Aug 31 2009
A thought on how to fix the Loan Modification Crisis
Article submitted by: 911 Foreclosure - Loan Modification Advice
Read More Articles at: Foreclosure Process and Loan Modification News
Join Other Homeowners Preventing Foreclosure by doing their own Loan Modification:
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 surge in the housing market stemmed from the greed of easy money. Lenders were abash in capitol and were willing to extend it to who ever asked. No money down and 100% financing? Sure we can do that! You’re not able to verify employment? O that’s not a problem, just tell us what you make and we’ll believe you! Is your credit less than average, don’t worry we’ll lead a blind eye. We know once you get into your payments you’ll be able to make them, if not, how about 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 harbors its own economy, just like anything else. So if you deduct half of the potential buyers from the equation, its only common sense that the prices will fall. It really is a simple equation: If you are in the process of selling your home, consider your current buyer options. Forget about those with a credit score below 620, and the self employed. Usually they cannot provide the income requirements to qualify for refinancing in the current market. So buyers then only have FHA, Freddie Mac and Fannie Mae as lender options. The problem with this is that these 3 lenders have similar underwriting requirements; so if you can’t qualify from them? That’s right, we’re sorry, but no loan for you. Well there still is Private Sector lending… but really, where does that take us?
Stick around, it gets worse. What about all the properties in foreclosure that have been recouped by the lender? These homes are being heavily blundered. Many are unoccupied and are in horrible condition. Others don’t have a for sale sign and aren’t being marketed. That coupled with the fact that many potential home buyers aren’t looking for rescue properties is bringing the market to its knees. An even greater problem is that many investors can’t afford the 20% down payment that is required for these properties due to the house’s condition. So the home just parks on the market. And eventually the banks even further lower the price dropping the neighborhood into a deeper debacle.
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 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.
I know that as much as I complain about the market, most people won’t take action. So I have decided to draft my own appeal to Washington to get our voices heard. If you agree with my views, take the time to join our causes at www.millionhomeownermarch.com. You can read my proposal there. Believe me if we don’t do something now, we may be looking at a even deeper economic depression.
