Admin

Catastrophe on Camile Street in Santa Ana

By
Mortgage and Lending with First Lending Solutions NMLS ID 1325784

OK, I'm usually pretty even keeled, but after reading an article in the Sunday Orange County Register, I'm pretty disturbed.

Street of Broken Dreams is the name of the article. Long story short: 14 of the homes on 2 blocks are in some state of foreclosure. 75.6 percent of the purchase loans for 2005 (last full year reported as of now) were issued by subprime lenders.

For Orange county, the Center for Responsible Lending estimates that 23 percent of the subprime mortgages made will end in foreclosure. That is 2500 of the 11000 homes bought with subprime money in 2006 in this county. I can tell you that they are typically conservative with their numbers which terrifies me even more.

If you insist, that first time hombuyers attend some form of counseling before buying the home, or you will not extend financing, does that create a bottleneck of buyers, or does it really help you as a consumer better understand before buying?

Less than 50% were US Citizens? I am Hispanic, so I know this is risky territory, but are we missing something that we should be looking at?

The median household income was less than half of the county median. Should the lender be required to monitor this the same way incentives are provided for lending in Low Income Census Tracts or Low to Moderate Income Borrowers?

Like capital gains that allow exemptions 2 out of every 5 years, should there be a limit for # of times allowed to refinance without proving the reason why the money is necessary?

Moving forward, should the American Dream of Homeownership be so easy to attain?

I guess this is the bucket of ice water I needed thrown in my face that has made me realize that there really are no easy answers, but a whole lot of heartbreak for the families involved, as well as those that are not, who happen to live in the areas that are being affected.  While I clearly understand there are no easy answers, as a real estate professional, I imagine I will work even harder at educating the masses knowing that there are unethical people out there that only care about getting paid, regardless of who gets hurt in the process.

I've never been one of those, and after reading this story in the OC Register, I intend to make sure I get them OUT of our industry. I hope that my peers will do the same in their respective communities across the US so we can mitigate this issue with as little pain and suffering as possible.  

Show All Comments Sort:
Karl Schott
Aviara - Agoura Hills, CA

 Yes, this is a sad thing, but as stated by Dave Peoples, you cannot blame the mortgage brokers alone. People who purchased this way also thought that there was no end to the boom and that price appreciation would get them out of the problem very quickly. Well, this is not the case as we are ALL currently seeing.

 

Aug 13, 2007 01:35 AM
Robert Spaight
Homestar Mortgage - Barrington, RI

Bill great post.  As a mortgage broker I agree with you that the those brokers who chose to "steer" their clients into risky loan products without making sure that they had a complete understanding of the potential negative characteristics of the loan need to be held accountable.  I have been in this business for 10yrs and have not written a a payment option arm to date.  Since my first introduction to this product I knew that it was a ticking time bomb.  When you have a mortgage product that offers a ridiculously low teaser rate and a payment option that doesnt even cover the monthly interest payment you are asking for trouble.  The lenders who developed and marketed these mortgages bear some responsibility as well.  The commisson paid to brokers for an Option Arm dwarfed those paid for conventional loan.  Our industry has been over run by unethical originators who were only in it to make a quick buck and were not concerned with their clients best interest.  My hope is that the current market conditions will "thin the herd" and we begin to repair our tarnished reputation.

Aug 13, 2007 02:31 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Darrel

I beleive you're only partially right. If "they" (the mortgage brokers) caused it, didn't the customer support it, and the market enabled it to happen? Having said that, see the next comment:

Rob & Diane

I'm with you all the way!

Dave

You hit the nail on the head! If anything it should make us think about who we choose to work with. Interestingly, of all the buyers and realtors I work with, we've had ONE client who has even come close to getting in trouble because we've counseled our clients so well before buying the home, even during the best times in the market!

Brian

I suppose you're right. Let's hope we can prevent these deals from ever getting to underwriting by counseling the ill-prepared buyers.

Aug 13, 2007 03:39 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Valerie

I agree that the rate reset combined with a declining value should not become the trigger for people to walk away because of lack of understanding or ignorance about the markets. All the more reason why I believe that education is key to helping people understand that real estate is cyclical, which like the stock market tends to fluctuate, but still improves over the long haul.

Licensing-yes with a condition. I've known (I've been one of them) people who work at the major banks (B of A, Wamu, Citibank, etc.) that will run circles around a licensed banker or broker, so there has to be a mechanism for their corporate training.

We knew the market wouldn't last forever. I saw this coming over 2 years ago.

You are certainly correct.....The agent and the lender make ALL the difference in the world.

Karl

It was like an extended Spring Break in real estate, and now we get to deal with the sobering effects of our actions.

Rob

I'm impressed. No Option Arms at all? I used them but insisted on overly disclosing the disadvantages, and all of my clients are still my clients. :) Funny that I only used them with low LTV's below 70 percent, so if they're still going to be offered, we should continue to restrict their availability.

I'm with you; let's polish our reputations as an industry. I know with all the Active Rainers there are so many of us that love what we do, and certainly do NOT support or appreciate the poor actions of the few bad apples.

