Stock market tumbles as investors flee subprime lenders
By Chip Parker, Jacksonville Bankruptcy Attorney on Aug 2, 2007 in Consumer Protection, Florida, Foreclosure Issues, Personal Finance
These subprime loans were underwritten with no virtually no proof of borrower income, relying upon a “booming” real estate market fueled by fraudulently inflated home appraisals. Furthermore, borrowers were oversold by unscrupulous brokers who promised refinancing before the teaser interest rate reset to unconscionable levels. The result has been disastrous, creating victims on both sides of the transaction. Now these mortgage companies are being attacked by the borrowers for violating the Truth in Lending Act and by the investors for doling out their money so carelessly.
The knee-jerk reaction of investors has been to foreclose upon these homeowners at record pace. Investors just want to cut their losses, but if it was the subprime lenders “innovations” that got them (us) into this mess, why don’t they innovate themselves out of this mess? In this slumping housing market that continues to implode onto itself, do these guys really want the house back?
The solution may be to actually work with these borrowers to avoid the foreclosure, but lenders would rather eat their own hand than rewrite an oppressive mortgage.
The solution could be right under our noses: a “bankruptcy bailout.” What’s that? Stay tuned . . .
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