Predatory Lending is at the Core of Foreclosure Problems

March 20th, 2009 | Tags: Foreclosure Data

With each passing day it is clear that predatory lending is at the core of foreclosure problems.

Small houses are one by one going up for sale in Arlington and Bennington – either single storey or at the most double storey standing back from the streets. The one in Sunderland is a green Victorian styled one near a semi rural neighbourhood. All these houses are going to be sold. The lender holding these has foreclosed upon their mortgages. A notice of sale has been advertised in Public Notices section saying that the initial mortgage holder is no longer the firm that is now in possession of the mortgage.

From the advertisements it appears that each of the original mortgages has coalesced and then sold to other servicing firms. Finally they all landed up in the investment list of the jumbo banks of the country.

During the last ten years value of property had been increasing by leaps and bounds. This had made each successive mortgage buyer think that they were doing the right profitable thing in investing. There was an erroneous notion that the bubble would go on ballooning and never burst. Actually these banks were gambling and relying on the fact that the borrowers would not default – at least not en masse.

The housing market has collapsed and the foreclosure tidal wave sweeping through the country is being reflected in its mini edition in Bennington County. The sub-prime mortgage market has crumbled like a house of cards. Those who could not qualify for prime mortgages with many conditions attached were tempted and smart talked into taking these dangerous risky loans. The credit ratings were not checked and there was no insurance cover.

The borrowers were mostly trusting, gullible and unsophisticated whose only wish was to own a house. Teaser rates were offered. Often no down payment was required and the borrowers fell for the trap of floating interest rates. They were made to understand that it would float down and never go up. But when the opposite happened the borrowers failed to continue and the deluge of foreclosures began. The lenders however had not gambled that it would happen at this rate.

A simple search on the Google shows a plethora of consumers complaining against most of the original mortgage companies. In 1996 a mortgage company agreed to payment of $325 as settlement in a lawsuit that had accused it of predatory practices.