Lenders are closing their doors left and right. Over 100 national wholesale lenders have gone out of business since the first of the year. Foreclosures are the topic de jour. What's happening out there? Jim Cramer from CNBC?s Mad Money recently had a rather emotional assessment on national TV just days ago. You can search for it on the internet. Is somebody at fault? Why is this happening? What are the repercussions? Recently Bank Of America made a 2 billiion dollar investment in Countrywide. You know there is a credit crisis when on of the very largest banks in the world steps in to help recapitalize one of the largest mortgage companies in the world.

?The mortgage market is in trouble". There are many reasons why we are in the current crisis situation that presents itself today. While many would like to blame the banks and brokers for the crisis, they are failing to focus on the borrower and their responsibility in the loan process. Nobody put a gun to the head of the borrowers as they possibly intentionally overstated income on certain loan products. Unfortunately, over zealous legislation by various states has sought to solve the problem by creating laws that remove certain types of financing. The states are trying to legislate the free market system of supply and demand. If certain loan products have higher default rate, the investors will eventually not buy them. If no one will buy the loan, it won't be created. Instead, the State of Minnesota as with other states has removed the ability of borrowers to get ?No Documentation' and ?Low Documentation' loans. There is a book call '1984' by George Orwell where 'big brother' decides what is allowed by society. The new State of Minnesota mandated mortgage legislation reminds me of this." For your reference, there was a wonderful DVD produced with John Stossel called The Blame Game: Are We a Country of Victims that I would highly recommend the legislature view before making any more laws that will hurt consumers rather than help. Until we start accepting responsibility for our actions, we will be a nation that likes to point fingers at others for what we've done to ourselves. The Minnesota legislation has removed responsibility for making choices from the consumer. Unlike other states that allow these lower documentation loans, Minnesota consumers now have less choice.

As of August 28th 2007, there were over 34K homes available for sale within the Twin Cities real estate market. Any legislation that removes a potential buyer from the market because they can no longer obtain financing due to state legislation is WRONG. In addition to changes in lower documentation loans, there has been changes in Subprime lending laws too. The real estate market is dependent on first time buyers starting the 'domino' effect in the housing market. Many first time buyers have no credit, limited credit, or blemished credit. These first time buyers now have limited access to mortgage products because of the new legislation that affects subprime lending. Subprime is not predatory lending. Yet it is often assumed incorrectly that the two must go hand in hand. Predatory lending is wrong. It is illegal and always has been. Subprime fills the niche for borrowers who are unable to get a traditional ?A Paper' loan because of their income, job, credit or all of the above. Some areas where the foreclosures have been the worst may not be attractive to the most credit worthy buyers. By removing mortgage products from the market that could have served borrowers more likely to purchase within those areas, you are actually making the foreclosure situation worse.? The credit crunch is likely to continue through 2008, according to the board of Realtors. We need credit to continue the momentum within the housing industry. Without financing, houses won't be able to be sold. There are few buyers that have the ability to pay cash for a home.

What's the solution? Let the free markets work like free markets. Have fairness among mortgage laws that apply to ALL lenders. Did you know that federally chartered banks are EXEMPT from state mortgage laws? That means the laws don't apply to everyone producing loans within a state. Is the consumer benefiting from a two tier system? How can consumers benefit when they are now given less choice and less competition? Who really benefits from these new laws-might it be federally chartered banks? Who have you heard the least amount of criticism or complaints from? This current situation is wrong and the consumer is being bamboozled by the lack of depth into the coverage by the media.

The focus has been on the borrower and portraying them as a victim. The news does not cover the stories about the home borrower who was successful in becoming a home owner using the very same programs that have been recently eliminated. The news also neglects to state that most mortgage brokers are honest hard working individuals who work on behalf of their borrower. Lastly, the articles and new programs fail to focus on all the individuals who have recently lost their jobs and careers within the mortgage business. There have been over 120 lenders that have gone out of business since January 2007. Who wants to address the hardship these families are feeling? During the third week of August alone, 13K people lost their jobs in the mortgage industry.

One proposed solution to today's current problem has been to expand FHA financing. FHA is a government insured loan. FHA is being referred to as the replacement "subprime". FHA has no published credit score standards. Shifting the risk to the government, which in essence is all of us instead of allowing the risk to be maintained in the private captial markets will be the end result. It will be interesting to review what happens over the next year. If FHA becoming the financing source of choice for borrowers with bad credit, we may be setting ourselves and borrowers up to fail once again as the root of the problem is not addressed or resolved. The root issue is personal responsibility and consequences for choices made. Not everyone is entitled to homeownership. Homeownership is a reward that is earned through demonstration of responsible use of credit.

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