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This blog covers the work I do as a REALTOR®, author, business consultant, motivational speaker, trainer, expert witness, and business coach. - Ralph R. Roberts

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October 31, 2007

The 10 Commandments of Selling Success

There are no secrets to selling success. Every salesperson knows what he or she must do to attract clients, grow business, and boost revenue. Sometimes, we just get so caught up in the day-to-day drudgery of doing business that we forget what we should be doing to build our business.

The following ten commandments of selling success can help you refocus your energy and enthusiasm on the factors that contribute most to your selling success:

  1. Practice your craft. Practice selling at work, at home, at the airport, in the taxi, at the grocery store, and wherever else you happen to be in contact with other people. The key to selling is being able to establish personal relationships with your clients. Practice by making meaningful connections with everyone you meet.
  2. Invest in your own success. As an entrepreneurial salesperson, you have to act like a business, and that means investing in your own personal and professional development, in the latest technology, and in support personnel, so you have more time to spend on what you do best and what earns you and your company the biggest profits.
  3. Adopt new technologies. Tech savvy clients are relying more on the Internet for their information and are using a variety of communications technologies to keep in touch, including cell phones, e-mail, text messaging, VoIP (Voice Over Internet Protocol or Internet phones), and blogs. To stay in touch with the latest generation of shoppers, you’d better be tech savvy, too.
  4. Hire an assistant. Hire or be hired. Hire people to take on tasks that they can perform better, faster, and for less money than you can, and then treat them well. The more work you can outsource to others, the more time and energy you can spend on dollar-productive activities. Instead of asking “What’s the cost of hiring an assistant?” ask “How much revenue am I losing by not having an assistant?”
  5. Fire your worst clients. The customer is not always right. In fact, some customers can drag you down, sapping time and energy you could be devoting to other, better clients. You don’t have to be rude about it, but get rid of the clients who are squandering your time and resources.
  6. Date your leads… or someone else will. Regardless of how you obtain leads, make sure you keep in touch with those leads until they are ready to buy. One great way to automate the process of keeping in touch with your leads is to add leads to a drip e-mail campaign. A drip campaign sends a series of e-mail messages to prospective clients over the course of several weeks or months automatically.
  7. Give without expectations. Sales coaches often recommend that you “give to get.” I’m telling you to “give to give.” If you’re expecting something in return, you’re not really giving–you’re bartering. Give for the sheer pleasure of giving.
  8. Take risks. The people who make the most money take the biggest risks, and that applies to sales as much as it applies to anything in the world of business. You have to be willing to invest money and take some chances. Otherwise, you’re not a salesperson. You’re an order taker.
  9. Embrace change. The Internet, new technologies, and the global economy have combined forces to accelerate change to a dizzying pace. The only way to survive and thrive in this environment is to embrace rather than resist change. Every change, particular changes that cause problems and headaches, is packed with potential.
  10. Achieve a balanced lifestyle. Being a successful human being means much more than achieving career success. It means remaining healthy, building rewarding relationships, supporting your community, and perhaps even raising children. Failing in one area of your life can lead to failures in other areas.
  11. Work on being successful in all areas of your life. Without the strong relationship I have with my wife and children, I would not have achieved the same level of success in my career. Success feeds on success, and, unfortunately, failure feeds on failure. Encourage everyone around you to set goals and pursue their dreams. Surround yourself with success.

    For more information on sales success, see my latest book, “Advanced Selling For Dummies,” which is available on Amazon.com and from fine booksellers and retailers nationwide.

Posted By: Ralph Roberts @ 5:00 am | | Comments (0) | Trackback |
Filed under: Books, Selling

October 30, 2007

How to Fuel Sales with People Power

The days of the lonely door-to-door salesman are over, thank goodness, but I often observe salespeople who have placed themselves in a sort of self-imposed exile. By falsely assuming that nobody can do it better than they can (whatever “it” is), they end up working themselves to a frazzle and never achieve the sales success they really deserve. The fact is that you can do more and do it better by harnessing the power of people.

If you need proof, just look at any major corporation. They never would have been a major corporation had they not hired people. Think of yourself as a mini corporation–You, Inc. Hang out a Help Wanted sign. Start interviewing people. Establish productive partnerships.

Fuel your sales with people power:

1. Find out what’s missing. What do you want to do that you can’t do because you’re lacking the time or expertise? As soon as you know what you need and don’t have (time, expertise, resources), you have a pretty good idea of the people you need to hire or partner with–people who have what you need.

