I’m contemplating how many of my buyers might not be able to hold onto their homes - my buyers who put zero money down from 2004 to 2006.  Right now I have only one friend and it’s not because of the ARM loan, it’s because her husband lost his job after going through some medical issues. Another buyer was also diagnosed with cancer right after moving, but I believe they’ve worked it out with their lender to stay.

While I am heartbroken for those now in trouble, I feel relieved, fortunate, and even off-the-hook that my list of buyers in foreclosure is that short.  Why?  Because the loss of home is not directly related to the "No Money Down Mortgages" that are at the root of today’s market meltdown.

What I do find incredibly disturbing is the news yesterday and today that the Feds KNEW in advance that the meltdown was likely.  Our own Miranda from Loan Shak wrote about this yesterday at Banks.com.

Apparently, there were attempts to warn the President and other top policymakers about the danger of exotic home mortgage loans. Banks were also supposedly warned. However, despite the warnings in 2005, final 2006 rules included no requirements that might have limited the effects of the mortgage market crisis.

They had clear warnings, but listened to the lenders instead, lenders who assured them that the regulations were excessive and would inhibit the future marketplace, according to MSNBC through the Associated Press.  These are the same lenders that are now in Washington asking for government handouts.

From MSNBC.com,

Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.

And looking further into the story, these are the proposed regulations that were ELIMINATED:

• Regulators told bankers exotic mortgages were often inappropriate for buyers with bad credit.
• Banks would have been required to increase efforts to verify that buyers actually had jobs and could afford houses.
• Regulators proposed a cap on risky mortgages so a string of defaults wouldn’t be crippling.
• Banks that bundled and sold mortgages were told to be sure investors knew exactly what they were buying.
• Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.

According to the article, each and every one of these were stripped out the new guidelines for those writing risky loans.  It’s no wonder we’re in a recession now if housing is the backbone of a strong economy.  And now our tax dollars get to bail out those responsible.  Somehow it just doesn’t seem fair, does it?