Article submitted by: 911 Foreclosure – Loan Modification Advice
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Politicians and the media fail to see the true cause of the foreclosure crisis. The cause of the great real estate depression (my term) is simply due to the extreme reversal that mortgage lending underwriting standards have gone through.

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?

Stick around, it gets worse. What about all the properties in foreclosure that have been recouped by the lender? These homes are being heavily blundered. Many are unoccupied and are in horrible condition. Others don’t have a for sale sign and aren’t being marketed. That coupled with the fact that many potential home buyers aren’t looking for rescue properties is bringing the market to its knees. An even greater problem is that many investors can’t afford the 20% down payment that is required for these properties due to the house’s condition. So the home just parks on the market. And eventually the banks even further lower the price dropping the neighborhood into a deeper debacle.

And just to make matters even worse, these homes don’t qualify for FHA financing. In today’s market, FHA financing represents the most lenient financing available for home-buyers today. But FHA has fairly strict property standards – these “REO’s” (properties owned by lenders) typically fail to pass an FHA appraisal. With all the new regulations and with all the stimulus money being handed out, Mr. Obama, we need regulations requiring lenders to get their foreclosed properties in order. These properties need to be handled with care and attention. Additionally, lenders need to begin relaxing their absurd underwriting guidelines. I have been in the mortgage business since the early 80’s and never in all that time have underwriting guidelines been as strict as today.

What can we do? Reach out to your congressman. Tell him or her that we need regulations that will force lenders to start doing the right thing with their foreclosed properties. We need them to be more agreeable to modification requests. We need policies that will require lenders to modify loans when the numbers clearly indicate that a home can be saved with a temporary payment reduction.

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.

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