Foreclosures

By J.G. Azarcon Esq.
I was watching TV local news and here comes this lady candidate opposing Rep. Albert Wynn of Prince Georges County, Maryland in the Democratic primary attacking the congressman for his vote on the bankruptcy reform law that passed last year insinuating that the law is responsible for the increase in home foreclosures.

This is one clear example of a politician opening her mouth without thinking. Bankruptcy reform tightened the qualifications for bankruptcy petitioners. By any stretch of imagination I am unable to see how this could lead to somebody to losing ones home.

I come face to face with many people who receive foreclosure notices. Some are able to save their houses with legal help. Others just do not have the financial ability to avail themselves of the relief available under the law.

You hear about sub prime mortgages as the cause of the turbulence in the housing industry. Why are many people losing now?

The story of this lady is very common. She works full time doing a blue collar job. Her son lives with her and contributes to the household expenses. Their combined incomes add up to three thousand dollars.
Mother and son are renters and never owned a house in America. The mother met a real estate agent in church who convinced her into buying a house. The thought of realizing the American dream was irresistible and she was excited about the real possibility of being called a homeowner.

The agent found a house for her. She remembers signing something but later claimed that the contract of sale bearing her signature had blank lines when it was presented to her for signature.

She told the agent how much she and her son earn per month. The agent introduced her to a mortgage broker who did not even demand any financial documentation nor personal information.

Several weeks later, her agent told her that she has to go to settlement on the purchase of the house and she must be prepared to proceed. When she learned that her estimated monthly payment would practically eat up her entire monthly income and that of her son, she balked.

Her real estate was not happy with her hesitation and she was told that if she did not go to settlement, she would face a lawsuit from the seller.

This lady sought an attorney for help. The attorney contacted the mortgage broker to find out if there was really a scheduled settlement. The attorney asked for an explanation how they could approve a loan and schedule a settlement when they have not even demanded any financial information from the borrower? Were they in compliance with lending regulations? If the purported loan requires around $3,000.00 in monthly mortgage, how can they expect the borrower such as this particular lady to meet her monthly obligations?
The attorney advised this lady not to go to settlement. After the attorneys communication to the mortgage broker, the brokers company notified the lady in writing that her loan was not approved.

But in many other cases, buyer/borrowers are granted loans with scant or no documentation at all. Some, even cab drivers, buy two or three real estate properties. Many of the loans were doomed to fail from the start. How can you keep your home if your mortgage is $3,000.00 and you are just making a few dollars a month over your mortgage payment? Some manage to hang on for a few months by taking in renters but ultimately fall short when renters leave.

Those with more money to spare are able to maintain their payments for a while. The problem is that many of the loans structured for new home buyers had variable rates that allow for affordable payments in the initial few years but substantially increases thereafter. There were those who could smell the heavy financial burden that the mortgage would entail. Some say that they were assured by their real estate agent not to be concerned because the value of the property will go up and that they could refinance again. The optimistic expectations proved disastrously untrue.

Most of these people who are losing their homes are still working the same in jobs that they had when the bought their houses. I dont see how you could fault government in this foreclosure mess. It is the abuse by people in the front lines of the housing market that has caused tremors in the industry.