To the subprime rescue
With many subprime mortgage borrowers facing monthly payments that are unaffordable due to ARM resets now and in the near future, various solutions are being proposed to rescue the borrowers from likely foreclosure. Some ideas coming from Washington are good, others are ill conceived and the best answer is probably somewhere in the middle.
The good news is that new loan programs are being developed to give options to borrowers stuck in the subprime mess. Both Fannie Mae and Freddie Mac are developing 40 year fixed rate loans to enable borrowers to have lower monthly payments and certainty regarding the terms. The problem is that many lenders cannot restructure the troubled loans because they don't own them any longer and while refinancing to a more affordable fixed rate loan is one of the best solutions, many borrowers might not be able to qualify for a new mortgage because of their credit histories, subprime was their only option to purchase in the first place. Please read Subprime loans can't be easily rewritten: FDIC, courtesy Rex Nutting at Marketwatch.
What is the real estate agent's role in the mortgage process. My belief is that we need to be informed about what is available from the lenders and to insure that our clients know what they are going to be signing. I fear that many did not help their clients during the past years and just walked away from the closing with their checks in hand with no regard for the clients ability to repay the loan either the next day or in the months or years to follow.
Most real estate agents have good relationships with good lenders and know that their clients will be well served by them. It is incumbent on real estate professionals to help their clients not only buy the home but help the client find financing that will allow them to enjoy living in their new home in the future.
I had the occasion to work with a first time home buyer this morning. He had a preapproval letter from a lender that I was not familiar with (he decided to get his financing in order before finding a real estate agent and that is a good thing too) and before commencing to work with him, I made sure he understood the terms of the loan he was looking for so there wouldn't be any nasty surprises for him down the road. (He was getting a nice conventional 30 year fixed and putting 10% down so I'm sure we'll find him a nice house.)