Who is at fault for the current mortgage crisis and real estate crisis and what did they do to cause it?

We are having a huge mortgage crisis and real estate crisis where millions of people are all of a sudden losing their homes to foreclosures and real estate prices are collapsing.

Also real estate buyers cannot get mortgages on homes that they want to purchase.

This seems to have happened all of a sudden.

It was not long ago that homes were being bid up at ridiculous rates with multiple offers and huge overbids.

Financing was readily available.

All of a sudden home prices are collapsing, there are foreclosures everywhere you look, and lenders will not give you financing to buy a house even if you have excellent credit and a large cash down payment.

Who caused this problem?

How do we solve this problem?

How do we make certain that this problem does not happen again?

One of the big problems that I see in the mortgage industry and real estate industry is the lack of training of loan officers, mortgage brokers, and real estate brokers.

These people command huge fees. Their fees are far larger than my doctor's fee or my attorney's fee.

We can blame the people who accepted these overpriced mortgages and overpriced homes, however that is like a surgeon blaming the patient for accepting surgery by the surgeon that later proved unnecessary or harmful.

The real estate brokers, mortgage brokers and loan officers are adamant about calling themselves professionals.

I know, recently I told one, (who was trying to convince me to sell my house and pay him $60,000 to do it) that he was just a salesman and nothing more.

He became very huffy and said in a very loud voice "I AM NOT A SALESMAN, I AM A PROFESSIONAL!!"

If they want to hold themselves out as professionals with some level of expertise, they had better act like professionals.

A good comparison is the practice of medicine. Back in 1900 doctors were as poorly trained as real estate agents are trained today.

Doctors were little more than salesmen of largely worthless remedies.

Dosctors were trained in diploma mills that gave them only very superficial training and an impressive looking piece of paper to hang on thir wall as proof of their supposed expertise.

A man named Flexner did a report on medical training in the United States. The result was that the diploma mills were shut down and all medical training was conducted at a very solid University that had to meet a long detailed list of requirements if it wanted to retain its approval as a medical school.

After the classrooom training, the student was also required to serve for a period of time as an intern to get hands on training in addition to the classroom training. The intern has to meet strict performance critetia and his performance as an intern is closely monitored and evaluated.

The student does not pass from the internship until he has shown the ability and determination to meet some very high performance standards.

The closest type of training that I have seen in the real estate industry is The Appraisal Institute.

The requirements for the MAI designation are a substantial period of rigorous classroom training and a minimum of 4,500 hours under the supervision of an MAI appraiser and the requirement to have his work reviewed by a committee of MAI appraiser before he receifves his designation. The 4,500 hour requirement is the equivalent of approximately 3 years as a student under the supervision of a highly qualified appraiser.

We need to establish a similar trainiing program for real estate brokers, mortgage brokers and loan officers.

We need to shut down the diploma mills and have real estate education at accredited Universities and Institutes such as The Appraisal Institute.

That way we will turn out people who actually are professionals instead of poorly trained hacks who are merely salesman claiming to be professionals.

This is reasonable to expect. Where I live, the average house sells for 1 million dollars. The typical 6% real estate commission is $60,000. That is far more than attorneys and doctors charge!!!.

If the real estate agents are going to charge fees like this, it is about time that they started earning those fees.

This mortgage crisis and real estate crisis has had a negative effect on all of us, not just the poor homeowners who are losing their homes.

For the ridiculously large fees that the real estate agents and mortgage brokers are paid it is about time that we started expecting a much higher standard of performance from them.

It's a symptom of our culture in that we think that we deserve to have all the nice things in life without earning them first. We can't just blame lenders...people are gambling on the market when they get a low ARM that they can barely afford at the beginning and just bank on the fact that the rising housing costs will bail them out. There needs to be less speculation and more conservative approaches to our lifestyles. You don't need a big-A house, a new truck, top of the line furniture and clothes when you are only freakin' 25 years old! Why does everyone expect to have everything better than their parents 10 years earlier than they did?

greed. lets say you ask me for a loan of $10,000. I don't care if you can repay it, because I will sell that note you sign to a third party. I get my money form them and don't care thta you can't make your payments to them.

This is the modern version of the tulip craze.

Investors stopped questioning the source of the loans they were buying. Bankers looked at the cash flow and kept lending. Buyers believed the hype that they could buy with no money down, pay interest only and somehow win if they owened their property for at least 2 years. All it would take would be for property values to continue to appreciate at astronomical rates and interest rates to never reset up.

Everyone involved was at fault and all should lose.

people in Florida Arizona who buy second and third houses high end houses at that and then thought the would rent them out to vacationers

There is not a major crisis in the mortgage industry....you are just hearing media hype..All real estate is local and only a few parts of the country are seeing falling prices. they'll come back-they always do....Why do you think it is so bad? Besides, the government will see to it that it does not get out of hand.The Treasury and President Bush have worked out a deal so that everyone can keep their payments the same-guarenteed for next 5 years...

To answer your question , I think it is the greedy banks that want your mortgage to reset and then they can gouge you with the higher interest rates...Way to go Pres Bush.

Wow! Lots of questions here so I'll just address a couple of them.
The mortgage foreclosure crisis is the fault of unscrupulous lenders who stick uneducated customers with bad loans that adjust upward into payments they cannot afford. BUT... The home buyers are also at fault. Why in the world would you make the biggest financial commitment of your life without investigating things fully first? why would you take out an ARM loan knowing it will become unaffordable at some point? Why would people gamble with their family's financial future by trying to qualify for more than they can afford? Impatience and greed. Buyers must take responsibility for their irresponsible actions.
Next, as for lenders not making loans to people with a sizable down payment and excellent credit... Hogwash! If that has been your experience, you need to get another lender! There are many out there with $ to lend especially to folks with the qualifications your outlined.
As long as people don't borrow beyond their ability to repay and don't contribute to the irrational climate some people are creating we will be just fine.

Home prices are collapsing okay. All buyers can still get a mortgage just a smaller one because the house is worth so much less. Be happy . There was a stock market crash in the USA and it was bad stuff. One hundred years before that there was one in France and England. England suffered no bad stuff cus the English government backed up the banks with the king's money. The French had killed the Kings, remember, so they crashed.

We in the mortgage business are to blame. Relaxed U/W guidelines to obtain more mortgages(sub-prime loans), were the main reason for this fiasco. We need to return to traditional loan qualifying. Documenting qualifying purchasers, licensing all L/O's who take loans. Educate L/O, processors, and U/W on fraud, and non-compliant loans.

Mortgage lenders caused it by approving loans to high risk home buyers. The lenders raked in their fees and commissions at the expense of the market.

Don't know how you solve it. Big, big mess.

You solve this problem by legislation that prohibits loans of that type to unqualified borrowers. This type of law would have to be quantitative to spell out the requirements.

The mortgage mess is a product of Wall streets' voracious appetite for AAA rated investments that were not really AAA rated. Wall street was buying so fast during the real estate boom that Banks created products for more and more people to get loans to in turn sell more to Wall street. For a while everything was fine because real estate was rising fast enough in value to stem the tide of delinquincies. Someone blinked and it all came crashing down.

Real Estate went up ridiculously fast because money was cheap, easy and people were greedy for fast gains. Many people made an enormous amount of money in real estate and many people are losing now - it's called capitalism and all investments are risky.

With all that said - it's all cyclical and real estate prices will rebound - that's guaranteed - write it down!

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