The Loan ‘Built For Failure’
The Wall Street Journal reports on adjustable rate mortgages. “The downside of the lending boom is starting to show. Rising interest rates are taking a toll on family budgets as growth in home prices flattens, and, in some areas, prices fall. The portion of adjustable-rate mortgages that were at least 90 days past due has climbed 141 percent in the past year, according to a recent study.”
“Housing counselors say they are hearing from a growing number of middle- and upper-middle-income borrowers who borrowed heavily to finance spending or buy a house they could barely afford.”
“Luisa Cordova-Holmes was looking to lower her monthly payments when she refinanced her $312,000 mortgage in 2004. Instead, she wound up digging herself into a ditch. Ms. Cordova-Holmes and her husband chose a so-called option adjustable-rate mortgage, which gave her multiple payment choices each month. ‘I had a lot of financial obligations,’ says Ms. Cordova-Holmes.”
“Two years later, however, the interest rate on her loan has jumped to 8.75 percent, her loan balance has climbed to $324,000 and her minimum monthly payment has risen to $2,257. She says the terms of the loan weren’t clearly spelled out.”
“Ms. Cordova-Holmes says she would like to refinance, but can’t, in part because her loan carries a prepayment penalty. Instead, she’s trying to sell her home. But with Detroit’s economy slumping, she hasn’t been able to find a buyer. When she and her husband first put the house on the market last summer, they were asking nearly $400,000. Now they’re willing to accept as little as $270,000.”
“‘We’re in a very bad situation,’ she says. ‘The payments are just killing us.’”
“Until recently, most mortgage-payment problems were an unfortunate byproduct of major life changes, such as job loss. But for the new wave of troubled borrowers, the problems stem largely, or in part, from the structure of their mortgage, housing counselors say.”
“In the past, the home mortgage ‘was a steadying influence; it neither rose nor fell over time,’ says Elizabeth Warren, a Harvard Law School professor. ‘All that has changed in the last half-dozen years,’ she adds. ‘The mortgage payment is now more variable than any other expense for millions of people. We’re working in completely uncharted territory.’”
“‘Often the reason somebody is put into an ARM or an interest-only loan..is because that’s the only way the broker or loan officer could get them qualified,’ says Jordan Ash, director of an advocacy group that focuses on predatory lending issues.”
“Edward Snyder, who bought his house in St. Paul, Minn., two and a half years ago. Mr. Snyder financed the $210,000 purchase with a $168,000 interest-only ARM and a $42,000 second mortgage. Mr. Snyder says he was stretched even before a rate adjustment on his ARM boosted his monthly payments by $200 in May. Since then, he has fallen behind on his water bills, car payments and student loan.”
“‘Now, it’s a choice of what gets paid late,’ Mr. Snyder explains. Last month, he received a letter from his lender with the words ‘rate increase’ on the envelope. Mr. Snyder says he hasn’t opened it ‘because it gets too discouraging.’ This week, he’s meeting with a mortgage broker to discuss his options.”
“‘If I had been aware both loans were interest-only, I would have probably turned the loan down,’ says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him. ‘I believe this loan is built for failure. There’s no means to build up equity.’”
“Some California brokers say they are beginning to see a return of ’short sales,’ transactions in which the sales price isn’t large enough to cover outstanding loans. Patti Vaughan, an agent with in Temecula, Calif., says in recent months she has begun to get calls from borrowers looking to unload houses they can no longer afford. ‘They’ve upgraded their houses, put in a pool and bought themselves Hummers and BMWs,’ she says. ‘Now they can’t get it refinanced and they can’t sell.’”
And so it begins…
You know, just the other day - after the hammer left on the ladder bounced off my head - I said to myself “I wish gravity had been fully explained to me. If it was I probably wouldn’t have left that hammer up there.”
It’s double the fun if you do that trick with an open, full can of paint at the top of the ladder. 3 Stooges style of housing accidents are my specialty.
I had one of those experiences first thing in the morning today — dumped a hot latte on my pants and sandals and felt embarassingly stupid.
Now whom do I sue???
“‘Often the reason somebody is put into an ARM or an interest-only loan..is because that’s the only way the broker or loan officer could get them qualified,’ says Jordan Ash.
ONLY WAY TO QUALIFY….WTF!!!!
I used to be amazed by people that bought anything, cars, furniture, homes… strictly on payment, with no concern about how much they would eventually end up paying.
Those were the good ole days. Now they stretch is to make the teaser payment on a home that they have no prospect of or intention of ever paying off. Doesn’t anyone have an ounce of financial sense? What planet did these chumps come from? Intentional recklessness that just blows me away. Debt levels (where debt service exceeds 50% of gross in many cases) never seen in our society. And… AG and BB still don’t believe there’s a problem?
I can smell the ROSES.
I smell tulips.
I smell trouble.
I smell opportunity.
Quite.
i smell crap
I smell fear
Its because of the dumb irresponsible people, that I am not able to afford a decent home although we make over $140K. So my message is…all of you irresponsible people(not the normal ones) in trouble deserve it. You brought it upon yourself without anyone forcing you. I will enjoy the show this Fall and all through next year and then I will buy one house and get one free….wait let me grab some popcorn…
peace out
Too damn bad!!!!!!! Read your loan documents and if you truly don’t understand them, you have two options: 1) Have somebody who understands personal finance and mortgages walk you through the documents and/or 2) realize that you are an utter moron and have no business making the largest financial decision of your life based on a foundation of ignorance.
By the way, both of these options only work BEFORE you contractually commit to a home purchase.
I don’t have time to read and understand it. If I don’t buy now, i’ll be priced out forever. Dont you get it?
And - ‘Interest is going up and Suzanne says it’s ok and real estate never goes down and they are not making any more land and the ball game is on!’
but, but…I thought that RE never goes down, and my home was a virtural ATM machine.
