Misplaced trust?

Lack of homebuyer education is one of the main culprits in the current subprime mess that we are dealing with. As a Realtor/Broker and Homebuyer educator I've seen too many people rush to purchase a home and because they seek very little guidance from a non profit housing counselor or a good Buyers Agent these individuals took the first product that someone was willing to give them even though there are a ton of high quality first time homebuyer mortgage products available in our area like the Soft Second from MHP and mostly all of the Mass Housing programs. I can't tell you the number of times that I've been at the closing table,while representing a Seller, and the Buyer is sitting there looking at a HUD-1 Settlement statement with 3 to 4 points in charges and an APR that's through the roof. In a lot of cases that Buyer knew the mortgage broker that they dealt with and at the end of the day still felt like they got a good deal because they didn't have to put any money down and now they are a homeowner...fast forward to the first rate adjustment (if it's an adjustable loan) and payment shock takes hold and then it's a totally different story. This problem is very prevalent in several minority communities throughout the city of Boston. I always tell people when dealing with the purchase of a home to look to an impartial third party for verification of the different vendors out there (non profits like MAHA or Urban Edge, or Codman Square NDC are a good start), realtors, loan originators, home inspectors, etc. And also make sure that they get good references from at least 3 satisfied clients. If an individual cannot provide that information keep looking until you find someone who can. For more information on avoiding bad mortgage advice and the mortgage scams that exist out there visit http://www.squidoo.com/avoidmortgagescams

I'm a real estate lawyer who did 3-400 closings in the past couple of years, there is no mystery about what happened. Greedy dishonest mortgage loan originators knowingly invited borrowers to lie about their income and assets and borrowers knowingly and willingly joined in on the misrepresentation. For every innocent little old lady who's facing foreclosure there are fifty people who knew exactly what they were doing and have no legitimate complaint. I cannot tell you how many times I had to bite my tongue at the closing table. But the closing atty's job - representing the lender, not the borrower - is not to tell the borrower he's probably making a big mistake by taking on such a loan. I tried, and almost got fired. One subprime lender told my boss they didn't want me closing their loans anymore - "he explains things too much."

I am a Realtor. The problem is that because there is no regular paycheck and the business is all commission, mortgage brokers and realtors for the most part will do whatever they have to in order to get a buyer the loan needed to purchase. I have yet to have a sale where the discussion centered around "can this individual really afford this?". This is where a buyer's individual education and smarts need to come in to make that determination. The buyer needs to be able to know his/her "means" and affordability and be able to make that decision. Additionally, subprime to me also means, "hey you can't really afford it so try this high interest loan and since you already have nothing, if it doesn't work out you'll just be back here where you started anyway".

I would quit the business if I was so strapped for income that I would fail to give advice in my buyer's interests. I ALWAYS discuss whether they can afford what they are buying (and borrowing.) That is what representation is supposed to be about. I am a professional; I represent the interests of my client over my self-interest. I give the best advice I have to that client. Frequently, that advice is "don't buy that" or "don't pay that much." Because I do that, it works out for me, too. I have lots of clients and make a good living. And I sleep at night.

I also don't understand the lawyer who says nothing about borrowers with false income while representing the lender. How is the lender -- his client -- served by his silence? That lender is now stuck with a high-risk borrower.

Not only do consumers fail to understand representation, so do the so-called "professionals." Education is needed on all levels.

I am tired of hearing the media rant about the corrupt mortgage cos. out there. What about personal accountability for the idiots who went forward with these loan? If you don't understand/like the terms of a loan then don't go forward. We have become a society of blameless consumers who refuse to take responsibility for buying over-priced houses, utillizing loans that enable them to overstate their assets and income. Trust me, if the bubble didn't pop and every clown out there who thought real estate was their way to easy riches without working succeeded, then these loans would not even be an issue. Our brainless society has become one where we want to privatize the gains and socialize the losses. Truly pathetic.

My dad advised:
don't mix business deals with family, friends or your church.

I moved to Boston in November of 1996 with almost no savings at all for a big down-payment, and a fairly spotty credit history. I was recommended to a mortgage broker doing business in the gay community and he worked diligently to comb through hundreds of loan programs to find one that I could qualify for, even though the interest rate was definitely a few points higher than the market average. There were absolutely no surprises because he did his duty to explain everything to me clearly and concisely and even recommended strategies for improving my credit score so I could refinance a few years.

Most of my experiences since then have been similar - honest hardworking mortgage brokers who navigate the zillions of options available with prescient skill - far more pleasant than dealing with faceless bureaucratic banks who never explain their decisions or provide alternatives.

It is up to the buyer (or borrower, in this case) to listen to the broker and make rational decisions. Nowadays with services like LendingTree.com you have even more options than just going through a broker. If you make $50,000 per year and honestly believe you can afford to buy a $450,000 house or condo, you've got bigger problems than predatory lenders...

I have been a mortgage consultant for almost 7 years. Banks are the way to go. I have always worked for a bank because I feel that there is a strong commitment from the bank to make good loans, and to do right by its borrowers. Lendingtree.com has each of its lenders pull your credit report. I recently met with someone who on a Wednesday had a score of 680, by the following Friday she was under 620---a.k.a. Subprime Land... It's websites like these, and "under"services like these that are giving mortgage professionals a bad name. Please do pass a law to keep the professionals in this service industry! If you are not servicing your customers... then what are you doing?

Get post and comments. It's all about getting the deal done and getting paid. As they said in wall street...
Attention. Please. Office Production is down ten percent this week. I recommend that you all go through your clients' investments for any portfolio adjustments. And don't forget -- double commissions today on our 'A' or better bond funds.
Especially you rookies. Also, remember, the sales contest ends tomorrow.... Rona, nothing wrong with getting deals done. Maybe Morg Brokers should have to get a series 7? Just thinking.

Ted,

For me, as a buyer’s agent, there is something wrong with getting the deal done if it is at the expense of my client. It’s the core value of agency to work in the client’s interest. There is a difference between being an agent (like a true buyer's agent in real estate or an attorney representing a client) and being a salesperson, who sells a product with no fiduciary duties to the person/people buying it.
Real estate "agents" who are not taking care of their client in so they can get done and get paid are shirking their duty. Mortgage brokers are responsible to the lender and the lender is responsible to the investors.
When so-called “professionals” rush to the closing table, things get sloppy and people get hurt.

I find it hard to understand the concept of blaming a mortgage broker for getting into a loan that a buyer can't afford. Can someone please explain to me how anyone can take on a debt that they cannot afford? Buyers should have a good idea of what they spend every month and what they are bringing home at their jobs. There's been a lot of finger pointing with this whole mortgage crisis, but I feel most of the blame should be on the buyers who borrowed more than they could afford and who took out riskier loans. Nobody put a gun to your head to make you sign off on a loan. It's your job to educate yourself on the mortgage process and your different options. I know that when i bought my house, i asked a lot of questions and made sure i had a full understanding of what my payments would be.

If we all live within our means this subprime lending issue would be out of question; our capitalist system has the tendency to assume we are all smart and that the sky is anybody's limit. It is time we learned to make projections that are palpable not quixotic othewise this quagmare would be a revovlving cycle or else stitch in time.

it's so easy to look back and say, wow this market was over priced. if the market had kept going up, the "friend" who gave you that extra push to buy that perfect house would be a hero. Most poeple are buying their first house on 90%- 95% margin (evil stockmarket term in a down market), its just that in the last year the music stopped and many good people got squeezed. State of Maryland for example will give first time buyers 9k for a 300k house with no money down. Leverage is what makes buying a home so profitable in the long.