How to Solve the Foreclosure Crises
This paper will discuss the impact federal legislation regarding the qualifications necessary for mortgage lenders, loan originators, mortgage consumers and high school students. These qualifications include mandated background checks for lenders, loan originators as well as others that impact the mortgage process including title agents and appraisers. Additional requirements for all involved with providing loans to consumers include completing and passing required education and testing. These steps and individual bonding are required before anyone providing mortgage information to a consumer is given a license to do so. Education and testing of all mortgage consumers prior to closing a loan should also be required. Mortgage consumers be educated that deficiency balances will be required as part of the mortgage loan/foreclosure process. Secondary educational institutions should include education regarding budget management to students might have on the reduction of foreclosures moving forward. These flaws will be identified and discussed. Recommendations will be included.
In 1973 The Real Estate and Settlement Procedures Act, RESPA, was formed to help consumers become aware of the costs associated with a loan and therefore become informed consumers. RESPA is a federal law and therefore sets specific guidelines for lenders to provide within three days of taking an application. RESPA was modified in 2009. Changes to RESPA were published in November of 2009. These changes take effect January 1, 2010. As with most Acts it had more bark than bite. Departments are underfunded and require states supply auditors. In addition states require lenders, brokers or bankers, to follow separate guidelines and licenses. Federally charted lenders fall into a separate category. Some state required originator background checks, others licensing fees.
Loan Originator Education
Ohio was the state that mandated loan originators pass formal training, testing and background checks Foreclosed loans in the state of Ohio were investigated by the attorney generals office for fraud. Other states soon followed with their own requirements. Colorado was the first state to require loan originator bonding. Regardless of state or federal mandate the consumer was protected by the mandates that afforded consumers the most protection.
Loan Consumer Education
RESPA and several counties in different states required consumer education. Little to no education was given to the consumer. Families tried to educate themselves. In many cases issues of late payments, approaching debt or fundamental changes in family situations faded to the wayside. The dream of home ownership now became the right of ownership. Increasing home values allowed people to make decision that they may not have normally done. The sudden decrease in property value, as discussed later, caused many consumers to stop making...