2. Do what you do best and hire out the rest. Figure out how much you earn per hour. If you earn $50 an hour selling and you’re cleaning your house over the weekend when you can hire someone for $10 an hour to do it, that’s borderline insane… unless, of course, cleaning your house is therapeutic or something you enjoy doing.

3. Hire an intern. Colleges and even some high schools have internships or co-op programs in which students are willing to work for free or for a low wage in exchange for job experience. Look into these programs for some cheap and often highly qualified workers. Many of these “kids” are very tech savvy and can teach you a thing or two.

4. Hire the talent you’re missing. Salespeople rarely hesitate to invest in a gadget or service they think they need, but when I recommend that they hire an assistant, they immediately find all sorts of excuses. The fact is that hiring an assistant has never been easier. You can even hire a virtual assistant. A virtual assistant works as a freelancer, so you don’t have to deal with messy payroll issues and benefits. For additional information, check out the International Virtual Assistants Association Web site at www.ivaa.org.

5. Cash in on R-Commerce (Relationship-Commerce). As Terry Brock (www.terrybrock.com) explains, on its surface, the economy is driven by the exchange of goods and services, but beneath this surface economy is the real economy, driven by relationships. By focusing on your relationships with customers, colleagues, and even your competitors, you can grow your sales infinitely more than by focusing solely on the exchange of goods and services.

6. Team up with a personal partner. It’s far too easy to skip out on your responsibilities when you’re accountable only to yourself. As Terry Wisner explains, by teaming up with a personal partner to set goals and keep one another on track, you can achieve much higher levels of success than by acting alone.

7. Get connected with a mentor or coach. Success leaves big footprints, so follow those footprints by taking on a mentor or hiring a sales coach to advise you. A mentor or coach can often point out shortcuts you may have missed, expose you to new opportunities, and make sure you’re doing everything you need to do to stick to your plan.

8. Become a mentor. You may think that mentoring a student or a salesperson who’s less qualified, less experienced, or less successful than you would be a huge expenditure of time, and perhaps it is, but what you get in return usually makes up for it. A younger student can often teach you a thing or two about using the latest technologies or expose you to new marketing and sales techniques. In addition, if you establish a solid relationship, your student promises to become a major networking asset later in his or her career.

If you start to feel the urge to fly solo, think again. When you open the doors and start connecting with people, you soon discover infinite opportunities. Try it!

Posted By: Ralph Roberts @ 7:00 am | | Comments (0) | Trackback |
Filed under: General, Selling

October 29, 2007

Achieving Success with the Strebor System

A while back, I realized that my last name, “Roberts,” spelled backwards is “Strebor,” and I designed a system for effectively implementing any plan for success.

When you’re ready to put your plan into action, follow the Strebor System:

S: Sticktoitism is the dogged determination required to ensure that you follow through on your plan.
T: Training provides you with the know-how and skills to properly execute your plan.
R: Results are what you build on as you attain higher and higher levels of success.
E: Enthusiasm provides you with the ambition and energy required to follow through.
B: Benefits give you the motivation to succeed.
O: Optimism is the confidence that enables you to overcome obstacles.
R: Reach is your commitment to taking risks and seizing opportunities that make you grow both professionally and personally.

The Strebor system starts with a positive attitude that gives you the enthusiasm, optimism, commitment, and sticktoitism required to pursue and ultimately achieve your goals. Although some people are born with eternal optimism, others of us have to work at it. Here are some suggestions on how to put yourself in a better frame of mind:

Identify your sales heroes. Success leaves big footprints, so follow the trailblazers to lessen the burden of your journey. Over the years, I have followed in the footsteps of my heroes, including Julia Rowland (my grandmother), Tony & Noel Fox of Fox Brothers Real Estate (my first mentors), Ira Hayes, Tom Hopkins, Zig Ziglar, Charlie “Tremendous” Jones, Art Fettig, Joe Girard, Ed Keim, Lee Iacocca, Norman Vincent Peale, Mark Victor Hansen, Og Mandino, Tom Antion, Les Brown, and a host of others.

Shadow top producers. Network with the top producers in your area and ask if you can observe them for a day. You can pick up a wealth of information and new techniques in a single day in addition to discovering a new source of motivation.

Write and repeat positive affirmations. Negative self-talk can drag you down into the depths of self-defeatism. Replace that negative self-talk with positive can-do affirmations. Mr. Positive, Dave Boufford, made his own leap to pursue his dream of guiding others in developing and maintaining a positive attitude through his inspirational e-zines Positive Thoughts and Positive News. Let Mr. Positive pump you up by visiting www.MrPositive.com.

