Put It Together and You Get A M-E-S-S!
Posted by Lee Sharpe on October 25th, 2007 — Posted in Charlotte Home Loans, Huntersville Home Loans, Lake Norman Home Loans, Matthews Home Loans, Mortgage Facts, Mortgage Market News, Things to Know About Real EstateTie all that together- John and Jane cannot afford the new payment, they cannot refinance or sell the home because they are “upside down” on the amount owed. They have no choice but foreclosure. The Lender that forecloses will loose anywhere from 10-20% of the value of the home in finally selling it after foreclosed. Multiply John and Jane’s scenario by 1 million times. It didn’t take long before the investment firms supplying the money for these mortgages said “No More!… They stopped supplying money to these large mortgage companies and the companies had to close down because they had no money left to lend.
Who is to blame for this current state of affairs? The media seems to like to point the finger at the mortgage industry and specifically at mortgage brokers. As a Mortgage Broker, myself, I know that brokers had very little to do with the mess that we are currently seeing. The media (and certain regulatory bodies) say that brokers arranged the loans that are now in default, so we are to blame. However, there are far too many other players in this game… players that stand to make a lot more money than a lowly broker. Who is to blame? The Broker? How about the Realtor that put them in the max house they could afford? What about the Mortgage Lender that offered the loan as a product for brokers to sell? They can only offer a product that they know will be backed by the investors, so ultimately the investor (the very player that has incurred the most losses) created their own “poison-pill.” They agreed to back these very high risk loans (at the advice of fund managers and bond traders), but when the foreclosures began to mount up, they were the first to pull out of the game (and file suit against the Mortgage Lenders to try to make them give back their profits in order to off-set the Investors’ losses.
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