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Modern media and Congressmen miss the true problem of the foreclosure landslide. The real villain of the Great Real Estate Depression is a drastic reversal of mortgage lending process and how lenders handle modifications.

The explosion of the housing market was fueled by easy money. Lenders were swimming in funds from insurance companies to Wall Street. These funds were available to anyone who asked; especially unqualified mortgage seekers. 100% financing? Not a problem, how about we cover your costs aswell? Can’t verify income, don’t worry we’ll just take your word for it. Fico score below 600? That’s ok, we KNOW your property will come back and you’ll be able to make the payments. O and if you can’t afford that, don’t worry we’ll let you pay less then interest.

Are you freaking Kidding me! Well I wish I could tell you this was just a fairy tale, however we offered them. Everyone in the industry did; it was the shape of the market in 2007-2008.

But today’s problem is different. In the quick reversal that caused the current housing implosion, lenders have created a world where you can’t even qualify for a mortgage. It is impossible for the general public to qualify for a mortgage loan unless they have excellent credit, documented assets and verifiable income. Essentially, lenders have cut off half of the market baring most homeowners from qualifying for financing.

Real Estate is merchandise and like any other product; subtract half the market and watch prices fall. It’s a simple computation. If you’re looking to sell your home, just forget about those buying with a lower then 620 credit score. And forget most of the self employed from being qualified; they typically cannot show the income for the mortgage they wish to buy. Buyers then only have Fannie Mae, Freddie Mac and FHA as options; so besides the required down payments all three of the lenders have similar requirements. So if you are denied by these lenders: so sorry; no loan for you!

Stick around, it gets worse. What about all the properties in foreclosure that have been recouped by the lender? These homes are being heavily blundered. Many are unoccupied and are in horrible condition. Others don’t have a for sale sign and aren’t being marketed. That coupled with the fact that many potential home buyers aren’t looking for rescue properties is bringing the market to its knees. An even greater problem is that many investors can’t afford the 20% down payment that is required for these properties due to the house’s condition. So the home just parks on the market. And eventually the banks even further lower the price dropping the neighborhood into a deeper debacle.

And just to make matters even worse, these homes don’t qualify for FHA financing. In today’s market, FHA financing represents the most lenient financing available for home-buyers today. But FHA has fairly strict property standards – these “REO’s” (properties owned by lenders) typically fail to pass an FHA appraisal. With all the new regulations and with all the stimulus money being handed out, Mr. Obama, we need regulations requiring lenders to get their foreclosed properties in order. These properties need to be handled with care and attention. Additionally, lenders need to begin relaxing their absurd underwriting guidelines. I have been in the mortgage business since the early 80’s and never in all that time have underwriting guidelines been as strict as today.

So what option do we have? Well reach out to the representatives, email your congressman, petition to your senator and get your voice out there. We need to force Washington to do something to fix the regulations barring lenders from making the necessary modifications to fix the housing market. We need to put policies in place to force the creditors to do the right thing for the housing market.

As much as I rant about the current status of the housing market, not many people are going to take a stance on their own accord. So I have decided to start a revolution and make headway with a proposal to Washington. If you agree with our cause and message, join us at www.millionhomeownermarch.com I’ll be touching base with you soon.