LGBH recently went through the heart wrenching process of trying to help some home owner's sell their house before it was lost to foreclosure. These poor folks were victims of loan fraud. The fraud perpetrated against them when they purchased was a "10" on the 'ugly loan practices' scale and involved not only an unscrupulous mortgage broker (NOT from our area) AND an agent (also NOT from our area) who (in my humble opinion) should have her license revoked AND spend some time in the 'big-house' for her behavior in this transaction.
I do not have enough room to write the whole story, but trust me...I am NOT overstating things. Here is a little bit of of the story so you can clearly understand the devastating effects loan fraud has had not only on our Country's economy, but more importantly, on the individuals ensnared by it; (Mimi's RANT starts now...)
About 2 years ago, right when the market was cooling, our unsuspecting clients were convinced that they could purchase a home that was WAY out of their price range using an ARM & a 2nd(!!!) to cover the purchase price and the OVER $14,000.00 of "closing costs" associated with the purchase. Their agent not only pushed them into a purchase that was clearly over their heads, but ALSO provided the earnest money for them to submit with their offer. (By means of one of HER personal checks no less!) The unsuspecting (and, yes, naïve buyers) were told by the lender (A mortage broker who was their agent's boyfriend and the ONLY lender she suggested her client's use! Can you say ILLEGAL?!) that a few months after the closing they could easily re-finance the whole loan package to something they could actually afford. What??!! In a slumping market??!! You have got to be kidding me! (Oh, yeah, the bad-guy lender said he would be "Happy to do the refi for them in a few months." What a peach!)
Evil deed done, the home owners went looking to refi a few months later and found that the mortgage broker who had made all of the promises had simply gone out of business. They went to other lenders to try to accomplish what was promised would be the solution for the whacky loan they had been encumbered with and were told, "Nope, can't do.".
LGBH was called in before the first payment went delinquent to try to sell this (now) overpriced-overleveraged-home in the open market. We set out to help these poor overwhelmed folks get out of this mess before losing everything.
LGBH had the property under contract not once, but TWICE during the time we had it. The second deal had money in it to pay off the first with extra (but not all) for the second. Heck of a deal in today's real estate market. BOTH deals were held up with red tape by the 2nd position lein-holder forcing the buyer's to move on to other, easier, pastures. MONTHS went by without communication from the 2nd lein-holder, phone calls went unanswered, voice mail boxes were found to be over limit, e-mail pleas were sent DAILY into a cyberspace blackhole, and the deals died slow ugly deaths. (Heartbreak after heartbreak for our poor client's.) (Prop's to my business partner, EMILY CROSS, who, with dogged determination pursued these deals on our client's behalf. I have NEVER seen a Real Estate agent give so much of themselves to a deal. She deserves a medal!)
Ultimately, with the abhorant business practices of the 2nd lien-holder (The 2nd largest mortgage lending institution in the nation no less!), our client's were forced into foreclosure.
EVERYONE in the initial transaction profited off of the consumer. The banks (already FAT with profits from the boom), the mortgage broker ($14,000 in CLOSING COSTS???), the selling agent (a juicy commission)...everyone BUT the consumer/homeowner made out like BANDITS (exactly what they all were!). Our client, the consumer, was left out in the cold with all of the debts associated with the transaction AND the foreclosure, a destroyed credit record, a smeared reputation and NO HOME!
I hope you can see from this ONE scenario exactly how destructive the greedy and law-breaking practices of these individuals was for all of us? ESPECIALLY the unassuming buyer who was trusting them all to be looking out for their best interest.
I am DISGUSTED with the bad guys who have done this not only to our clients but to ALL OF US! (END Rant...for now...)
This is one reason why I am in TOTAL support of the tightening of lending law. I am in TOTAL support of the NAR Lending Initiatives (see article below). And why I am proud to be a member of the Live Good. Be Happy. team of Realtors who operate by the Realtor Code of Ethics and follow the laws of Real Estate Agency to the letter. If something is not good for the people we have the great honor of working for (FOR being the operative word) then we TELL THEM! (The Golden Rule...what a concept!)
Live Good. Be Happy. Be Smart. Be Informed. Be Careful.
-Mimi
Daily Real Estate News August 16, 2007
NAR: More Is Needed to Stop Abusive Lending
Abusive lending practices erode confidence in the housing market and strip equity from home owners, says the NATIONAL ASSOCIATION OF REALTORS®. To protect borrowers from deceptive or abusive lenders, NAR asked the Federal Reserve Board to adopt new rules that would address everything from prepayment penalties to the use of “teaser-rates.” Among the major changes NAR proposes:
No prepayment penalties. Eliminate prepayment penalties for all categories of mortgages, and if that is not feasible, bar prepayment penalties for subprime mortgages and other mortgages where abuses are found. “Borrowers and their families are often trapped in abusive loans when they can’t afford to refinance because of high prepayment penalties,” NAR President Pat Combs says.
Escrow for taxes. Require that subprime lenders mandate an escrow reserve for taxes and insurance. “This again will protect borrowers from large payments they can’t afford and help insure they understand the total cost of their monthly mortgage,” Combs said.
Low-doc loans used rarely. Require that “stated income” or “low-doc” are only used sparingly and in cases where there are mitigating factors. NAR called on the board to implement strong underwriting standards that would require all mortgage originators, not just subprime lenders, to verify a borrower’s ability to repay the loan.
Flexibility for life circumstances. In determining a borrower’s ability to repay, lenders must be flexible to accommodate unique circumstances. “Lenders should have the flexibility to consider all relevant facts, including a borrower’s income, credit history, future income potential and other life circumstances,” Combs said. “NAR believes that existing guidelines are not enough to protect consumers,” Combs said. “Fighting abusive lending is an important issue to REALTORS®. We not only want to help people achieve the dream of homeownership, we want to make sure they can continue to live it.” Among other changes NAR recommends to the Fed: Adopt anti-mortgage flipping regulations that require lenders to verify that the new loan provides a significant benefit to the borrower; encourage lenders to use alternative credit histories for borrowers with little or no credit histories; require all institutional lenders to periodically report borrowers’ payment histories to at least three national credit bureaus; require lenders to offer borrowers mortgage choices with interest rates and fees that reflect the borrower’s credit risk; and, working with HUD, improve consumer mortgage disclosure under the Real Estate Settlement Procedures Act (RESPA).“The Fed must act responsibly to protect consumers, and NAR pledges its support,” Combs says. “We champion the principle that all mortgage originators should act in ‘good faith and with fair dealings’ in all transactions, just as Realtors® are required by NAR’s Code of Ethics to treat all parties in the transaction honestly.”Learn more by reading NAR’s 8-page letter (PDF) to the Fed, which includes a description of each recommendation. Earlier this year, NAR released its enhanced Responsible Lending Principles and has consistently encouraged federal banking agencies and their state counterparts to address abusive practices.
— REALTOR® Magazine Online
"If anyone you care about needs a Realtor, please share my name with them." -Mimi Heading into my 20th year in real estate, I am a third generation Realtor® serving Bellingham and Whatcom County, Washington. My motto is: Do good work for good people.