I agree strongly! How many IDIOTS sign anything in this me now …got to have it society. You find Simpathy between Sh-t and suicide in the dictionary!!!!
sounds good except “simpathy” is spelled sympathy.
The phrase is “between sh!t and syphilis.” So it’s all good.
you mean it’s between suicide and syphillis
But, but, but…….we is a ownership societyy. The guvernment done tole me so.
Ifn you have sum more babies they give you more muny as well. I lub the gubment.
Yes, we are an ownership society. The government owns us. Or thinks it does.
The banks own many homoaners…
The loans don’t matter when prices appreciate at 20%/yr. Gary Watts, DL and LAY etc were the loan advisors. Prices only go up. You can always refi or cash out. It’s a license to print EASY MONEY. Can’t lose!
Then came the new improved (THE ONES IN THE LOAN DOCS) payments and 2006… 2007 is gonna be a bitch for the FBs.
Well, the fact is that until very recently it wasn’t something you had to worry about that much, because the bank wouldn’t qualify you for a loan you clearly couldn’t afford. I can imagine getting snookered into a loan like this pretty easily. When we bought in 2000 I knew to ask about things that had traditionally been problem areas– whether there was any pre-payment penalty, for instance– but I didn’t even know such things as no-doc loans and negative amortization existed. I try to read legal documents that I have to sign carefully, but I can easily imagine being at a closing, asking, “What does this mean?” and being assured that everything’s just fine and dandy.
Seems to me that taking the attitude of, “buyer beware” just encourages more and more outrageous fraud until you get to the point where even the savviest are being ripped off– at which point there’s no functioning legal system left and it’s a little late to start yelling, “Jail the crooked SOB’s!”
I’m afraid some of the well educated aren’t that curious. I believe the term is “sitting on one’s laurels”. They’ve had their school and career achievements so they’re at the APEX of knowledge on all fronts.
Husband of friend has PhD & is like that. I try to suppress a reaction whenever he “explains” things to me. But I had to laugh out loud when he started to tell me what it was like to go through labor. Yeah, HE was telling a mother of 2 what it was like. Not to mention I doubt he’s sat through all the stories when women get together and compare notes! At that point he had watched his wife once! I howled.
Well, back to the point. I think when it comes to asking for financial help, some people are just way too proud or don’t believe they need any help.
“I didn’t even know such things as no-doc loans and negative amortization existed”
We had a negative amortization ARM when we bought our first house back in 1984, or was it ‘83? But the situation was completely different, the interest rates were coming down from historically high levels; they had been up to 17% for a fixed rate loan, they had come down to 12% for an ARM and there was every reason to think they would drop more. I don’t understand why people have been using them at historically low interest rate levels because that’s just like putting the noose around your neck and watching it gradually tighten.
Too d@mn bad!!!!!!! Read your loan documents and if you truly don’t understand them, you have two options: 1) Have somebody who understands personal finance and mortgages walk you through the documents and/or 2) realize that you are an utter moron and have no business making the largest financial decision of your life based on a foundation of ignorance.
By the way, both of these options only work BEFORE you contractually commit to a home purchase.
Guru,
“Ms. Cordova-Holmes, an accountant” is clearly someone who should understand personal finance and that should have been able to crunch the numbers ahead of time. IMO she was just another greedy AllUcanfinance housing buffet-er who is dissapointed with the market not bailing her out again.
An accountant? Oh my, why would an accountant let a national newspaper use their name and describe the debacle she got into — through her own ignorance? Any of her clients reading that article must be shaking in their boots wondering what she’s done to THEIR financial books!
I’m sure she’s a low level bookkeeper who says that she’s an accountant. If she is a CPA who handles complicated matters, I would be very afraid.
Accountants generally sum up events after they have occured. They usually are the last ones to know sales are falling and the market for a product has changed.
As far as factors influencing a market, they have’nt got a clue. They can only tell us a market is changing after it becomes obvious to everyone. And that’s not very helpful, is it?
Until recently I worked at one of the big public accting firms. Most CPA’s know either GAAP or tax regs, but have little understanding of markets or macroeconomics. Had over a dozen people in my office purchasing houses last year w/ ARM’s, I/O’s, etc. When I mentioned a possible bubble, I got the standard responses. Morons.
My next door neighbors are have refinanced twice in the last 5 years. (That I know of) The most recent time because they “needed” to buy a new Land Rover because they were having a second baby. They are in debt up to their eyes. She is a CPA he has and MBA and worked in defined benefit pension fund administration for years before going back to school to get a certified financial planer license, which he currently practices.
If anybody should know better!
Heck, I refinanced twice in the last 5 years(2001 and 2003). I would argue that anyone who didn’t refinance (to a low fixed rate) in 2003 was probably making a mistake. IMHO we’ll won’t see
Most of the time these financial planners just push more creative ways to finance things and other stupid things like TSAs that perform poorly. They think they’re experts because most of the other people aren’t aware of all the ways you can get creative to shoe-horn yourself into trouble. They lose sight of the big picture and just focus on the detailed bullshit making them think they’re professionals.
Stop slaming “Ms. Cordova-Holmes, an accountant”…
-Edward Snyder is the real victim here!!! just read his story.
“Edward Snyder, who bought his house - blah blah. Mr. Snyder says he was stretched even before a rate adjustment blah blah.”
“‘Now, it’s a choice of what gets paid late,’ Mr. Snyder explains. Last month, he received a letter from his lender with the words ‘rate increase’ on the envelope. Mr. Snyder says he hasn’t opened it ‘because it gets too discouraging.’
Come on…. Edward is discouraged.
‘I believe this loan is built for failure. There’s no means to build up equity.’”
-He was’nt able to flip his equity.
I financed a slightly used car after I graduated. They sent me back to the lobby when I started to read the loan agreements. I guess noone had ever done that before and that was just for a loan of a few grand. By the way the loan and purchase agreements really sucked totally stacked against the buyer.
