I began in this business in 98' as an assistant manager at a local bank. I was in the finance division (which sounds impressive but...let me go on) in the finance company, we were responsible for processing turn downs from the bank to see if we could finance them (at a higher rate). I was so young and new to the business, that I didn't realize that in a lot of instances we weren't really helping people...(we were doing what they wanted) but, it wasn't in their best interest long term.
My finance career was short lived, however I will never forget what my manager told me one today. He said, "at some point all of this "loose and fast" financing has to stop or ...what happens to the economy, will be worse than the savings and loan scandal." I fear he may be correct.
I was just attended my 3rd Minnesota Affordable Homes Congress, many of the people dealing with affordable housing get together every 2 years and discuss the issues around the Affordable Housing Crisis in areas of Minnesota. According to some statistics I was given, there are some really terrible things happening. There are incredibly high numbers of loans that are in foreclosure many of the people are; low income, on a fixed income or a person from a community of color. Almost 700,000 nationally just in these groups, according to their statistics.
That is a lot.
The biggest offender seems to be the "option arm". In many cases, these loans were given to people on a fixed income, the clients' income wasn't going up quickly or the client didn't fully understand the loan program...just the payment. That is what they do...the only sell the payment. Never mind that it won't be that low 6 months from now.
There was an article that I read this week where they busted a real estate fraud circle in Colorado. Fortunately they had an ethical broker that cooperated (and I think turned them in) but, the damage was already done. This ring had falsified documentation on loans like; social security numbers, W2's, paystubs, ect. They commited $34 million in loan fraud. I personally know that the predatory lending in our area is out of control. I have no doubt that this is an iceberg and we have NO idea how big it is.
KEEP YOUR EYES OPEN...be very careful and listen to your little voice. Make sure you discuss your clients finances with them. Learn how to calculate payments (check your local real estate board for a class).
The client percieves 84% of the time (according to Fannie Mae), that the real estate agent is the trusted advisor that will protect them in this process. If you are referring them to a loan officer that says they can afford it and they can't...they will blame YOU.
I wish all agents wanted SUCCESSFUL HOMEOWNERSHIP...not just a deal.
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