Surround yourself with positive people. When I am around someone who has a negative attitude, I can feel the energy and enthusiasm being sucked right out of me. Positive people bring me up, make me believe in myself, and encourage me to strive for higher and higher levels of success. Avoid people who drag you down, and gravitate to those who lift you higher. This includes family, friends, colleagues, associates, and supervisors.

Wake up with a positive plan. The first 15 minutes of any day can make or break it for you, so spend that first 15 minutes developing a positive plan. Once you have a plan in place and the sticktoitism to execute it, you are well on your way to a productive day.

Define “success” in your own terms. Don’t let other people dictate what “success” means to you. Spending more time with friends and family, getting involved in your community, and pursuing other interests may mean more to you than earning millions of dollars. Of course, doing all of those things and earning millions of dollars are not mutually exclusive.

Reward yourself. I reward myself in two different ways: I reward myself upon achieving a specific goal, and I reward myself in anticipation of achieving a specific goal. Some people don’t understand that second approach–why should I get the reward before I achieve the goal? Well, once I reward myself, then I know I have to work harder to pay for the reward. I usually charge the reward on my credit card. That gives me the added motivation of earning enough to pay for the reward before the balance comes due.

Tip: If you are a part of a Real Estate agent team, make sure that everyone on your team is contributing to creating and maintaining a positive attitude in the workplace. Deal immediately with any conflicts that arise, shut down the gossip mill, and find a way to relieve tensions and create an environment in which people are eager to come to work the every morning.

I encourage you to put the Strebor system into action in all areas of your life. I have found it effective for achieving both personal and professional goals. Remember, however, that it all begins with a positive attitude.

Posted By: Ralph Roberts @ 10:05 pm | | Comments (0) | Trackback |
Filed under: General, Selling

October 18, 2007

My Latest Article for RealtyTimes.com: Preforeclosure Investing

My latest article for Realty Times is now available on RealtyTimes.com:

INVESTING IN PREFORECLOSURES
by Ralph Roberts

Some of the best bargains in the foreclosure market are actually in the preforeclosure market — weeks or even months prior to the time when the property ends up on the auction block. The earlier you can locate a distressed property or homeowners facing foreclosure, the less competition you have and the better your chances of ultimately acquiring the property at a great price.

Networking for leads

The earlier you can find out about a property in preforeclosure, the better. You may even be able to discover properties before the foreclosure notice is posted. Choose the area where you want to buy preforeclosures and then network heavily in that area. Create your own business cards and hand them out to everyone you meet, and then network with people who are likely to have early leads:

  • Real estate agents
  • Foreclosure attorneys
  • Divorce attorneys
  • Bankruptcy attorneys
  • Title companies
  • Loan officers

Reading the foreclosure notices

Call or visit your…

To read the rest of this article, see “Investing in Preforeclosures” on RealtyTimes.com.

Posted By: Ralph Roberts @ 10:28 pm | | Comments (0) | Trackback |
Filed under: Writing, Real Estate

October 8, 2007

Mortgage Meltdown, Fraud Fallout — What’s the Difference?

Recently, I was discussing the mortgage meltdown with a reporter who made the mistake of asking me who or what I believed was primarily responsible for the mortgage meltdown and housing crash of 2007. My reply consisted of a single word: “fraud.” My conservative estimates target fraud as being responsible for at least 80% of the problem, and most of this fraud was perpetrated by industry insiders (both in the Real Estate and mortgage loan industries) on the consumers.

Of course, there is plenty of blame to go around. If consumers were not so greedy, using their homes like ATM machines whenever they needed an equity fix, perhaps the problem would not be so widespread and so deep. If fiscal conservatives were in charge of running the government at federal, state, and local levels, maybe we would not have a culture built around deficit spending. If politicians hadn’t agreed to ship manufacturing jobs overseas and open our markets to free foreign competition, maybe Americans would have more money to make house payments. If we had universal healthcare coverage, people wouldn’t end up in bankruptcy whenever they needed surgery.

I could go on, but from what I have witnessed in the Real Estate and mortgage loan industry comprises a concerted effort on the part of industry professionals and insiders to fleece the consumer. Cash back at closing schemes caused a huge part of the problem. When homeowners purchased their homes, many of them would borrow in excess of the property’s true market value–sometimes hundreds of thousands or even millions of dollars more than the home was worth. They were then stuffing the proceeds in their pockets as if they had earned it.

