Ohio has been rocked by the sub-prime mortgage crisis. Scores of families and people have lost their homes to foreclosure, and entire communities have been blighted as a result of increasing numbers of abandoned homes. Others have had their credit ruined or lost the equity in their home.
Sub-prime mortgages are residential home purchase loans made to people with less than stellar credit. Not so long ago the sub-prime mortgage business was booming, offering the american dream to those with poor credit histories or prior bankruptcies. And while people feel differently about who is responsible for getting home-buyers in over their heads – borowers or lenders, the formerly booming sub-prime mortgage industry was wrought with fraud. The ways in which a borrower can be defrauded in connection with a sub-prime loan are many. For a good description of some of the ways see the recent Cleveland Plain Dealer Article at http://blog.cleveland.com/plaindealer/2008/05/foreclosure_crisis_a_trail_of.html. To name a few: 1) the terms of the loan were often times misrepresented to the borrower(s), including the amounts of future payments in connection with what proved to be very risky Adjustable Rate Mortgages (ARMs); 2) hidden and undisclosed fees and charges accompanied some sub-prime mortgages; 3) lenders and brokers gave borrwers false information; and 4) lenders and brokers encouraged and advised people to enter into loans they ultimately would not be able to afford.
The sub-prime mortgage industry boomed for so long because so many of the people and institutions invovled were generating massive profits without any risk or accountability. For example, the mortagge broker who found the lender for the borrower earned his or her fees and incurred no risk in connection with the loan. The original lenders were often times selling the loan as soon as it closed or shortly thereafter to instituitions purchasing loans on the secondary market. Secondary buyers were bundling thousands of sub-prime loans together, securitizing them and transferring them into trusts. The trusts then sold shares of the securiteis or bonds to other institutional investors.
Eventually the marry-go-round stopped when interest rates associated with the ARMs increased and people began defaulting on their loans. Among those left hiolding the bag are secondary mortage buyers and sellers now stuck with loans that are not being repaid and that are in foreclosure, and institutional investors whose securities are now devalued and often times worthless bcause the loans backing the securities are in default. Even more devistated by the sub-prime mortgage melt-down, however, are those usually lower income credit risk home purchasers who could not afford the loan they were sold and advised to enter.
Now that the other shoe has fallen, it is important that those responsible for creating this mess are held accoutnable. Thousands of Ohioans have had been foreclosed upon, had their credit ruined, or been stripped of the equity in their home because the terms of their sub-prime loan were misrepresented or not fully disclosed, or because they reiled on the advice of a broker or lender who was only interested in making a quick buck.
Our law enforcement officials and legislators need to investigate this induatry at every level and bring to justice those who have perpetrated fraud. Ohio’s Attorney General’s office now has an entire unit (the Mortgage Fraud Task Force) specifically devoted to investigating and prosecuting mortgage fraud around the state of Ohio. See http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/1194946350307190.xml&coll=2.
In addition to criminal investigations and proceedings, our government officials should and are pursuing civil lawsuits against the perptrators of mortgage fraud. The country is becoming more aware and educated about the problem. If you or someone you know has lost their home to foreclosure because of undisclosed balooning payments, or is in a residential mortgage loan that will cost more than the house collateralizing the loan is worth, or has discovered loan terms that were not appropriately disclosed, or was advised to enter into a loan he or she cannot now afford, or who feels he or she may be a victim of mortgage fraud, reach out to someone who can help. Lawyers and state agencies are pursuing more and more cases involving mortgage fraud.
For good and up to date information about mortgage fraud see http://www.mortgagefraud.org/