Greed and Ignorance Responsible for Housing Crisis
Written by Charles "Butch" Grimes   
April 26, 2007

Finger pointing as the foreclosure pressure heightens.

United States--Apr 26, 2007 -- /prbuzz/ -- Across the country, the rate of foreclosures has dramatically increased. Analysts and industry professionals have all weighed in with their expert opinion often attributing the crisis to the natural law of “market corrections” and uncertain economic times. However, the one admission that no one seems willing to make is that we are in this mess because of greed and ignorance. “Butch” Charles Grimes, host of “We Talk Real Estate with Butch Grimes” is not afraid to make this admission.

“Invariably at every social function I attend, at least 2-3 people seek me out regarding a real estate issue. In more than 90% of the cases, the problem can be traced back to the consumer’s failure to read and understand the fine print on their loan documentation and the industry’s failure to truly educate the consumer,” states Grimes.

According to Grimes, professionals in the industry share one common goal and that is to make money. It was not enough to sell homes to consumers who could qualify for a mortgage and were financially prepared to own a home. Those sales had already been made. So the industry “relaxed” its lending standards to expand home ownership to a broader market.

However many professionals involved in the transaction were woefully unequipped to educate buyers on making the smartest purchase. Buying a home is the single largest investment most will ever make yet many took that journey with “professionals” who did not have a clue what it was about.

Grimes does not limit his criticism for the industry but also blames consumers for their role in this crisis. Greed not only drove the industry to find more borrowers but it also drove consumers to accept loan terms and mortgage notes which were unreasonable. Buyers did not read the fine print on their loan packages nor did they fully take in that after the purchase, comes the responsibility of home ownership. Greed and ignorance are never a good combination and that is clearly evident in today’s market.

“Real estate professionals must help potential homeowners do a comprehensive assessment which includes how they would handle their mortgage if their financial situation changed, “states Grimes. Grimes continues, “Professionals can no longer sell adjustable rates mortgages (ARMs) with abandon on the basis of interest rates remaining low. Many borrowers are now in foreclosure as a result of ARMs. No one ever asked the tough question of what would happen to the monthly payment if the maximum rate was reached. Instead they only remembered the loan officer telling them not to worry because they could refinance in 6 months and get a better rate.” Grimes believes that agents must educate themselves so that they can educate borrowers. On the flip side, borrowers must READ first and ask questions before signing on the dotted line. It really does take two to tango and finger pointing is not going to solve the problem.

Grimes wants the industry and consumers to take more responsibility for its transactions. He stresses that financial education must be a priority believing the industry must help some borrowers delay buying a home until they are ready. Says Grimes, “New Cadillac Escalades, Mercedes, and Range Rovers aren’t mandatory for the new garage. What about a savings plan so that you’re prepared for home repairs and other emergencies? “Grimes teaches that new homeowners should first get acquainted with their new investment and take it for a spin before they invest in spinning rims on a hunk of metal that they cannot call home.

Grimes admit that his views may not be popular but he prides himself on saying what others are afraid to voice. “I would rather offend a few by being truthful if it will spare someone from buying a home that they are simply not financially or emotionally prepared to own.” In fact, Grimes believes that home ownership is not for everyone. “Owning a home is a privilege not a right”. Not everyone is prepared to handle the financial and emotional responsibilities that come with owning a home and some folk should just be turned away.

According to Grimes, Real estate professionals who accept their role as educator are likely to receive a greater response from consumers. Professionals must be willing to partner with their clients even if that means selling them a smaller mortgage or encouraging them to delay their buying decision until their financial house is in order.

The industry must demand more from its professionals. Not everyone who can pass a test is qualified to work in the industry. If you sell a customer a suit that doesn’t fit they can return it, but selling a customer a bad mortgage is not something they can return.

Conversely, consumers must demand more of the real estate industry and be willing to take the time to become educated before making a major purchase. Grimes realizes that we will never eliminate foreclosures or missed mortgage payments but states “when consumers and the industry work together we can certainly help many avoid a fate that has become all too common.”

About Butch Grimes
Charles “Butch” Grimes is a recognized real estate authority, often called upon by national and multi-national companies for guidance on achieving success in the ever-evolving minority emerging markets. Grimes is Executive Producer and co-host of the weekly radio show, “We Talk Real Estate with Butch Grimes” on KTYM, 1460 AM in Los Angeles. He also writes a monthly column as the, “The Real Estate educator” for many statewide and local newspaper like The L.A. Focus Magazine. Despite his many obligations, Grimes is now on the CENTER STAGE National Speaking tour sponsored by Wells Fargo. For more information on Grimes and upcoming tour dates, contact him at This email address is being protected from spam bots, you need Javascript enabled to view it

Contacts:
Lupe Lozano
We Talk Network®
(323) 750-3690 x. 201
This email address is being protected from spam bots, you need Javascript enabled to view it
# # #
About the Press Release
Foreclosures in the United States have reached alarming levels. Contrary to popular belief sub prime mortgages are not solely to blame. Industry professionals and consumers allowed greed and ignorance to override good judgment.


 
< Prev   Next >