Comments on Arizona Republic's Article, "Bankers fault themselves in meltdown"

The pen is mightier than the sword! After reading the article, Bankers fault themselves in meltdown" I had to send in my 2 cents. I believe the article and research behind it shows how the banking industry is still in denial and does not understand what they did to us! My letter to the republic writer, Russ Wiles is below.

Russ,
Thank you for your article, "Bankers fault themselves in Meltdown." I am glad to see more attention to this subject. However, I believe the bankers are still in denial about what happened and thus making things worse.
I am a valley Realtor and have been since 1995. I was in the trenches and my experiences over the past few years guide me to these beliefs.
This meltdown has can be blamed on many groups, including us Realtors, however, I believe the largest issues lie with the lending industry. I don't believe it was the pressure for home ownership that caused the meltdown, but the pressure for bank fraud. I don't believe interest only loans are the problem, nor do I believe 100% financing is the issue. When we look at 2 example buyers in 2007, both buying $300,000 home. If one was interest only, then 2 years later they owe about $292,000. At the same time another buyer puts 10% down and 2 years later owes, $263,000. In each case when the homeowner finds their home is now worth $140,000, they begin to question why they are working so hard to make these payments. They also begin to question why the value was so high and believe they have been scammed. Simple issues of life come along and push them over the edge to short sale, loan modification or foreclosure.
BUT WHY DID PRICES CLIMB SO HIGH? What I saw and what I believe is the following:
Loan officers started pushing "Sub Prime Loans" they make more money on them.
"Quasi Investors" stared buying 5 to 10 homes thinking they could flip them and strike it rich.
Demand for Sub Prime Loans increased because of Wall Street FRAUD.
Values went up to a point where most could not qualify without a "liar" loan, and most purchased liar loans not because they knew they were, but because the unlicensed loan officer sold them that loan. They make more money and can sell a larger loan amount in this case for this buyer.
Appraisers used comps from totally unrelated neighborhoods to get values higher.
People were making tons of money so the "rush for real estate" exacerbated things.
With this value run lasting about 4 years, even the biggest skeptical gave in to what was happening.
The only way to stop it was for lenders to stop lending. They did and that fed to the crash. Right now we are in a huge recovery. It has started in the lower end price ranges, but is quickly moving to higher value homes. Supply of Single Family Homes is 29,603 there are 16,033 pending home and 25,407 have closed escrow so far this year. It is easy to see the numbers are looking better. The inventory level is below 4 months when looking at the past months closings and right at 5 months when looking at closed YTD. We are in recovery. But, due to stricter mortgage and appraisal rules today, values continue to decline. WHICH IS HURTING THE BANKS MORE THAN ANYONE ELSE, except the tax payer.

Wow, I think I got off track. Lastly, I just want to say, when I look at what the bankers say:
1. "top answer... lax loan-underwriting standards" I say, BS, it was FRAUDULENT use of those standards by un-licensed loan officers.
2. "next most common response...political focus on encouraging home ownership" NO one told you to go to the masses and sell them fraudulent loans to increase home ownership. There were plenty of other options that would not have run up the market.
3. Then, "lax oversight of the mortgage industry." Finally, this should be number 1 through 7! Bingo!
The "unreliable and dishonest borrowers" that I mostly experienced then and now with the short sales, were investors! As I called them, "Quasi Investors" which is a term I use for someone that is not in the financial position to be an investor.
So many blame the public, I mean the borrower, for not reading loan documents. How many people do you think read their: health insurance plan, life insurance policy, auto insurance policy, prospectus for every company they invest in, research on their 401K and all related documents. I would believe the number of Americans who read ALL these documents would be in the less than 1% range. How can you blame a borrower. They get 2 weeks worth of solid reading and have to do it in 1 hour!!!! Oh and the mortgage company is usually getting those documents to title late, so they are rushed to get in and sign to close on time.
Anyway, I hope we can stop blaming issues that did not cause this problem. Focus on the ones that did and realize, when the market is hot is when you should make it more difficult to get approved. When the market is hot is when appraisers should be more stringent. Right now we need 100% financing, we need to take into consideration the difference between a trashed REO or Short Sale compared to a nice home when appraisals are done.

That's it, HAPPY MOTHER'S DAY!

Thank You and Make It A GREAT Day,

Jeff Cameron
Keller Williams Integrity First
480-502-7699
Jeff@AzREOConnection.com
www.TheCameronTeam.com
www.ArizonaBankDeals.com