So if a person had been pre-approved for a loan that they could not afford, you'd go ahead and show them homes in that price range, get your commission, and then say it's not any part your fault when they lose their home a couple of years later?
Ed O.
No more than if someone paid you for their services with their mortgage payments and lost their house.
Since all my clients are either still comfy in their homes or have re-sold them for a profit I'll have to address your question hypothetically.
Hypothetically, the only way someone can be financed for a home they cannot afford, or will not be able to afford in the near future due to contract changes scheduled in the original loan, is through blatant fraud. The fraud would have to be perpetrated by either the buyer, the mortgage broker, or both. The fraud would also have to be deliberately ignored by the lender's underwriter since most fraud is easily detected in this process.
As a Realtor, the only way I could have knowledge of this would be through a confession from my buyer or the mortgage broker. If something like that ever happened, or even if I suspected it was happening, I would withdraw myself from the transaction and from any future association with the suspected party or parties.
The typical over-financing scenario involves a mortgage broker who tells the client to leave out certain info or fudge about their income, and?or tells them not to worry about the "hidden" rate increase in 2 years because they can easily re-finance on their equity at that time. Sometimes the client may deceive on their own, but the mortgage brokers should catch it if they are following the law. But I really feel the lender fraud hype is sort of a red herring to distract from the bigger picture.
But as I've said before, the vast majority of foreclosures are due to the skyrocketing cost of living (healthcare, gas, food) and the falling rate of compensation for the average American worker. The upwards redistribution of wealth from the pockets of the American middle class to the Cayman Island accounts of the Mitt Romneys.