Einstein has been quoted:
“There are only two infinite things: the universe and human stupidity, and I am not sure about the first one.”
In all this (richly deserved) dumping on clueless borrorers let’s not forget the lenders responsibility. Stupid borrowers who don’t read or understand their loan details are still just chasing the american dream which has gotten harder and harder to reach for more people in the last 10 (actually 40) years. It’s the unscrupulous Lender, Mtg broker, appraiser trinity who are the real enablers of this crisis, and the ones (lenders) most likely to be bailed out in a crash.
They know exactly what they are doing, and it’s not good for borrowers or the nation as a whole.
This is why I just sleep better when I’m short the market.
Agree, completely
What should have been expected? This is a complete mess and I cannot fathom why so many people believed that rates would stay low forever. I believe we will see double-digit rates again in the near future lest the twin-deficits be tamed.
Rates are still low. It’s a buyer’s market!
I thought that it was insanity to gen an ARM when rates were at their lowest. But hey, I’ve got 4.875% 15 yr fixed so I’m in clover.
There’s no means to build up equity
Now people are finally starting to get it.
She says the terms of the loan weren’t clearly spelled out.
BS. Read the fine print. But granted, the lenders should have brought the fine print to her attention.
This is just the folly of our society’s focus on the monthly nut and not on the total loan amount. I really feel for these folks and I hope that structural changes are put in place to correct the problems after the dust settles.
The article mentioned she is an accountant. Yikes!
Ben, if you right a book “Yikes” should be the title.
Yikes! That’s a great title. Ben if you publish a book with all our comments how will you divide up the winnings? Maybe I should leave more comments! Yikes!
I am sure my comments are worth $0.00!! lol
No Crispy, 2¢, just like the rest of us.
My comments are worth more because “it is different here” in Seattle.
I’m collecting a bunch of quotes from various sites. Now at 60pages, Word, 12font. If I would ever sell, I’d be selling it not as original thoughts, but for taking the time to organize it all. That’s a service worth paying for, isn’t it? The collected wisdom of these blogs?
i hope her clients find a good attorney. of course they should check the background of the attorney to see if he has an option arm.
i wish there were an easy way to identify dolts that’ve used these loans. why would anyone do business with someone who cant be responsible with their own $?
There is. Just look for the Hummers and Escalades in the driveways
Sorry to have to correct you Ben, but I believe it would be more accurate to say she is an “idiot” employed as an accountant.
Ya didn’t “have” to correct Ben, Pilgrim, ya did it because ya wanted to.
As in, “Not a polite thing to do when your inside Ben’s house, Pilgrim.”
It just demonstrates how “financialy illiterate” general public is.
Anybody know how prevalent prepayment penalties are for I/O loans? What time period is typical?
Just trying to reduce my financial illiteracy, though I would never go I/O. I don’t owe.
1-3 yrs. The longer the prepayment the better the rate and LO’s commission
I never researched the facts about prepayment penalties on I/O loans. But from 60+ years of experience, common sense and a lot of business transactions, I can tell you that the probability of an I/O loan issued in the past three years having a painful prepayment penalty is pretty close to 100%. The only exceptions might be naive credit unions and the like — touchy-feely lenders, if there are any.
I know a bank where the interest only loans do not have prepayment penalties (PPP). These loans have fixed rates and interest only payments for 5, 7,10 or 15 years. A seldom used option is for the borrower to choose a 3 year PPP in exchange for a reduction in rate of .125% for the full fixed rate period or 5, 7, 10 or 15 years. The loan officers are not paid any different whether there is a PPP or not.
She is probably good with fuzzy math, or is a ex Enron accountant.
or currently working for a GSE.
She’s chief accountant for the Treasury of the United States.
I believe she might be the person in charge of the Yankees’ salary cap.
I think it is BS that she didn’t understand the payment structure. It not like she was getting a 30-yr fixed. What really was going on is that, they wanted to ride the wave up and sell at the top, pocketing as much cash as possible. Too late, and now what are they left with… A nice toxic mortgage that sadly will sink them.
It’s a classic case of heads I win; tails the bank loses.
If the market is up, I am savvy financier; Justly rewarded for my financial acumen.
If the market is down, I’m just simple folk, taken ‘vantage of by a slick banker.
Personal responsibility is dead.
Actually I’ve had two clients tell me recently that they wanted fixed loans on new purchases. The day of closing they both discovered they had been put into adjustable loans. One closed and one walked out. I think this scam happens more than you might think.
An insurance agent I can trust fully (almost as rare as a mortgage broker or RE agent you can trust) tells me he gets a $175 commission for a 30 year fixed loan. (State Farm.) The commissions on fixed are very low while the commissions on adjustables are extremely high. Is anyone else seeing this type of fraud?
Do your clients read and speak english. The good faith estimate prior to them sitting down for a closing tells them what type of loan they are signing up for. If they did not get that then they should have walked out at the closing.
Come to think of it, if they did not receive the Good Faith Estimate prior to the scheduled signing they should not even have showed up to the closing.
And how many people realize that? Most folks don’t do this kind of financing routinely, so they tend to put more trust in the lenders than they should. They have no idea what to watch for and what to expect.
As for the fixed/ARM bait and switch, from the stories I’ve heard, it’s extremely commonplace. They’ve worked that on almost every friend and family member I know who’s tried refinancing in the past five years. One common denominator is the intimidation at closing: We _tried_ to get you a fixed but you *didn’t qualify*. This is the best we can do for you - so take it or leave it.
Some borrowers called their bluff and walked (and got fixed loans elsewhere) others caved in and signed.
I’ll be honest with you guys - back when rates hit an all-time low I wanted to re-fi my fixed mortgage. But I had become so paranoid by the rampant accounts of the bait-and-switch games, I couldn’t bring myself to go through with it. I realized I couldn’t trust anyone to work an honest deal with me, and didn’t care to complicate matters by bringing in a lawyer to help me spot the cons. Yes, I was that sure there’d be attempts to con me. So I’ve held onto my 6.5% mortgage, which is quite reasonable anyway.
