Lax Rules of Mortgage Brokers Have Been a Cause for the Foreclosure Crisis
January 12th, 2009
At last states have begun to tighten rules for the brokers dealing with mortgages. These lax rules have been one of the primary causes of the foreclosure crisis.
In Indiana one of the easiest things in life had been to become a mortgage broker. No antecedents were checked and no tests made to find out if the person had attended the number of classes required to qualify and understand the complexities of the mortgage game. All that a brokerage firm had to do was to deposit the necessary fee of $200 to get a license from the state and start operating by linking lenders with borrowers. Todd Rokita sarcastically commented, “It was kind of like the wild, wild west out there. You came in, you paid a small fee and boom – you were a mortgage broker.”
But the halcyon days are over and Indiana has set up hurdles for aspiring brokers. Many other states are toeing this line of action to rein in the brokers and also to crack down on fraudulent brokers. The latter are being blamed for having played a significant role in the foreclosure crisis. Since Indiana has started cracking down on brokers, more than 1,000 licenses have been either surrendered or revoked.
Congress has taken steps to impose more conditions on lenders – background checks and training in ethics. The jumbo banks like Wachovia, Bank of America as well as National City have stopped operating loans via brokers and are relying on their own loan officers.
Many however are critical that the move has come too late. Had it been earlier this predatory lending practice would have been nipped in the bud. Colorado and Alaska were the last two zones without brokerage rules but these two states have also started imposing restrictions from 2008.
Pundits opine that the worst is not over and it is apprehended that nearly 2.2 million borrowers will be foreclosed upon in 2009. The houses near to these foreclosed units will see drastic drops in their values – the decrease could be to the tune of $350 billion.
This does not bode well for regions like Martindale-Brightwood in Indianapolis where neat and trim houses are sitting next to crumbling houses with overgrown gardens and peeling plaster, left vacant by foreclosures. The empty houses have become cesspools of disease and crime. Foreclosures are spreading like a virus.
- Bouncing Cheques Issued by Title Companies Lead to Foreclosures
- Increase in Foreclosures Prompting Class Action Legal Suits
- Avoiding Foreclosures by Walking Away From Loans are not Without Problems
- Foreclosure Assistance Being Taken on Tour by Housing Advocate
- Washington Mutual, the Symbol of the Foreclosure Crisis, Continues to be in Trouble
- The Consequences of not Paying Mortgages Can be Grim
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