In the Wake of the Subprime Meltdown
By Tracey L. Taylor
The subprime market meltdown has revealed how far we are willing to go for that almighty dollar. Yes, it’s simplistic to point the finger at the subprime lenders; however, we are all responsible for the current tribulations being experienced. The real estate industry has to be held accountable for its actions. Educating the public is a big responsibility, and requires an almost nonstop effort to teach and inform our clients about the loan process, requirements, consequences and the responsibilities that come with the purchase, refinancing and selling of real estate.
HB4050 legislation gave us a lesson in what happens when we allow the actions of a few to negatively impact the lives of many. For years while we went about our daily business, there was a quiet pillaging of low income and minority homeowners who did not know any better because they were not made aware of the impending financial assault on, for many, their only economic refuge.
How many times did you try to reach out to your client during and after the closing to remind them about the pitfalls and traps associated with unscrupulous lenders? What efforts were made by you to educate the public about the symptoms of a typical crooked lender? I am equally guilty of this oversight, as I always left the financing details to the lender. Many will not admit the same but that’s OK. And I’m not saying all real estate practitioners are guilty of this, either. I’m saying we have a huge responsibility to do a better job looking out for the people that compensate and place their trust in us.
July 1, 2008, will initiate the beginning of SB1167. This law is a revised version of HB4050 with some very interesting pieces. The new law will encompass all of Cook County. The parties affected will be first-time homebuyers who select an interest only, negative amortization, points and fees in excess of 5 percent and ARM loan products. This will set into play required counseling and review of the loan product to insure its viability and fairness for the consumer. There is also a provision for The Home Equity Assurance Act “guarantee fund.” This predatory lending database pilot program is claiming to reduce the risk to borrowers receiving bad loans from lenders. Although the number of lenders has dramatically been reduced due to the meltdown, there is still a need to exercise caution and due diligence when working with a lender. This law has placed the majority of the burden at the door of the lender. Unlike in the past, lenders must now show a fiduciary relationship with the borrower.
This is our opportunity to shine! We need to remain at the forefront of this industry. We need to show our devotion and respect for the industry by reaching out to our clients, customers and the general public and informing them that real estate is still the greatest return on investment to date. Talk to your association about being involved in creating proactive means of communicating these talking points to the public. We need to reclaim the public’s trust. They have been hit over the head long enough with “it’s a bad market” rhetoric. Let’s continue to monitor SB1167 and familiarize yourself with the new law; after all it directly impacts you.
My philosophy has always been “each one teaches one.” The more the public hears our voices and our commitment to their economic well being, the more likely they are to want to make a purchase. I don’t know about you, but I can always use the business. Are you with me? Let’s make it happen.
Tracey L. Taylor is a broker with Keller Williams Realty, Chicago-South Shore. He can be reached at 773.721.9200 or at [email protected]
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