And by the way, the bank holding my mortgage has called me several times trying to convince me to ‘liberate my equity’ by re-fi’ing into a (much larger) ARM. I’ve had some sharp exchanges with them over the phone.
There are so many warnings and notifications in the loan package now, I don’t know what more we could add. The Truth-In-Lending statement was added after the last time this happened. I’m sure there was one in her loan package. There always have been and always will be people who don’t read what they sign, and who trust to fate. Then when fate beats them up, they say “Why didn’t somebody (i.e., the government) stop me?” Such is life.
What happened to the old rule “Caveat Emptor”, “buyer beware”? When you are about to purchase a 1/2 million dollar home, a 1/2 mil mortgage, that is a big major business Contract, and you had better go over every provision with a fine-toothed comb, and probably get advise from disinterested parties such as CPA’s.fibancial planners, ect escpecially if you are relatively naive and illiterate in financial/business matters.
I had a business before and believe me it is a dog-eat dog world as far as business contracts go.
No. do not expect the government to bail you out if you fail to make wise and sound business decsions. If there is Fraud or other criminal breach of contract then it goes through the court system. Other wise the rule Caveat Emptor applies.
Here is why people don’t hire people to advise them..
People are arrogant and ignorant. They think they are too smart and don’t need the advice or professionals. They think they are brillant wheelers and dealers.
Also, they don’t see the value in paying an expert $150/hr., but a $20,000 commission is fine, because they don’t think it is coming out of their pocket (if they only knew).
Pen-
Thank you, thank you, thank you. This is a position I have held for a prolongued time now.
Reading this blog on a regular basis is both heartening and saddening:
It is encouraging because it is evident there are independant thinkers in this world. The opinions voiced here are, for the most part, generated by people who have:
1) Listened repeatedly to “conventional wisdom”.
2) Instead of blindly accepting the notion, have paused, scratched the surface and analyzed in their own minds the accepted principles upon which those “truths” were posited.
3) Have looked at the argument from both sides with an open mind and done their own research because they would rather stick out like a sore thumb and be (initially) ridiculed by the sheep rather than be taken for a ride along with them.
What is saddening is that there are too few of us. It’s not that you have to agreee, just that you at least have to have thought it out independantly.
Is it really that difficult to do your own homework? Information is everywhere and more easier to find than ever. You don’t even need to buy books any more. How many websites are there that contain a step-by-step guide to buying a home/ picking the right mortgage/chosing the right lender (or broker)/what to be aware of and how not to get screwed? they are everywher….. for free. All it takes is a little bit of effort.
The problem is that people would rather listen to their friends or relatives for advice when they should only be listening to them for their opinion. My own father has been bugging me for years to buy, buy, buy and I kept letting him know that was the last thing I was going to do. Only now has he started to see things from my point of view. Yes it was a little discomforting at first but that has now become a feeling of validation and increased inner strength because I did not capitulate and I made the right decision for myself.
The information is available everywhere. I take great comfort in the fact that could never bs any of the readers of this blog if they ever called me to assist them with a purchase or refinance. These are the people who have the fiscal wherewithall to own a home and manage their money responsibly.
The world needs more of them.
‘Caveat Emptor’ went out when ‘real estate prices always go up’ came in…
If I remember correctly, (I have had several ARMs) all the important parts of the contract pertaining to the possible changes in loan rates/amounts need to be initialed by the borrower.
“She says the terms of the loan weren’t clearly spelled out.”
So, I guess she is admitting that she signed loan docs that she did not understand.
Good point joesixpack. She can’t blame anyone else now.
“Stupid is as stupid does, Forrest.”
This is only the beginning. This could have all be avoided had the FED had some balls and not kept rates way too low for way too low AND had they tightened the credit standards for mtg and banking entities. OH WELL. 2 F’n late now. Let the carnage begin. Once there is blood in the streets the FED will be in charge of mop-up duty, hopefully my taxes wont pay for this stupidity!
Banks aren’t going to pay, they are going to raise the fees I pay for everything I do and pass the cost through to all of us; then the Federal Government (not the Federal Reserve) will pick up the rest, again passed along to all of us; and then it’ll happen all over again with because there is no way the Fed is going to tighten lending standards as we slide into a recession.
It’s done Telco. We are on our way. It’s said that interest rates take 6 to 9 months for interest rate changes to be fully felt in the economy. We still have 1% to 1-1/2% of interest rate changes to be absorbed. Don’t sound like too much, but that’s about 20% change remaining to fel felt.
An economic slowdown is on the way, Fed or no Fed.
Not to worry, the gov. is intervening:
http://yahoo.businessweek.com/investor/content/aug2006/pi20060810_284614.htm
Government-sponsored enterprises (GSEs), such as Fannie Mae (FNM) and Freddie Mac (FRE), as well as lenders such as Countrywide Financial (CFC) and Wells Fargo (WFC), are all looking at foreclosure prevention strategies, according to Sharga. “The GSEs and lenders are developing novel solutions on workout programs to prevent people from going into foreclosure,” he says. “Because if the number of foreclosures is too great, it drives down the market and they find themselves stuck with a lot of depreciating property on their hands. It is much more in their interest to educate homeowners on what their options are and come up with ways to help them keep their homes.”
While many Americans will almost certainly find themselves in foreclosure, for others this could represent an opportunity that had been denied them in recent years, as prices climbed around the country. It’s important to note that foreclosure laws are not federal, and so each state, as well as the District of Columbia, is different. In New York, homeowners have 455 days between the time they’re delinquent on their loans and the time a lender can foreclose. In Texas, this pre-foreclosure period is 27 days, the shortest in the U.S.
A prominent feature of the Japanese depression (1990-200?) was the so-called “zombie companies” which were BK except they were propped up by creditors. The overhang of these zombies helped keep the Japanese economy in a permanent state of deflation with no substantial recovery to date.
