While the consumer could always choose his own lender, agents should be required to present at least three options to the consumer. If the consumer faced less than three options, either by choice or because the subprime nature of the loan allowed for only one or two options, the consumer needs to sign a waiver of the three institution rule. It would then be the agent's responsibility to provide answers (informed consent) about a laundry list of potentially predatory practices - going over each item and comparing the three lenders in regards to each item, and having the consumer sign off on each of these items indicating an understanding of the differences between institutions. This can be accomplished with a standardized form checklist.

While this would undoubtedly require additional training initially and continued ongoing training specific to mortgage lending practices, this would help ensure that consumers did not unknowingly take on loans that could not be paid off early, take loans with balloon payments unknowingly, take "maximized" loans without full knowledge of how taxes and insurance add to the monthly payment, or otherwise become involved in mortgage schemes that may negatively affect the borrower.

No, this added involvement and responsibility of the real estate agent will not eliminate the foreclosure and subprime default situation. However pushing some of the responsibility for informed consent to the real estate agent is likely to have the following effects:

* Consumers will be better informed as to their options, and how one institution relates to another. They can actively pose questions to the agent - questions they may not even know to ask without a structured informed consent comparison of lending institutions.

* The subprime default situation is likely to be made better - it would essentially take three potentially predatory lending institutions, three predatory mortgage lending salesmen, one unethical real estate agent and one somewhat informed consumer to enter into a contract that had a high probability of default.

* Real estate agents, as they make their progression from facilitator to expert in their field, would likely be able to demand a higher salary in the form of rising commissions. As is the case with all competitive endeavors, a balance is reached between the costs to do business (such as increased costs of ongoing education) and passing those costs onto the consumer while balancing those price increases against the agents' competition.

There is no simple solution to eliminate foreclosures. In fact, foreclosures will never be eliminated in their entirety. Despite that, the shifting of responsibility to well trained agents can help alleviate the problem and make all involved more aware when a loan is of a subprime nature. This can help create the "good" subprime loans while minimizing the ones that result in foreclosure.

The information in this article is merely an opinion. No statement within this article should be viewed as a suggestion or statement to buy or sell real estate for investment purposes or any other purpose! The data was garnered from sources believed to be accurate but is not guaranteed.

See our Real Estate Predictions for 2008! See our Coeur d'Alene Real Estate Article here!

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