Many of our homeowners whose residences are in foreclosure have been subjected to fraud, deception and unfair dealing by home equity purchasers, savings banks, commercial banks, mortgage companies, credit unions, savings and loan associations, mortgage brokers, realtors, appraisers, closing attorneys and other unprincipled in the housing financing sector working under deceitful pretenses. The recent rapid escalation of home values, particularly in urban areas, has resulted in a significant increase in home equities, which are usually the greatest financial asset held by homeowners in this state or any other state. Homes are being foreclosed in Memphis at a rate unprecedented in the history of our city. The daily notices of trustee's sale are now in the hundreds. During the period of time between the commencement of a foreclosure proceeeding and a scheduled foreclosure sale date, homeowners in financial distress, especially the poor, elderly and financially unsophisticated are vulnerable to the importunities of equity purchasers who induce homeowners to sell their homes for a small fraction of their fair market values through the use of schemes which often involve oral and written misrepresentations, deceit, intimidation and other unreasonable commercial practices.
Although the problem of predatory lending is generally associated with the subprime lending market, there are many criminals who profit by deliberately making loans with burdensome terms to homebuyers who are likely to be unable to repay them. These fraudulent practices include fee packing (a predatory loan practice where a lender charges processing fees or percentage points for loan origination that are higher than usual and not justified by the services that they provide), predatory steering practices targeting minorities, equity stripping (a crooked loan practice that allows the lender to charge high fees for refinancing that eats the homeowners equity), disregarding a buyers ability to pay, creating and requiring payments that are unaffordable, issuing loans in excess of value along with phony appraisal documentation which fraudulently inflates property value, and all with intent to target persons who aren't able to understand the transactions they're entering into. By making a loan based only on a properties value, without considering the borrower's ability to afford the loan payments, the borrower will default and the lender will profit from the foreclosure.
The builders in Memphis are still creating valleys of architectural masterpieces that are more like large, vacant museum pieces in communities that few if any can afford to live in, as though we didn't have enough homes already existing on the open market. This sad scenario is also contributing to economic demise. It's rumored that honorable real estate agents, long-standing in the business, are retiring their licenses because homes are on the market for unendurable extended periods. Massive reductions in market value are forced and distressed sales are everywhere.
It is the responsibility of our leaders to insure that those who would become victims of fraud are made aware of better alternatives.
The recent collapse of much of the subprime mortgage industry because of rampant fraud is probably the worst economic disaster that we will face in our lifetimes. As we all know from so much negative press, it has the potential to "cripple the nation". It began in the late 1990's when the property assessors all over the country began indiscriminately inflating the values of properties in order to tap the increased equity for more property taxes. State and local government, which should have done the math, started it. We need leaders who can stop it and correct the books. Things'll get better and we can pour the sauce on and rock and roll once more.