Aug 13, 2007 03:59 AM
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Some of this is really hard to comprehend.  If buyers were stating income that they didn't have and loan officers knew it that's just unbelievable to me.  This goes beyond loan officers - it's ultimately the fault of the company offering the loans and lack of oversight by the government. 

If however, the homeowners could afford the loans on the pre-adjustment payment schedule, than I truly believe that the lenders holding the notes should be incented to to roll back the payment and tack it onto the end of the loan for another 2 years to give the market time to stabilize and to allow for programs to be developed to midigate the damages.   If not, were talking economic depression

Education is absolutely the key to stopping this kind of abuse.

Aug 13, 2007 04:21 AM
Rita Bradley
Laguna Hills, CA
Valuation Consultant in Orange County California 949-916-3263
Great article Bill.  I do blame the homeowners somewhat too.  I'm someone who could have "gone stated" legitimately and bought a home (at inflated Orange County prices) but chose not to get into a loan I couldn't afford and continued renting.  As a single parent of two children I'm really glad I rented because now we don't have to go through foreclosure, moving etc.  We are such a "gotta have it now" society where the virtues of patience and hard work seem to have gone out the window.  If one can't save a downpayment for a home and pay their bills so their credit is decent and earn a high enough income, they just may not be ready to buy a home in Orange County.  It's that simple.  Even a modest condo in Orange County is not affordable for many who live here.  Hope I don't sound judgemental or negative.  I do wish those that lost their homes success and happiness for the future.  We all have our lessons to learn. 
Aug 13, 2007 04:21 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Kate

I was always taught that the statement of income had to be "reasonable" for the job being stated, or you had to verify cash flow with bank statements, so its obvious to me neither happened. Someone definitely has to monitor this moving forward. I don't know that it should be the government machine though...I'm certainly willing to listen.

Rita

Glad you enjoyed the article. Thanks for being one of the responsible ones. You don't sound judgemental at all, though I will say that there are way too many lessons being taught right now. Let's hope that these homeowners wake up and smell the coffee, and not just bury their heads in the sand thinking they were unfairly punished because of their lack of understanding. Personal accountability!!!

Aug 13, 2007 04:55 AM
Rita Bradley
Laguna Hills, CA
Valuation Consultant in Orange County California 949-916-3263

Personal responsibility-you bet.  You reap what you sow.  If you lie about your income, the outcome probably won't be good.  Take care.

Aug 13, 2007 04:58 AM
Dan Weis
Comey & Shepherd Realtors - Cincinnati, OH
Cincy Real Estate Advisor
That is so sad!  There's blame to go around for everyone, but consumers need more information before making such a big decision.  I've been teaching home buyer classes with a lender for almost 20 years.  I know I don't reach a lot of people, but for those I do, I know we make them better educated about what to do and not do when buying a home and what to watch out for.
Aug 13, 2007 05:02 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Dan

Awesome! The people you reach are better served by your actions. If we can replicate what you do, the industry would be much stronger. Can you email me a blurb as to what you teach specifically? is it a homebuyer seminar or something deeper?

Aug 13, 2007 05:15 AM
Anonymous
Anonymous

> Moving forward, should the American Dream of Homeownership be so easy to attain?

No, it should much more difficult to attain homeownership, as it was in the past. Many people do not have the financial strength or the responsibility for home ownership, as is proven by the current loan mess.

Ultimately, for ever bad loan there was a stupid and/or uneducated buyer. As a Realtor, I always lean very hard on first time buyers to make sure they understand what they're getting into with regard to repairs, maintenance, property taxes, insurance, PITI, etc. We don't help people into stupid situations, we talk them out of it. That's part of our job, in my opinion, to talk some people out of buying instead of trying to put every buyer into a home.

Steve Crossland
Austin TX
www.crosslandteam.com

Aug 13, 2007 09:32 AM
#22
Bill Nazur
First Lending Solutions - Riverside, CA

Steve

If only more people would follow that mentality of saying no today, we wouldn't have to deal with the fallout that affects every single one of us! Thanks for your comments....they are much appreciated. Make it happen for us in Austin!

Aug 13, 2007 10:39 AM
Sarah Miller-Legg
Meridian Star Realty, LLC - Chandler, AZ
It's Real Estate; Done Right!

Great post ...after 23 yrs in So. California I relocated to AZ and I can tell you that while homes in the Phoenix Metro Area appear to be the bargain of the century to Californians who've been priced out of the

market there or want to invest, budgets are stretched to the limit for average AZ families because the payscale is much lower. AZ home prices increased dramatically over the past 3 yrs but wages didn't.  Even with the current price corrections, it's very difficult for many AZ families when the added pressure of higher gaoline prices are factored in.  On a brighter note, they aren't making any more land in sunny CA and it will always be a popular destination...the market will make a comeback.  

