Who is to blame for the real estate foreclosures? Lender, Loan Broker, Real Estate Agent or Buyer?
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Answer:
In spite of all the recent hoopla about how mortgage lenders were "bad" for giving money to "unqualified" people, the blame rests securely on the shoulders of the buyers.
It shouldn't matter if you're "qualified" to buy a home by anyone's standards. This is the only one that counts:
Does your budget allow for a mortgage of X dollars a month? Does it also allow for small, but regular increases, when taxes go up?
If the answer to either question is "no", you have no right attempting to buy a home. Problem is, very few people even know what a budget is, much less know how to create and then stick to one.
D. None of the above
The Buyer - the bottom line is most people have exercised very poor judgement and getting into loans that they cannot ultimately afford. Do you blame the electric company when your lights get turmed off - NO because YOU didn't pay the bill! Same premise.
a little of everyone but...
the lending companies themself are the only one at fault and they are the ones hurting right now but it was their slacking on their policies during a hot market they wanted in on the $$ so they gave the loans to just about anyone with a job. Many of these should not have been able to secure a loan and what do you know 6 months into their new house they have spent all the money they had saved before if any and can't make the mortgage payment then when they do have the money they are behind 2 months and the late fees add up to almost another payment in itself
Bottom line is the lending companies put their own head in the nuse and hung
But the american homeowners will suffer in the long run because with a constant and steady amount of foreclosures on the market it will put a halt on home values and they will either not appricate much or even decrease.
I don't think you can fault the Realtors - because they don't have any idea of what an individual can and cannot afford. There's enough blame to go around among lenders, brokers, and buyers - but don't forget Wall Street either. The demand for the CMOs (Collateralized Mortgage Obligations) and MBSs (Mortgage Backed Securities) created a demand for types of loans that had never existed before. So let's not let them off the hook either.
Please lets also not make the mistake of thinking that someone has to be "to blame." There are plenty of foreclosures that take place as a result of job loss, catastrophic injuries, divorce - all types of things that have nothing to do with any of the folks you have listed.
first the buyer !. it is the buyers responsibility to know what type of loan they are getting into and that they can afford the mortgage payment ..then the lenders could be viewed for for not educating the consumer and risks on the loan products .... Loan Brokers are known to be the worst and shadiest when it comes to educating the consumer on the loan they are getting you into..
There is no blanket answer to that question. Generally speaking, it's possibly a combination of all of the above. Predatory lenders are always out there and buyers unaware get tangled in their web. A good real estate agent will keep a watch out for their Buyer helping them to make "informed" decisions.
In our market, lenders and loan brokers have been at fault for miscalculating the Buyer's payments on new construction. The first year's tax assessment is usually based on unimproved property taxes, often totalling less than a thousand dollars for the first year. The following year and all years thereafter assesses the property taxes on improved property taxes. That adjustment jumps from under a thousand to several thousand for the year. IF the lender's initial calculations for escrows were on unimproved without informing the Buyer, shame on them. Escrows will have to be adjusted several hunderd a month for the following year when the appraisal district reassesses value on improved property. That adjustment puts the Buyer totally out of budget and ultimately ends up foreclosing.
The short of it, buyer's who bought with low FICO scores, no savings, financing 100% and to keep the payment low went with an adjustable rate mortgage are the ones who are falling victim to foreclosure.
Are real estate agents to blame? Like any other industry, you have the good and the bad. If the agent isn't watching out for their Buyer and not helping to challenge the rates and fees charged, then shame on them. Those kind give the rest of us a bad rap.
In my opinion, "buyers unaware" and "predatory lendors" have been a large percentage of the foreclosures. While that has always been out there and will continue, there's an influx of them now because of the way they've allowed loans to be structured (e.g. uninsured conventional loans) and lowering the standards or restrictions (e.g. low FICO scores). This allowed lenders to qualify the unqualified.
Collusion among those party to the transaction is another problem. More on that at www.mortgagefraudblog.com; another good source for helping you with answers to your question.
The buyer. The reasons are not very simple, but it really does boil down to the buyer. The housing problem in this country is very much aggravated by the predatory lending schemes that got the mortgage industry in this mess to begin with. That said, nobody forced you to take that ARM loan for 250K house in suburbia on your 45K salary with no money down, if you think that's a gratuitous assertion, you're probably who I'm talking about. We live in an age where people refuse to acknowledge that they live beyond their means. The reason is rather simple. If we were to adjust our housing goals to reflect our after tax income a lot of families would be living in the ghetto side of town instead of the suburb. That's the bottom line.Don't like it, rent. OR convince your neighbors to move with you to where you both can afford it. I'm not holding my breath on the latter.
