If you noticed I blamed the individual. And I do. This was a scam on the American economy by only individual... at least at first. So who are these people. Well what they mostly have in common is that they were manipulated by pride. These Individual fraudsters are easily categorized.
The Buyer and Borrower
Now these are obviously one in the same. These persons did one of two things or even both blatantly wrong and fraudulent (in my humble opinion).
- More Than You can Chew - These guys took loans with terms they could not abide by. They new there was no way they could possibly follow through with their loan and they took it anyways. Granted many of these buyers had a feasible or what they thought was a feasible plan to get out of the loan and often out of the position of ownership. That line of planning is fine as long as you have the ability to cover the agreement you have taken in the first place. These folks did not. They could afford the teaser rate but not the follow through. everyone likes the teaser. but the loaner makes money on the follow through and would never have funded the loan if they new there was gona be no chance of follow through. plain and simple. I claim the following notion to be fact; if you agree to contract terms that you have neither intention nor ability to follow through on then that person commits fraud by documenting their false pledge to uphold the said terms. That's just common sense.
- You Changed Your Mind - You will often here this idea from your local intelligent smart ass; something is worth whatever someone is willing to pay for it at that given moment. I actually say this is not true personally but I would be outnumbered so for this arguments sake we will follow the economic standard. Many buyers agreed to the worth shown by the agreement to purchase the home at the price they purchased it for. Then once the truth came out quickly decided that they no longer wanted to pay the price they agreed to pay bc they could no longer in theory sell it for that price. So they stopped paying the mortgage. There are people living in a home today (1000's) that have not paid on their mortgage since 2009 or 2010. Yes this is true. Tons of people in california are going on their 5th 6th or even 7th year with out making a payment. The mind set follows like this; I bought the house for 850,000 but would now be lucky to sell it for 490,000 therefore I'm not going to continue paying the loan I used to purchase it. To take a loan that you can afford then decide not to pay it is fraudulent.
These guys were something. Towards the end of this century's first decade this profession was making money left and right. By this point lots of the guys didn't really no squat about finance and often were really not even that smart. They were sales people. The time share type. If you paid close attention there were these small little private loan originator companies popping up every where, I mean all over the place. These were the subprime lenders who pushed the exotic mortgage loans on anyone who was breathing. They got huge commissions because in theory, or rather on paper, the loan terms were very investor friendly yielding high returns. The problem was the borrowers couldn't pay the loans off once the teaser rate passed and the mortgage rate reset. For nearly a decade you had once bartenders and mattress sales men turned "loan officers" making 100k plus salaries from these fraudulent exotic loan products sold to big banks on wall street. I can't believe Wall Street fell for it honestly.
Though there has been a strong effort by the federal Government and the mortgage lenders themselves to provide outlets and opportunity for homeowners who need mortgage help and foreclosure assistance, most homeowners probably feel that these efforts are to little to late.
There was a lag (at best) in available help for homeowners in or near foreclosure.
Hopeless Hope - The Untold Story
The first attempt at establishing some sort of organized program that could help homeowners only proved hopeless right from the get go.
The Hope For Homeowners Program was a FHA insured refinance program that was created as an effort to help homeowners avoid or stop foreclosure by refinancing out of high interest loans and underwater mortgages.
Hope For Homeowners was designed to help those homeowners who were responsible borrowers but trapped in a mortgage that simply was to expensive. The program was established by President Bush.
It simply did not work.
Houston we Have a Problem - Year End 2008 - First Quarter of 2009
After the utter failure of the first attempt to provide some sort of mortgage help for homeowners who were suffering through a financial hardship, the folks in Washington started to really take notice at the seriousness and severity of the housing crisis. Perhaps for the first time there was a sense of unity in agreement with the notion that something had to be done and something had to be done soon for the American Homeowner.
The first move actually came from the lenders in the form of a foreclosure freeze which was announced before the start of 2009.
The foreclosure freeze was a massive freeze of the majority of foreclosure sales that would have normally taken place between late November through early to mid January of 2009.
The biggest organization that took part in this activity was Fannie and Freddie, whom are government sponsored organizations that buy mortgage investments and securities.
Other large institutions participated such as Bank of America, Citi Mortgage, and other large lending mortgage servicing institutions.
