There are two camps when it comes to foreclosures, and in response to my recent posts on the topic, both have popped up with their gloves on: In one corner, in the green trunks, are those say the foreclosure mess is the fault of greedy buyers who knew what they were signing and just wanted too-much house. And in the other corner, in the red trunks, are those who say that lenders are at fault—with predatory products and an unknowledgeable audience, they were an authority figure saying "sure you can afford this!"
What we can't control for the most part is what lenders are up to. There is pressure from Washington with the Hope Now Alliance to get more lenders to negotiate new mortgages and payment plans with homeowners in trouble as well as mortgage holders realizing that short saleshave to be an option for more than 1% of their borrowers who need them. And even if you're not affected by this mess directly, we're all affected indirectly as foreclosures pop up around us like feisty dandelions, cutting down everyone's home values, and banks trickle down their losses into banking fees, slamming doors on new borrowers, even those with good credit.
And so the drama unfolds—what's next? Check for developments here and let's work on what we can control: Where and what we sign.
What's your solution to this crisis? What lessons have you learned if you were affected? Write me using the form below.
Anyone else find it interesting that the two comments with the most disenchanted view of the situation came from residents of the same state, Florida? Just an observation... --Nate, NJ
Posted on: 27 Jun 2008 2:13 P.M.
The problem now is that banks are giving all of their listings to a few agents who are too busy or are located too far from the listings to properly manage and market the listings. Would you sell your home with a listing agent who has 100+ vacant listings located all over town, or would you hire a local agent who can manage and market your home? The banks are paying full commissions so there is no savings to the bank. It makes no sense. --David, VA
Posted on: 27 Jun 2008 1:31 P.M.
I thought that bank were required not to exceed 28 of gross income for the purchase of a home no exceptions. If the bank did not take this into account they should be subject to whatever lawsuit is brought against them for the violation of federal lending laws. --David, TX
Posted on: 27 Jun 2008 12:04 P.M.
Banks and Lending Firms ordered appraisals of properties to be recorded higher than the actual value. They would then repackage it and sell it to another bank or lending firm for a profit. This form of unethical business practice has caused properties value to be unknown. Which resulted in the downfall of the “Housing Market”. Thus, the reason why the CDO’s and MDO’s actual value became unknown.
To fix this problem, you must go back to the root of the problem. This solution is quite simple. Banks and Lending Firms must began to order true (no personal interest) appraisals of all properties held by them.
Another dirty trick by the banks in an attempt to trick the home owner to pay for appraisals, is when they sent out letters informing home owners that they are freezing the line of credit until the home owner sent in an up-to-date appraisal. They wish and want the home owner to pay to correct the problems they created. --L.G., PA
Posted on: 24 Jun 2008 3:45 P.M.
I know some people did not understand the mortgage documents they were signing. In my 12 year career in the mortgage business I saw a lot of borrowers not really know how to budget for all the expeneses we face today. My belief is we live in a society where things equal success which right or wrong we live were everyone is trying to keep up with the Smith's or whomever's name you want to use. Many people myself included always thought things would continue to increase in value as they had for some time. And at worst case they would stay the same. Like many others I lost my (mortgage) job and then all my belongings. Everything I had worked for over the past 12 years.
I only have one person to blame: Myself. --Brian, GA
Posted on: 24 Jun 2008 2:00 P.M.
The American dream has turned into the American's nightmare. The banks are flat out not lending, for anything to anyone. Therefore, causing the values to artificially drop, as they forced the reverse just 3 years ago. Homes in central FL right now could not be built for their current selling price even if land was free. If this is not a bottom - what is? As bad as it is down here right now, and it is the worst I've even seen in 15 yrs, I fear the worst is yet to come for folks in the north. I used to live in the northeast. How are people going to heat their homes, never mind the mortgage payments. I think the heat bill will be greater than the mortgages. In 1997 I paid about $2500 per year. Now that would be $15k. Who can afford this? If you live north of the Mason Dixon, move now while you can. --Ray, FL
Posted on: 24 Jun 2008 1:45 P.M.
We have become a very complacent people. The federal/State/Local government like it or not is whom many in our country turn to for guidance. Many believe that if the government says it's ok or encourages it, it must be the right thing to do. Government says buy a house, I better buy a house. This mortgage mess is clearly on their (or our) back. Government is the gatekeeper, this is a typical example of capitalism run amok without regulation. The sad part about this is, it's not the person in foreclosure that is going to be hurt, they just received free rent for a time. The banks they are not the ones in trouble, it's not like the head of the bank is going to be hung in the town square. No it's all of us, people who have savings in dollars, people who understood how leverage works. People who traded their one precious commodity, time for pieces of paper with dead presidents. --Steve, AZ
Posted on: 24 Jun 2008 11:52 A.M.
Do you think that investors and builders are at fault in adding to some of the current problems? There are many investors that built spec homes looking for a big payday combined with even more builders chasing the market building specs on their own. The result is huge supply and dwindling demand. The Buyer now can be very picky and wait for the right deal on a brand new never lived in home. Also when these investors and builders started defaulting on their loans it added to the speed that some of the banks went under. --Steve, UT
Posted on: 24 Jun 2008 11:28 A.M.
My wife and I bought our home in 1990. We bought 60% of the house the lenders said we qualified for. We bought plenty of house for our needs; we had no one to impress. We were, and are, delighted with and devoted to our home.
People don't understand money, and it's a problem for them. They are too easily seduced into bad deals. Now they want my family's tax money to bail them out. This is our reward for being careful: we get to subsidize everyone else's mistakes. I am sick of it and I'm not being quiet about it anymore.
The banks, on the other hand, should have known better, as money is supposed to be their area of expertise. I have absolutely no sympathy for the banks and if they all go belly up that would be OK with me. And yes, I understand exactly the implications of what I just said.
The Congressional mortgage bailout is wrong on any level, and corrupted by Dodd's involvement. If the Countrywide deal isn't a "quid pro quo" I don't know what is. I'm not stupid enough to believe it's anything but what it so obviously is. --Stonewall, VA
Posted on: 24 Jun 2008 8:16 A.M.
To permanently solve the housing crisis, we must do the following: #1: End our dependence on foreign oil by creating a modern day "Manhattan Project" in which we develop a new generation of high efficiency automobiles. High gas prices are ruining the finances of average Americans, and it is making it very difficult for people to pay their mortgages. #2: Provide universal health care coverage. Because of health insurance costs, businesses can no longer afford to hire people who, if they had a job, could then afford to pay their mortgage. #3: Start rewarding savings instead of consumption. Americans must stop buying every "goodie" they want and instead start saving. With that money, banks could again start lending money to average working people. #4: Improve our educational system. The better educated people are, the less likely they are to be "tricked" into signing a contract that ruins their finances. The current Washington proposals might help a small amount, but our nation will never again experience prosperity unless we end our dependence on foreign oil, reform our health care system, reward savings and improve our educational system. It will, I believe, take a generation to solve this problem. --Gary, FL
Posted on: 24 Jun 2008 2:29 A.M.
The cause of the mortgage foreclosures is a combination of buyers, lenders and policy makers. --Bill, CA
Posted on: 23 Jun 2008 11:19 P.M.