A thought on how to fix the Foreclosure Epidemic
August 18, 2009
Article submitted by: 911 Foreclosure - Loan Modification Advice
Read More Articles at: Foreclosure Process and Loan Modification News
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Modern media and Congressmen miss the true problem of the foreclosure landslide. The real villain of the Great Real Estate Depression is a drastic reversal of mortgage lending process and how lenders handle modifications.
The explosion of the housing market was fueled by easy money. Lenders were swimming in funds from insurance companies to Wall Street. These funds were available to anyone who asked; especially unqualified mortgage seekers. 100% financing? Not a problem, how about we cover your costs aswell? Can’t verify income, don’t worry we’ll just take your word for it. Fico score below 600? That’s ok, we KNOW your property will come back and you’ll be able to make the payments. O and if you can’t afford that, don’t worry we’ll let you pay less then interest.
ARE YOU FREAKIN KIDDING ME? Well unfortunately, no, I’m not. This was the state of the industry up until 2007-2008. I should know. Lenders visited my company, MortgageOne and my online mortgage shopping portal, Mortgage123.com every day of the week, pleading with us to help get these loans out to a voracious marketplace. And I won’t lie to you… we offered them. Everyone did.
But in a quick reversal, today’s housing implosion was caused by lenders going to the other extreme. Today, you can’t get mortgage financing unless you have impeccable credit, sufficient and provable income, and verifiable assets. Some would say common sense underwriting, but not me. Today, lenders have effectively cut off half of the market.
Real estate is a product like anything else… subtracts half of the potential buyers, watch prices fall. It’s a simple calculation. If you’re looking to sell your home today, just forget about those with lower than a 620 score. And forget most of the self employed. They typically cannot show the income required to qualify for the mortgage amount they can afford to pay. So take em out of the equation. Buyers only have the FHA, Fannie Mae and Freddie Mac… and aside from down payment requirements, these three entities have very similar underwriting standards. So if you can’t get one of those loans, sorry. I should mention that in rural areas, USDA loans are another option. Another government agency loan? Private sector lending? What’s that?
Think that’s bad? O it gets worse. With all the homes racing into foreclosure, those properties returned to the lender are being grossly mismanaged. Very few are occupied or even have a for sale sign. Potential home buyers are less interested these days in purchasing a rescued property with the great deal homes up for sale. Additionally, investors are unable to qualify for homes due to the homes current state and market value. This leads to a eventual decrease in the property’s price further depreciating the neighborhoods value.
And if that wasn’t enough, these homes don’t qualify for assistance from the FHA financing commission. In the current marketplace, the FHA’s requirements to obtain financing are more lenient than it has ever been. But the FHA does have fairly strict guidelines for property standards based on lender owned homes. With all the free money handed up by Dear Mr. Obama, we need regulations put in place to get the foreclosed properties in order! Instead of the strict guidelines put in place by creditors, these homes need to be handled with care and attention. Being in the industry since the early 80’s, I’ve never seen the market this strict.
So what option do we have? Well reach out to the representatives, email your congressman, petition to your senator and get your voice out there. We need to force Washington to do something to fix the regulations barring lenders from making the necessary modifications to fix the housing market. We need to put policies in place to force the creditors to do the right thing for the housing market.
I know that as much as I rant about this, most people will not contact their local representatives. So I have decided to draft my own proposals. I plan to put my proposals into the hands of every congressman and senator in Washington. If you agree with my views, won’t you join me? I’d like to include as many signatures as I can get with my proposals. If you provide your contact info, I’ll send you the proposals and when we’re ready to go, I’ll ask for your signature. But it’s completely up to you… you can read my proposals before deciding to be a signor. But I believe what I present will make sense and you will want to join us. I’ll keep in touch with you until then.
Tags: foreclosure
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