immediately.

It is interesting to see that as the mortgage and real estate market has taken a downturn, lenders have turned to student loans, which are repaid over many years - up to 20 in most cases - similar to the 30 years that a home loan is amortized over.

Only time will tell if student loan defaults will become a crisis in our society similar to the foreclosures. Some news commentators and talking heads on tv have speculated that the auto industry may be next with its flat sales and low (or zero) interest loans. Certainly the default risk on a zero percent interest loan is still higher than zero and those loans, when packaged with other interest-bearing loans and sold to investors, would sell at a steep discount.

As always, I appreciate your comments and feedback…