A comment made yesterday by a consumer is emblematic, in my estimation, of the situation nationally. She works as a paralegal, her husband as an electrician. I'll speculate that this couple is representative of the demographic that most of you serve.
"My husband and I were victimized by our mortgage broker, appraiser and lender. Our Good Faith Estimate showed a fixed rate loan; when we got to closing on a Friday at 4 p.m., we received an adjustable rate, interest only mortgage and a second mortgage/equity line of credit! We were past the closing date due to the lender, and the seller said if we did not sign then they would keep our $11,000.00 deposit ... and recently we found out that the appraisal was inflated by approximately $25,000!"
While it's obviously a complicated situation with any number of moving parts, there's no reason to distrust the woman. Why would she lie? Why would she make blatant accusations of appraiser fraud that weren't true? Why would she paint a broad canvas of predatory lending practices if they didn't occur? Are all buyers liars? It's doubtful!
For 20 years I conducted closings referred by real estate agents and loan originators. More than once I was compelled to seek a legal opinion after hours to determine my own liability because a deal turned ugly at the table. More than once I had buyers accept unfavorable loan terms, angrily and reluctantly, because their possessions were stowed on a moving van and they had nowhere to go. More than once I heard licensed professionals lie like hell to earn a commission or a fee.
It's undeniably convenient to blame irresponsible borrowers for the woes of the industry such as they are. It implies that someone else, anyone else, is at fault. Gilda's narrative doesn't suggest the presence of real estate agents in her transaction. Perhaps, if good agents were involved the abuse wouldn't have occurred. But, what about all those times appraisers were asked, or threatened, by industry insiders to be a bit lenient by inching a value upwards by $1,500 or $2,500 to make a deal work. It's a far cry from $25,000, but we can't ignore the cumulative reality. Is it possible that a little cheat here and a little cheat there contributed in a big way to the problem we now face? Could it be that the same mentality of cheating a little to make life easier found its way into every aspect of real estate protocol?
At times the truth is painful!
As a "card carrying" capitalist, I embrace the wisdom of free markets while denouncing government intervention in all its hideous forms. Like most of you, my formative education leads me to believe that imbalanced markets need time to correct themselves. How much time, though? My heart and intuition lead me in an entirely different direction. I recognize the need for intrusive medical treatment when a patient's health is in immediate and eminent danger. Our neighbors, family members, and friends are suffering horribly. Once the bleeding has stopped, we can look for solutions.
Our domestic housing crises stands center stage in the theater of international opinion. Even the likes of Osama bin Laden recognized its potent psychological affects by mentioning the crises in a stream of anti-American rhetoric. Public officials will hear the cries of consumers in Gilda's predicament because it's their mandate. The free market itself will incorporate Gilda's plight into its corrective gyrations because it has to.
Yes, everyone holds a degree of culpability. But the fact remains: Once a business model fails to protect the interests of vast numbers of consumers, it's no longer viable!
It would be exceedingly naive to expect that in three years the real estate industry will look the way it does today.
Why you ask?
Because ... even if the crises miraculously resolved itself today, the catalysts that caused it are still alive and well!For a well written and provocative post see Obtaining Housing Meltdown Absolution with a Holiday Round of the "Caveat Emptor Chorus." Rosemarie Hicks explores the paradigm of esoteric dishonesty that miserably failed trusting consumers and real estate markets in general.