More assistance for biggest groups of buyers
Both candidates in the November presidential election did little to offer a significant national housing policy, let alone cater to the needs — and deal with the abuses — of seniors and minorities, the largest groups of homebuyers.
Housing is critical to the economy, so why not target and assist the people who are going to fuel that fire?
The National Association of Realtors reports that more than one-third of all first-time homebuyers were members of a racial or ethnic minority, indicating the huge purchasing potential of minorities.
What most surveys don’t reveal is that the majority of abuses in real estate and lending continue to involve minorities, which includes the growing senior population.
In the home mortgage business, historically those looking to make a fast buck have circled the first and last rungs of the housing ladder, seeking to nail the least suspecting group of borrowers who have the greatest ability to afford a home.
Think like a crook for a moment, and consider the possibilities …
First, you have a huge group of “last-time buyers” who are not familiar with the terms or the plethora of loan programs available today. These folks have had no need, nor interest, in researching loans over the past 20 years because they’ve had no intention of moving. But they have a ton of cash and have surfaced to find themselves in the current maze of loan opportunities that are foreign to their borrowing background.
Then, you have a huge group of minority buyers — and they are not just first-timers. I recently interviewed a borrower, a native of El Salvador, who was pressured into abandoning his fixed-rate loan for a higher adjustable-rate deal that left him with a lump-sum payment of $95,000 after nearly 20 years of payments on a $105,000 loan.
“I have to think my Latino background had something to do with it,” Roberto said. “She just kept pressuring me and pressuring me with deadlines. She said if I signed by the end of the month I would be able to save a mortgage payment.”
Roberto was seeking to lower his monthly mortgage payment plus pay off approximately $6,000 in consumer debt. He has a good job with the postal service and makes timely payments on all money he owes.
“The loan person continued to tell me that I was the only one of her clients who was second-guessing this deal,” Roberto said. “I was skeptical and kept insisting that all this be put in writing so I could really understand it. But she kept telling me this was the best way for me to save a lot money. One day she came over with the paperwork for me to sign up. I ended up signing it. She didn’t break my hand or anything, but there was a lot of verbal pressure.”
Roberto is not alone. In a report on abusive lending, the federal government recommended that increased consumer education and disclosures about the lending process would cut down on abusive lending.
It seems that every time a new loan program makes sense and helps hundreds of consumers, a scammer jumps into the middle of the scene, turning the program into an absolute mess that should be avoided at all costs. Then, the program is revamped and reissued. For example, government loans used to be fully assumable, with virtually no requirements. Great wrinkle, until the equity skimmers came in and found a way to steal hard-earned equity. Now the guidelines to assume are as stringent as refinancing a loan.
It used to be that intentional deception centered on equity-skimming con artists who assumed mortgages and quit making payments. When the mortgage holder foreclosed on the loan, the lender sought full payment from the initial borrower — typically an innocent veteran or senior who was left holding the bag. Now it seems more signs of deceit can be found at application, closing and everywhere in between.
How do you explain equity skimming to a senior — or misleading loan reps to an immigrant who has always dreamed about buying a home in America?
And I thought just qualifying for a loan was tough.
Tom Kelly, former real estate editor for The Seattle Times, is a syndicated columnist and talk-show host.
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