In Grand Rapids, the rates of foreclosures have increased dramatically over the past year.  Kent County is averaging about 100 foreclosures a week right now.  The crisis is a result of a number of factors including lay-offs in the furniture and auto industry over the past several years as well as more buyers opting for adjustable rate mortgages which are adjusting upwards and increasing payment levels significantly. 

As a real estate agent, I have negotiated foreclosure and pre-foreclosure sales for my clients.  Each part of this process is gut-wrenching and often laden with anxiety and guilt.  The fact is that unwanted, disruptive events can come suddenly into anyone's life; illness, a bad financial decision or investment, job loss, business failure, death or divorce can plunge anyone of us into a situational crisis that is unexpected.   But, there are some disturbing  patterns that are evident amidst all this chaos.

The Mask: 

  Traditionally, a mask is worn to cover and conceal one's true identity or activity.  Perpetuators of crime hide behind it's anonymity to shield themselves from prosecution.  The crisis in foreclosures in West Michigan is mask which veils a broader dimension of involvement beyond those whose homes are being forfeited.  Perhaps, the nature of the injury could be succinctly stated as creating inventive methods and means to over-extend financing to individuals in a manner that puts them at severe risk for default. 

Lending models are extremely accurate in their predictive ability to determine default rates.  Adjustable rate mortgages have historically been viewed by the lending industry as a high risk alternative.  But in the last couple of years adjustable rate mortgages and interest only loans have skyrocketed with double digit increases.  The temptation to be over-extended/leveraged on debt has knocked on our door in different forms.  Sometimes it has arrived as a letter, a call or fax describing an incredible "teaser" rate for a few months or years. In other instances, the delivery was via loan officers willing to finance anyone or anything for a fee.    We have been regaled by TV commercials starring incredible testimonials of individuals who got out of a debt crisis by creating more debt! 

Many segments of the industry and society have been co-conspirators; appraisers created inflated values to buttress shaky real estate transactions.  Sometimes the misdeed was the action of a homeowner in concert with a buyer who created fake documents to substantiate a false transaction or an investor allegedly "flipping a property".  But, the point is that somebody designed the letter, somebody made the call or TV commercial;  the appraiser, loan officer, Realtor, homeowner & buyer where not nameless or faceless.  Who is the somebody? The somebody is us.  Everyone who chose to turn a blind eye or to participate, everyone who knew the truth and ignored it, everyone who was consumed with greed or who was just plain ignorant.  

 All of us have worn the mask.  The crisis in the real estate industry is not unrelated to our collective choice as a society to be irresponsible in our spending habits and personal decisions.  In fact, we no longer refer to ourselves as humans, we are now called CONSUMERS, a term which may reflect some unconscious desire to divorce ourselves from the implications of our decisions.  The consequences have now returned home to roost...literally as all of us are being confronted by the prospect of potentially thousands of homes placed on the market because of a foreclosure proceeding.

The good thing about a mask is you don't have to wear it, it can be removed.  An African proverb says: At anytime that you choose to wake up, it becomes morning for you.  We can each choose to wake up and take individual responsibility and control for our financial lives.  We can remove the mask and take a critical look at our personal spending habits.  We can choose to walk away from transactions which are not financially wise or prudent.  We can choose to say NO to acquiring additional credit and increasing our debt load.

The crisis has spurned some positive results.  Housing affordability has never been better.  Last year, ABC News featured Grand Rapids as one of the most affordable places to live in America!  In the past 12 months, I have witnessed an urgent call to education amongst real estate professionals and mortgage lenders. There is more widespread understanding of what constitutes illegal activity and this light makes it more difficult for darkness to hide misdeeds.  There are obviously many more lessons to be learned, and all of us will be learning them.

 *Special note:  The FBI recently offered classes to real estate agents, brokers and mortgage lenders in Grand Rapids, Michigan to educate the industry about the disastrous consequences of lending & real estate practice which constituted the practice of fraud .  Most agents had never had this type of information presented so starkly and clearly.  As a result of these classes and other situations, the Grand Rapids Association of Realtors has established a FRAUD HOTLINE available to the public to report suspicious activity and has beefed up its Professional Standards recommendations to ensure better education and enforcement of the transactions done by its members.