By JIM SINCLAIR
With all the controversy surrounding subprime loans and the fate of companies such as New Century Financial of Irvine,which supposedly swept in on the mortgage market like a greedy landlord in a black cape,one wonders, who exactly is responsible for home foreclosures?
To read real estate news or feature articles in any local or national publication, one comes away with the clear and irrevocable idea that the guilt of foreclosure is primarily a stain on the hands of bankers and mortgage lenders.
But that certainly isn’t true. Although the press and the public in general have made bankers and lenders a convenient whipping boy for the sizeable increase in foreclosures across the nation, there is another party that is equally as responsible for the horrible plight of facing foreclosure.
That responsible party is the people inhabiting these jeopardized homes. They ultimately need to find a path for: a) figuring out a way to keep their home; b) salvaging their credit if they do give up their home; and c) finding an acceptable place for their families to live.
If foreclosure for you conjures up an image of an abused, down-and-out middle class family who has to declare bankruptcy and move in with mom, you’re close. But you’re missing part of the puzzle. Foreclosure also can strike a crushing blow to corporate executives and entrepreneurs who have suffered a business setback.
The reason you hear about the middle class woes and not these “high end” horror stories is simply because the upper middle class know where to find the resources to help them out of their situation and keep them from going all the way through foreclosure.
In my real estate sales, finance and investment firm, I provide confidential services for corporate executives, attorneys, entertainers and a variety of other professionals, some holding adjustable rate loans that will reset in the near future and some who missed a few payments and are in default.
The big difference between these higher income homeowners and the lower income homeowners is that when financial difficulties strike the wealthier elect to face the music a lot sooner. Many of them utilize the services of an experienced “short sale” real estate professional to sell their home on the open market to the highest bidder before the bank has the chance to take over.
Middle class homeowners often think they can sell their home the traditional way for top dollar in less than 90 days. They are plagued by crippling denial as the grim reality just gets worse until the hour glass runs out and there is no time left to retain their dignity.
Foreclosures are increasing both locally and nationally. In an early June speech, Fed Reserve Chairman Ben Bernake said, “We are likely to see further increases in delinquencies and foreclosures this year and next as many subprime adjustable-rate loans face interest-rate resets Foreclosures have risen to roughly double, nationally, what they were in 2005.”
Bernake, like so many other officials and pundits, is guilty of “mortgage speak.” To him and practically everyone else who gets behind a microphone or a computer, the reason for foreclosures are “subprime adjustable rate loans that face interest-rate resets.”
Didn’t flesh and blood consumers take out these loans? Didn’t they choose to purchase the largest investment of their life utilizing the help of the lowest bidding mortgage broker? Didn’t these responsible consumers get their home purchase advice from a mortgage or real estate “professional” who left their job at Wal-Mart the year before to pursue a more lucrative career in the booming real estate business? I wonder why they didn’t have a clue that rates could climb, home prices could drop and in two or three years they might be in a tough spot?
I will agree that we have an increasing foreclosure problem on our hands. But it’s not with the bankers, lenders, columnists and observers. It’s with the consumers who took out a loan. And the blame also is with those irresponsible homeowners who make excuses and play the victim instead of taking responsibility and action when hardship strikes. There always are options.
Jim Sinclair is chief executive of KKSD Inc., a real estate financing and investment firm in Anaheim Hills.
