It appears that that dung heap is finally hitting the fan in the mortgage industry. As lender after lender fold up their tent due to illiquidity or even bankruptcy, many homeowners now find themselves in an unfamiliar position concerning their mortgage loan.
The dilema is that for some, their bank has gone out of business, and if they are still in business, the loan guidelines that allowed them to originally purchase the house, have changed, meaning in some cases, they no longer qualify even to refinance. Banks, frightened of the possibility they can approve a loan, and then be stuck with it because Wall St. won’t buy it, have put a stranglehold on credit guidelines.
This is happening all over the country, causing Real Estate financing to slow to a trickle, resulting in homes sitting on the market far longer than usual. It is not uncommon to see Realtors bemoan the current situation, chain smoking in parking lots, wondering just what the hell is going on.
The solution? Shake out. Homeowners that got stuck with loans that morphed into beasts are simply going to be foreclosed on, or will be forced to walk away from the property.
Who’s to blame? Well there is a lot of finger pointing going on, but the average Joe, wanting a part of the American pie, is really not at fault.
My finger is pointed to the banks and politicians.
You see, the way it worked was that the banks lobbied the politicians to allow financing rules and parameters to become more and more lax, until here in California, gardeners were able to purchase homes on the average of $400,000 with no proof of income or even citizenship! All that was needed was a couple of letters from his customers who pay him on average, $75.00 a month, to attest that he cuts their grass. Since when did cutting someones grass allow a purchase so large? Truly something went wrong here, or is it just me?
Speaking of the banks, the more popular method of destruction was the Pay Option ARM, or as they say in Texas, “a pic-a -pay.” Why was it so widely touted by the banks? Because in an accounting rule that paralled Enron, banks were allowed to book future earnings on the Pay Option product, even though the loan had not been paid, boosting their corporate earnings, their stock, and stock options. The rich truly get richer.
And, in a pure gangster move, the banks, needing soldiers to do their bidding, decided to cut the mortgage brokers in on the action, rewarding them with a commission upon them charging you a higher rate than you qualified for. And let me tell you, the brokers never hesitated to do what would put more money in their pockets. And if grandma Jones couldn’t handle the payment, well there is always the nursing home right?
So, the banks and politicians are the perpertrators, the brokers, the pawns, and Joe Six Pack, the mark.
If you are a speculator, my money is on storage facilities, because when they come out of that house and go into a apartment, and that is where they are going, they are going to have to store all of that somewhere.
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