A thought on how to fix the Housing Landslide

Posted on August 22, 2009
Filed Under Mortgage | Leave a Comment

Article submitted by: 911 Foreclosure – Loan Modification Advice
Read More Articles at: Foreclosure Process and Loan Modification News
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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 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.

But today’s problem is different. In the quick reversal that caused the current housing implosion, lenders have created a world where you can’t even qualify for a mortgage. It is impossible for the general public to qualify for a mortgage loan unless they have excellent credit, documented assets and verifiable income. Essentially, lenders have cut off half of the market baring most homeowners from qualifying for financing.

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?

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 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 option do we have? Well reach out to the representatives, email your congressman, petition to your senator and get your voice out there. We need to force Washington to do something to fix the regulations barring lenders from making the necessary modifications to fix the housing market. We need to put policies in place to force the creditors to do the right thing for the housing market.

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.

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