Lenders Practices and Consumer Awareness

Over the last several years Arizona has had incredible gains in appreciation. So many people and investors thought 48% appreciation would continue forever. With the rate we were headed no one moving to Arizona would be able to afford a home. Arizona is home to mainly service industries... so who can afford these highly inflated homes? I think to keep the economy strong this correction in home values was a necessity. But when is the correction going to end? Why do we keep seeing sale prices decreasing? What happens when these sub prime loans hit maturity and adjust?

I think we are just seeing the beginning of the tidal wave of short sales and foreclosures. My wife and I are Realtors in Arizona and are exposed to short sales of investors and primary residents alike constantly. It is no surprise that investors got way in over their heads with some of there decisions, but we are also seeing a lot of problems created through predatory lending. So much so that our Governor, Governor Janet Napolitano, is trying to pass a law for these poor practices of preying on the uneducated consumer.

The fact is people don't know how to read GFE's (good faith estimates) and the lenders are preying on their ignorance. How many people know what a Yield Spread Premium is? Very few Realtors know and the numbers are much greater for consumers. The lender puts down 0%-3% and it's not disclosed in any of the estimates. I think it should be required that this is disclosed in a dollar format not a % format. The difference between 0% and 3% in a $300,000 loan is $9000. There has to be some form of ethical and moral behavior on the lenders behalf. I'm not saying that all lenders are this way and don't deserve to be paid for their services. However, when someone is signing their closing docs for more than an hour do you think they are going to know that they are paying an additional $9000 that they didn't plan to?

I do believe ARM's are a problem, but even more so I think someone needs to educate the public on unethical loan practices ie undisclosed items, prepayment penalties (for loans greater than 2 years old). I think there needs to be a bill passed that protects the consumer more...or even better... consumers should always consult a REALTOR!!

So if you are in the market to buy a new home in Arizona consult a professional

The Jones Group