| As someone who is involved in the Banking industry, | | | | hidden or altered. |
| and someone who has seen and made loans that | | | | 4) Fraud - This is fraud at all levels through the |
| have not always performed as agreed, people have | | | | process.a) Application fraud such as falsifying the |
| asked for my opinion on what ales the nationwide real | | | | information on the application (overstating income or |
| estate market and whether it has hit rock bottom. The | | | | assets), or making up fake tax returns (which is simple |
| latter question is easy to tackle and that is no, | | | | to do now days with all of these tax programs).b) |
| absolutely not! Not trying to be an alarmist but a realist. | | | | Underwriting Fraud - explained in #3 above. |
| Things will get worse, and in some states much worse, | | | | Commissioned lenders / underwriters cutting corners |
| before they get better. I live in Michigan so I will factor | | | | to get deals done and hence earn a commission.c) |
| my reasons for the significant rise in foreclosures and | | | | Appraisal Fraud - appraisers stretching values to make |
| delinquencies to local factors which will be applicable to | | | | sure that the home values come in where it needs to |
| many states. For a while, Michigan led the nation in | | | | in order to make a deal happen. Why would they do |
| foreclosure rates. We have since been passed by | | | | this? Because if the values are consistently too low, a |
| Florida, California, and Arizona for the dubious award | | | | lending institution would not use this appraisal firm |
| of having the most foreclosures. So what has caused | | | | anymore but rather would go up the street to an |
| it, here are a few reasons: | | | | appraiser who would give the values needed.d) Credit |
| 1) Unrealistic loan products - Because borrowers | | | | Fraud - There are firms that you can find on the |
| historically never let their homes go into foreclosure, | | | | internet or in the phonebook who are established to fix |
| Bank's significantly relented on the underwriting | | | | or scrub credit (for a cost). Thus a Borrower who had |
| standards with larger institutions offering loan products | | | | bad credit yesterday could have good credit today |
| up to 120% of the home value in a loan, stated income | | | | and hence qualify for a loan that they otherwise might |
| products, requiring interest only payments, ARMS with | | | | not. |
| escalating rates, etc. If you had a pulse, you got a | | | | 5) Loss of Jobs / Downsizing - This is a huge culprit in |
| mortgage. I personally have good credit and could | | | | Michigan who's economy is staked to the once big |
| have qualified for any mortgage product I wanted two | | | | three automotive firms. People who are use to making |
| years ago by stating my income on an application at | | | | six figure incomes and who based their home buying |
| whatever I needed for approval. Why was there ever | | | | on said income are in peril with a reduction of hours or |
| a product which did not require me to support my | | | | losses of jobs altogether. |
| income with pay stubs or bank statements? Why was | | | | 6) Increase cost of everything - Gas, groceries, |
| there ever a product made where you didn't have to | | | | clothing. Everything has gone up significantly in cost |
| put some money into the deal. When I bought a house | | | | without a commiserate increase in earnings. |
| I had to have 20% in. Why were the Bank's and | | | | Accordingly, people's disposable cash flow is |
| Mortgage companies taking on all of the risk? The idea | | | | weakened and getting weaker. |
| of a loan is to be a partner but the homebuyers had | | | | 7) Loss of Negative Stigmatism Associated with |
| no skin in the game. They had no equity so it did not | | | | Bankruptcy / Foreclosure - There once was a time |
| hurt to walk away. Not everyone deserves a home, | | | | when having poor credit, filing bankruptcy, or losing your |
| that is why they have apartments. | | | | home to foreclosure was almost like walking around |
| 2) Overnight Mortgage Companies - Because the | | | | with a scarlet "A" on your chest. It use to be very hard |
| profits were so huge for years, mortgage companies | | | | to get credit again after these negative events. |
| were springing up over night and mortgage hacks | | | | Nowadays that is clearly not the case. |
| were born. People that did not understand mortgages | | | | Certainly there are many other factors that have led |
| were now underwriting them, bundling them off, and | | | | to the demise of the home mortgage industry - this is |
| selling them for nice profits to Fannie Mae and Freddie | | | | just a few that I usually point to. I am also asked if |
| Mac. These companies have since folded up tent and | | | | there is a good avenue to find out about foreclosed |
| have probably moved on to the collection / foreclosure | | | | houses in your market to find some great deals for |
| business. | | | | purchase. The best options are to call your local banks |
| 3) Commissioned Lenders / Underwriters - While the | | | | and mortgage companies and ask for the ORE (Other |
| theory of a commissioned lender makes perfect | | | | Real Estate) Department or I have used a site on my |
| sense, you only get paid for mortgages that get | | | | blogger (see below) which is a wonderful reference of |
| funded, that causes desperate or greedy people to do | | | | properties for sale in the market. |
| untoward activities. This causes a "Used Car | | | | The only way for the real estate market to head back |
| Salesman" mentality of selling the mortgage at all cost. | | | | in the right direction is for houses to start selling and |
| Never mind what is best for the borrower/purchaser | | | | while these will be at a discounted price, at least |
| or for the lending institution, sell the mortgage, make | | | | assets will be moving. This will eventually cause there |
| your cut, and move on. Many institutions paid bogies to | | | | to be less houses for sale on the market and as that |
| underwriters based upon loans closed too. This is | | | | happens eventually the house values will start to inch |
| problematic as it takes the checks and balances out | | | | back up in value (supply and demand). Not going to |
| of the process and could easily allow information to be | | | | happen overnight unfortunately. |