Don't get me wrong. As a renter by necessity I am frustrated with the overpriced nature of our housing market. There is no justification for a median US house price of 212K while the median US income is 45K, which mean that one should not hold a mortgage higher than 150K with a 20% down on current rates. So we're living beyond our means as a society. We can mope and gripe about the lending institutions and their practices, but come closing time, nobody forced ya to make the deal. If you thought it was smart to sit on the idea that the market would continue to explode by double digits so that you could make a profit at the end of your pre-balloon payment period, you're the owner of your own gamble, not the bank. That's another paradigm shift we need to recognize, the idea that it is no longer smart to use the roof above your head as your short term ATM machine. That's like the guy who gambles on the kid's college fund, great if you make it, but in the highly probable chance you'd lose your shirt, you still have to take care of your family. In essence, yeah the banks are greedy (I find unchecked capitalism repulsive, but I digress) but you're still accountable for your choices. I for one welcome the market correction. I am a firm believer in the idea that when the middle class finally dissapears it will create enough discontent among the disenfranchised population to cause people to put down the Kool-Aid and shake the government to squeeze their propiertors (those making more than 200K a year) to cough it back and redistribute the wealth. Maybe then houses will become affordable again.
That is a much larger question that what it seems. I would blame The Fed if I were to point the finger.
When the Attack on the Towers happened, The Fed needed to boost the ecomony immediately in order to keep our financial markets moving (notice the drop of the dollar within the past five years).
As a result, the rates plummeted to 20 year record lows and that stimulated the rule of supply and demand. There was an influx of clients interested in buying property, and refinancing there existing property and as a result - mortgage mom and pop brokrages accross america sprung up. Similarly speaking, lenders (in having to deal with this demand), joined in on the band wagon, and created "hybrid" or "designer" mortgages that encompassed a variety of different - riskier clients. The idea was that if you bundle enough stinky products together that that risk wouldnt stink so to speak.
Furthermore, with the concept of supply and demand, and the need to get these properties sold or refinanced, appraisers "fluffed" values of these properties nationwide. This caused a balloon or a massive inflation of the housing market that was inevitably going to rupture.
Pairing this all together, it has been predictible since it first began about five years ago that you pair enough risk, with fluffed values, and raising interest rates (a faultering economy) - that a mortgage "meltdown" as i have heard it termed would come to be. And so it is.
Now-> instead of focusing on who did it, it is better to focus on how to get out of it.
Right now mortgages, and real estate is going through a self cleaning process. Guidelines have tightened, and will stay consistantly rigid for probably another year (as the bottom of this cycle is more than likely going to hit around January). The crappy lenders that were charging between 2 to 4 points in origionation on the back end of your mortgage are going out of business left and right. Only the strongest of Lender will survive this (and the strongest one currently is even dealing with its own wowes - referance cnn ).
Things will not ever go back to the lax way of five years ago, but guidelines will open back up again to a certain degree.
Bottom line is, the people that should not be able to afford the luxury of Financing the American Dream will not be able to, and those that can, will be rewarded, and while we anticipate the time that things will be cleared up as being a year to three from now - know this - Industry wide we are righting the wrongs of this supply and demand lesson.
If you would like to learn more about the trends of the mortgage industry over the course of the past twenty years - reference the housing associations web page @ www.hsh.com
I am a Mortgage Banker
Quicken Loans
(the fifth largest LENDER in the United States)
lenders
Blame the buyer's
Greed pure and simple made people think they were going to get rich buying properties they could not afford.
Heard mentality is easy to spot at the top.
When you read in the paper that people are paying 10-20,000 MORE than the property is worth and homes are selling in 3 days that should send up a red flag.
I sold my home at the top. Next time you read that everyone is making a killing in whatever is the "Next Big Thing" do the opposite of what everyone else is doing and sell.
Those who do not remember history are condemed to repeat the exact same mistake over and over.
Unless there's someone that put a gun to the borrower's head, it is the individual's fault who applied for the loan that he could not afford. There are other various reasons of course, some foreclosures aren't due to mortgages. But the majority of foreclosures are due to inability to payback loans because they didn't compensate for higher rates. For more information about foreclosures on how they work and how to invest in them, I have some suggested reading below.
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