How is legality determined? Laws are decided by man to determine “legal” and “illegal”, the same men who are getting kickbacks from large companies like lending institutions, who lobbied for the reduced regulation in the lending industry. That same regulation has allowed banks to dictate the short sale process and as such don’t allow investors to be paid a fee at closing for working with a homeowner in foreclosure, negotiating a short sale, finding a qualified buyer and keeping everything from falling apart.
As are the rules of the lenders, in short sale negotiations, they will not pay anyone anything because they are “already losing so much money.” The problem with this argument is that they really aren’t losing any money whatsoever. The money they claim to lose is the same money that they lent (threw away) to undeserving homebuyers in amounts greater than the value the property financed. (If anyone lost money in this fashion in the private world, they’d just be called irresponsible, foolish and would have to start over.) If there was ever mortgage fraud, this would be the case. But that’s not what we’re talking about here; we want to know if this practice, recently coined, “the Investor-Backed Bailout”, is illegal, or if it harms anyone, other than the ‘poor’ banks.
Now, I bring you back to the fact that laws are created my men, and the most influential ones at that, but had the laws been different…if lenders had a legal responsibility to save homeowners from losing their homes after having created a situation where they cannot afford to pay their debt…how different would this situation have developed? Many don’t have chance now because of the recession caused by banks over-lending. They can’t afford their homes now, even if they had been able to previously. Since these institutions are not able to help these homeowners at this point or offer any real solution of their own at all, wouldn’t you believe that there is something wrong with the law in this case? How about the law that passed to send your tax money to these lenders who welcome it with open arms, while they still do not offer homeowners any options until they default on their loan, or lend any money out to worthy home buyers?
Luckily, a group of entrepreneurial investors stepped up and navigated the difficult laws that had been stacked in the banks and other lending institutions favor. These entrepreneurs, the same kind of creative and forward thinking people that made this country the most powerful and productive nation in the world, have been termed “crooks”, “liars”, “cheats” and “scumbags”. They must be doing something illegal then right?
They are actually earning a living by providing a needed service, and being compensated in direct proportion to their ability to perform this service. You won’t find this type of risk too many other places, that is why it’s called investing, and many of us would not have the boldness and courage to do it. And there have been no other solutions provided to keep so many homes from being abandoned by foreclosure.
Not only are short sales investors operating within the confines of the law, (because if they weren’t you would surely have heard of someone being locked up by now) they are also acting within the framework of our capitalist society. Despite the limitations in the system, investors have found a way to solve a problem, and I think we all can agree that foreclosures are a problem, and do so without doing anything immoral.