"Caught in a Toxic Mortgage"...This is a must read

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lendingmaestro_IHB

lendingmaestro_IHB

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<p><a href="http://money.cnn.com/2007/09/12/real_estate/surprising_face_of_foreclosure_Olivers/index.htm?postversion=2007091711">http://money.cnn.com/2007/09/12/real_estate/surprising_face_of_foreclosure_Olivers/index.htm?postversion=2007091711</a></p>

<p><em>"' But their main problem wasn't a usual symptom of troubled borrowers: job loss, divorce, personal problems or health reasons. Instead, they say, it was a bad mortgage from a fast-talking broker.' "</em></p>

<p>The author of this articel seems to believe that this "isn't the norm", and based upon previous housing cycles, he's probably correct. But, and this is a BIG BUT. This exact situation is far more prevalent than what was previously seen or even imagined.</p>

<p>From a lender's perspective, these people aren't in as bad of shape as many Californians. As you find from reading this article, it is textbook housing bubble loan origination at its best. This is what caused the housing bubble. I think it should be mandatory for every man, woman, and child to read this article.</p>

<p><em></em></p>
 
I'm a little jaundiced with this types of articles. Everybody got something they didn't expect. Nobody heard "negative amortization' or any other terms. That doesn't they were neither said nor documented. They went looking for and found an ultra low payment. If they needed breathing room like the article says, in my past experience, people looking for an out, don't hear much of the negatives when told there's an out for their immediate problem.
 
<em>"The author of this articel seems to believe that this "isn't the norm", and based upon previous housing cycles, he's probably correct."</em>





Which part of this situation "isn't the norm?" I don't think people <em>unknowingly </em>taking out these loans is norm. But I think a great many people knowingly took out these loans with no idea how they really worked. Is there much distinction between the unknowing and the ignorant? I don't know. Deception maybe, but how do you prove it?





I also wonder how many people realize how much their payments are going to increase when -- and if -- they refinance?
 
I find it interesting that people distrust car salespeople and lawyers and yet are so trusting of lenders.





My view is that most of the homeowners acted like 18-year college students with credit cards. With the promise of a water bottle or t-shirt, people sign up and use credit cards without any thought for the consequences. Then, like with the homeowners, they are shocked when the bill comes (What I have to pay for things that I bought?).
 
<p>I was referring to the fact that their housing crisis was based on a bad loan scenario and not job loss per se or other economic factors that the author was referring to as the norm.</p>

<p>This housing crash, unlike all others is going to be facilitated by bad loan choices, and not pure unemployment, or rate increases.</p>

<p>I also agree that borrowers were so caught up in their monthly payment savings that they didn't really stop to investigate if it was a good idea. You can't put the blame solely on one entity, all parties involved came together to create the perfect financial storm.</p>

<p> </p>
 
I do not feel sorry for these people one bit at all. They were looking at the smallest payment possible and not the whole picture...kinda the American attitude now.





However, I do have one question...it doesn't make sense that they bought the home for $235K put down $130K, and had a payment of $1100 (they also had great credit). Anyways I don't think the whole story was told and that article I think just made me dumber.
 
<p> "A sucker is born everyday." If it sounds too good to be true it probably is"</p>

<p>What bothers me is the media spins this as though the homeowner was a victim. </p>

<p>How were they a victim? I can go on the internet or open the phone book or go to a library or call another broker and find out the details of what I am being offered. If you are not savy enough to do any of those things then you should do nothing. The only reason people can take advantage of you is that you let them.</p>

<p>You wanted something and you allowed yourself to be taken advantage of. </p>

<p>I keep thinking these are the same people that if they could sell that house today for a 100k profit they would be bragging about their financial genius. Arghhh. </p>

<p>I am not the sharpest knife in the drawer but is someone told me they could give me more money for a lower payment I would be a little weary. Especially if they were talking about an introductory rate.</p>

<p>I read the 0% balance transfers on the credit card offers I get and make sure I know those gotcha clauses. (then I throw the offers away). But if I take the offer and my FICO score goes down they can raise my rate to 20% for instance. Who would cry for me if I transferred my balance only to lose my 0% because I opened another credit card which made my FICO go down. Nobody. I think what people would say is "don't buy something you can't afford and you shoulda read the gotcha's"</p>

<p>They should have read the gotcha's or had someone that was sharper then them explain it in plain hillbillyese.</p>

<p> </p>
 
<p>haha. </p>

<p>When a homeowner uses a mortgage broker, he/she usually does not know what bank is funding the loan. Suddenly, one day out of nowhere they receive a loan packet, including a truth-in-lending disclosure, from some random bank. The borrower goes "huh? wtf is this?" so they call up the broker. If they decide to call the bank, they will not get any information and will be referred to the brokerage firm that submitted the loan.</p>

<p>I get calls all the time from borrowers wanting to inquire about a loan that is in processing w/ the wholesale division of my bank. I am not allowed to comment on the terms of their loan at all. I can pull up the notes on the file and if we deem that the process is stalled, or the borrower explicitly requests via recorded phone call that he/she would like to proceed directly with the bank, I can help them.</p>
 
My office is in a complex by JWA. There is a mortgage broker office that I can view when I look outside my office. Every day there is a group of 20 something kids sitting outside smoking. Once in a while they throw a sheet of paper on the ground....I picked one up one day and it was a "term sheet" for a loan. It scares me to think that these kids are selling products that can destroy lives.......any way.......during the past month there are less and less kids outside smoking....