What was the Purpose and Importance of the Foreclosure Freeze?
There were many benefits that derived from the foreclosure freeze. For instance many homeowners were able to obtain some extra time to come up with a game plan to avoid foreclosure or perhaps to save money for what was an inevitable move.
President Obama and Making It Work
During this same time frame president Obama was inaugurated as the President of the United States. Homeowners and the rest of America had what felt like their last hope of any type of mortgage and housing solution.
President Obama and his administration made big commitments to the problem and went work in a big way right from the get go.
In February of 2009 the Obama Administration announced there upcoming plan they named the Making Home Affordable Plan.
Making Assistance Programs Feasible and Home Affordable
The Making Home Affordable Plan was a program created to allow homeowners who were at risk of foreclosure and or mortgage default find mortgage payment relief through one of two innovative assistance programs.
There are many aspects of the Making Home Affordable Plan. However two programs stand out above all others.
The Making Home Affordable Mortgage Modification Program
The Obama Loan Modification program is now known as HAMP or Home Affordable Modification Program. This program has streamlined the loan modification process. It gave incentives to both lenders and borrowers. The program worked well and set a standard for a very confused industry.
The Make Home Affordable Mortgage Refinance Program
The other major program established by the Making Home Affordable Plan is a Mortgage Refinance Program that Allows Homeowners to refinance there mortgage in to a lower cost option which will help the homeowner make the mortgage payments affordable. This refinance assistance program is known as HARP or the Home Affordable Refinance Program.
More on Obama Assistance Programs
The Obama modification and refinance programs were criticized for having a slow start. However the programs were nimble and modified more then once with in the first several months. They soon started to pick up speed and did so rather quickly.
Success of the Obama Mortgage Assistance Programs and Strategy
The programs now are in full swing and are utilizing a streamlined make sense approach to lowering monthly mortgage payments and allowing homeowners to make home affordable.
Building Blocks of Mortgage Assistance
The efforts and results of mortgage assistance are sought through many options. The list below highlights some of the more popular and successful ones.
Loan Modification has become increasingly popular.
Mortgage Refinance has become increasingly difficult but if a mortgage refinance is obtainable it is one of the more favorable mortgage solutions available to Homeowners.
Short Sale is quite common in the world of foreclosure but the Homeowner will almost always lose their home in this situation.
Hard Money Loans are very lucrative for investors if equity has accumulated in the property.
Loan Audits performed by lawyers in effort to find grounds to legally challenge the lender is a new trend. Many have found success, as the lender will often opt for loan modification at the threat of a lawsuit.
Bankruptcy will stop the foreclosure proceedings but generally the Homeowner will eventually loose the Home down the road.
Forbearance The lender often grants a forbearance agreement or a repayment plan to the Homeowner in efforts to retain home ownership.
Selling the home on the open market is a way to stop foreclosure but it is generally a better idea to postpone the sale to relieve the discounting pressure on the sales price of a home when in foreclosure.
Cash for Keys Programs have been established by many different lenders and government agencies for both homeowners and renters who have lost their home due to a foreclosure. These programs provide financial assistance for the moving expenses these families have incurred.
Trouble Brews In Mortgage Assistance Industry
As the rise of the housing and mortgage crisis came to be, so to followed a new industry that launched with a boom. This industry was primarily composed of loan modification service firms. The basic idea of a loan modification firm was pretty simple and straight forward. They offered an opportunity for a homeowner to obtain the help of professional assistance to aid in their efforts of negotiating a restructured mortgage agreement, in return the homeowner would pay a fee for the service.
The idea and concept of hiring a loan modification firm makes a lot of sense. Theoretically the homeowner is able to obtain qualified help that has their interests in mind. Unlike a representative of the lender, or even a nonprofit housing counselor the loan modification firm is paid by the homeowner. Though the loan modification services offered by the free market seem to make a lot of sense at first glance the practical application of the services and the performance of the loan modification firms did not live up to such expectations. To put it bluntly the loan modification service industry quickly earned a criminal orientated reputation.
Though there is much more to the story then bad intentioned entrepreneurs, in fact we believe the truth of the matter would and perhaps will make one of the most disturbing stories ever told.