Have you seen the headlines? Top national news story a few week’s ago:
New Century Financial Corp., the second largest sub-prime mortgage lender, is broke. They can’t pay the creditors who are demanding money and rumor is that we’ll be hearing about bankruptcy soon. Even the New York Stock Exchange has suspended trading for the company, once a giant among lenders.
It finally happened.
The sub-prime market was being pushed to its edge for months—by lenders with unethical predatory tactics—and now it’s getting ready to collapse in on itself. These predatory tactics included ridiculous mortgage programs being offered to consumers who literally cannot afford them.
There was a report on Nightline not long ago about an elderly woman who was told by a lying sales rep that she would have no payments for five years on her refinance loan. But she had to sign before
Now she’s losing her house because the bills started to arrive for $2,300 a month and she takes home only $1,000 a month from her social security. She’s going to lose her home because of believing an unscrupulous company that made promises it never intended to keep.
I’m sick and tired of it. We as real estate agents have to watch this every day and sometimes there’s very little we can do about it except to advise people that perhaps they’re getting in over their heads and they should talk to an attorney.
Because even though we get a sale, we know what’s going to happen. The people who fall victim to sub-prime lenders typically don’t have the ability to pay back the loan. They miss payments and go into foreclosure. All because they signed under pressure that they’re going to lose what they have been conned into believing is a “good deal”.
This has been going on for years. But finally—FINALLY!—the predators are getting what they deserve.
This is good news.
No, it’s not good news for the people who have been bilked. I’m not saying that. But what I am saying is good is the fact that this industry is now squarely under the spotlight. It’s the top story on the nightly network news and on the Internet. Federal authorities are even beginning to take a look.
The Mortgage Banker’s Association, a Washington-based trade group, recently said that in the 3rd quarter of 2006, delinquencies were at 12%. This indicates that investors are no longer interested in sub-prime loans and they’re trying to sell them in a frenzy. This puts even more media attention on the crisis.
Maybe the con games are over. Maybe now people will wake up and see what’s been going on for years. Maybe now we can get back to lending money only to people who can afford it.
As a real estate agent, it is your responsibility to at least understand what your clients are getting themselves into. Don’t feed into the frenzy by taking them down a road that may lead to a cliff. Read about it. Investigate it. Understand it.
I know agents who have erroneously thought that sub-prime mortgages are good for the industry because they allow more people to be able to “afford” to buy a home. The problem is that these people truly can’t “afford” to buy. No amount of low initial
Here’s something else to think about:
Picture a neighborhood with a strong sales value. Suddenly, one of its homeowners is forced into a “Desperate Sale” because of a bad loan. They have to sell quickly to avoid foreclosure, so they take the first lowball offer they can find.
What happens then? All the homes in the neighborhood are suddenly devalued because one home sold for less than it’s worth. What if there was another homeowner in the neighborhood who had to do the same thing? And another? Do you see how the value of a neighborhood can be completely decimated?
These mortgages are not good for your clients nor the industry. The best thing you can do for your clients, your industry, and yourself is to advise your clients to speak with an attorney before signing anything.
And tell them to never sign anything under pressure! If it’s truly a good deal, it will still be there tomorrow.
