Today I find it difficult to watch the TV news or read a newspaper article when it is speaking about the mortgage industry. I really do not know where these people get their facts as for the most part they are way off base. In episode one I spoke about a Bank L/O and Broker L/O and I see that many of you did not realize this based upon the response. The real bomb shell in this, in a head to head comparison a Bank L/O is not required to have a current DRE or MNLS license to do the same job that the Broker L/O is doing. How can this be?
There is a loan modification show moving around the country that is trying to help people that are in or near foreclosure. The sad reality is this, 80% of the people that wait days to speak to a consular will not even qualify for the Obama refinance / loan modification relief plan. The frontend debt to income ratio is so low that most of us with our reduced income have no chance of qualifying. The front end ratio is your gross income as it equates to your house payment, PITI. So sadly most of these people will not get any relief.
I explained in Episode One that a Bank L/o is no different that a Broker L/O so that you understood that banks sell loans. It is not personal it is business, business without a face which is bad in my opinion. Banks make money from loan fees not loan interest. The interest model went out the window several years ago. Yes there is always the exception but if your loan is 417,000 or less then the banks will sell your loan. The Banks sell the loan or loan note to the fat cats on Wall Street. If you remove the emotion from the term “Wall Street Fat Cat” you would realize that they are speaking about you and me. We invest our 401K fund accounts and if you closely many of them have a real estate piece in them. Imagine that! So to some degree you own your own mortgage.
So here is the problem that everyone needs to understand. Banks today for conforming loans are nothing more than Mortgage Brokers. They fund the loans themselves and then sell the loans off and setup a servicing agreement so it appears that your loan was never sold. It is smoke and mirrors!
If your Bank held the note to your home mortgage then they should be able to modify your loan without deal. The reality is that the Banks do not own the Mortgage notes so they have to request modification approval. The Banks are the service providers for the note holders and part of being a service provider for the note holder is they have to do the dirty work and foreclose on people.
When you go to work you expect to get paid, well so does the note holder aka 401K Real Estate Fund. As long as mortgages are being paid the system works and everyone benefits. We have good credit, build equity and our 401K investments build equity too. It is all good as we have money in our pockets and we see our investments going up. The problem is the note holders want to be paid for them working for you just as you want to be paid when you work for an employer.
Loan modifications do not work because they hurt everyone that is invested in a Real Estate Fund or owns Real Estate. If Banks are not allowed to foreclose on distressed property then they can not recoup their money lent out so money tightens up. The tighter the money the more it hurts Real Estate Values and Real Estate Funds.
In the current course of action our 401K’s will continue to go down just like our Real Estate values. Some people were depending on their Real Restate holdings to retire. What a surprise they must be faced with now.
The Banks will not lose money no matter what direction they choice to go. If they foreclose hey will make money and if they hold off on foreclosures there will be a backdoor deal somewhere that pays them off some how some way. Is it possible the FDIC? Just a thought but please watch the below video link.
So all of this sounds horrible and it is but the first wave of people to lose their homes are now eligible for a new mortgage today. This is our system which is not prefect but it works equally for everyone. It is time for the healing to begin and mortgage rates in the low 4% range and 1980 home values are unbelievable. The so called “Fat Cats” know this and continue to buy up houses in alarming quantities. Do you think they can all but set the price for a home in the future? So who will pay in the end, that’s right, you and me.