Seattle’s local NPR station KUOW ran an interesting segment yesterday morning called Navigating the Current Housing Market.
KUOW host Steve Scher has real estate agent / appraiser Richard Hagar and Urban League housing director Linda Taylor in-studio to discuss how we got where we are, and what’s going on right now with real estate in and around Seattle.
Here are some interesting excerpts.
On how people got underwater:
Hagar: “So what we ended up with is a lot of home owners, particularly new construction, that would end up with a loan for far more than the house was worth. The moment they got into it, the loan may have been worth $50,000 more than the value of the house, because there was a car, or kickback, or something else thrown in with it. …They started off underwater.”
Hagar: “Sometimes within a complete subdivision, every house would be one of these strange little deals. We saw it up in Silver Lake in Everett. Every single home in the plat sold with a car, or money back to the buyer, or something. Again, so the loan was already for more than the house was worth, the day they bought it.”
Scher: “Did people think they were getting a free car?”
On who is at fault / who is responsible for the fraud:
Scher: “How much of this problem—of people facing foreclosures, of being underwater—part of it is the crash in the economy, how much of it though is because of fraud?”
Hagar: “A large percentage… there’s a combination. Banks were doing loans that they shouldn’t have done. Borrowers were buying for more houses than they should have… there’s a lot of contributing factors. However, when you go in and pull off the homes that are in foreclosure right now, 80% involve some level of fraud.”
Hagar: “Everybody’s saying ‘the buyer’s lying.’ It’s a combination. Sometimes it was the appraiser, not appraising it right, and doing it fraudulently. Sometimes it was the borrower lying about their income, their occupancy. It could have been that the loan originator was showing them how to do this, was ‘helping’ them with their down payment, cash under the table just before… So there’s a wide variety.”
On “predatory lending”:
Taylor: “I don’t know if it’s predatory lending. Because predatory lending, you have to clearly be deceived. And clearly you know that you have an adjustable rate, that it’s going to change, and your income isn’t.”
Scher: “So people were being blind, polyannas.”
Taylor: “Just misled, I believe. And always told: ‘Don’t worry. You can refinance that later.’ …And then when the economy changed and turned, they couldn’t do it.”
Scher: “So was it predatory, or did people just have the bubble mentality, all the way up and down the line?”
Taylor: “I’ll go with the bubble mentality.”
Even I was told the “don’t worry, you can refinance later” line when my wife and I were shopping for a pre-approval in 2005, just before I started this site. Huge warning klaxons went off in our heads, and we walked away.
One thing that surprised me was how frank the real estate agent Mr. Hagar was. Kudos to him for not sugar-coating the situation like so many other agents attempt to do. You can download the full show from KUOW. It’s definitely worth putting on for a listen while you count the work hours until the weekend today.