Let the finger pointing proceed! There’s definitely enough blame to spread around. If you’ve been following the business news at all in recent weeks, you will see that the academic pundits, and the professional ones as well — better known as economists — are ready to point their fingers at the Federal Reserve, should the economy tank and fall into a recession instead of a soft landing like many of them are forecasting. “Those 17 consecutive hikes in the Federal Funds Rate killed us!” they’ll exclaim.

But probably the greatest amount of finger pointing these days is directed at the lending institutions of America. “Darn those lenders! They did this to us!,” they’ll proclaim.

What’s it all about? Everyone who is a so-called expert (some self-proclaimed) in the real estate industry is coming out with articles these days pointing to the adjustable rate mortgages (ARMs), the interest-only loans, the negatively amortizing loans and the option loans. Even a grass-roots consumer organization has been formed by a consumer advocate who is complaining that there is no formal training or licensing required in order to become a loan officer.

Labeled “exotic” loans by today’s standards, these easy-to-get-into trouble products are nothing more than what the industry used to call “creative financing” back in the late 1980s and early 1990s — and we know what happened when that buying frenzy came to an abrupt halt.

Did lenders misrepresent or fail to fully disclose the downside of these easy to qualify for loans? Maybe in some cases. But the fact is that soon up to $1 trillion in these adjustable-type loans are due to readjust at higher interest rates and, in a worst-case scenario, hundreds of thousands of homeowners could find themselves losing their homes in foreclosure.

Who can they blame? Financially-distressed homeowners will likely point fingers at lenders, mortgage brokers and even real estate agents for selling them homes and mortgages that they ultimately couldn’t afford. But in the end analysis, the ultimate responsibility always lies with the consumer to make sure they understand the financial obligation that they’re signing up for.  And to never sign a document without being sure that they understand the terms and conditions they’re agreeing to.

The fall-out from all this finger pointing is that the foreclosure pipeline is going to open up, providing RealtyTrac members with multiple win/win opportunities to find hidden gems in the foreclosure market while helping distressed homeowners avoid a financially-devastating foreclosure.
 
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