In the beginning, the media placed blame squarely on the lenders. The intellects of the industry finally spoke out and sited the truth that everyone involved was to blame for the sub prime free for all, including consumers. As a Realtor and at one time a loan officer, I have a keen insight on how things played out. It is real easy to define what happened;
1. The investors/banks backed by the now well known Fannie and Freddie offered loan products with low considerations for credit score, financial stability and proof of income.
2. Loan officers are brokers between the consumer and the loan products offered. Banks and investors offered loan products through said loan officers. Consumers came to loan officers with different personal financial situations and the loan officer produced a loan that the consumer required based on the light requirements from banks.
3. The creative loan products were offered, and taken by consumers, under the thinking that they could buy now with an adjustable rate or interest only mortgage in hopes their financial situation would improve in the coming few years, their property value would rise and they would refinance to a fixed rate.
4. The scenario in #3 above worked fine for years without a problem, then the economy drops from beneath us causing property values to fall thus disallowing a home owner to refinance.
Those are the simple basic reasons for our mess, and in reality this is how our economy works, we are a boom and bust economy, and have been for quite some time. In the early 1990’s we saw foreclosures rise in the same manner and the real estate industry along with consumers thrived on the number of sales at good values. Those homeowners eventually sold, made some money and bought upward to their next larger home. The economy as far as I remember has been swelling and shrinking and it does not usually mean doom and gloom. It’s very much a geographic opinion when I say this in that it can, and does, depend upon the local micro-economy of a given state or city.
As a buyer of real estate this is the time to scoop up property will it’s on the low end. As a Realtor it’s a time to switch gears to where the market leads me, to foreclosures, leases also finding creative ways to help people repair their credit score t match new lending requirements. This is also a time to reset the housing market, refinance home owners into fixed rates and start fresh so we’ll again see equity in homeownership.
What we are seeing in 2009 has been brewing for a while and actually began in some areas 4 years ago but we have seen the recession spread so fast that it’s just recently been publicized within the past year or so. As it has is the past, this market will get past us and many will out for the better with a new house, new jobs and new small businesses.