Guess what? Fannie Mae is doing their best to bring “zombie homeowners” to the USA! I predict a similar effect on the US economy (quasi-permanent economic malaise) if they succeed to any degree…
New federally-mandated lending standards due out in a matter of weeks…
tick.. tick… tick….
“‘If I had been aware both loans were interest-only, I would have probably turned the loan down,’ says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him.”
Looks like Mr. Snyder can’t read either.
OK, this is why i decide once a week that I have to kick my bubble blog habit (and then fall off the wagon). It is too depressing to see these stories about hapless marks who are victims of vultures (realtors, mortage brokers, lawyers, lenders) This bubble may be about greed, but it is also about everyone skimming dough as the ignorant masses march by. This is why we have a government and regulations: to prevent those who are not capable of understanding the system from screwing themselves. This isn’t new. All the freemarketers who want to deregulate and let the scam artists go crazy don’t give a damn because they don’t end up footing the bill.
You dolt. If there wasn’t a government constantly bailing idiots out there wouldn’t be any of them left.
Just a question. Exactly what purpose does it serve to keep idiots in their current state?
Would you prefer that the “idiots” be living in their cars buried under a mountain of debt?
While I don’t advocate overindulgent spending, I’m also not so callous as to take pleassure when people suffer as a result of their foolishness.
I agree with your point that the government often bails people out and that people like you and I pay for this service. I would argue that is by design. You think someone like Alan Greenspan didn’t understand that the easy credit bubble would lead to people incurring excessive amounts of debt? Do you think he might have suspected that other people would benefit handsomely from it? Do you think he expected that society would just let all of the saps slip into poverty? I doubt it. I have no question he is smarter than I could ever hope to be and understands this stuff much better than my own cartoonish view. If he did understand it, the equation is pretty simple: small group skims money, somewhat larger group trips on their own ignorant ****s, and the whole group bails them out. There are winners and losers in this process.
I object to the government that allows this to happen (encourages it to happen?), you object to the government that bails the suckers out.
In other words, we disagree over what role the government has in creating the situation in the first place and whether it should have been more diligent in structuring rules for interactions between the sophisticated and the unsophisticated. People are sheep and they always have been. For much of history, the great majority lived pretty unpleasant lives–much more unpleasant than today–and “government” consisted of a small group of folks rat-****ing the rest. In the vast majority of the world, this is still true. My view is that we avoid becoming like the rest of the world by restraining those who would punk any chump for profit and by minimizing the safety net to send the right message to the larger populace. I don’t think we fix our problems by simply allowing people to “learn for themselves” in a laissez faire system. Anyhow, not an easy question to answer and the issue is much more complicated than I portray it here. That it my “doltish” view.
I apologize if I offended your sensibilities.
People become sheep when they are treated like sheep.
What you propose is just an incredible waste of resources, that - like an other government solution - will only make matters worse.
If you want to protect the idiots get off your wallet and start a save-the-idiot foundation. But keep your hands out of my pocket.
I’ve done everything I can in the last 3 years to protect the idiots in my sphere of influence (Only one “thank you” and a “you were right” so far.)
That’s all we can do without stealing resources from our kids.
“While I don’t advocate overindulgent spending, I’m also not so callous as to take pleassure when people suffer as a result of their foolishness”
Sorry but I think you might be a little confused. This whole bubble business had absolutely nothing to do with anyone being foolish. Most people are but that is entirely irrelevant.
The RE bubble was, not unlike any bubble before it, built strictly on greed and the belief that there will always be someone more foolish than me. Feeling sorry for a greedy turd that drove the bubble you live in and will ultimately end up bailing out is both a useless and foolish emotion.
Sheep are sheep whether you start off by treating them like albert einstein or sheep. Either way, they get sheared. You like the government to the extent that it enforces the rules to your benefits. If someone promises to pay you, and then they don’t, you’d go to court and sue. THAT’S GOVERNMENT too. That’s government regulation. If you want to go back to the wild west, and enslave debtors, and break the legs of a non-paying debtor, be my guest.
Otherwise, we’ve got to let these sheep get sheard, look at how we got into this mess, and look to the government to avoid whatever they’ve been doing to get us into this mess (prolonged periods of low interest, subsidized mortgages, lax lending standards, etc)
GSEs need better oversight. GWB had as a cornerstone of his presidency the notion of an ownership society where everyone that wants a home could get one. He may ultimately be to blame for going easy on the GSEs. Without the abandonment of lending standards there’s no way this bubble could have sustained itself for more than a year or so.
Would a one-page summary of the loan - cost, current payments and maximum payments with a timeline showing - really be too much government intervention? Lenders should be required, in writing, to show the worst case scenario on an adjustable loan. Then no one can say “I didn’t know.”
Why can’t we just go back to the old Savings and Loans that worked for half a century? I understand regulation necessarily impedes economic growth, but c’mon, I’m going to have to deal with all these deadbeats hitting me up for beer money. I would prefer someone stopped them from making a bad decision in the first place, than gloating about how screwed they are now. In either scenario I (and the rest of us here) still come out on top.
“That’s all we can do without stealing resources from our kids.”
Our future has already been bankrupted, so the people in power might as well continue screwing over the under-30 crowd.
> Would you prefer that the “idiots” be living in their cars buried under a mountain of debt?
There is already a helping hand from the government, called bancruptcy proceedings. If you misstepped once, your creditors cannot bury you under your debt forever. But you should not be able to have the good life and then expect others to step in that you can keep your ill-gotten gains. Instead, you should loose what you got (and even then there are many exceptions like IRAs) and start from zero again (but not from minus).
> Would you prefer that the “idiots” be living in their cars buried under a mountain of debt?
Of course not, I would prefer “Soylent Green” as a solution for these folks.
