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Merlin Jetton: "I have read that banks in the mortgage business, especially the ones serving lower income communities, were pressured by the government into making more subprime loans. Also, there were organizations like ACORN watching bank lending practices and reporting banks ..."
Right. I understand that, as well, and from the same sources and others in agreement on that point. The way the mortgage business intersects housing, though, is that realtors often have preferred partnerships with banks, sometimes more or less formal or informal, depending on state laws, etc. Here in Michigan, collusion is looked down on, but realtors get nice gifts to help them remember the names of mortgage brokers. As a real estate agent 2002-2003, I got a couple of beautiful desktop appointment books, a few more vest pocket minders, and such like, from mortgage brokers. Mortgage brokers assemble the paperwork and shop the loan to banks or other lending entitites. The real estate agent finds a broker who finds a lender. Sometimes there are two realtors, the seller's agent and a buyer's agent. All of these people have an incentive to see the deal go through. No one wants to see the buyer go somewhere else.
As housing prices climbed. the incentive to sell one home and buy another was real for the homeowner. The best part was the creative financing that let you put cash in your pocket and still have a nice line of home equity to draw on if you bought the home at less than its nominal "market value." Again, here in Michigan, that market value was established by a state-licensed housing appraiser. A realtor (or anyone) could come up with about the same numbers, but only the state-licensed housing appraiser could give the state-licensed mortgage lender the official estimate of market value, upon which is based the property tax. (Ah! now we come to it, eh?) Property taxes are "local" but the rules are defined by the state government. Property taxes are generally based on about one-half of the market value of a home. See... everyone wins! ... So, there is really no reason to look too closely as long as most of the paperwork lines up with expectations.
When we started looking at homes in the mid-1980s... well, actually, when I was kid in the 1960s, the estimated value for your home was one year's gross income for the family. Then, in the 1980s, it was double that.... then triple... Lenders were falling over themselves to sign mortgage loans.... My wife was needling me by reminding me that my $30 per hour for six months did not equal her $30,000 a year for 12 months. So, that's $60k at a time when realtors wanted to put us into newly built houses at $165 and $200,000, We were happy to be in an $89,000 Cape Cod for $10,000 down. By the time I held a realtor's license in 2002, you could buy a house with 1% down and roll the closing costs into the mortgage. That wasn't ACORN's idea.
So, yes, Merlin, I agree with you that there is blame to go around, all the way around, but that means, all the way around. Don't stop passing the dish with the in-laws. Everyone gets a heaping helping.
(Edited by Michael E. Marotta on 10/13, 7:34pm)
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