Sub-prime and Specialty Loans was not “ghetto loans”

Many blamed the fall of the housing market on loans that were given to low and middle class borrowers who really could not afford them nicknamed “ghetto loans”.  Some, like me, who worked in the mortgage industry, was quick to say that the majority of those specialty loans were well outside of their credit score and income range.  The below article adds a little more creditability to my argument.

 “Renters accounted for 40% of families facing eviction from foreclosure in 2009, according to the National Low Income Housing Coalition. And unfortunately, they often hear about it from the bank, just weeks before the sale, says Janet Portman, an attorney and the managing editor of legal book publisher Nolo. "The landlord wants the tenant in there, paying rent," she says. The lack of notice was so pervasive that last year Congress passed the Protecting Tenants at Foreclosure Act, which gives tenants at least 90 days from the foreclosure sale to move out. (Previously, they had as few as 30 days, Portman says.) Provided the new owner doesn't want to live there, the law also lets legitimate tenants -- those who signed a lease before the sale and pay a market value rent, among other qualifications -- stay through the end of their lease.” (Grant, Kelli B., 12/08/2010, SmartMoney.com, 5 Things Your Landlord Won't Tell You, Retrieved from www.realestate.yahoo.com).

Many 1st time landlords or those who currently owned rental property were the first to be allowed access to these mortgages and were allowed to take advantage of this program which gave them clearance to purchase as many units as they wished.  Their objective was to purchase them, perform minimal rehab and then rent them out for enough money to cover not only the mortgage on the property but make a few dollars in between.  When the economy began to sway, renters began losing their jobs and with renters who defaulted on their obligations, the bubble began to bust.  Many of those who were left to defend for themselves were forced to seek other remedies; all the while property owners with multiple properties were falling behind on the mortgage and could not get caught up.

While it must be mentioned that some of the argument of individuals getting homes that really could not afford is true, it is not the total reason for the bursting of the housing bubble as many may claim.  It was a failure to plan that caused the worst housing disaster that we may have ever seen.  Owners failing to plan for this contingency, borrowers failing to plan ahead and banks failing to pay attention to all of the warning signs.  Many had a role in this disaster and most refuse to accept that but all of us need to understand what happen to possibly prevent it from happening again.   

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