Do you believe that Mortgage Lenders caused the real estate so called "crisis?"?

The interest rates are still great. (at one time they were 12%+.) The glut of inventory is caused by investors and buyers who didn't qualify or couldn't afford the houses they were buying, but were given financing anyway. The actual house sales are only down 10% generally, after 4 years of extreme growth. Why isn't it reported as it is in the media?
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Some of the answerers blame real estate agents... they are not responsible for reporting of income, assets or appraisals. So please get your facts straight. Selling a house is not the same as financing it...Please!

This isn't reported in the media because it doesn't sell air time. Gloom and doom is what sells and makes us watch.

I believe there are several factors that caused the "crisis" - but the main component was naive lendees who qualified for huge loans they had no chance of being able to afford. They bought all the hype that they could just refinance their house at a fixed rate down the road and didn't take into account that housing values could not sustain indefinate year over year growth. And shame on the lenders for making those loans.

People making $9 at Target bought $400,000 houses, folks refinanced to have money to buy the boat and the Hummer - and now the repercussions of these poor decisions is coming to the forefront.

I predict there will be a line up of pasty faced, well dressed folks in front of a Senate committee attempting to explain how all this happened. And what can be done to rein in the mortgage industry.

There are two people at fault. 1) the lenders for giving people loans that they knew they couldn't afford. 2) Greedy people that knew they couldn't afford a house and still bought it.

Personally I don't have any pitty for either. Lenders were making bad business decisions knowing that the people would default on the loans as soon as the adjustable interest kicked in. And if I walk up to someone on the street and offered them a 4000 sqft house for $800 a month the first thing out their mouth would be "how many people died in the house" why would they not question it in the loan office.

Lenders alone did not cause this situation. They had willing partners in those who signed the mortgages which they offered. Those clowns who got in over their heads are just as responsible for what is happening as are the lenders who offered the financing to them.

Nope.
under educated buyers helped.
mass media helped - not every poor broke indebt working paycheck 2 paycheck person should have a house.
school systems with their lack of real world economics and math helped.
lots of chefs in this kitchen and now we'll all get top pay. Remember the Savings/Loan crash of the 80's?
mass media only reports negative to SELL adds.

I worked at a mortgage company for a while and I saw many deals that shouldn't have been done because people couldn't afford the homes. Many tricks you can do to help people buy a home. Now many of these deals have gone down the drain because the people couldn't afford the loans when the variable interest rates went up and their payments went up. so yes they have a lot to do with the problem.

i dont believe that its their fault only banks made it easy for people to get home loans knowing they may not be able to afford them and later having to deal with forclosure.

If you,the consumer, enter into a loan agreement for thousands of dollars, without a COMPLETE understanding of the costs involved, then your greed and or ignorance is responsible for the situation in which you find yourself. I know that sounds harsh but the truth always is. It is up to you to know that if you budget yourself into a home investment within 15$ of your annual income that problems will arise. Living comfortably in a 300k home is infinitely better than sweating in your sleep in your nice 489k home. It's not brain surgery folks, just math. The lenders job is to lend, the realtors to sell, and the buyers to make certain that the home you purchase is one you can reasonably afford. Its not about keeping up with the joneses anymore folks. This wake up call is only an indicator of an underlying symptom of a buy now pay later mentality. OMG, was Dan Quayle right after all??!!

They are partially responsible.

The biggest fator responsible....GREED. lenders, brokers, investors, homeowners.....buyers ..sellers.. investors in mortgage securities.
Blame goes all around.
A loan officer

Unscrupulous Mortgage lenders and unscrupulous REALTORS, real estate agents and real estate brokers contributed greatly to this crisis.

I will give you two examples of fraud committed by Real Estate Brokers and Mortgage Brokers that I am very familiar with, and I suspect they are just a small example of a much larger pattern of fraud in the real estate industry.

With respect to my colleague's daughter, several years ago she bought her first home, a condominium in San Jose.

When it came time for her to make her first mortgage payment the lender told her that the payment was more than three times the payment on the written estimate that the Mortgage Broker had given her.

This was more than 100% of her income!

She let me see copies of her records, and yes the Mortgage Broker had given her a written estimate of what her payments would be. The written estimate from the Mortgage Broker was less than one third of the payment that the lender was demanding.

This created quite a dispute with the lender.

For obvious reasons she refused to make the ridiculously high payments that the lender was demanding.

The lender foreclosed and she lost the property.

My real estate attorney is now suing the lender, the Mortgage Company and the Real Estate agents involved with that transaction for fraud.

We were all very puzzled how she could have even qualified for a loan with payments that are more than 100% of her income.

In the process of the lawsuit the lender gave my attorney copies of the documents that they had in their files.

The information on the mortgage application that the lender had in their files is very different from the information on the copies that my colleague's daughter has in her files.

Also her signature in several of the papers in the lender's files is clearly forged.

However one thing that is curious is that the lender also has the documents with her signature as well.

When my attorney asked her about that, she said that at the sign off the escrow office told her that she needed to sign her mortgage application again but rushed her and would not let her read the applicatiin and said that it was a document that she had already signed and they just needed her signature again for the lender.

The information on that document had been changed to show that she had over four times her actual income.

Apparently the Mortgage Broker had originally tried to forge her signature on the new application, it was caught right before the sign off and they just quickly tried to get her signature on that application by making her think that it was the application that she had submitted.

They goofed however. They forgot to remove the application with the forged signature which is otherwise identical to the application that they got her to sign at the signoff without reading it.