Some might say that in this case, consumers are clearly at fault. After all, they were the ones who benefited most from the scam. However, in a huge majority of cases, professionals were advising these homeowners, telling them that this was a perfectly acceptable practice, that “everyone was doing it,” and that you were almost stupid for not doing it. The professionals would even conspire to defraud the banks, lining up appraisers who were known to appraise houses at whatever target value the buyer, seller, and agent decided. In return, the appraiser won more business, and the loan officer and real estate agent “earned” higher commissions. Everybody wins!

Another tactic that mortgage lenders used to suck in clueless buyers consisted of selling consumers on adjustable rate mortgages (ARMs) that had teaser rates. When housing prices were spiraling into the stratosphere, fewer and fewer people were able to afford to take out a conventional mortgage to purchase a home. They simply didn’t have the income and savings required to obtain loan approval at the current interest rates. Instead of denying these high-risk lenders loans, the industry simply lowered the initial interest rate, so more people could qualify. Loan officers downplayed the fact that the interest rates would probably rise significantly months or years down the road. They told the buyers that they could simply refinance if the rate was too high. Unfortunately, when credit tightened, homeowners could no longer refinance with a conventional mortgage. Foreclosure became imminent.

During the big party when housing prices were on the rise and interest rates were dropping, mortgage brokers and the loan officers who worked for them, turned away few if any applicants. If you didn’t make enough money, they would encourage you to fudge the numbers on your loan application. To boost your credit score, you could simply piggyback on someone else’s credit card (this little loophole has been fixed). In some cases, the loan officer would simply have the applicant sign a blank loan application, so the loan officer could fill in the required information later–information that would be sure to win the applicant loan approval.

And this is just the day-to-day fraud. Professional con artists are also responsible for boldfaced scams that have ripped off homeowners and lenders alike. Armed with the Internet, technology, and know-how, these fraudsters could produce forged paperwork to score millions of dollars in mortgage loans for homes they never even bought.

What we are seeing now is fraud fallout. The system has been bruised and battered for too long. The very professionals who rely on the industry to feed them and their families have caused the problem, and many of them are now nowhere to be found. They scammed the system and left hard-working Americans to pick up the tab.

Posted By: Ralph Roberts @ 8:01 pm | | Comments (0) | Trackback |
Filed under: Real Estate

October 6, 2007

Swimming with the Loan Sharks

Every spring and summer, you are sure to spot stories in the press about shark attacks off the cost of Florida, Long Island, and California. You rarely see a story, however, about the loan sharks attacking homeowners all across the United States.

Many people believe that the current mortgage meltdown has been caused primarily, if not exclusively, by homeowners whose appetite for credit far exceeds their ability to repay their debts. This is far from the truth. Mortgage originators acting more like street toughs than representatives of lending institutions have contributed far more to the current crisis. Instead of acting as professionals, they have led homeowners out into the water and essentially bitten off their arms and legs.

Read this comment, which was left on my other blog, FlippingFrenzy.com, just yesterday afternoon by reader Lisa Ashton, from Saunderstown, Rhode Island:

“I am a single mom of two kids–one in college, one in high school. I have raised my kids alone in my home for all this time. I have owned my home for 21 years, actually built it with my ex husband. I hold down three jobs currently to try and make ends meet. I am a registered nurse in a school system.”

“I refinanced my mortgage in April of 2006 with Aegis Lending Corporation. They did a ‘no doc’ loan and lied about how much I made to make a high mortgage amount work. I was trying to take out $25,000 to finance my daughter’s college needs at the time. They said I made enough to cover a $493,000 mortgage! In reality I earn only about $55,000. I now have house payments that eat up about 98 percent of my monthly income.”

“They also hired an appraisal company (Macloud Appraisers in Narragansett, RI ) who somehow agreed to appraise my home for $560,000 when the town only values my property at $320,000, and it would probably sell for about $400,000 on the market today.”

“To bring my interest rate down to 6.5 percent, Aegis charged me $30,893 in discount points at closing. That would have meant that their standard interest rate was 14 percent! What sort of ARM starts out at 14%?”

“Now you may wonder why I would agree to such an arrangement. Well, Aegis advised me to stop paying my mortgage while they were refinancing me, because it would screw up the payoff amount they received. Admittedly, I was naive in following their advice–I stopped paying my mortgage. After all, they had already approved my loan.”