Peter T: And of course bankrupcy serves another purpose. It is SUPPOSED to discourage lendors from handing people the shovel that they can use to dig themselves into debt that they can’t get out of. That’s the reason that I don’t like the bankrupcy reform from last year. “If these people are such bad borrowers, maybe you shouldn’t have lent them money.” I see it as bailing lendors out from their own bad business decisions. Yes, people are free to make bad decisions, but it is not unreasonable to hold corporations that have underwriters, lawyers, loss-prevention analysts etc to a higher standard than Joe Sixpack. Permitting the stupid and/or unlucky to declare bankrupcy is the means by which we do this.
Are they idiots? They will bail on their loans and buy again in a few years time when prices are lower.
Maybe the real idiots are the savers who will get their savings reduced due to inflation, under reported inflation.
Point is giving the keys back to a bank doesn’t seem to really have affected any of the people I’ve known who have done this ( 3 )
“It is too depressing to see these stories about hapless marks who are victims of vultures (realtors, mortage brokers, lawyers, lenders) This bubble may be about greed,”
Oh give me a break, pull your head out, I hate this kind of woe is me self righteous whining. If you read the article they say a lot of the phone-calls to the BK Attorney were from people who make $3,500.00-$10,000.00 a month not exactly burger flippers and walmart greeters refinancing their houses. What did these people you blame do go to these folks homes and hold a gun to their head to make them refinance or did these morons go to Best Buy and salivate over the latest HDTV Plasma 100 inch screen televison or visited the Hummer dealer got excited about the prospect of paying 3.75 a gallon and picked up the phone to orchestrate their demise. Gimme a break
Hey Curm, appreciate the sentiment, but what makes you think government is the answer to any of this? FBI can’t ID arabs learning to fly jets but not learning to land them. CIA thinks WMD in Iraq is a slam dunk. FEMA can’t get a chopper of bottled water to the Superdome for 5 days. Need I go on, or should I include other governmental or quasi-governmental agencies such as SEC, Fed, SSA, Medicare, FNMA and so on… Hell for an example of totally F…ed UP government at all levels, simply look at the State of California!!
Fred Hooper for President!
I say mrincomestream and fred hooper for president!
In california the medi-cal System is ripped off to the tune of billions every year. How about the 10’s of billions of cost overruns involved in contructing the Metro rail system. Anytime the State-federal Gov’t’s get increasingly involved in creating more and more entitlements, there is inevitably massive waste and fraud in the system. I see on the streets Cal-trans workers doing street construction/repair projects: if there are 10 workers doing a single project, half of them are standing around watching the others do the actual work.
I’ll see your Metro rail and raise you a BIGDIG.
And another thing! Maybe it’s time to recognize that most of the people in this country are selfish, narcissistic, greedy bastards trying to scam the system or rip-off their neighbors. Don’t think so? Call 1-800-SUE Someone or become one of the many millions of new recipients of Social Security Disability Income, or the additional millions that have filed bankruptcy because the government didn’t protect them from the greedy credit card company. Arrghh. Ok I feel better now. Have a nice day.
Fred,
I agree with pretty much everything you say–people are greedy morons and our current federal and state governments are populated by many incompetent swindlers, and that applies to both parties (each beholden to special interests in its own way). I just don’t believe that “no government” is really a viable alternative to working for a decent government. Also, I worked for three years for the State of California in a political position and understand that our system is flawed.
Maybe it takes the shock of recession to force people to spend more time learning about government, politics and politicians, and less time driving around in their friggin SUVs yapping on cell phones. If so, we’d be better off.
Call it naive. I just have never figured out a theory of how you run a society that doesn’t involve depending on some subset of the group to make and enforce sensible rules.
As a final note, I always try to keep faith in the syatem (if I didn’t have faith that government can function, I’d probably be living in a bunker somewhere with a decade’s worth of canned food for company). Our country relies on the same type of blind faith as that which fueled the housing bubble. It isn’t like our constitution and laws are so unique, it is just that we all believe they mean something and in many places in the world they don’t. If people lose faith in the “rule of law” and the idea the our government will enforce rules fairly and look out for the interests of everyone equally, we’re doomed. Our democratic system survives because enough people buy into this theory and rally when the Ken Lays of the world start running amok. When that faith is gone, we’ll be no different than Colombia, Nigeria, or any other corrupt hell hole.
Curm
Well said, very thoughtful comment. As I said, I understand your sentiment. Unfortunately, I am increasingly cynical when it comes to our government and the lack of understanding by our citizen “drones” that don’t have a clue what is meant by “rule of law”. We are a Republic, and when our most fundamental laws are broken by hordes of Mexicans and South Americans crawling across our border, and our government and its citizens look the other way, I lose respect for the laws and the people that enforce them, and especially despise those that exploit them. That said, why should I be forced to get a permit to backpack in the Sierra’s? Why can’t I, as a lifelong law-abiding citizen, carry a concealed weapon (or visible for that matter) in the State of California in order to protect myself from thugs, gangs and other ilk of our society. I am ready to take a stand, but unfortunately, I fear that not many will stand with me. We get what we deserve. Some hard times may be just what we need, and since “we” are the government, we have only ourselves to blame. I still don’t think more regulations will make much difference as the scope of our problems are far greater than implementing more lending disclosures and regulations. See yesterday’s bits bucket for my comments on fiat currencies, for example.
Again, I appreciate your thoughts and sentiment, and wish you well.
You live in California? Move to AZ , you can carry a gun if you want to.
I’m with ya Fred!
Me too!
Why not bring up the Millions of ILLEGALS that will suck the social security system, hospitals, schools, dry, they’re already.. They’re also building a social security building in Mexico City.Why? WaWa where are you when we need you
Even better, why don’t you get your racist repug ass out of this country.
