Helping Those Who Won’t Help Themselves

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I am an independent real estate broker, focused on the residential real estate market in downtown Boston.

Helping Those Who Won’t Help Themselves

Posted on 04/26/2007 08:50:32 | Link | Post Comment

So, the subprime mortgage loan crisis is getting a lot of press these days.

There's two pieces to this puzzle (?!).

There are those who took out subprime loans, whose loans were fudged, either by their mortgage brokers, lenders, or attorneys, etc. The buyers in these cases may or may not have participated in these "schemes" (i.e., committed fraud).

Then there are those who took out subprime loans because they couldn't get any other type of loan, but are now unable to pay back their loans, either because the interest rates on their loans have reset or because "life events" (being laid-off, losing jobs due to illness, etc.) have swallowed up all their income (or both ...).

The media, in my opinion, is lumping all these cases together. Of course, the end result is the same, right? Some homeowners will be unable to pay their mortgage loans, and their lenders will foreclose, putting them out on the street.

My concern is that, in the media's quest to portray this as "David vs. Goliath" - the simple, pure-hearted homeowner vs. the evil mortgage loan empire, they are missing the complexity of the situation.

Which leads me to this article:

BOSTON - Gov. Deval Patrick, reacting to record numbers of people losing their homes, called Wednesday for the criminalization of mortgage fraud, better tracking of foreclosures, and a public education campaign for would-be homeowners.

"It is vital that we have an effective and immediate action plan in place to help homeowners facing foreclosures," Patrick said. "Addressing this problem requires a comprehensive approach."

Patrick’s crackdown would include legislation to make mortgage fraud a criminal offense and prohibit abusive foreclosure rescue schemes. Current law allows authorities to file civil lawsuits against offenders.

It also would require that before any foreclosure can go through, a mandatory "pre-foreclosure notice" be filed with the state. The plan would establish a central repository of foreclosure notices at the Division of banks to better track foreclosure trends.

Other highlights of the plan include:

Tightening licensing and education requirements for mortgage lenders and brokers to eliminate disreputable firms and practices;

Helping those facing a possible foreclosure with a new hot line and referrals to reputable foreclosure counselors and lenders;

Raising licensing and examination fees for licensed mortgage lenders and brokers to increase enforcement and create a mortgage fraud unit;

Increasing the net worth and bonding requirements for mortgage lenders and brokers to ensure that companies with a limited financial stake cannot get a license.

This doesn't help solve one of the primary problems - people took out loans they couldn't afford to pay. You might call it willful ignorance. Or, greed. It's what got us into this mess, not lender fraud.

More: Patrick seeks crackdown on foreclosure fraud, enhanced oversight - By Associated Press