PUBLISHED 4-29-07

The American dream of home ownership has turned into a nightmare for many of the nation’s families, including many in Bakersfield.

The news last week was grim:

• Kern County’s foreclosure rate is triple the nation’s.

• Law enforcement and real estate professionals report mortgage fraud litters Bakersfield’s housing market.

Greed, lax lending rules and  enforcement, fraud and buyer stupidity have caused rampant foreclosures that plague communities throughout the nation.

How do we get ourselves out of this mess?

• Tighten lending rules and add  criminal penalties for fraud.

• Create pools of money to help first-time buyers or victims of fraud obtain new loans to prevent their homes from going into foreclosure.

Both steps are necessary to stem the losses families and communities sustain when foreclosures glut the inventory of homes on the market.

Low interest rates and sales hype fueled the real estate boom that took off after 2000 and began peaking in 2005. For a while, Bakersfield was one of the nation’s hottest real estate markets.

As hammers were swinging on new homes, outside investors priced out of more expensive markets rushed in to grab “affordable” homes, spiking prices in their wake.

Everyone was making big money. Starter and fixer-upper homes that would have sold for under $100,000 were going for over twice that amount. Whoopee. No questions asked.

Meanwhile, families who could never afford a home took advantage of low interest rates and schemes, including no-interest, 100 percent, cash-back-at-closing loans to buy big.

While they may have qualified to pay initial loan installments, when adjustable rates  adjusted up or loans had to be refinanced, marginal buyers found themselves out of luck — in some cases owing more than at the start. Often their homes’ values had dropped or had been inflated from the get-go.

Mortgage fraud in Bakersfield “is very prevalent and it will become more prevalent,” Bakersfield Police Detective Frank Wooldridge told The Californian last week.

Law enforcement and regulatory agencies are investigating reports of mortgage fraud in Bakersfield and elsewhere. Wrongdoers — whether they be greedy buyers or disreputable sales agents and lenders — must be punished. Meanwhile, Sen. Mike Machado, D-Linden, has introduced SB 355, which would expand state regulatory authority over many of the state’s lenders and real estate brokers who make home loans.

It would make state-licensed lending firms follow new federal “guildelines” that include basing lending decisions on a borrower’s ability to pay the maximum monthly payment for an adjustable-rate loan, rather than just the introductory rate, and placing less importance on a borrower’s “credit score” and more on income and ability to repay the loan.

No duh. You have to wonder under what rocks federal and state regulators have been hiding.