The condominium was ridiculously over priced. I had my own appraiser make an appraisal of the property based on the same date as the lender's appraisal. The value that my appraiser reached was much lower.

I also asked my appraiser to review the lender's appraisal.

My appraiser found that the lender's appraiser had ignored recent comaprable sales in the same complex and instead had used sales some distance away in other complexes in better locations.

My appraiser said this is violation of good appraisal practices.

With respect to my own experience this summer refinancing my own home: I have excellent credit and the amount that I was refinancing is less than 50% of the fair market value of my house.

I found a Mortgage Broker on the internet that claimed to have a fixed loan at 3%. This is of course much less than the 5.5% 30 year fixed rate loan that my bank was offering me, so I went with the online Mortgage Broker.

When it came time to sign off, I wanted to read all of the papers in great detail, especially after my experience with my colleague's daughter and the mistake that she appartently made when she signed some papers without reasing them because she felt pressured to hurry up. .

At the sign off for the refinance of my mortgage, the escrow officer had not scheduled enough time for me to read all of the documents and another escrow officer showed up with her clients before I was even one third of the way through.

The new escrow officer said that it was time for her and her clients to use the conference room for a sign off.

My escrow officer went out side and was talking to the other escrow officer. I clearly heard my escrow officer say very loudly "HE IS READING ALL OF THE DOCUMENTS"

She came back and appeared to be very annoyed with me because I was taking so long.

She clearly expected to be able to hand a document to me for my signature without giving me the opportunity to read it.

She continued to make loud sighing noises which I interpreted as her way of letting me know that she was very annoyed with me when I tried to read all of the documents.

Finally we came to the document that spelled out the true rate and terms of the loan.

Only that payment was fixed. The 3% was only used to calculate the payment required. The amount of the interest that was not paid would be added to the balance of the loan.
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Also this was actually an adjustable rate loan, not the fixed rate loan that the Mortgage Broker had promised me and that I had agreed to.

This loan had something called an index and a margin that is used to determine the actual interest rate, not the 3% that they had advertised on the internet.

The fully indexed rate on this loan (that is when the index rate is added to the margin rate) was 9.75%!!!!!

That is a rate for people with bad credit, not for someone like me with excellent credit (My credit score is over 780)

Not only that but this loan has a maximum cap of 15.75%!!! That is outrageou!!!!!

I never would have found this if I had not insisting on reading all of the papers in great detail.

Not only that, but some of the print on these documents is so small that I had to ask the escrow officer to get me a magnifying glass to read it.

My escrow officer was very annoyed with me.

When I discovered that the actual interest rate on this loan was 9.75% not the 3% that I had been pomised. I stopped the sign off and cancelled the loan, much to the annoyance of my escrow officer and the Mortgage Broker.

I went back to my bank and refinanced my mortgae at 5.25% fixed for 15 years. I decided that I wanted to pay it off early and I could afford to make the larger payments.

They also gave me a better interest rate on the 15 year than the 30 year year loan.

I mentioned my experience with the internet Mortgage Broker to the loan officer at my bank. I asked her why these Mortgage Brokers do things like that.

She explained that the Mortgage Brokers are paid by the lender something called a yield spread premium or YSP.

She said the YSP premium to the Mortgage Broker on the loan that he tried to give me at 9,75 % would have been over $15,000, while the YSP on the fixed rate loan that I got probably would have been a little less than $1,000.

Clearly the Mortgage Broker would prefer the $15,000 to the $1,000.

That is an enormous economic incentive for Mortggae Brokers to sell or trick people into these expensive loans that they do not want or need, but are extraordinarily profitable for the Mortgage Brokers.

Personall I think the the tern "yield spread premium" is a misnomer.

I THINK THAT THE TERM "KICKBACK IS MORE ACCURATE"

The mortgage lenders are guilty by having the house appraisers give them number that are needed to put the deal together . In other words make sure the appraisal are higher .As well one of biggest mistake the mortgage companies have made is loaning money to those without a down payment . What's in it for the new home owner who can't afford the house as the interest does creep up to hang on to the house , if they can't make the payment they just turn the key in and lose absolutely nothing of their capital as they went in without a down payment , and fact most of the time the land transfer tax are usually rolled in to the total purchase price which in turns is pushing the real estate values higher . Another problem is refinancing of mortgages for personal debts .Personal loans and credit cards are withdrawn from the equity of the house to pay off their debts and most people get right back into debts within a short time . Their should more stringent rules for home buyer , as all of us are paying for bad debts of mortgage default in the form of higher interest . As for house sales being down and not reported , I am not sure where you are getting your information but its being reported in the area being affected .

I blame the Government for not implementing strict laws on mortgage companies to regulate their lending practices. Lets face it, many people in the U.S. are not very good at making decisions about their finances and these people who signed these ridiculous interest only mortgages shoulder a lot of the blame as well. But our government is in charge with protecting the consumers in business, and they have not done their job as far as I can see.

I work in real estate in Michigan and there is no license law for mortgage bankers (only the broker they work under). This basically means ANYONE can get a job selling mortgages and if they do a bad job, the worst thing that can happen to them is they get fired, after which they can turn around and go work at another mortgage place. They need to regulate the mortgage industry the same way the regulate Real Estate Agents.

This would curb many of the idiots in the mortgage industry that do harm to their clients to make a few extra dollars.

Everyday I go on listing appointments where people cannot sell their home at the current market price because they owe more than their house is worth due to these ridiculous over-lending practices.

Just crazy.

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