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Who is at Fault?

By Tom Horner

Real Estate Broker/Owner with Blanchard and Calhoun

March 16, 2007 03:35 AM

Everywhere you turn this week the news is about Mortgage foreclosures and defaults. Subprime Mortgage loans defaults have fueled most of the talk. In the past quarter 13.5% of the nation's subprime mortgage loans were in default. In Georgia the rate is 17.4% according to the Mortgage Bankers Association.

Who is to blame for this? The Homeowner in default or the Mortgage company who originated the loan. Does the Realtor who represented them have any blame? I do believe the Homeowner has to take most of the blame. they need to understand how the payment can change in just a few short months. They need to look at the implications of their monthly spiraling out of control. Most home-buyers look at what the Mortgage originator is telling them they qualify for. What they need to look at is what can they afford. Homeowners must look in the mirror, when their mortgage is out of control and ask for help. The help can come in calling a local Realtor or Mortgage company to see all of their options.

Why do we need to be worried about the rising defaults & foreclosures? Everyone will see more houses on the market, The inventories of homes will increase causing prices to drop. The requirements to get a loan will tighten, creating fewer buyers which will cause markets to be vulnerable.

Here are a few more Statistics, about 12% of outstanding Georgia loans were subprime last quarter, 3.9% of prime loans in Georgia were past due, subprime loans it was 17.4% according to the Mortgage Bankers Association. Realty Trac which monitors mortgages statistics says 55 to 60 percent of loans in foreclosure nationwide were subprime.

What are you seeing in your Market? Who is at fault?

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Sean Hashimoto

Primary Residential Mortgage, Inc. NMLS 3094 - Honolulu, HI

Senior Loan Officer

Now this is only my opinion: I think to put fault on one or the other, you would have to look at how the scenario went down.

In one way I agree with you to where the home owner is to blame. They need to understand their situation and know what their limits are. They also need to understand their mortgage program, how it works, and how it may affect them in the future.

On the other hand I also feel it's the mortgage orginator's responsiblity to analyze their situation and make professional suggestions. They should also make sure that the client understands their mortgage program and how it works. It is one thing to be able to qualify someone. It's another thing to put them in a risky situation.

I've turned down many clients that I could have qualified. To give you one situation that I had: Married couple with 3 kids. I had them qualified for a 100% program. But, looking at their financials I asked them to look at things that are not part of the program. Things like utility bills, gas, food, clothing, etc... They were very greatful for me pointing out these things. Needless to say about 3 months later they called me to say that they purchased that home they wanted. I asked them a few questions and found out that they went through another broker and was put in a subprime program. 2 Yr ARM interest only with a 2 yr prepayment penalty. I told them to be very careful and educated them on how the program works. I also told them to still call me if they have any questions, although now I'm not sure I would be able to do anything for them if something negative should happen. So, knowing their situation I can only assume that the loan officer/mortgage orginator just wanted to make a commission without the client's best interest at heart.

Sean

Mar 22, 2007 10:22 PM

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Tom Horner

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