Amazing. How is it possible that he didn’t know both of his loans were interest-only? As I mentioned here before, I’ve owned several properties since 1979 and with each one I learned something new. AND, with each one, I learned what questions to ask, and asked them. You MUST ask questions if you are not clear. So what if it takes a few hours. As a matter of fact, the best thing to do is do your due diligence *before* you set out on your quest to take on the largest financial debt of your life. As nice as the RE agent appears to be, they are NOT your friend…it is business…they will tell you what you want to hear, and food on their table is dependent upon the sales that they make. When they see a potential buyer, they ONLY see dollar signs.
All potential buyers on this blog…do your due diligence, be educated, do NOT go in blind or you could wind up like the folks mentioned in this story.
(off soapbox)
BayQT~
“‘If I had been aware both loans were interest-only, I would have probably turned the loan down,’ says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him.”
>> Looks like Mr. Snyder can’t read either.
Maybe he does have a good reason to be late on those student loans, then, considering the worthless education he got with them.
“The portion of adjustable-rate mortgages that were at least 90 days past due has climbed 141 percent in the past year,…”
This is very scary. I’m beginning to think Great Depression part II scary. We are at the very beginning of this, and it’s only going to get worse. I’m very concerned that these folks are going to drag the rest of us down with them. I’m solvent except for the balance of my note. Even though it’s not that big, it’s still debt.
Not to be an alarmist but we are heading for an economic cataclysm that will make the great depression look like the good old days. The government has the ability to make your money worthless. They are deep in debt and on the hook for trillion$ more. Do you think they will stop creating money now? In spite of these risks I still think most housing is short-term overpriced.
People don’t make enough to pay the taxes for these overinflated monsters. Short term my butt. They may print money, not only will it be worthless, but companies and everyone will go under. Deflation may set in? We’ve never been down this path so we have no idea how bad it will be. I hear inflation/deflation.
One thing is certain is we won’t stay where we are.
I made that statement with the expectation that prices will come down over the short-term, meaning that now is not the time to buy in most cases. Very long term 20-30 years we certainly may see higher prices due to devalued currency. You are right about property taxes in many cases.
That will suck. Esp. for the rich when we hunt them down.
will this be a replay of Weimar Germany in the early 1920’s when folks had to pull wheelbarrels of cash to the grocery mart just to purchase a dozen eggs and a bread loaf.
I’ve heard this analogy SOOOO many times. You know, it was probably only one wheelbarrow ever that this happened with, one time, and probably the original owner just moved to an apartment and had no use for it anyway (ala One Red Paper Clip). Time for a new example.
Maybe next time they’ll be talking about the Bush America rather than the Weimar Replubic, and a SoCal House instead of a wheelbarrow.
Seriously - no more wheelbarrows. Please.
The following is an example of the talk around the water cooler/hose. Middle class! What middle class? Remember the good old days when you only needed one job, not three? Hey Joe what did you bring for lunch today, crackers again?
I keep thinking of the home 1/2 mile from the beach my grandfather bought with his 8h grade education. Now many PhDs can’t afford that property.
I should probably explain he bought that place in the 1930s and lived there his entire life.
What happens to consumer spending when more and more of the consumer’s income is spent on financing debt?
Maybe the blog should be called “The Housing Bomb Blog” because i think this is going to be more than a pop, but a BBBBBBBBOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
No popping, no explosions, no grandure. Just folks sinking one at a time into the mire of debt and insolvency. The stories of bad loans and stupid borrowers will become numbingly familiar.
The war stories won’t cause me to lose a wink of sleep. What troubles me is if many member banks get into trouble dropping below their reserve requirements as loan losses mount. That’s when the USG brings out the cavalry and decides the federal reserve printing presses need to work overtime.
Then we get stiffed to cover for the boneheads that went on a credit rampage…
“She says the terms of the loan weren’t clearly spelled out.”
+
If I had been aware both loans were interest-only, I would have probably turned the loan down,’ says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him.
+
‘Often the reason somebody is put into an ARM or an interest-only loan..is because that’s the only way the broker or loan officer could get them qualified,’
My God , oh to be a class action lawyer in the near future!
Too bad he signed a Federal Truth in Lending disclosure at the closing table or he would not have had a funded loan. Class action would be trumped because even on an ARM the potential increases are disclosed on the form based on current conditions…. More than likely he was rushed through the closing by the broker/LO and the closer … I find it ironic that people pay more attention to their auto financing than their home financing.
ahhh the sound of the ticking time bomb of ARM adjustments…
Major indices and 10 year historical paint a scary picture and this is only beginning…. moneycafe.com
Oh if this were the only piece of fraud we’ve seen. There’ll be plenty of lawsuits by borrowers against brokers for telling them to “adjust” their income on the stated income portion of the no-doc loan application. Plenty of lawsuits by borrowers where there were statements made by the mortgage broker that says “don’t worry, it says your rates can go up, but they never do,” etc etc.
If you think that the Federal Truth in Lending disclosure is a lead blanket before you get that x-ray, you’d better think again.
If you think that lawsuits are going to be won by what you just stated. You’re no lawyer. I have personally seen that kind of crap get tossed out on it’s head with the judge snickering and shaking his head.
You’ve never seen the levels of fraud and abuse we are about to see. That’s exactly how new case law gets made. An example:
Products liability cases were lost over and over again, until ONE was won. After a long string of dead bodies. I think we’re going to see a long string of dead bodies and new law getting made. You may feel shielded by the law right now, but it will be the hammer to your nail at some point.
Perhaps the cases you saw weren’t even close because the individual who brought the case was weak. Poor showing of proof, or just a bad plaintiff. When you have 1000 borrowers, dealing with the same company, same broker, same exact set of circumstances, then you have class action fraud.
No dismissal on summary judgement. That case goes to trial with people on the jury that have friends and family that have gone BK and have been foreclosed.
You may have been right in the past, but you don’t know what the future will bring. My opinion is that this one way in which abusive lending practices will begin to blow up.
We’ll see.
For an attorney, ‘billable hours’ is always winning ……
The borrower can’t pay his mortgage, how the hell is he going to pay “billable hours” Hey, Mr. Attorney, willing to take a case with no money upfront from a guy in foreclosure?
