Subprime Brokers finds new business as loan fixers

It is very alarming to see that the very brokers who lent out subprime mortgages (that eventually caused countless foreclosures and fueled the economic meltdown) are back to business again, this time disguised as “loan fixers.”

In this article, the NY Times chronicle the new loan fixing business of Jack Soussanna, who used to be a mortgage broker, is now working for a loan modification company. They charge a upfront fee of almost $3500, they promise to negotiate with lenders to lower existing mortagages for subprime home owners. Other companies, like FedMod, are also disguising as loan fixers who actually used to sell subprime mortgages.

The problem, these loan modification companies are charging money for empty promises; they never actually deliver the promises they make. In fact, more than 650 complaints have been filed against FedMod alone. State and Federal authorities have started to deal with such companies for fraudulent business practices. For example, the California Dept of Real Estate have ordered 210 businesses to terminate loan modification businesses.

From this article, one can see that government regulation is evidently extremely significant. The Obama administration first established the Federal Loan Modification program in order to help people. However, with free market economy there will be ambitious, profit-maximizing companies who prey on the vulnerable, unsuspecting citizens.. The judicial system can help contain the fraudulent practices with lawsuits, but is that enough to stop these loan modification firms? Do we need some concrete government policies to stop them?

NYC Announces Affordable Housing Project

Great news, New York City just announced on Wednesday that they’re starting a new pilot program to convert as much as 400 condo units into affordable rental units for middle-income families. House owners and developers are given a subsidy given that they promise to rent to middle-income families.

With NYC as an example, this article also suggests that other cities will follow with similar projects to restore abandoned homes and complexes from foreclosures. Looks like the empty houses left behind by subprime owners will be put into use by the local governments. Let’s hope for more active government programs to help the current economy.

Kudos NYC!

Click here to read the full article from the Wall Street Journal

Revival and Regression in Harlem

There was an interesting article on the New York Times on July 7 (see link below) about the gloomy housing market in Harlem. Surely, Harlem is hardly a high-end neighborhood, but it did experience tremendous revitalization during the last decade. From 2004 to 2007, as indicated by the Times, plenty of residential units have gone into the millions. New businesses, shops, renovation works, and construction projects have led to an influx of relatively affluent residents, thus driving up the housing price.

The article offers a rather depressing outlook that the boom has become bust, at least during the last two years. Without doubt, the market cooled down, which is the case for most places in the United States. However, is Harlem done?

Given the current economic conditions, some of the new businesses and shopping areas are also bound to suffer greatly. Nevertheless, a decade worth of improvements will not go away anytime soon. The new buildings are already constructed. The old buildings are already rehabilitated. The residents are still wealthier than before.

Harlem may no longer generate the same level of enthusiasm from investors than it did a few years ago, but it is very likely that the historic neighborhood still has great investment values. When the market begins to recover, Harlem will probably continue its revitalization process. If that were to happen, the best time to invest may very well be right now.

Harlem’s Real Estate Boom Becomes a Bust [New York Times]

Recovery Coming?

It is certainly too early to make any predictions, but it may still be possible to remain optimistic about this year’s housing market, at least according to Reuters (see link below). As expected, there are conflicting reports coming from all directions. Nevertheless, the numbers from this April’s housing sales at least offer some encouraging signs that the bleeding has stopped, at least in many, if not most, areas. A speedy recovery may still be a long time away, but a number of investment opportunities may soon appear.

Spring U.S. Housing Market Hints at Awaited Recovery [Reuters]

Simple explanation of 2008 Economic Crisis

Realtynomics is here to help you understand the link between policy making and the economy. To begin, we’ve searched through dozens of explanations for the 2008 economic meltdown. This is the one that stands out as the best explanation for the meltdown. It’s clear and simple, and elucidates how sub-prime lending eventually led to credit problems of the banks. If you want to untangle the mess of the worst economic downturn since the Great Depression, this link is indispensible. If you don’t like reading, the link comes with a video explanation as well. Check it out!

How to Explain the Subprime Financial Crisis Part 1

How to Explain the Sub Prime Crisis In Simple Terms Part 2

How to Explain the Subprime Crisis in simple terms part 3