The mortgage meltdown

  My naivite made me believe the story. The American dream. That every American that wanted to could and should own their own home. I bought into that dream. I shared that dream. I wanted people to be able to change their story and own part of the DREAM. I got my real estate license in 1996 and my first step was to buy my own house, which I did in 1997. And then it went from there. I bought my 2nd home in 1998 and turned the first one into a rental. Owning property was always on my radar and having rentals was a way for me to have a retirement and a way to pay for my son's college.

In 2000 I divorced my son's dad and realized that being a single mom and a Realtor was not a good mix for me. I decided to go into the lending side of real estate for more stable hours and specifically, weekends off! So in 2002 I became a Mortgage Broker by simply filling out an application. Unlike real estate, no license was required. That struck me as very odd but, whatever.

Fast forward to 2011. I have owned a total of 12 homes. I sold my first home for a loss in 2009. I took my first foreclosure in 2010. Currently I have a total of 9 pieces of real estate. I am behind on nearly every single home. I have struggled financially to make ends meet since 2009. My industry took a humongous nose dive after the mortgage collapse and I dipped into every investment/retirement I had in order to stay afloat.

I never, ever expected to be in this situation. The emotional roller coaster has been amazing. Add to it the burden I carry for my clients that are under water, behind on their mortgage or losing their home. It has felt overwhelming at times. My whole goal in being involved in real estate was to make a better life for myself and at the same time to help people become home owners and investors. It was all good until the summer of 2007 when the mortgage world began feeling the affects of the crazy lending.

I went as far as to take over payments for a past client who's mortgage had "recast" and she didn't know what to do. She had moved out of state and I offered to take over the property. I thought getting another piece of real estate was in my best interest and I didn't want to see her fall. The property was negatively cash flowing by $300/month when I took it over. My husband and I improved the property in a huge way. Thousands of dollars in landscaping, painting, and other various repairs. I still believed in real estate

Unfortuantely when I ran out of money in January of 2010 I had to give the house back to her. I had fallen behind on the mortgage because I was too proud to let her know that I was broke.  By then the property was only losing $150/month. I used the deposit money to cover the costs and pay the mortgage during the time that there wasn't a tenant. It was a bad situation.

I have a new understanding for the ramifications of what the government did along with wall street. The process of being behind on any payment is humiliating, distressing and devastating. So many of us bought into the idea that home ownership was truly for anybody. The lenders lowered their standards so much that I once helped an UNEMPLOYED person get a loan. Of course he had incredible credit scores and lots of assets but we did a NINA loan which is no income no asset. For this particular loan it was not required to list the income or assets. In fact, they went as far as to say DO NOT LIST ANYTHING in the income and asset statement.

Lending with no documentation was on the rise. Lender after lender would come into our offices and tell us how to "structure" loans so they would get approved. I understood this as part of the process. Credit score wasn't as big of a deal as people believed. Of course those with higher scores (680 or greater) would get into the best matrix of rates and loan-to-value.

Looking at the world from where I am currently sitting I can see how far my industry tipped. Stated income loans, also known as "liar's loans", were initially put in place for self employed individuals. The reasoning was their tax returns and documentation was much more complex than W2 employees. Besides, they had so many deductions who really knew their "true" income. As a self employed person you could deduct just about anything as a business expense. From the underwriting stand point it really did make sense to me.

When they came out with stated income loans for people who had a W2, I was surprised but jumped on the band wagon with all the other mortgage brokers out there.I mean, the whole idea was to help more people get a piece of the real estate action.  Looking back, this was the pivotal piece of the economic destruction that we have seen. This was the nail in the coffin for subprime mortgages. And the collapse of the real estate industry.

For nearly a decade real estate was booming. From 2005-2007 it seemed that the entire country was having a real estate frenzy. People who knew nothing about real estate were buying up houses with pure speculation of making huge profits. And many people made a lot of money. Others weren't so fortunate.

I was never big on expecting huge appreciation. And my real estate philosophy has been buy and hold. I have taught my clients to anticipate a 6% appreciation which was the case from 1968-2004. The 20-30% increase that was happening beyond 2004 had mostly to do with the loose lending guidelines. The availability of money. The fact that the government thought it would be better to increase home ownership.