Crisis
States are experiencing an increase in foreclosures. Foreclosure of homes purchased under terms that were less than favorable to certain home buyers. Many of these home buyers were young first time buyers or low income buyers. Some of these homeowners’ incomes were inflated by a mortgage broker to insure that an overpriced home would sell. How the deal worked was a mortgage brokers would freeze out appraisers who would not appraise the value of a home higher than the actual worth of a home. Second, the unsuspecting buyer would not be aware of the coercive relationship between appraiser and mortgage broker, who both benefited from the buyer’s lack of knowledge.
Example: A home valued by the appraiser at $100,000 but the lender only loaned $72,000. However the original value on the sale disclosure was listed at only $59,000. The mortgage broker does not want the buyer to know the value of the home is only $59,000. At the end of 30 years the new buyer will have purchased a $59,000 for a total a little less than $200,000.* numbers have been changed to protect the identity of the purchaser.
It appears that subprime lenders have not learned from their mistakes or are willing players in getting the upfront money from homebuyers. Appraisers feeling the heat from mortgage brokers working to collect a hefty commission are pushing for real estate fraud rules.
This year it is predicted that these egregious loans with explosive adjustable rate mortgages will push many of these homeowners into foreclosure. So worried about the number of homes impacted by suprime hybrid ARM, that there is a group, Leadership Conference on Civil Rights calling for a foreclosure moratorium. And those borrowers who can afford these subprime deals could find that their lender may have filed for bankruptcy and the buyer will find themselves trying to find the new holders of the loan to prevent their homes from going into foreclosures from nonpayment. The crisis has even hit Wall Street, the stock market.
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