The Foreclosure Crisis

There is a lot in the news these days about the real estate industry and the breath-taking number of home foreclosures. As the number of foreclosures spiraled upward nationally, Washington was said to be relatively protected from this trend. We are now however rapidly climbing the ladder of state rankings in number of foreclosures per capita.There are two aspects of this crisis that receive a great deal of attention.
First the lending practices of banks are roundly assailed now. Our legislature just passed laws curtailing certain home lending practices of state regulated institutions. On the national level Fannie Mae and Freddie Mac just signed an agreement that says they will not accept a loans based on an appraisal originating at the bank. This will affect the industry and should serve to delay closings a bit, at least in the short term. In order to help a stagnating home lending industry the FHA has revised its rules.There has also been publicity about foreclosure rescue scams, the practice of preying on people going through a foreclosure by taking their title to their homes, paying off the defaulted mortgage, renting the home to the former owner and eventually evicting the former homeowner. This is structured so that the “rescuer” receives all of the equity in the house and the home owner receives nothing. This term our legislature passed laws closely controlling this activity.
Something that has received almost no attention is the research into fraudulent practices of borrowers, usually home buyers. The Mortgage Bankers Association announced a report that attributes a portion of the current crisis to fraudulent credit applications. The most frequent false statements in credit application in 2007 related to employment history and income. There were also a great number of false statements related to the borrower’s intention ot occupy the home. It should be anticipated that there will be heightened scrutiny in those areas.
The Foreclosure Crisis

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