Whos Fault Is It?

Thank you to www.americanmortgageeducatorsinc.com for this article. Tawney Warren is the author and one of the four consumer advocates that anchor this wonderful organization and help borrowers and homeowners nationwide. Thank you for your contribution:

Whose fault is this mortgage mess?  First of all, I don’t think it is a mess, I think it has become a catastrophe.  When one family loses the American Dream, their home, that is almost the most devastating event someone can live through besides the death or illness of a loved one.  Going through foreclosure beats your soul.  You lose all confidence in yourself and it can begin a chain reaction of destruction from loss of job, loss of friends, but loss of confidence is the worst.  If you still had your confidence, you’d feel that you know well enough what went wrong and you could pick yourself up and dust yourself off and do it again, only better this time.

Analysts have written their articles and pointed the finger at this person or that but, let’s look who has blame in this catastrophe.

How about the legislators for not requiring that loan officers in this country be educated and licensed.  After all, they are selling a family the largest debt they will probably have in their lifetime.  Why is it considered acceptable that they only present a consumer with one option?  (More)

The option that pays the mortgage broker or loan officer the most commission.

How about the lenders who push the products they want sold by offering more incentives and commissions to the mortgage brokers and loan officers.  Which products were they pushing with higher commissions, it’s easy to see now….ARMs  (Adjustable Rate Mortgages).  Consumers were paying the commissions up front to the loan officers and the loan officers were receiving additional commissions on the back end of the loan.

How about the fact that lenders knowingly accepted stated income applications that were liars’ loans?  Then they bundled them into the securities that they sold investors domestically and internationally.

How about the investors who thought that buying these risky securities because of the cash potential that they had that banks would be getting from consumers?  Not only in the current loans but the loans that consumers would certainly be refinancing after their teaser rates ended.

How about the presidential candidates who ride the tail of this monster?  Why is it only the Democrats who are using this issue as one of their main presidential platforms?  At least Barak Obama and Hillary Clinton have introduced their plans and even legislation, but does it go far enough?  Do we have enough manpower to police the shear number of loan officers in this country?

How about the consumer who allowed themselves to be easily hoodwinked by the mortgage broker or loan officer that they could afford to buy a house with no money down (let’s remember that means you have NO EQUITY in the home at all) by using piggyback loans and the pay option ARMs or ARMs with teaser rates for the first couple of years.  Mortgages that if they were to take out as the traditional 30 year fixed, they would never have been able to afford.  Not being educated enough or sometimes not even being informed how the additional debt they continue to heap onto the principal of their mortgage would turn them upside down in their home.  So many didn’t even understand that they could wind up not being able to refinance , which they were told by their loan officer that they would be able to do as the remedy when the teaser rate ended so they could still have a fixed rate again.  So, the greedy unlicensed, uneducated loan officer who pushed the lenders bad product with the highest commissions only to tell the consumer it’s okay that all you can afford is the teaser rate, we’ll sell you another loan in a year or so and make even more commissions.

Now consumers can’t even sell or refinance their homes to get out of the mess that was created by a whole slough of people.  Everyone had their hand in this cookie jar and now the cookies are gone.  Now even consumers with good credit scores are having trouble refinancing the stupid ARM they had refinanced into to save a bit of money each month or used to buy the house they really couldn’t afford.  If consumers can’t even pay their mortgage, how are they going to come up with the tens of thousands of dollars that they need to pay off the difference between what the house is worth now and the debt they owe on the same house?

So the newest option is the FHA Secure plan…at least it is something but it only helps some of the people.  Does it help those in California who had to take out Jumbo loans in order to finance that home purchase?  Does it help that a consumer has to wait until their interest rate is reset, not make their mortgage payment before they can qualify?  What sense does that make?  Start to hurt your all too important credit score before Superman comes flying to your rescue….what a joke!  First of all, there is no speed at which this will happen so consumers still are painfully hurt.  At least for those that this will help they won’t be completely devastated.

Now don’t even get me started about Bernanke and whether or not we are going into a recession.  I think that this slippery slope everyone had their hand in creating was just a matter of time before it burst its gunk all over everyone.  The biggest question is how do you fix this mess?  Will it correct itself if Bernanke lowers the discount rate? Not in and of itself.  Since it’s not just one level of individuals involved it requires fixes at all levels.  The most important in my mind is with consumers becoming better educated about what they will allow mortgage pushers to push at them.  Then consumers need to require that loan officers in all 50 states be educated and licensed to push the mortgage products that are good for consumers not just their own pocketbooks.   Then we need to set standards with lenders who place the high incentives on risky products for their loan officers to push.  We also need to voice our opinions to our state and federal legislators that we believe all of this needs to be done for the sake of consumers and our long term economic growth.

So, as I see it, there are more fingers to point than I have on both hands.  I think that consumers need to start by understanding that there are more options than the one that they are given by a mortgage broker and start educating themselves about mortgages and real estate. They can do this by enrolling in our FREE online mortgage and real estate school.  They can come and listen to our experts in our FREE educational seminars so they can know that they are not becoming the victims of loan officers/mortgage brokers, lenders, etc...  We have more than 5,000 pages of information to use to educate yourselves.

Comments

[mortgages]

All I can say is wow. That is a lot of information. I wonder how long it took to come with an article that long and how long you have been pondering on the ideas express here. Thanks.