Stimulus Questions No One is Asking
Amid the frenzy of homeowners facing foreclosure, potential buyers struggling to obtain
loans and banks,
lenders and realtors trying to stay afloat, I feel like there are lots of questions that no one is asking! Correction, the regular guy on the street like the real estate professionals I deal with daily are asking. But no one is listening to them or answering their questions.
What Real Estate Professionals Say
Through my weekly radio show, podcast and website at
www.WeTalkRealEstate.com, we're hearing the same questions from both professionals in the industry and current and potential homeowners. Here are some of the most common ones:
1. How do you bail out people when 53% of
loan modifications are already back in foreclosure within 6 months?
2. If the majority of bad
loans come from folks who are pre-qualifying with no income, or no qualifying loans what do you do once they don't qualify?
3. I've got a good FICO score. Why is it taking so long for me to qualify?
FDIC head Sheila Bair has made the argument that modifying loans works, but only if the modifications are meaningful in the first place. Who is making this determination? What are the guidelines? It sure seems like it's still every
lender for them self—expect for the fact that we're giving them money and saying, "Do as you see fit!"
No Long-term Advantage to Current Loan Modifications
Where is the consistency? Where is there any meaningful interaction between the banks, the mortgage insurers, the lender, the credit scoring organizations, and (how's this for a novel idea?) the real estate professionals like myself? Between the time I spend working in my own business and the time spent with callers to my various shows and those on my social networking site at
www.WeTalk247.com, I can honestly say I've got my finger on the pulse of the real estate economy.
I've got clients with mega-high FICO scores who are waiting for months to get qualified! Yet, others are pre-qualifying with no income, don't end up getting the
loan in the end, and we've just wasted time. So who wants that empty house now? The banks sure don't want them!
Why Loan Modifications End in Default
When modifications don't truly reduce payment- chances are good they will end in default! Since there are no standards of mandates for
lenders in modifying loans, here is what we are ending up with.
Most home loan modifications:
- Result in higher payments
- Offer unaffordable terms that desperate homeowners accept
- Increase loan balances due to added fees and unpaid interest, or
- Leave homeowners owing more than the price of their home
Frankly, there is plenty of blame here for everyone: CEOs, banks, businesses and homeowners. The truth regarding homeowners who "didn't know what they were getting into" is usually that they just heard what they wanted to hear. They wanted loan approval and a home. They didn't look at possible interest rate adjustments and future ability to pay.
As a real estate professional, I go out of my way to educate my clients, and so do most of my peers. But you can't make folks hear what they don't want to hear. It's given my profession a bad rap.
Here's the bottom line. Until these huge issues are addresses, the loan modifications won't have the long terms results desired. About half will continue to end in default.
Those of us in the industry every day have a perspective that no seems to be listening to. In order to solve these problems loan modifications need to be deep, realistic and long term. Want to know what else needs to be done? Dare to listen to the callers on my show. We've got some practical solutions for homeowners, real estate professionals and everyone currently affected.
Are you listening?
Office of the Comptroller of the Currency show that nearly 55% of loan modifications end up in default within 6 months.
Butch Grimes Real Estate guru, community activist, renowned industry leader whose books, national tours and educational approach to real estate and technology have made him a sought after figure in the California and national real estate markets.
