Baltimore County

Letter: Small lenders are having big problems in mortgage crisis

Loni Ingraham's recent story, "Latest auction of vacant Armacost nursing home...," (Oct. 20, Towson Times) underscores the growing crisis in Towson and other areas regarding real estate.

Many attribute the collapse of the U.S. economy to the disintegration of property loans and value. There is great finger pointing at banks and mortgage companies.


Claims are reported of fraudulent loans, illegal foreclosures, refusals to assist home buyers behind in their mortgage payments, etc.

Astonishingly, political hucksters and dim-witted judges have responded to these crises in many cases by suspending property rights. Legal and political machinations are widespread, resulting in a cesspool of obstacles preventing foreclosures.


Some buyers have paid nothing on their mortgages in years, but can remain in the house. In place of wisdom and meaningful housing policies, judges and politicians engage in a vendetta against mortgage holders.

Yet property values continue to spiral downward. Studies show that up to 95 percent of borrowers whose payments are significantly reduced still continue to default. Vacant and boarded up homes rapidly spread as buyers, sellers and lenders cease to trust either the legal system or the legislators.

However, one part of the current fiasco that seems to be neglected completely is the sad plight of private lenders. These are people who, in spite of a failing economy, courageously made loans to individuals who finally had a chance to buy a home.

Many of the small lenders took their savings, sold their own home but held the note, or even used retirement funds as capital. They anticipated receiving monthly mortgage payments to partially cover their own expenses including funds for medical care, nursing homes, food, shelter and so on.

Expenses for fixing a house up, securing buyers, paying taxes, insurance and the such are enormous. Yet hundreds of such "granny entrepreneurs" took the risk.

They had trust in the legal and political system. Meanwhile, the buyer by purchasing a house from a private lender had far lower closing costs than with a bank and often a better interest rate.

Tragically, when buyers who had such private lenders default, no distinction is made by politicians or judges. Folks whose retirement funds and so on went into the investment are treated as harshly and derisively as dishonest banks and mortgage companies.

Meanwhile, funds from such private parties for future loans understandably are drying up.


'Nuff said about the evil of banks and the pathos of home buyers. Something needs to be said on behalf of private home sellers whose generosity is now haunting them.

H. L. Goldstein