I have been in the Real Estate industry since 1978, so I have seen the good, the bad and the ugly.  But, this is one of the ugliest in my memory.  Daily, I have someone asking me, what happened, when will it get better and how do we get out of this mess.

The way I see it, the Real Estate "Bubble" literally started over night and ended the same way.  It was the convergence of Greed meets Deed.  Yes, real estate was gaining in value at a nice steady pace, with a few pockets of poverty and unexplainable wealth.  (I still don't know how anyone can afford a home in California). 

Many say it was a combination of the lenders and the realtors getting together and making it happen.  But, the reality is the lenders began the "process" of excluding the realtors from the process using the privacy act as a heavy weapon in order to keep us at arms length.  This gave them the opportunity to mislead those who are overwhelmed by all the "jargon" that makes no sense.

In the "old days" we Realtors would attend loan application with our buyers so we would know what was being said, be able to explain and help the transaction to closing.  I know two people personally, I talked with the Lending Tree loan officer myself, almost lead my cousin down the path of lost savings & predictable foreclosure.  Thank goodness she called me so that I could call the loan officer to get the details and explain them to her.  When I called, I identified myself as her cousin and Real Estate Associate Broker, he began givng me a quick down and dirty on the details.  By the time I finished questioning, the real down and dirty was this loan began low, around 4%, (he was vague), interest would adjust monthly, but there was a minimum payment that would stay the same for two years, so the loan was a negative amortization loan (it would grow each and every month), and cap off in five years.  A disaster waiting to happen.  Just the other day I ran across a Home Inspector, someone who is savy.  He had to refinance, cost him $25,000 to get out of one of these very loans, he did not understand that it was a negative amortization loan.

So, when the Politicians talk about "bailing" out greedy, people with bad judgement, think again.  Many of those foreclosures are from two sources, Job Loss, and Mortgage Payments out of control.  Even though the Feds have reduced rates over and over, it has not trickled down to the consumer.  Why?  The banks are using that money for leverage on their own loans....these are professionals who know exactly what they were doing and still are doing.  

We may consider making them accountable, how?  Let's write to Congress and suggest that these lenders, investors who bought the loans and hedge funds who invested in them, be required to recast every single loan at no cost, make them a fixed rate and at the start rate they offered these individuals to begin with.  They need to stay fixed for 7 years, then they can become adjustable with movement not to exceed the cost of living on a yearly basis or no more than a 1/4% whichever is lower.  This would very likely stabilize the market, stop the bleeding and begin the healing. 

The job losses were a systemic infection that started from the heart of the mortgage business and worked its way out.  Mortgage payments got out of hand, buyers could not refinance, or buy, buyers could not buy, lenders had no one to lend to, and income from the existing loans began drying up.  The lenders had to lay off employees,  business began drying up for, surveyors, appraisers, builders, electricians, plumbers, roofers, laborers, office workers, the retailers that support these worker: building suppliers, garden centers, landscaping businesses, and the businesses that support them: department stores, grocery stores, automobile dealerships, restaurants, travel agency's, and the list goes on.  Yes, the Lending Industry is the center of the Universe. 

If they recast these loans, jobs will begin to appear again, slow but sure and it would begin.  This is the only sure way to turn this around, everything else is a band aide.  The true culprits would be required to make good on their problems, but the win...win would be that they would begin getting money from Real Estate that would yield ZERO.  They thought the market would continue and when foreclosures came, they would have made money on making the loan, selling the loan, then reselling them home.

Only two industrys made it through this crises, the oil industry (the President) and the defense industry (the Vice President).