Ok I didn't have time to read this whole entire thread but wanted to throw in a few cents.
If we first consider some of the programs that brought our housing market and economy to where it is today, I think some light might be shed on this subject.
1. Probably the program I have always most hated.. The Option ARM. This loan was originally designed for the ultra-rich and high commissioned executives. In the middle of the housing boom as rates started to raise the tiniest bit, lenders loosened their qualifications on this program. So much so that even Alt-A lenders were offering it!!!
Bottom line with that is if you don't have perfect credit and payment history, you should not be acquiring a negative amortization loan!
2. Because a certain someone wanted every American owning a house, sub-prime lenders were allowing the shadiest of borrowers to obtain an equally shady loan. These were typically ARMs with high caps. Well it's a few years later and their loans are adjusting! (the ones that were even able to make it past their second payment) Now look at another plethora of foreclosures.
3. Everybody got in the mortgage and real estate game. These positions are typically commission only and designed for people educated on how the industry, the economy and how money works. This led to misinformation, TONS OF LOAN FRAUD, and ultimately the highest amount of foreclosures the world has ever seen.
Now keep in mind that lenders went crazy with programs that barely had any underwriting guidelines whatsoever, loan officers didn't know what they were doing, and borrowers were living on the dream of owning their own home and being able to pull more cash out than they would make in two years because of inflated home values. These are all ingredients to starve a future economy and **** on people who were lied to by supposed 'professionals'.
Because of all these things we see tons of banks have closed that employed thousands of people that were not properly trained in the first place. Portfolio investors losing their asses on these lenders original business. Thousands of people that have either no job, no opportunity besides taco bell and nobody has any economic security. Not to mention the thousands that are WAY upside down on their homes.
Regardless of all this depressing turmoil... there is recourse. The banks do not want to lose any more money than they can prevent. People do not want to lose their homes because of frivolous companies and unsound loans. And our economy cannot take another large hit.
There is something called Loan Modification. This is where a borrower cannot qualify for a new loan but still has the ability to make some sort of reasonable payment. They have two options.. 1) try to negotiate with their lender to modify their loan themselves or 2) hire someone at a typically lower than refinance fee rate to do this for them at a much higher success rate.
A borrower may be so incredibly upside down on their home they have to short sell. At this point in time there is no other option unless you want to ruin your credit ultimately.
Or at last breathe.. file for bankruptcy and use your American right at a second chance.
I think it has long been agreed the finance industry needs more regulations. These are not necessarily regulations on the people trying to acquire loans, but economical and ethical regulations on lending companies to prevent anything like this from ever happening again...
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