One of the primary causes of the financial collapse, and more specifically the collapse of the real estate market, was the presence of mass defaults. As the demand for property increased, the proportionate values for such land increased as well. To accommodate this welling demand, mortgage lenders extended loans to unworthy citizens. 

 

 

This process was made possible because America's real estate laws, and the laws associated with lending were not properly enforced. Citizens could obtain a loan without even getting their credit history checked. As a result, families and individuals were taking out hefty loans, with massive interest rates attached, and defaulting on their payments. 

 

 

The number of defaults of swelled, causing massive foreclosures throughout the nation's real estate market. When a lending institution or mortgage lender offers these loans they expect their investment paid off, in full, awith added interest. With numerous defaults however, these companies were left with a large deficit. Therefore the after effects imposed by mass defaults sent shock waves to both the lenders and borrowers.

 

 

Even though the bad credit of unworthy borrowers led to a mass default, bad credit mortgage lenders still exist. Because of the economic crisis, however, these bad credit mortgage lenders are highly regulated via state and federal law.

 

 

In addition, a bad credit mortgage lender issues unsecured loans, meaning the general obligation to pay off the debt is not collateralized by a lien on the property of the borrower. Bad credit mortgage lenders coordinate with secured mortgage lenders to offer the individual an opportunity at receiving a mortgage. In essence, the presence of bankruptcy will result in a general claim issued by the creditor of the specific assets assigned to the creditor.

 

 

Bad credit mortgage lenders also issue lenders mortgage insurance, which is a private form of insurance, which is required for individuals with bad credit. A lenders mortgage insurance policy is designed to offset the losses of a default; a borrower must pay an additional rate to insure against the prospects of defaulting and a subsequent foreclosure.

SunTrust Mortgage is the eight largest servicer of residential mortgages in the United States managing over 950,000 residential mortgage loans with total assets of $172.2 billion as of June 30, 2011.  As of 2009, SunTrust employs 28,001 employees and maintains corporate headquarters in Atlanta, Georgia and Orlando Florida.   The flagship company is SunTrust Bank of Atlanta and maintains a total of 1,661 branches primarily in several southern US states.  The modern day Sun Trust bank is a merger of the Trust Company of Georgia and SunBanks Inc of Florida.  The current CEO is William H. Rogers Jr.

The current Board of Directors consists of sixteen members sitting on five committees.  These committees are:

• Audit
• Compensation
• Executive
• Governance and Nomination
• Risk

SunTrust operates like most banks offering personal finance, investment, retirement and loan services.  

SunTrust’s stock value plummeted in 2007 from $90.61 per share to $9.06 in 2009.  They participated in the Troubled Asset Relief Program to prevent its collapse in the face of soaring foreclosures.  SunTrust would eventually sell of its shares in The Coca Cola Company to raise capital.

According to the Federal Reserve, SunTrust initiated 41,543 foreclosure actions during a two year period, January 1, 2009 to December 31, 2010.  In response to these numbers, the Federal Reserve issued a cease and desist order and accused this lender of improperly assessing the amount of principal, interest, fees and expenses owned by the borrower without proper review of oversight.  Many documents presented in court were not notarized which the bank blamed on a lack of staff available to deal with the unprecedented rise in foreclosures coinciding with the economic turmoil.  The Fed charged that SunTrust was guilty of unsafe and unsound banking practices as they did not provide sufficient oversight and adequate resources to the accelerated pace of foreclosed properties.

As a result of these findings, the Federal Reserve proceeded to order SunTrust to develop a plan for greater oversight of risk management, auditing and compliance of foreclosure activities especially in relation to the use of independent contractors involved in the process.  Additionally, SunTrust was to ensure that they had adequate funding, offices and staff to carry out mortgage loan servicing to prevent similar mistakes from 2009-2010 such as un-notarized documents and the lack of research in regards to individual mortgage claims.

Sources: https://www.federalreserve.gov/newsevents/press/enforcement/enf20110413a8.pdf

A reverse mortgage is a loan typically offered to seniors or those individuals who have fulfilled their original mortgage. A reverse mortgage is used to release the available home equity in the person's property. The release is typically awarded in one lump sum or in multiple increments. 

 

 

The home owner's obligation to fulfill the rest of the loan is deferred until he or she dies or until the home is sold. When a reverse mortgage is obtained, no additional mortgage payments will be required; the interest is added to the lien on the property. When the owner's equity is released, the debt against their property will increase each month.

 

 

In simplistic terms; when an individual takes out a mortgage they are indebted to a lender or financial institution. The home represents the individuals’ equity or investment. As the individual homeowner pays off his or her monthly mortgage the debt to equity ratio decreases, meaning more of the home, in essence becomes theirs and not the banks. 

 

 

As they continue to pay off their mortgage, their level of equity rises and their debt decreases. A reverse mortgage therefore, is simply the reverse of this. When the mortgage is paid, a homeowner has the opportunity to take the equity out of the house. 

 

 

The lending institution will transfer money to the individual and in turn receive a portion of the property. This process, in turn, increases the homeowners’ debt, but allows them income in the form of equity from their paid mortgage.

 

 

Reverse mortgage lenders often aid elderly people through direct payments. Reverse mortgage lenders will qualify applicants based on their home values, and the presence of any outstanding debts. 

 

 

If a person is qualified and receives a reverse mortgage, he or she will receive liquid payments from the reverse mortgage lenders. In turn, the reverse mortgage lenders will receive a portion of equity in the home.