 

Aug 13, 2007 12:01 PM
Christi Stewart
Prudential California Realty - Laguna Niguel, CA
Prudential Calif. Realty

Bill,

I read this article this morning.  What really bothers me the most is what Ms. Duque said about the contracts being in English and since she doesn't speak English very well and that there were so many papers to sign, she just signed.   I find this appalling (sp?).  Why didn't the loan officer who obviously knew she didn't speak English very well, make a point to go over the whole contract. I think that is called a Fiduciary responsibility.  Whoever sold her that loan should be reported under the guise of predatory lending. 

Aug 13, 2007 01:05 PM
Rebecca Savitski
BSR Real Estate Group - Cary, NC
NC Real Estate Listings
Crazy and scary at the same time. What is the resolution?
Aug 13, 2007 04:27 PM
Bill Nazur
First Lending Solutions - Riverside, CA

Sarah

I give you a couple of Arizona summers before you come home to California! :) Thanks for your comments. We'll be waiting for you to come home.

Christi

Thank you so much for your commentary, though I certainly don't agree. I've taken HOURS to walk a Spanish speaking client through their docs, and I was pleased with what they had to say at the very end; "Wow, I really need to learn better English to make these important decisions for my family, don't I?" While several disclosures and documents are now available in Spanish, I do not believe it is the industry's responsibility to appeal to a clients understanding of the language, just like I could not travel to any country in the world, and expect them to accomodate my lack of understanding of their language. When in Rome, do as the Romans do". Now, I will say that if they were properly counseled, Ms. Duque would not be so willing to walk away from HER fiduciary responsibility as a responsible homeowner.

Rebecca

Yup, it is crazy and scary. In the short term, I believe we need to work through the issues one client at a time. Some will have favorable solutions, and some will not. To me as long as the client is willing to work with you, I find the banks are more than willing to help the client. In the long term, I believe the lenders that remain, will become stronger on their own, as we do not need the government adding more regulations. There should be some tracking system for realtors and lenders as to the performance of their transactions. I know of several underwriters at major companies that are reviewed this way, and it supports them having ownership of a client.

Aug 13, 2007 07:17 PM
Christi Stewart
Prudential California Realty - Laguna Niguel, CA
Prudential Calif. Realty

Bill,

I am glad that you take such pride in your work to make sure your clients understand everything.  You obviously are very honest and care about the people you do business with.  And yes, Ms. Duque does have a responsibility as a home owner, I don't disagree with you there.  However, not all people in the lending industry are like you.  Between 2004-2005, many loans were made where people fully did not understand what they were getting into.  The fault lies on both sides of the fence.  However, there are unscrupulous people out there that will take advantage of people who are either naive or who aren't totally fluent in the English language all in the name of making a dollar. I am not saying that people who come from other countries shouldn't learn English if they are going to live here, by all means they should.  All I'm saying is that if I were to buy a home in another country, I would expect the company I was doing business with to provide me with someone who could A) to fully explain and/or interpret the documents to me and B)provide me with a copy of the document in English.  It is for the protection of both parties involved.  Sadly, Ms. Duque's story and many others are not the last we are going to here.  I believe it is going to be awhile before the the market can completely  flush itself of the problems created by 100% financing and other high risk loans that were made. On the positive side of this, buyers that have been sitting on the sidelines waiting for the prices to adjust are going to start taking advantage of what is on the market.  I've got two buyers right now that have been waiting for this to happen and they are actually excited about what they are seeing.     

Aug 14, 2007 05:55 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Christi

Thank you for clarifying! I bet you thought I ignored your comment, but just had an otherwise busy day...sorry for my delay in getting back to you......

Personally, I believe that it will be a couple of years in our Southern California market before we've "flushed out" these high risk deals. I want the impact to be minimal on price, but we'll have to see how much inventory comes back to the marketplace. At the same time, those buyers that have been sitting on the sidelines need to get in early so as to become the ones generating what should become a new "demand" on the marketplace.

Aug 14, 2007 04:42 PM
Andrew Clemente
United American Mortgage Corporation - Anaheim Hills, CA

Great Post Bill -

It's a sad state of affairs.  If you've been in this water long enough you've seen the sharks.  I agree with a few of your returned comments. There ae muliple levels of responsibility.  Some great programs were created by lenders and the bad apples in the bunch always find a way to abuse it.  You know bad agents will because of financial greed, you know office managers will because they want the numbers, and well some of the lenders looked the other way or as a compliance friend of mine said about a former subprime company he worked for "Who said they even looked" (Reason he left 1 1/2 years ago).  

My company is trying to spearhead the rapid rate of short-sales and REOs.  We want to help, bottom line. If we can't help keep the home owner in their homes we want to make an uncomfortable situation as painless as possible. 

 

Aug 14, 2007 07:00 PM
Bill Nazur
First Lending Solutions - Riverside, CA

Andrew

A pleasant blast from the past.....

Thanks for hunting me down. I will call you sometime after 11 am today as I am serving on a panel for NAHREP in OC this morning. Looking forward to catching up with you.

Of course, I'm sure you're dealing with the fallout from the current marketplace. Can't wait to share thoughts regarding the market as a whole.

Aug 15, 2007 02:25 AM