Help Owners Stay Put

From the NAR President: Subprime mortgages have driven many families into foreclosure and led to lender closings.

August 1, 2007

REALTORS® are all about helping people move, but the current subprime lending crisis has brought into clear focus the added value we can bring by helping home owners and future home buyers avoid having to move because they can’t pay their mortgage.

I’m sure you’ve seen the headlines and even experienced the crisis firsthand. Subprime mortgages have driven many families into foreclosure and led to lender closings.

Not every subprime loan is a bad loan. For those who can’t qualify under conventional lending standards, there’s a market for alternative loan products. But subprime loans become abusive when borrowers are qualified under terms they can’t hope to afford. That’s what happened during the real estate boom, as lenders relaxed their underwriting standards and introduced such innovations as teaser rates and floating rates. As a result, delinquencies for subprime loans stood at 13 percent at the end of 2006, and 4.5 percent were in foreclosure.

The prospect of a foreclosure is devastating; families often use up their savings to try to stay afloat. When homes do go into foreclosure, it hurts the neighborhood, too. Vacancies lead to declining prices and can devastate the strength and stability of the community.

What consumers need now is a lifeline. As REALTORS®, we can help address the growing foreclosure problem and reduce the chance of future buyers facing foreclosure by:

  • Advocating for smart lending practices.
  • Talking to lenders we work with to understand how they handle delinquent mortgages.
  • Learning what our state and local governments and local nonprofits are doing to help borrowers in trouble on their mortgage loan.
  • Reaching out to consumers in our communities to let them know what resources are available.
  • Making sure buyers we’re working with understand how to evaluate the mortgage terms they’re being offered. It’s no longer enough to send buyers off to become prequalified before they start the home search.

The NATIONAL ASSOCIATION OF REALTORS® is here to help. Over the past several years, NAR has worked with the Center for Responsible Lending and other partners on a series of brochures to help consumers understand the mortgage market. Our newest brochure, How to Avoid Foreclosure and Keep Your Home, provides outstanding guidance for existing home owners who are in trouble on their mortgage. Other brochures include:

  • How to Avoid Predatory Lending
  • Specialty Mortgages: What Are the Risks and Advantages?
  • Traditional Mortgages: Understanding Your Options
  • Learn About FHA Mortgages

You can download any of these brochures free at REALTOR.org, or you can order them in packages of 50 for $20. At REALTOR.org, you’ll also find resource pages on subprime lending, responsible lending, and smart financing. These are practical, user-friendly resources that you can use in the field to help prospective and current home owners keep their homes and build wealth for the long term.

Financial education is the key to curbing abusive lending practices. With these simple tools, we can save consumers who are drowning in mortgage debt and preserve the quality of life in the communities we serve.

Pat Vredevoogd Combs

Pat V. Combs was 2007 president of the NATIONAL ASSOCIATION OF REALTORS®.

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