How Mortgage Practices Have Added to the Real Estate Debacle

The real estate and mortgage meltdown that has occurred here in South Florida , as well as many other parts of the nation, is a direct result of greed, both on the part of investors, developers, and, more often than not, home owners. And, of course, mortgage companies, offering deals too sweet to be true (which they were) just upped the ante that much more.

One component of the problem were investors, many of whom had been soured by the lackluster returns their investments were getting in the stock market. The unrealistic rise in real estate prices in Florida, as well as elsewhere, looked like a golden opportunity to double or even triple their money by putting a minimum down payment on their investment homes. Interest rates were at an all time low, even though many of these mortgages had balloon payments a few years down the road. These investors planned on "flipping" these homes before that ever happened. We know people who timed this right and actually did make huge sums of money with very little down payment. Some actually sold their homes immediately after they were completed. They had been locked into pre-construction home prices, and these homes had increased in value by hundreds of thousands of dollars before they ever closed. These were the lucky investors who got in and out before the bubble burst. But everything is timing.. Investors who got on the bandwagon late, and whose homes were caught in a backlog of construction delays, were not as fortunate. As prices started declining, they couldn't sell these homes as they were completed. I know of investors who are now paying high mortgages, property taxes and high homeowners premiums on three or four empty homes. They still have to pay to keep the electric on, for lawn and often even pool service, and water bills . Watching them decline in value only makes things worse.