Now that the real estate bubble has burst here in Contra Costa County and millions of hardworking homeowners have lost millions in home equity, the banking regulators and our politicians should carefully review the root causes so that the same lending scenario never happens again.
Who is to blame? There were many players complicit in the huge fraud perpetrated on the American people: of course, the real estate agents, mortgage brokers and appraisers that artificially inflated prices and pushed many to buy beyond their means; virtually anyone tied to the real estate industry, including the developers (who did not inform many new homebuyers that they were selling the houses next to new homeowners) and greedy investors/real estate agents trying to make a fast buck (who, unable to flip or even rent the homes, then flooded the new neighborhoods with low-income, subsidized renters, creating additional problems and increasing crime).
The largest amount of blame for the current real estate meltdown should be directed at the liberal legislators and “socialistic” politicians that for years forced the banking industry to lower standards and lend out money to unqualified borrowers in the name of “diversity” to spread the homeownership dream.
At the height of the fraudulent lending boom, it was possible for an unemployed individual to obtain a loan on a home up to $1.2 million by just stating their income on a falsified loan application, obtain 100-percent financing, then pull out equity to buy oversized SUVs and boats.
Only now that the bubble has burst are we seeing the rampant fraud and greed perpetrated by many in the real estate industry. On a daily basis we see foreclosure notices posted on brand-new homes, as greedy investors walk away, leaving many new developments ghost towns and targets for crime.
In a last-ditch effort, many families are doubling and tripling up in one home, further harming our tax base and straining local services, not to mention increasing the blight in previously well-kept new developments.
Several of the largest local mortgage brokers have gone belly-up, and California is mentioned daily as the epicenter of foreclosed properties. The problems have now come home to roost – the fraudulent practices exposed and the ripples affecting every homeowner and business owner in California.
What is the solution? A return to conservative lending practices and limits on uncontrolled building that created the speculative real estate environment in the first place; criminalizing the large campaign contributions to local and state politicians from developers, realtors and unions; creating a law requiring developers to disclose to anyone buying in their development the current number of homes sold to investors; passing legislation making sub-prime loans and predatory lending practices federal crimes with mandatory sentences for all involved.
Then, perhaps, we can prevent another financial meltdown and inflated housing market in California.