A few weeks ago we asked you to tell us what
you were seeing out there; stories about the effects of the subprime debacle
and the credit crunch on those who are on the ground and feeling the real impact.
If you are a delinquent borrower, what have been your experiences in trying
to work with your lender? What impact has tightened credit had on pending house
sales? What is behind the massive cancellations of home sale contracts reported
by new home builders?
We heard from you loud and clear.
We have had dozens of responses from consumers, mortgage brokers, former lenders,
real estate agents, and investors. Some people wrote one line, others submitted
The replies we received ranged from well reasoned and analytical to extremely
emotional. In the latter group words gushed out without regard to grammar or
spelling and in many cases will require a lot of translation; you can almost
see the tears on the "paper."
Consumers admit that they stretched to buy their homes or that perhaps they
were not as careful as they should have been in vetting the companies they were
borrowing from or the individuals who were charged with placing their loans.
Some of the people writing were begging for help, others have simply given up
but wanted someone to hear their story. Most sad are those people who have lost
or are about to lose their homes yet still have no idea what hit them.
So far the responses have broken down into several categories:
Reports from debtors who are trying to resolve individual problems with mortgage
Stories about victimization from predatory lending;
Anecdotes from investors and real estate agents who are trying to work with
lenders on short sales and/or purchasing owned real estate;
One thing we did not expect but which dominated much of the correspondence
is the lack of understanding of the home buying and/or lending processes that
still exists. Even people with experience in real estate or lending seemed to
have closed their eyes and walked into a wall when buying their own homes.
A lot of letters that sort of fell into the above category were from people
who did understand the risks inherent in what they were doing but they deluded
themselves into believing the boom would last longer or that their rates wouldn't
jump so much.
There was also a lot of finger-pointing. Consumers blaming
real estate agents for selling them too much house; mortgage brokers accusing
lenders of pushing aggressive sales techniques; everybody seems to have a favorite
It is also instructive to hear how quickly and often over what small problems
people got into serious trouble. There has long been an adage that says most
people are only five (or four or seven - pick a number) paychecks away
from being homeless. The letters we received showed just how thin the margin
is for too many.
One question we asked which has not received much response is from the servicing
side; how collectors, loss mitigation specialists, and foreclosure attorneys
are coping with the increase in delinquencies and foreclosures. We would
love to know from their perspective whether mortgage servicers are heeding
the advice of Freddie Mac, Fannie Mae, and the federal government to work with
homeowners or if, as we are hearing from those homeowners, they are unyielding
and inflexible in workout discussions.
We cannot possibly publish each and every one letter we received, at least
not in full, but we will approach the backed-up mailbox and
deal with each of the rough categories we have outlined above. We know that
our readers frequently respond to our stories months - even years - after they
are originally written so we hope to keep this as a running dialogue as long
as the subprime situation and the resulting fallout continues. We look forward
to hearing from
you and we especially hope that what we hear a few months from now will
be more hopeful than what we are hearing today.