COVID-19 Pandemic: Foreclosure Epidemic Heightens

The Foreclosure Epidemic

The foreclosure epidemic of subprime mortgage lending practices in the United States is widespread and severe. It is also cyclic and predictable. The primary victims are hardworking families who, instead of enjoying the benefits of the American Dream, homeownership, are struggling to preserve their homes. A massive contributor to this national recurring and progressing foreclosure issue is the poor lending practices and corrupt underwriting practices, which restrict credit and artificially inflated market values. Consequently, the credit crunch results from reckless lending and a lack of adequate mortgage industry regulation.

The mortgage subprime crisis is an economic disaster and creates significant challenges to the property bylaws’ traditional rules and regulations. Banks contribute significantly to this crisis by marketing mortgages through deceptive and unfair practices, such as in the case of Ambrose et al., 2015.

Many consumers are enticed into taking high-priced loans by extending low-interest rates at loan origination, which are secretively unaffordable and a form of premeditated foreclosure by Wall Street. In these low-interest-rate environments with happy homeownership buyers, banks willingly take their money in exchange for a mortgage and Deed of Trust and then pass the risk to other Investors whom they also deceive by marketing these notes as secure, safe investments.

These practices highly violate the essential requirement of consumer protection and statutes of securities regulations. Also, most US banks interfere with mortgage securitization by creating a privatized mortgage registration system that significantly undermines the property titles’ publicity and clarity. Because of the lax record-keeping practices and securitization procedures, the banks grossly undermines the property recording system.

The Foreclosure in the United States

As a result of these fraudulent activities, the foreclosure rate has risen massively in the United States and exceeded the initial economic crisis during the Great Depression. With falling real estate values, stringent lending rates, rising unemployment, and fluctuating interest rates, the foreclosure crisis has proportionally and consistently increased. Since 2010, millions of homes have been systematically stolen from homeowners by the money thirsty big wigs in the financial institutions using coercion to steal homes from working-class and middle-class Americans. These homeowners are essentially destined for foreclosure through stratagems maliciously employed to predicate foreclosure as a destiny. Shattering the American Dream for homeowners and exploiting and separating families subject to foreclosure resulted from these illegal and fraudulent practices.

Although the economic and political conditions play vital roles, most data shows that the bank’s negligence purely motivates the current foreclosure problem by abusing loan terms.

FHA – The Federal Housing Administration

The Federal Housing Administration (FHA) observed massive slack from the toxic mortgage market implosion. In 2009, FHA announced that it would impose strict standards, although that action only counted so much given their track record. FHA insured loan delinquencies kept blowing through every historical sustainability benchmark. In the same year, FHA insured federally-backed loans totaling an unprecedented $360 billion. The bailout amounted to 30 percent of all the mortgage purchases, 20 percent of the entire refinancing transaction history, and 50 percent of all new homebuyers.

Conversely, without FHA loan financing, the retail real estate industry would have been an astronomically different market. In reality, FHA failed to impose strict guidelines. The mortgage sector headed into another mega-bailout simply because extending insured home mortgage loans to homebuyers at subprime rates of 3.5 percent and lower with zero tax credit promotes poor lending practices. The real estate industry’s demise with inflated home values is depreciated over fifty percent the next year. The below graph shows the previous delinquency rates:

As depicted in the graph above, over fourteen-percent of the home mortgage loan financing falls into the stage of delinquency. The real estate market is a horrible mess, with all home mortgage loans falling slightly over nine percent. Consequently, some FHA-backed lenders are pulling out massive amounts of toxic mortgages attracting the regulators’ attention.

Since 2007, FHA insured loans exploded by a factor of four, mainly because of the disappearing toxic mortgage market.

To tighten standards, FHA required borrowers to attain a credit of 580 for one to qualify for a 3.5 percent down payment of the agency’s program. Borrowers with low credit scores had to pay at least a 10 percent down payment. However, this rule’s application would have little practical effect because the average individual borrower’s credit score in the United States as of 2021 is 703.

An OCC-OTS banking regulation classifies the above data as follows:

>660 and above (Prime)

>620-659 (Alt-A)

>below 620 (Subprime)

In reality, the above metrics do not qualify as regulatory standards. The problem is that some buyers would acquire homes with very little to no money down. The chart below shows imploding loans.

The above figure is a daunting chart showing problematic FHA insured loans even during the boom cycle. Unfortunately, this is where 30 percent of the entire mortgage volumes are focused. The situation is already a crisis, and the banking sector is drying up the productive economy.

Are you or someone you know facing foreclosure? If so, it’s not the end of the world. There is still hope and options if the bank has not already foreclosed on the property.

Here at Imperium Enterprise, we follow due process to ensure properties and homeowners facing foreclosure are not victimized by this epidemic, especially during the COVID-19 pandemic. Contact us to determine how we can help pay off your existing mortgage debt to stop foreclosure proceedings this week!

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(408) 684-6911