Foreclosure Crisis

Owning a home used to be considered by most as a “dream” that all Americans held as the ultimate symbol of success. But the Sub prime mortgage crisis has turned so many dreams into nightmares that people now are looking at home ownership as, at least, a nuisance and at worst, a nightmare.

Blame for this crisis has been placed on the lenders who supposedly tricked people into loans they could not afford others blame the borrowers who “gambled” on flipping a property before they had to make a payment and yet a third group blame the Treasury Secretary for leaving interest rates very low for an extended period causing the housing bubble which burst in 2008.

I, personally saw loans come across my desk in which the borrowers never made a payment. When I researched these loans and spoke with borrowers I discovered that there were many parties at fault for this problem.. loan brokers made huge commissions, sellers colluded with appraisers and loan brokers along with straw buyers who just needed a good fico score to take out a “no doc” loan (a loan where you dont have to prove the ability to repay). Several borrowers were actually elderly people who were paid up to $5000 just to sign the loan documents in which the sellers were cashing out hundreds of thousands of dollars. From that, everyone got paid.. the loan broker, the appraiser and so on.

This could not have occurred if lenders followed prudent lending standards, the rating firms assumed real estate would continue to increase at 20%/year (which everyone knows was unrealistic) and Wall Street firms weren’t so hungry for huge bonuses by bundling and selling the Mortgage Backed Securities (MBS) to investors all over the world with a triple A rating.

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