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 explosion of the housing market was fueled by easy money. Lenders were swimming in funds from insurance companies to Wall Street. These funds were available to anyone who asked; especially unqualified mortgage seekers. 100% financing? Not a problem, how about we cover your costs aswell? Can’t verify income, don’t worry we’ll just take your word for it. Fico score below 600? That’s ok, we KNOW your property will come back and you’ll be able to make the payments. O and if you can’t afford that, don’t worry we’ll let you pay less then interest.
Are you freaking Kidding me! Well I wish I could tell you this was just a fairy tale, however we offered them. Everyone in the industry did; it was the shape of the market in 2007-2008.
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 is a product like anything else… subtracts half of the potential buyers, watch prices fall. It’s a simple calculation. If you’re looking to sell your home today, just forget about those with lower than a 620 score. And forget most of the self employed. They typically cannot show the income required to qualify for the mortgage amount they can afford to pay. So take em out of the equation. Buyers only have the FHA, Fannie Mae and Freddie Mac… and aside from down payment requirements, these three entities have very similar underwriting standards. So if you can’t get one of those loans, sorry. I should mention that in rural areas, USDA loans are another option. Another government agency loan? Private sector lending? What’s that?
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 just to stoke the fire further, most of these homes don’t qualify for FHA assistance. In today’s market, the FHA restrictions are by far the most lenient than I have ever seen. But the FHA does have strict guidelines for properties under lender control. With all the free money by the Obama Hope plan, we need to put firm regulations on the foreclosed properties to get the market back in order. Instead of stricter guidelines, loan modifications and foreclosures need to be handled with care and attention.
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 rant about this, most people will not contact their local representatives. So I have decided to draft my own proposals. I plan to put my proposals into the hands of every congressman and senator in Washington. If you agree with my views, won’t you join me? I’d like to include as many signatures as I can get with my proposals. If you provide your contact info, I’ll send you the proposals and when we’re ready to go, I’ll ask for your signature. But it’s completely up to you… you can read my proposals before deciding to be a signor. But I believe what I present will make sense and you will want to join us. I’ll keep in touch with you until then.