And there is this guy that drives up in an SL600....black. He always has this big breasted woman with tight pants in tow(camel tow).....I suspect he is the owner..........I also suspect that he will make an excellent server at Denny's in about a year..........
 
Something's fishy here, if they put that much down they'd only have a $100,000 mortgage with a $100,000 income, with monthly payments around $600 for a 30 year conventional fixed rate mortgage, and they couldn't live with that? They make $100,000 and are that stupid they don't know about the terms of their mortgage? They make $100,000 and are so strapped for funds to make their mortgage payments they have to listen to a shyster mortgage broker? I'm also tired of hearing about victims like this who make enough money they shouldn't be in trouble unless something else is going on that's not disclosed.
 
What I never understand when I read stories like this is why didn't they read their "note" that they signed. It should be pretty much spelled out that their p&r payments will adjust with interest rate changes.





On a side note, my 5th grade teacher drilled it into our impressionable heads that balloon payments were bad. As a 10/11 year old, I had no idea what she was talking about, but I never forgot it. So I guess there is something to be said about an Irvine education.
 
<p>ABC,</p>

<p>My gut feeling is they are a bunch of liars.</p>

<p>Just once I would like to see this interview:</p>

<p>Reporter - So you are going into forclosure.</p>

<p>Respondent - Yes</p>

<p>Reporter - You took out an ARM from a sleazy broker who misled you and now you are losing your home.</p>

<p>Respondent - No what happened was I got greedy. You see housing prices were were going up 10-15% a year even more. I figured the "sleazy broke could get me a 110%-125% neg am interest only partridge in a pear tree loan. What that meant is I could live for 2 years in this beutiful home for less then I could rent. I had no money out of pocket and in 2 years I could make any where between 50k-200k after costs. What the heck. It didn't work out so here I am in foreclosure.</p>

<p>Reporter - So are you bitter?</p>

<p>Respondent - What do I have to be bitter over this experience saved me money. I am not really losing anything. Can't lose what you don't own. I guess I should feel bad about the banks and the people that lost their hedge fund money. Hey why aren't you interviewing them? I hear some people are losing values in their pensions because their money was in the hedge fund that bought my loan.</p>

<p>Reporter - There you have it greedy people are losing their houses. BAck to you Biff.</p>
 
<p>^^ Ha ha. Nice. I had tried many for many years to warn people off these loans with little success. Now a large majority of these people (my younger collegues) are in big trouble. Anyway good luck and I hope these people find a way to make things work.... Hopefully not losing their home. I just find it funny that people NEVER think about what the costs of things, in whatever field.</p>

<p>Like that owner with the big breasted GF, you know she's got to cost and small fortune to keep. Better to keep somebody who is about as level headed and smart and not so frontal endowed.... </p>

<p>good luck</p>

<p>-bix</p>
 
<p>I totally agree. Of all the loans I brokered, I always tried to obtain the lowest rates with minimal fees. I could never understand how the other loan officers made so many loans and so much money. Then I realized that they were selling horrible loan products to their clients - something that I was unwilling to do. I think that was how the business was set up... pay a chunk of commission to inexperienced loan officers so that they may sell something they know nothing about. Personally, I never did an option arm or a 2 or 3 year adjustable. It was always 30, 20, or 15 year fixed. So I'm glad to say that they people I worked with do not have any problems with their financing. I guess it was a good thing that I took my time to get my broker's license before jumping in, selling loans, and ruining people's lives - it goes to show that education does matter; it may not make you rich quick, but it does deter unwanted consequences. I just hope that all these bad loans only pertain to 5 or 10% of the total homeowners out there. Even with my RE license, I have not encouraged anyone to buy within the past two years. That's bad for business, but at least it's good for my morality. I'm hoping I can be more positive and active in 09.</p>
 
<p>I guess you all missed this part </p>

<p><em><strong>"Nearly a year after they bought their home, Kurt's mom fell ill with Alzheimer's disease. Vicki quit her job to take care of her and later started a home-based Internet business selling candle-related products. The couple took out a second mortgage to free up some cash."</strong></em></p>

<p> </p>

<p> </p>

<p> </p>
 
I realize it's sad situation to have relative with Alzheimers but "to free up cash" means to go into debt willingly and knowingly. They most likely didn't have to tap the equity in their home but they most likely treated their home as an ATM which is how most families get into trouble.
 
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