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The Mortgage Mess: Stop the Blame Game and Fingerpoint Pointing-Let's Work to Solve the Problem!

This is a straight forwward post and plea to all that have a concern.....and now this is all most everyone! No frills, no fancy graphics, no links for reference! News and information abounds so no need.

STOP THE BLAME GAME and FINGER POINTING as this will only impede our collective efforts to implement fixes, legislation and all that will be necessary to restore confidence and stability in our financial markets as a whole. Likewise, to implement whatever prudent measures are necessary to help as many Americans as possible to avoid foreclosure.

There is enough blame to go around for everyone to include the mortgage lenders, loan officers, mortgage brokers, greedy investors, legislators and even the consumers themselves. While everyone is focused on who's to blame valuable time and resources are lost or squandered.......time now is of the essence!

Channel all efforts on a solid course of action and legislation. If you want to play the blame game and point fingers.......we have all the time in the world. Unfortunately the clock is ticking down to toward an explosion.

I encourage each and everyone to make the focus on solutions and not blame. Let your legislators know this!

I can see where identifying major sources for blame will be a must for action but lets not wear blinders here!

P.S. As an example, I would vigorouly support immediate legislation that would put a moratorium or ban on prepayment penalities, particularily for those creative/sub-prime loans such as the 2/28, 3/27 and Option ARM's. I believe a significant percentage of homeowners cannot negotiate a refinance as the pre-payment penalty is prohibitive., often $5-10,000 and more. I would suggest that it would be better to waive the penalty and the long term gains from a portfolio than to take a bath (larger loss risked due to foreclosure). What say ye? What other solutions?

Posted by Ron Withers on 08/30/2007 11:55 AM

Comments (6)

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6 Comments on The Mortgage Mess: Stop the Blame Game and Fingerpoint Pointing-Let's Work to Solve the Problem!

Excellent Blog Ron! ANother releif may be debt forgiveness owed to the IRS when there is a short sale or foreclosure. Most Americans are unaware that under the current rules, when you lose a home to the bank, or participate in a short sale, the amount of the loan forgiven by the bank rolls over as income the following year and taxes are due onthat amount, which is treated as ordinary income.

It is my understanding (and I hope this is correct) that effective in September, Debt Forgiveness will no longer be treated as "income" onthe following year's taxes.

Some 7 million people will have their teaser rates adjust inthe coming year. Foreclosures will rise as a result of this. We are already at historic highs in foreclosures. Until this crisis stabilizes, the market is indeed strained to the breaking point.

08/30/2007 03:23 PM

by Allison Stewart REALTOR ®St. Cloud Florida (Florida Pines Realty, Inc)

Allison,

Thanks for stopping by and commenting and sharing that! Interesting......this had not yet occurred to me. Geesh.....talk about a surprise for some poor souls. Giving up a home...short sale...then taxation on a forgiven debt.....ouch...insult to injury comes to mind.

08/30/2007 06:20 PM

by Ron Withers (Town & Country Mortgage Services, Inc.)

Ron... the one thing about the prepayment penalty is that you can reduce it or avoid it by raising the rate or with a fee. What so many fail to realize is that if the lender can't charge one, they will raise the rate a little anyhow. New Jersey went through this about 4 years ago. It's illegal to charge a penalty now, but they added to the rates anyhow. Think about it, the lender needs to make some money anyhow and if people refinance in less than two years, that lender will actually lose money or break even.

Overall, I do agree though, we need to be positive, stay focused and find solutions... and to stop pointing the fingers.

jeff belonger

09/03/2007 12:32 AM

by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages -- Mortgages (Infinity Home Mortgage Company, Inc)

Jeff, you are absolutely right about the prepayment penalty. The lender is going to cover their yield one way or another.

However, I believe that the vast majority of these existing 2/28's, 3/27's and option ARMS's that will re-set have an attached penalty.

My thought was that mortgage lenders's dealing with struggling borrowers with these types of loans should weigh the benefit of waiving the prepayment penalty to allow the borrower to refinance vs. the probablity that the loan could go into default/foreclosure or maybe a short sale. The odds are that if one of the latter occurs then it is morely likely they would suffer greater loss. Combine this with declining values and a home sitting vacant for months and vs. the $5-10,000 or so lost of the prepayment penalty. Take the loss to the long term yield and recoup your entire balance while the getting is good!

09/03/2007 04:52 AM

by Ron Withers (Town & Country Mortgage Services, Inc.)

Ron.... your suggestion of waiving it kind of makes sense. But I guess when these lenders lent the money at first, it was a risk. Now, I guess they will take their chances, again risk, because they ant that money. I agree, their loss could be a lot greater, but I guess they will take that gamble.

jeff belonger