Aegis failed to provide me with a closing packet prior to the closing date to review. They didn’t even tell me what to expect in terms of a monthly payment. I discovered all of this on closing day, when I was already two payments behind on my existing mortgage. I realized that if I refused to sign for the new mortgage, I would be in big trouble with my previous mortgage company, so I signed the papers.”

“Aegis told me not to worry. Within six months, I could refinance with them again and lower my payment to $2918 per month. (I currently earn about $3600 take home.)”

“Instead of refinancing my loan, Aegis sold it within a week after closing to GMAC Mortgage company and then filed for Chapter 11 Bankruptcy. Now I was really stuck.”

“I have gone through all of my retirement ($30,000) and all of my savings ($15,000) and maxed out every credit card to stay current with my mortgage for this past year or so. No one will refinance me, and now since I’m so maxed out on credit cards, I’ve watched my credit scores plummet well over 100 points in the past four months.”

GMAC has told me they will NOT work with me to help me out. I have called them for the past three months asking about some way to help me, so I don’t end up in foreclosure. They have told me that they rather have my home.”

“September 2007 was the first time in 21 years I’ve ever missed a payment on my home, and I’m just sick about it. I did receive something from the court stating I could file a claim against Aegis Mortgage–a ‘proof of claim’ form–but who knows how long that will take to work through the system. By that time, my children and I will have been evicted from our home.”

“So that’s my story. I can’t lose this home. I’ve worked so hard to keep it. It’s my children’s safety net. This is all they’ve known, and I can’t take it away from them. I won’t. But I don’t know what to do.”

This is just one story, but it is representative of what has been happening in every state in the Union–lenders preying on homeowners who have been duped into trusting the system and the professionals who run it. It is the equivalent of going into a doctor’s office and intentionally been diagnosed as having cancer. The “doctor” prescribes a host of expensive tests, medications, treatments, and therapies just to jack up your fees, and then flies out of the country when you’re money runs out.

When you seek the advice of any professional–a doctor, attorney, accountant, Realtor, or whoever–you expect that the person is going to give you accurate information and reliable advice. You do not expect the person to flat out lie to you.

We have to stop blaming homeowners for the current mortgage meltdown and start holding loan originators to the same standards we set for doctors and other professionals. We also need to start placing the blame where it belongs–not with the homeowners but with the loan originators who know better.

Posted By: Ralph Roberts @ 11:15 am | | Comments (2) | Trackback |
Filed under: Real Estate

October 5, 2007

The Truth About the Mortgage Meltdown

You have been reading about the mortgage meltdown and seeing daily news reports about the record number of foreclosures. Mortgage lenders and dropping like flies. Even large companies such as Countrywide Mortgage are feeling the crunch, having to borrow billions of dollars to keep their doors open. Based on what you have read, heard, and seen in the media, maybe you feel as though you have a pretty good grasp of what is going on and what caused it, but how much do you really know?

To find out how savvy you really are about this mortgage meltdown, take the following single-question quiz:

Why have so many mortgage lenders gone out of business?

  1. Homeowners are unable to make their payments.
  2. Massive amounts of real estate and mortgage fraud.

If you are among the multitudes of the ill-informed, you probably chose A. And if this were the 1950s, perhaps you would have been correct. Back in the 1950s when banks loaned money directly to people who were unable to repay the debt, the banks took a direct hit to their bottom line. They felt the pain.

In the current system, most banks rely on brokers to originate the mortgage loans. These brokers typically have loan officers who work for them and are in charge of selling loans to consumers, helping the consumers fill out their loan applications, and performing other tasks to expedite the loan process. Loan originators receive a commission for every loan that’s approved, and because they are lending someone else’s money, they take on risk only indirectly.

When someone borrows $300,000 to purchase a home, for example, the broker receives 2 points at closing for a total of $6,000. They then package the loan with other loans and sell it to the market at 104 percent or $312,000. In this case, the originator just “earned” $18,000 off the mortgage loan–the $6,000 commission plus the $12,000 markup.

When bad loans are traced back to mortgage fraud, misdeeds and misrepresentations, originators takes a double hit. They are forced to buy back the bad loans, and the lender cuts off access to future transactions. With huge chunks of money flowing out and little or no money flowing in, the mortgage originator is forced to close up shop. That is what is currently happening and why we are now seeing a mortgage meltdown.

When interest rates were low and housing prices were soaring, mortgage fraud was rampant, but the problem remained hidden because homeowners were awash in equity. Credit was easy to get, and mortgage brokers and loan officers made it even easier. If an applicant couldn’t qualify for a particular loan, the loan officer would simply encourage the applicant to fudge the numbers or would fudge the numbers on the applicant’s behalf. If a home buyer wanted a larger loan to cash out some money at closing, you could always find an applicant to accommodate–inflating the appraisal to make the property appear to be worth more than it really was. Loan officers were tripping over each other to approve risky loans and nab their commissions.

