According to a report on http://ml-implode.com/ 6 of the 25 top sub prime lenders have closed the doors or been taken over.  The lenders that Aaron Krowne reports are either bankrupt, nonexistant or have been taken over are:

1. First Franklin
2. OwnIt
3. MLN
4. ResMae
5. ECC/Encore
6. Fieldstone

According to his reports and his informative website, many lenders are falling suit.  This is not a surprise considering the number of foreclosures are still on the rise.  Lenders are beginning to feel the pinch of this hurting economy.  A lot of homeowners that were approved for loans between 2003-2006 did not qualify.  With not enough qualified borrowers, lenders were creating new ways to get these people approved, whether right or wrong.

With the huge popularity of ARM’s and Interest Only loans homeowners were rushing out to refinance or purchase when previously they weren’t qualified.  Lender guidelines were relaxed and homeowners were put into a position they shouldn’t have. 

I see that some people are of the opinion that this was the homeowners responsibility.  I do agree but only to a small degree.  Yes, a homeowner is responsible for reviewing the documentation of the loan and the terms.  Most of us will agree, however, that we are not borrowing experts.  In fact, a lot of the new homeowners are first time homeowners.  If we knew what to look for and who to go with why would we need mortgage brokers?

I have seen too many homeowners fall victim predatory tactics like having to sign papers and review everything in 15 or 20 minutes because they have told the homeowner there is a deadline for the paperwork.  Don’t get me wrong!  Not all mortgage brokers will do this.  In fact, most won’t.  But there are a few bad seeds that will do anything to get the loan through including overstate income. 

 I read an article the other day that said 90% of all stated income loans were over stated a minimum of 5%.  Of that 90%, 60% of those loan applications had income overstated higher than 50%.  Apparently none of these particular cases were checked against the borrower’s tax records with IRS.  Now this study was apparently done on 100 random loans using stated income.

I don’t know about anyone else but I know this is not the end.  We have not seen the worst of our situation just yet.  With lenders dropping off like flies and more following, we are going to see the Foreclosure filings increase.  Fortunately many lenders are aware of this also and have taken proactive steps to work more effectively with third party negotiators to help resolve these issues.

The best advice I can offer homeowners that aren’t currently facing Foreclosure is SAVE, SAVE, SAVE!  Put away enough money for emergencies and have a little to fall back on.  When an unforseen event arises you will be prepared and will have the ability to bounce back quickly.  If a car breaks down or you have an illness in the family without having this back up it is possible you will end up in a preforeclosure or Foreclosure situation.  Protect yourself and start putting 7% of your earnings in a savings account just for emergencies.  Once you have saved up enough for at least two months you will have a less difficult time staying on track.

Written by:  Donna Atwater (CFreedom), If you are facing Foreclosure or experiencing mortgage difficulties we can help.  Fill in our short contact form and one of our consultants will contact you for a free, no obligation consultation to discuss your options.