Mortgage Officers
Mortgage Companies Set Off the Great Foreclosure Crisis of 2008
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.
About the Author
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
Mortgage Loan Officer Will Dance For Biz! www.tslend.com
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