CNC Mortgage Blog

There is  no  single  cause on  which to blame the mortgage crisis in the United States that started towards the end of 2006. If you go to the site www.ml-implode.com you will see that as of today 241 institutions have stopped or seriously curtailed their mortgage lending activities. Several more entities are on the watch list.

With increasing real estate prices lenders wanted to get in on a “safe” and profitable business around the year 2000. Lending money to homeowners with a mortgage on the property to guarantee that the loan would be paid back seemed so simple and easy.

If a person had handled their finances more or less well, had an acceptable credit score and claimed to have sufficient income and assets, they could qualify for 100% financing to buy or refinance a home. All those terms “more or less, acceptable and claimed” were stretched to the limit. Borrowers wanted to buy homes and lenders were eager to lend them money, what a great combination!

The climate lent itself to all kinds of fraud and abuses.

Documents: Improved computers, printers and faxes facilitated the production of false W2 forms, paystubs and bank statements. Underwriters who worked for the lenders either delegated or were too busy to verify or question these documents. Or the investor’s guidelines didn’t require verification. Who did this? Almost all levels were involved; borrowers, loan officers, loan processors, account representatives, sales managers. At some institution even the underwriters received bonuses based on their closed loan volume.

Duped borrowers: Abuses were perpetrated on all kinds of borrowers. But minorities, with low levels of education and minimal resources were preyed upon. They bought overpriced houses from sellers who were frequently disguised as real estate agents. Properties were flipped, bought and resold quickly. Appraisers accepted the prices on purchase agreements. Borrowers who did not understand English signed their names on any document presented to them.

Since it is possible to have a single owner for a real estate brokerage, a mortgage brokerage, an appraisal company, an inspection company and a title company, all angles of the transaction could be accommodated to please the borrower and the lender.

When you are buying or refinancing you can choose the title company. You don’t have to accept the suggestion of the realtor or the loan officer.

If English is not your native language, look for a title company that has a closer or translator that speaks your language.

Of course people have been tricked into wrong mortgages, it is the borrowers responsibility to know what they are signing.

If you feel that you have been tricked or defrauded, bring your case to the Department of Commerce in Minnesota.

As mortgage brokers we try to make the mortgage origination process as simple and painless as possible. We do not benefit asking for unnecessary documents at the beginning of the loan application.

There are some standard documents that we know will be required by underwriters who will finally approve your loan. However, sometimes the bank will ask for additional documents. It is important that the borrower provide us with the request quickly for several reasons.

The banks are still in mortgage crisis mode. Banks are very nervous with new loans and all transactions are being looked at carefully. Appraisals are questioned, employment is verified, income is scrutinized. Banks are changing conditions on loans that are already approved. It is difficult to keep up with changes in conditions to approve loans so the faster a loan is closed the faster you will get your loan approved with the best conditions.

Please help your mortgage broker, loan officer or mortgage banker with documents quickly.