In todays home market, lenders have many homes in their “reo departments.” That is bank jargon for real estate owned. In other words, foreclosure properties.
Home drainage problems prevent huge numbers of homeowners everywhere in America from refinancing their homes just when they most need to.
Many homeowners are holding variable rate mortgages and need to refinance before interest rates on 30 year fixed rate mortgages go higher. As we all know, the lenders, investment bankers and all their chronies have already spent their profits and are looking for, and getting, free money from the Fed to buy their way back into the game.
It is much like a poker player being able to still borrow money from the house, after reckless abandon and bad play.
During boom real estate markets, inspectors and lenders gloss over, or simply do not discover, many home drainage problems with the homes being sold. This has given home sellers a license to be non-disclosure advocates. Everything has been good with the new home buyers until winter time comes, when home drainage problems resurface. This is what the new buyers of the home most do not want.
A very bad break for the home buyers since the homes drainage problems were actually pre-existing conditions and were well known home drainage conditions that were never disclosed to them prior to closing of escrow. This is home seller fraud in most states because of a state required home history and condition disclosure, that obligates homeowners to disclose the presence of, or past history of, home drainage problems, to include all groundwater problems, no matter what the sellers believe is the source of the problem. They will probably be wrong.
In our current home lending environment lenders will probably refuse to make the home loan without someone solving the home drainage problems. In the past decades there would have seldom been a problem with the buyers getting a price discount from the seller and not doing any drainage work prior to closing of escrow. The lenders only wanted the buyers and the sellers to acknowledge the problem and sign off, taking the lender off the hook with respect to that issue.
The lenders were selling the paper produced from the mortgage, faster than it took the ink to dry sometimes, so it seemed. They never worried. They were the Alfred E. Newman of banking, all rolled into one, as the poster child, standing there looking stupid saying; “what, me worry.” You remember the old Mad magazine character.
Many of these lender, characters, were not worried what so ever about getting the home back in a foreclosure, as they did not hold the note/mortgage in their portfolio. They had no further responsibility, and no ramifications from anyone for the note becoming bad debt. They just saw it as another profit picture. An opportunity. A new opportunity for them to make more money on the home, and pick up the poor folks equity that lost the home, if they had any.
The lender game is changing a little bit, but lenders will always have the upper hand, and the last call on the home transaction funding, if you want a loan from them.
Underwriting standards are getting rough however, and interest rates have remained high as the banks cost of using the money has dropped to less than .5%, which is the fed funds rate that the banks pay the federal reserve for having the honor of selling 5% loans to the public. Sweet business for them alright.
Down payments have gone up. The sub prime mortgage crisis was the first scape goat we had for public consumption and then what followed, was more trouble yet. It is, and was a landslide of bad attitudes, fraud, bad debt, bonus incentives for screwing up, so it seems, and squandered cash, all brought to you ladies and gentlemen from out friends at the local gambling hall we call Wall Street, where fat cats have shocked everyone back to their senses with their outrageous displayed ability to strip cash from our fingers, as we watch, hang on, fret, and eventually still lose that cash, and perhaps a string of rights and values as well.