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• Foreclosures Stem From New Loan Practices
  

  Foreclosures are rising. House prices are falling. City leaders, caught in the fallout, worry that the worst housing slump in 15 years will destroy neighborhoods.

  Just a few years ago, the same politicians were in the same neighborhoods, talking about how the increase in home ownership had stabilized older, urban areas and turned them into good places to invest.

  What happened? The housing turmoil that is roiling Providence and other cities results from a confluence of factors: historic changes in the real-estate industry, the drive toward home ownership for every American, low interest rates, exotic mortgages, unscrupulous lenders and lax regulators.

  They've all become entwined to create an industry driven by investors without the old safeguards that once protected consumers and communities. As foreclosures increase in city neighborhoods and the housing market deteriorates statewide, it has created concerns for every homeowner who is watching the value of his or her property depreciate.

  The roots of the developing crisis are in the evolution of the way Americans finance the purchase of houses. After World War II, the standard mortgage had a 30-year fixed rate and was granted by local banks to creditworthy borrowers. Traditional banks held the mortgages they made and collected the payments.

  That system was stable, but not very liquid, meaning that money and investment from the real-estate industry did not flow freely through the financial markets, leaving out investors. Wall Street's answer in the late 1970s was the creation of new products that allowed the lenders to bundle the mortgages they made and sell them to investors, who held the paper certificates and collected the payments. The securities could be traded among investors, creating a robust secondary mortgage market.

  The money the investors paid to the lenders to buy the packages of loans they originated was used by the banks to make more mortgages.

  For a while, the banks, investors and house buyers seemed to benefit. Market analysts said the liquidity in the mortgage industry improved the health of the U.S. economy. The risk of making and holding mortgages was shifted away from the banking system. Even consumer advocates signed on, saying it made more money available to more people at a lower cost.

  But what also evolved was a new industry of loan originators, whose role was solely to make the loans, package them and sell them to investors. They had less concern about credit risk than the bankers, who had to worry when they held the paper.

  Besides the Wall Street investors, government-sponsored agencies such as Fannie Mae, Freddie Mac and Ginnie Mae grew in the 1980s and 1990s into huge, ready buyers of mortgages.

  As the number of lenders expanded, the banks, which had lost market share, jumped deeper into the frenzy of making loans.

  The expansion of mortgage lending was further fueled early this decade by the national economic expansion, sparked by historically low interest rates. That put more money in more consumers' pockets, giving them down payments and closing costs to buy houses that previously had been just beyond their reach.

  And then there was the culture that said homeownership is the key to family stability and healthy neighborhoods. Everyone should be able to own a house, advocates said, trying to push the ownership rate in the country from about 66 percent toward 70 percent. Taking on debt was part of being a consumer, everyone was told. There was even a joke that made the rounds: "You're not a real American until you're'paying a 30-year mortgage."

  The new lenders, companies such as New Century Financial and American Home Mortgage, also created new products for potential buyers who couldn't meet the requirements of the traditional 15-year, 30-year or adjustable-rate mortgages. The exotic new products all came under the umbrella of what were called subprime loans. The name was derived from the term "prime," used to describe a bank's best, credit-worthy borrowers. Subprime meant more risky.

  The subprime loans allowed people with spotty credit or sketchy income to still borrow money to buy a house. Some of the products had little documentation requirements and low "teaser" rates designed to get buyers into a house, but then adjusted after a year or two to a higher rate.

  For a while, even the higher rates that cost a homeowner a bigger monthly payment were manageable. If the homeowner had trouble making the payment, he or she could always refinance into a new mortgage because house prices were appreciating rapidly, allowing the homeowner to use the collateral to borrow more money.

  The subprime mortgage originators made more and more loans because Wall Street's appetite for securitized bundles of mortgages seemed insatiable.

  There was also a new breed of unscrupulous loan originators who emerged to meet the demand. They targeted lower-income, minority, urban borrowers, playing on people's dreams of pulling their families into their own homes by borrowing money through exotic products. These predatory lenders zeroed in on specific lower-income neighborhoods, where word of mouth spread quickly about available money. Some of the borrowers were not financially sophisticated and had no business pledging to pay back mortgages they couldnÂ’t afford.

  Still, they signed the papers anyway.The mortgages were made and resold to investors.

  The quality of the loans being packaged for resale was supposed to be monitored by the rating agencies, which ranked the creditworthiness of mortgage securities. But with so many people making so much money, and seemingly no top to the housing market, nobody was looking too closely.

  The government regulators were also missing from the system of checks and balances.

  While traditional banks remain highly supervised to protect the taxpayer-backed deposits used to make the loans, two other groups of loan originators that grew up during the housing boom had less oversight.

  The big banks' mortgage lending arms, such as HSBC Finance and CitiFinancial, are subject to only limited oversight by federal regulators. And the independent mortgage companies that sell loans to Wall Street or one of the government-sponsored agencies didn't have any oversight at all.

  The housing industry continued to expand through 2006, when it peaked, and then, like all housing cycles, began to contract, pushing down housing prices. Loans began to go unpaid. And borrowers who couldn't meet the monthly payments could no longer refinance to cover the debt because the property had slipped in value, leaving less collateral to borrow against.

  As the national economy has softened, more loans have fallen delinquent, meaning they are past due at least 30 days. The delinquencies have led to foreclosures, with many concentrated in city neighborhoods. Out-of-state banks and investment companies have become the new owners of vacant, foreclosed properties.

  Many of the subprime lenders have gone bankrupt. Losses among the investors who bought the securitized packages of loans have taken money out of the economy, tightening credit for borrowers.

  The housing industry is now in distress, a victim of the confluence of changes over time.

  By some estimates, up to 2 million homeowners in the United States are at risk of foreclosure.

  The developing crisis is visible in city neighborhoods, the same neighborhoods that city leaders once promoted as signs of economic and social progress, but now are marked by abandoned property.

  It is a crisis that's been a long time building, and it will take a long while for history to correct.

  Are you a victim of Predatory Lending or  Mortgage broker Fraud?...

  Are you unable to refinance your Mortgage?
  
  Did you get an inflated appraisal? See: http://mortgage-home-loan-bank-fraud.com/first-american.htm 
  
  Were you charged single premium insurance?
  
  Were you charged High Fees?

  Are you being locked in by Prepayment Penalties?

  Were you charged Yield-Spread Premium? 

  There are many different ways that banks, lenders and brokers can trick homeowners into giving up their homes.

  There is a legal remedy to recover Truth In Lending Act violation fines, void the lenders security interest in the property and collect money damages.

  You may be a victim of Predatory Lending Practices...here are many different ways that banks, lenders and brokers can trick homeowners into giving up their homes.

  Find out more about how your Broker or Lender may have violated the Truth in Lending Act and other consumer protection laws...Click on this link: http://mortgage-home-loan-bank-fraud.com/report.html

• BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES
  

  FHA to implement new “FHASecure” refinancing product