JayMillionaire's Blog

There is no one particular reason that we are in one of the worst housing slumps ever there is more a like ripple effect that occurred.  I am going to break down the different groups of people currently struggling thru this housing crisis because the media has a way of mixing them all up.  Here they are

1. W2 employees that brought homes thru stated loan programs.  Stated Income programs were first designed for self-employed and commission based employees because their income has always been a bit difficult to prove with all the tax deductions allowed at the end of the year.  But when lenders starting allowing W2 employees to state their income they created a problem they couldn't have imagined.  Oh a stated loan is one where you don't have to have your income verified you just the mere fact that you work there and how long.  Well most of these borrowers did not take fixed loan programs because the fixed rate offered on a stated program was just to high to them so they took the lesser of 2 evils and went with a 2/28 (the worst), 3/27, or a 5/27.  They took an adjustable arm banking on the fact that (a) these programs would always be around (b) that the housing market would continue to flourish and the equity would allow them to refinance before the loan reset and (c) No one ever explained to them that what they were doing was against the law.   

2. Borrowers who purchased homes based on the interest only portion of the loan.  The usual way of computing your Debt to Income (DTI) ratio was based on calculating the Principle, Interest, Taxes, and Insurance (PITI).  Here comes some more new programs that only calculated the interest payment making borrowers qualify for much more house then they can afford.  Basically taking say a $3000 mortgage payment and making it a $1800 mortgage payment makes the borrowers think he can afford that loan.  Well when it's time to qualify for that loan at the full PITI payment they can't and they can't afford the full payment once it starts because they couldn't afford it from the beginning. 

3. Prior to Jan 2007 Most states didn't require loan officers to be licensed.   The housing market was booming and any business that makes money has to always be on the look out for the crooks but unfortunately when the government noticed it was already to late.  60% of the people I ran into over the last 3 years were either Realtors or Loan officers and I was just amazed at how some of them could be either some were both which really was astonishing.  Mortgage Brokers at one time had more business then they could handle so they hired mostly whoever came knocking and if the broker wasn’t honest you best believe that his or her staff was sure to follow but not all those one left and went to other companies.  There were laws in place for the Mortgage Broker but none requiring any training to become a Loan officer which I found amazing given the fact the sensitive information you are handling when submitting an application for a loan.  You have access to a person whole entire life as well as the loan that you put them in can make or break them and with little to no experience or training imagine the amount of people that sold borrowers whatever they Broker told them.

4. And last but not least THE 6 YEARS WE HAVE BEEN FIGHTING 2 WARS!   I don't know of any country that could spend billions of dollars a day fighting to wars in to separate countries and still expect their country to be thriving.  We have been at war for at least the last 5 years think about the number of soldiers not here working in our economy I think the number of soldiers at war is somewhere over 300,000.  Sure that is a small part of the economy but for some of the small states where a lot of these soldiers are from that's a lot.  This war hasn't been good for anyone as far as I can see; we still face serious threats from terrorist around the world.  We are no safer then the start of the war although I haven't seen an orange alert since the last Bush election I don't feel any safer.  And traveling aboard is certainly out of the question right now so once again the war has not push this country forward but merely taken us back to housing crisis, recessions, stock market crashes, as well as record gas prices.

Those are only a few reason that the housing market is in shambles but I want to end this on one final note.  YOUR JOB IS NOT YOUR CREDIT!!!!   I find it appalling when we have ads by stars boosting that YOUR JOB IS YOUR CREDIT because last time I checked your credit was your credit.  Amazing that the stars job is their credit but tells average working Americans that statement makes it ten times harder for people to really understand the importance and significance of your credit.  These are the same problems that have caused the economy to fall.  How do I talk a client into budgeting and paying bills on time when they just brought the car and home of their dream all with a 580 credit score and a decent job?  Paying bills and saving will definitely be the last thing on their mind and now the creditors see they just brought a house so here come the credit card offers.

 I am aware there were a lot of people that were taken advantage of but my 5 years in the business has shown me that not many people took any FREE HOME BUYING CLASSES that explains the process from beginning to end.  

Education is the key to all this mess

Jay Millionaire