Yes, that's right the mortgage companies and their henchmen
caused the foreclosure crisis that is affecting everyone in
the United States right now. I'm not saying the homeowners
are blame-free, but the actions and the practices of the
mortgage lending industry set-up many homeowners to fall
into foreclosure. Thousands of homeowners are trying to
stop foreclosure process right now because of the runaway
lending practices from the last eight years.
The very types of mortgages offered to the homeowners are
evidence that the mortgage companies set loose a runaway
train. Now that train wreck of foreclosures are sweeping
our nation right now. The types of mortgages that were
statistically destined for failure include these 3:
(1) Interest Only Loans
(2) 80/20 Loans, AND
(3) Self verification of income.
(1) INTEREST ONLY LOANS: this meant a buyer's mortgage
payments did not put one red cent toward equity. This type
of loan was offered to bring down monthly payments and
most buyers, overwhelmed by the amount of paperwork at a
mortgage closing, were unaware none of their money went to
the principal of the home. These loans, by bringing payment
amounts down put buyers in to homes in expensive housing
markets they could not otherwise possibly afford. Other
cases, mortgage officers outright conned unsuspecting
people into more house then they could afford.
(2) The 80/20 loan: what a classic twist, we leverage the
home for a 100% with no money down on the house, but
thousands paid in closing costs. No equity was disaster
leading to the foreclosure process.
(3) NO INCOME VERIFICATION LOAN: What can I say about this
one, the loans name says it all.
The loan officer would tell you nothing down on the house,
but when you would receive the closing documents you would
see thousands of dollars towards shady fees that a person
couldn't make out if they even had a Harvard law degree. So
buyers put down an amount of income they made and mortgage
staff did not verify it. These no money down,
interest-only and no income verification methods produced
millions for the mortgage companies and what did the
homeowner receive? Houses they couldn't afford, a ride on a
runaway train headed straight for the foreclosure wreck we
are in now.
But let's look at what the mortgage companies got out of
it. The Loan Officers received their commissions; the
mortgage companies received their fees then sold the
mortgage to an investor in China, Japan or Europe. When the
homeowners go into foreclosure does anyone go back to the
loan officer and ask for the commission back, based on
their unethical and unsound business practices? No. Does
anyone ask for the fees and commissions collected by the
mortgage companies? Nope, not one penny back. The biggest
concern by the mortgage industry was getting their money
from the mortgage closing process and their payments
thereafter. This market has mostly collapsed on itself
now, the sub- prime market where many of the mortgage
company bottom feeders lived thankfully have gone out of
business with the sub-prime market shut down in August of
2007. Problem is the full weight of this foreclosure crisis
is still falling on homeowners now.
The real estate agents and the real estate appraisers
assisted this foreclosure crisis with inflating the value
of property to get in on the sale. The real estate agents
having little training in many cases and in their blind
quest to get rich, real estate agents would push buyers
into property they couldn't afford, by assuring them, the
buyer must be able to afford it because Look!!! You
"qualified for" the loan "they wouldn't give you a loan if
they didn't believe in you. We now know this is not true.
But real estate agents are also keeping their commission
right now.
Real estate agents also helped drive prices up. For
example, in 2003, I told an agent that I wanted to make an
offer on a house and I wanted to bid under the asking
price. You'd have thought I'd just asked the agent to give
me a ride to Mars! The agent replied, "People offer more
than the asking price to make sure they get the property."
But it's not true, it's a bargaining process and if you
have an agent that won't write a lower bid, get another
agent because the agent's biggest concern is not if you are
paying more for a house than it's worth, their biggest
concern was the commission. Appraisers in the rush to keep
real estate brokers and mortgage companies happy (and
themselves in jobs) made sure the appraisal value would
come in at the required asking price. The bank took the
appraisal and the homeowner has a house. Look at that
chain of events; does it leave more than a little room for
over inflation of prices? Do you think any of these
professionals are going to hand back their fees for the
rampant mishandling of home buyers' lives?
The United States government inadvertently started the
foreclosure crisis way back in 2003 when Federal Reserve
Bank dropped the interest rates to its lowest in four years
in an attempt to slow down a potential recession. The
mortgage companies swung into high gear handing out
mortgages, biggest requirement to see if you qualified was
by having a pulse. The mortgage companies started issuing
Adjustable Rate Mortgage (ARM) to virtually anyone, and
issued with with a promise that the market will still be
strong when the ARM comes due, property values would
increase, and the buyer would be earning more as time went
on. The issuing of mortgages with glee and total abandon
for consequences lead up to the foreclosure crisis starting
in 2006 and beyond.
Now the Big Boys of mortgage companies are crying to the
government for help due to the reckless handling by
mortgage companies of buyer's credit and the funny part is
the government is listening to them. But the government is
not listening to the homeowners who are fighting to stay
above the surface and stop the potential foreclosure
looming over their heads. The government has offered some
minuscule relief for certain homeowners, but the ones that
will qualify is about a 1/3 of those homeowners facing
foreclosure. And the relief is very temporary, measured in
weeks or months. We have a long way to go before the end of
this foreclosure crisis; I'm curious how the great
foreclosure crisis of 2008 will lead us. Will the
government need to step in to regulate the mortgage
industry more stringently? Will the government help the
homeowners keep their homes? Time will tell.
----------------------------------------------------
MJ Jensen has studied Real Estate from the Homeowners
perspective for over 20 years. He provides tips on mortgage
problems, and understanding debt and credit solutions for
consumers. You can visit his site at
http://www.stopbankforeclosurestips.com/free_report
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