I started to answer a comment on one of my bloggs, and as so often happens when I'm commenting I got a little carried away. I posted the comment, but the more I looked at it the more I wanted everyone to see it, so after a short edit here it is.
Those that blame mortgage brokers for those nasty sub-prime loans forget that Borrowers received a "Good Faith Estimate" and "Truth in Lending" form when they applied for a loan or within 3 days there of! When a mortgage broker, submits a file to a wholesaler they will also send the borrower a GF & T in L!If the broker or the lender make any changes to the program, the borrower should receive these disclosures again.
At closing there will be two more sets of "GF and T in L" forms one from the broker and one from the lender in addition to all of the other disclosures! All signed by the borrowers, everyone stating that they, the borrower, understand the disclosure. Between the application and closing the borrowers will have signed 40 to 50 times, EACH that they understand what they are getting! Yes, many will only remember the bottom line, but are we going to punish everyone because some are extremely stupid?
There is not a problem with the application or closing process. Borrowers know what they are getting!
The problem is human nature! When the buyer stops making the payments, he never believes it's his fault! Never, never, never, never!
Yes, there are some crooks and total incompetents, but I'm unsure how much of the foreclosure problems they caused, the borrowers signed their papers too! Some people have been screwed, but they lost their house because they stopped making the payments they agreed to.
I feel very sorry for the people that lose their home, but to put the blame on the mortgage industry is absurd!
Thanks to the sub-prime mortgage market, we have a higher percentage of home owners than at any time in our history! Those nasty loans and the brokers that sold them have expanded home ownership beyond anyone's dream! For all the negative press it's important to remember that 80% of those so called "undesirable, unqualified, undeserving would be home owners have succeed!
To all those calling for reform, I suggest: As you leave home count your first 24 neighbors, now look back towards your home, carefully study all 25 homes, odds are 5 of them were purchased with those nasty sub prime loans! One of those 5 is in trouble and may lose their home, but 4 have homes they couldn't have any other way. The 1 that stops making his payments will be gone. Now, which 4 of your reaming neighbors are you going to get rid of? Would you really deny 4 families homes of their own, just so you don't have to feel bad about the one dead beat?This whole issue is class and race bigotry! How dare those undesirables think they dissever to live like their betters! If we eliminate the sub-prime market, in the name of "consumer protection," we can force those people back in their place!Now do you have any question on where I stand? If you do I want you to leave home tomorrow morning in the other direction and count 24 more neighbors. Keep in mind that your home is included in this group too! By the end of the week, if you go in the remaining directions, you'll not only have 4 neighbors losing homes to those nasty sub-prime lenders but at least 1 losing it to a conforming lender! If we can protect another 16 families out of their homes, you won't have to deal with undesirables, or just maybe your neighbors will have one less!
William J Archambault Jr
The Real Estate Investment Institute