It’s Not Over – Sharks and Wolves Find New Ways to Game the System

The front cover of the current issue of Business Week (December 1) states “The Subprime Wolves are Back and They’re Feeding Off the Bailout.”

This article will really get your blood boiling. What’s happening is that many of the same mortgage brokers whose aggressive, sometimes illegal, and pure greed lead to the real estate run-up and crash are at it again. But this time, they are jumping on FHA loans.

Here’s an example that pretty well sums it up:

A condo developer in South Florida sets up a mortgage company to finance loans for buyers of his condo units through FHA loans. His mortgage company made 1855 FHA loans since November 2006. 923 of those loans are in default proceedings as of October 31.

More Foreclosures Ahead

The Business Week article describes other abuses and how the FHA is overwhelmed and has difficulty properly reviewing applications. BW exposes mortgage brokers who were put out of business in several states setting up shop with new companies to push FHA loans. They are using the same tactics they did in pushing subprime loans. The result – a new wave of foreclosures. With FHA loans numbering 1 in 4 of new loans issued, this will lead to more foreclosures. Not what we need at all. These loans are guaranteed by the US Government, so yes, you and me will be paying.

There is a lot of really good information in this article. You still may be able to get a copy of the magazine or check it out at your local library. A podcast version is available at the Business Week webiste.

The Daytona Beach real estate market is rocked with short sales and foreclosures. We don’t need anymore. I’m sending a note to my congressman to ask him to read the article and take action. The sharks and wolves need to be stopped.