Subprime Lending Restrictions - BAD IDEA!

Real Estate Agent with Hampden Homebuyers

There were discussions on Tuesday, 3/27/07, about imposing legislation and restrictions on the mortgage field as it relates to subprime lending and the foreclosure situation.  Some of the ideas suggested is that there be a mandatory 30-60 day "cool off" before a lender can continue the foreclosure process.  There were several other bad ideas suggested as well.

I understand that the goal is to stem the foreclosure problem but our elected officials need to look at the ramifications of instituting these ideas.  The largest drawback is that the lending institutions will discontinue lending in Massachusetts.  A large majority of loans originated in MA are subprime and if you remove the lending institutions to lend on these deals you are going to directly, negatively, affect the entire real estate market in MA.  It is not to far fetched to believe that the institutions that will continue to lend in MA will increase the base interest rate on subprime loans.  This will further hinder the real estate values in MA.

Some may say that this would be a needed "correction" of market prices.  The correction could result in more foreclosures initiate.  Is this what we really want; a depressed real estate economy and an increased foreclosure market?

Now on to the 30 day cool off period.  Currently banks will work with homeowners by waiting a several months (average is 4 months) before sending the file to a foreclosing attorney.  If you require an additional 30 days that the bank has to wait and allow the homeowner to appeal the foreclosure all together then the banks will be forced to initiate the foreclosure process much sooner than before.  I can easily see banks starting the process in the first month or two of being late.  Again, causing an increase in the number of foreclosures initiated.  The cost of reinstating will increase as well because the foreclosing attorney will have to charge and plan on a longer litigation process.


These are just some of the drawbacks that I foresee if the proposed restrictions are instituted in our great state.

I welcome your feedback and conversations about this issue. Please feel free to call or email me in addition to replying to this blog.

Best wishes,

Dominic Kirchner II

World Properties Int'l - Avion Realty


Comments (3)

Keith Jeppson - Salt Lake City Real Estate
Everest Realty Group - Holladay, UT
Welcome to AR.  I agree with your concerns over regulation of the subprime market.  Yes, there needs to be some tightening..but that should be market driven and not driven by legislation. 
Mar 28, 2007 03:21 AM
Grant Howell
Alex Lowery Real Estate - Frisco, TX
Broker/Owner 214-234-6901

There are too many people making money off those who don't have that much by shady dealing and charging outrageous fees for the chance for the American dream "Owning a home".  I think the waiting period could help a few, but for the many, there going to foreclosure anyway. Seems like the lawyers are going to make all the money on this deal.

Mar 28, 2007 03:26 AM
Ron Bouchard
Avion Realty - Taunton, MA

As far as the cool off period is concerned, homeowners already have 6 months from the time they miss their first payment until the auction in Massachusetts.  Why should they be given another 30 days? 

Outside of the small percentage of cases where mortgage fraud was the cause, homeowners enter into an agreement promising to pay back the loan.  They are fully aware of the terms and conditions of the agreement and should be held accountable when they fail to abide by those terms.  It sucks when it happens but the finger should be pointed at the correct party....the defaulting homeowner!



Apr 16, 2007 09:07 AM