Article submitted by: 911 Foreclosure – Loan Modification Advice
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Social Media and the government fail to see the true crux in the foreclosure epidemic. The culprit of the Great Real Estate Depression is a drastic reversal that mortgage lending models have experienced.
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 freaking Kidding me! I’m afraid I wish I was. This was the state of the market from 2007 – 2008. I should know, lender visited my site daily at Mortgage123.com asking if we would extend these lines of credit. And we did… Everyone did.
On the other hand, in a quick reversal: today’s housing epidemic was caused by the banks going to the extreme in the other direction. Today, you can’t even get financing on a mortgage unless you have perfect credit, sufficient and verifiable income and ascertained assets. Effectively, lenders have basically cut off half of the mortgage market!
Real Estate is merchandise and like any other product; subtract half the market and watch prices fall. It’s a simple computation. If you’re looking to sell your home, just forget about those buying with a lower then 620 credit score. And forget most of the self employed from being qualified; they typically cannot show the income for the mortgage they wish to buy. Buyers then only have Fannie Mae, Freddie Mac and FHA as options; so besides the required down payments all three of the lenders have similar requirements. So if you are denied by these lenders: so sorry; no loan for you!
But just wait. It gets worse. What about all those foreclosed properties that have been taken back by their lenders? These properties are being grossly mismanaged. Many of them don’t have for-sale signs. Very few of them are being maintained. Most potential home buyers have no desire to even look at these properties – they don’t want to rehab properties. And even investors that can afford the 20% – 25% down payments that are required today cannot get traditional financing because of the condition of these properties. So they sit on the market. And eventually, the banks lower their prices further depressing the value of surrounding properties.
And just to make matters even worse, these homes don’t qualify for FHA financing. In today’s market, FHA financing represents the most lenient financing available for home-buyers today. But FHA has fairly strict property standards – these “REO’s” (properties owned by lenders) typically fail to pass an FHA appraisal. With all the new regulations and with all the stimulus money being handed out, Mr. Obama, we need regulations requiring lenders to get their foreclosed properties in order. These properties need to be handled with care and attention. Additionally, lenders need to begin relaxing their absurd underwriting guidelines. I have been in the mortgage business since the early 80’s and never in all that time have underwriting guidelines been as strict as today.
So what can we do? Call your congressman, email your senator, and make your voice heard. Tell them that we need to amend the regulations and force creditors to do the right thing for homeowners. We need politics to put policies in place to force lenders to modify these loans if it can save a property.
As much as I rant about the current status of the housing market, not many people are going to take a stance on their own accord. So I have decided to start a revolution and make headway with a proposal to Washington. If you agree with our cause and message, join us at www.millionhomeownermarch.com I’ll be touching base with you soon.