Mortgage Investment Lending Associates (MILA), a subprime wholesale lender that was based in Mountlake Terrace, Washington shut down during the spring of 2007, primarily due to the fact that its loan officers were responsible for huge numbers of fraudulent loans. Several employees who refused to go on the record reported that they passed along proof of fraud committed by at least one of the company’s loan officers. This person made so much money for the company that instead of firing its employee, MILA relocated and promoted the person.

Now that the housing market is in a slump, it’s as though the water has been drained out of the pond, and now we can what is at the bottom… a whole lot of muck.

Posted By: Ralph Roberts @ 2:20 pm | | Comments (2) | Trackback |
Filed under: Real Estate

October 3, 2007

Mortgage Con Goes Global

As we scramble here in the United States to pick up the pieces from the latest credit crisis and housing market crash, we often overlook the fact that U.S. lenders did not simply sell risky mortgages to homeowners. No, once they were done fleecing homeowners, lenders decided to sell those risky mortgages to overseas investors. After all, why hold onto mortgages that you know homeowners are going to be unable to pay? The U.S. mortgage lending industry essentially pulled off a Ponzi scheme of global proportions, and now the United States stands to pay the price.

Here’s how the scam went down. Back in 2000, the American economy was floundering. Some sort of correction needed to happen, but Alan Greenspan, the Federal Reserve Chairman at the time, decided that we could give the economy a bit of a boost by cutting interest rates.

Mortgage interest rates dropped, more Americans could afford to buy homes, housing prices rose, and suddenly, Americans were rich with equity. Housing values were climbing like there was no tomorrow, and with loans being so cheap, people started cashing out that inflated equity in their homes to finance their enjoyment of the good life.

Unfortunately, housing prices hit a critical tipping point. Fewer and fewer Americans could afford these overpriced abodes. Again, a market correction was in order, but the banks didn’t want that. Instead of letting the housing bubble naturally burst, which would have resulted in more affordable houses, they decided to offer more affordable mortgages–adjustable rate mortgages (ARMs) with low introductory interest rates. This enabled more people to continue buying homes, and home prices to continue to rise.

Everyone was happy. Interest rates were low, so more people could afford to buy houses, lenders and mortgage brokers were processing more loans, Real Estate agents were earning higher commissions, builders were selling more newly constructed homes, and state and local governments were raking in higher property taxes. Life was good.

The only trouble was that the banks failed to account for the fact that eventually the housing market would tank and the teaser rates on the adjustable rate mortgages were scheduled to skyrocket. The banks failed to think ahead… or did they?

Based on what you read in the mainstream press, you might tend to believe that the banks did not know what was going to happen. After all, many mortgage lenders had to fold up shop. Others were brutally punished in the stock market when their share price took a nose dive. The thought the banks were clueless, however, is simply not true. The banks were fully aware of the looming sub-prime mortgage crisis. In fact, they were well prepared to quite literally pass the buck… to foreign investors.

Passing the buck

To get these risky sub-prime mortgages off their books, the banks diversified and then bundled their mortgages, repackaged them, and peddled them to the international community as safe investments. Through financial sleight of hand, the banks tricked investment-rating agencies including Moody’s and Standard & Poor’s to assign these mortgage securities higher ratings and valuations than subprime mortgages would generally receive.

Trusting the U.S. banks and America’s well-known investment-rating agencies, foreign investors bought these securities hook, line, and sinker.

As long as the party was in high gear and housing prices were soaring, foreign investors were completely unaware of what was about to happen on the other side of the ocean (their investments were performing quite nicely, thank you very much). Unseen to them, however, interest rates on many sub-prime mortgages were scheduled to rise, making mortgage payments unaffordable for millions of Americans. When what was fated actually started to happen, foreclosure rates skyrocketed, and foreign investors were left holding the bag.

Now, the U.S. is in quite a financial pickle. Deep in debt and stripped of equity, the U.S. relied on consumer confidence and foreign investment to fuel its economy. Now that both of those assets have been shredded by the mortgage lending industry and rampant real estate fraud, what can we rely on to fuel our economy in years to come?

Posted By: Ralph Roberts @ 3:15 pm | | Comments (0) | Trackback |
Filed under: Real Estate