29 of 33

Yes

Write now Article Tools

We got ourselves into this mortgage mess basically because of forgetting to obey the Golden Rule. Simply, if we follow the teachings of wisdom, we would not be in this economic situation.

The mortgage lenders have not been following wisdom, and instead have been following dishonest practices, and allowing consumers to get a mortgage loan with almost nothing down, little if any underwriting, stated income as opposed to full-documentation, and providing risky mortgage products, such as the ARMs (Adjustible Rate Mortgages). I will break each of these down.

There have been plenty of instances where underwriters would not look at the loan application, and would simply push it on through so the consumer can get into the home of their dreams. This may mean money for the lender, but is not always a benefit to the consumer, since the consumer is the one that has to pay the mortgage payment each month. Lenders have been believing that home values will do nothing but go up and up, and therefore, if they make a loss on a consumer, the value of the home will take care of that. As we see in this market, that has not been the case as all. In so many markets, home values have gone down, and seller and lender have lost. The stable way of doing business is to send the application to an underwriter who will check references, analyze credit, and determine the ability of the buyer to take out a mortgage loan, for the terms and program interested.

Stated-income loans are just that. The borrower states his assets and liabilities, and there isn't the requirement for proof and verification. Not all borrowers have been honest about their finances, and lenders let them pass through. Everyone suffers as a result. Full-documentation is better in many cases, at least, the lender can determine if the borrower has the finances: down payment money, enough money for closing costs, and can make the monthly mortgage payment including mortgage insurance if that may be required.

Now, there is always risk associated with an ARM, or an Adjustible Rate Mortgage. The interest rate can go up, and that means the monthly payment goes up. This has surprised many homeowners, and they have had to deal with the burden of more money going towards the mortgage. Many have not been able to pay the additional amount, and have had to declare foreclosure. Often, the lender will give two or three months time before beginning the foreclosure procedure. That means, you go without paying the mortgage payment for that period

• 1
• 2
• next page >>

Add your voice

Know something about Is there a solution to the mortgage foreclosure crisis??
We want to hear your view. Write now!