Ahhhhhhhhh Now I see.
david cee –
Who said the FB needs to have money? As a “younger” adult in 1989, my wife and I had the very unpleasant experience of being the plaintiffs in a RE civil suit. After 3 years, we finally were approaching our day in court. When we entered the courtroom for a pre-trial settlement hearing on the Friday before the Monday trial, I was amazed at the number of attorneys, aids, etc., that were present in the courtroom. The umbrella of “responsibility” for our financial injury was more widespread than I realized. It looked like the courtroom of the O.J. Simpson trial.
Don’t think for a minute that any FB needs a cent to their name for an “argument” to be made on their behalf. There will be a line of lawyers with business cards in hand willing to help them with their sorry financial state of affairs, as well as those representing the fools that allowed them to get to this point ……
LaLawyer-
Tell me your kidding. Your not comparing the greed of FB’s and flippers losing their a$$es in the housing bubble to “ooops my brakes don’t work” and three legged baby cases are you. Oh Pulheeezzee.
This type of fraud and abuse happens everyday up or down market. The feds raid offices here in Los Angeles and surrounding cities at least every 6 mo’s bubble or no bubble. Downey, Lakewood and those areas are consider mortgage fraud capital of the universe.
Your either very young or very naive. When you get around the fact that the FB or Flipper has signed no less than 3 documents stating the fact that everything on the application is true and correct and he understands what he’s about to venture into then get get back to me.
What is that phrase lawyers like to say when one says he didn’t know about the law “ignorance doesn’t equate to innocence”
Almost all the real estate docs I have signed in last 5 years had “required arbitration” clauses on any disputes.
Courts have ruled this legal.
Seriously, incomestream, it’s you APOSTROPHE re.
Hate me all you want - it doesn’t change that fact that YOU’RE incompetent.
LMAO spelling lessons from the jacka$$ that was caught making up words and what did the poster say something about a “double negative” a couple posts back. I’m to tired to look it up.
Shaddup your credibility is shot as far as being the grammar champ.
Further, grammar champs tend to be life chumps. There’s no point to mastering the english langauge anyways; time to learn Chinese!
Or spanglish?
“Oh if this were the only piece of fraud we’ve seen. There’ll be plenty of lawsuits by borrowers against brokers for telling them to “adjust” their income on the stated income portion of the no-doc loan application. Plenty of lawsuits by borrowers where there were statements made by the mortgage broker that says “don’t worry, it says your rates can go up, but they never do,” etc etc. ”
From the 1003 (the loan application the borrower signs…… waaaay before the signing of final documents)Acknowledgement And Agreement section:
“Each of the UNDERSIGNED specifically represents to Lender and to Lender’s actual or potential agents, brokers (yada, yada)……….
1) the information provided in this application is TRUE AND CORRECT as of the date set forth opposite MY SIGNATURE and that any intentional or negligent misrepresentation of this information contained in this application may result in civil liability…….” (emphasis intended)
“
By the time all of these cases really get going, the mortgage companies will all be in Bankruptcy anyways and there will not be any assets left to go after.
“Ms. Cordova-Holmes says she would like to refinance, but can’t, in part because her loan carries a prepayment penalty.”
One thing we often fail to mention is the pre-payment penalty. Many of todays ARM’s have pre-pays. This will keep borrowers from refinancing until it’s desperation time (ie I’ll eat the pre-pay and refi because I just can’t handle this payment anymore) Problem is most of these pre-pays are at least 8K-10K, and if they’re already tight on the equity to make the refi work, the pre-pay pushes them over the edge. Their stuck in their situation, end of story.
Another sad story about my industry. A lot of pre-payment penalties could have been avoided. Now, with most sub-prime lenders these pre-pays are a given, unless the borrower buys the pre-pay out at close. But there are a lot of A-paper deals that ended up with pre-payment penalties, especially on the Neg-Am deals. Why? Because the loan officer will get anywhere from 1-2 point lender rebate if the pre-pay is added to the note. The program doesn’t start with a pre-pay, but it is an option provided by the lender to be added, and allow for a hefty commission. For example, a lot of the Neg-Am ARM’s are offered to the broker at par pricing, no rebate. Throw on a 3 year pre-pay, and you’ve just landed yourself a 2 point rebate on top of whatever the LO is charging up front. So, the LO sits with his/her client and tells them the bald face lie that this program comes with a mandatory 3 year pre-pay and they buy it as the honest truth. Happens more than you know.
Wow.
We are hoping to buy someday when the market normalizes and we can do it the old-fashioned way (i.e. decent downpayment and fixed rate loan). Neither my husband nor myself have owned a home before (many years in school, followed by the current bubble market). What are some of the questions that we should know to ask regarding fixed rate loans?
You’ll probably get all your questions answered, and then some, by reading this blog…there are some very very smart and careful financial wizards here. I’m amazed at how much my knowledge of all things financial has improved with just this one blog, although there are many more to read as well.
This is how the internet excites me most. I’ve implemented several new financial goals that are a direct result from this blog and the people who offer information. It’s up to me, naturally, to use discretion, but for the most part, I’m way ahead on my financial goals.
It’s hard to get hosed on a fixed rate, A-paper deal (Fannie-Freddie) Pre-pays are not offered on these loans and there are limits on what the broker can make. Stay with this type of loan and you should be alright.That being said, you can still get over-charged on these loans. Shop. shop, shop. Compare at least 3 brokers, preferably more. Understand your Good Faith Estimate and Truth & Lending. This can be a hassle, but worth the effort. Don’t be lazy with probably the biggest investment of your life. Never, and let me reiterate never, immediately go with the broker your realtor recommends. These relationships serve each other, not you the consumer. If your realtor aggressively pushes a certain broker on you, then something is probably wrong. Never let a sales person at a big development tell you that they have a “preferred lender” that you must use. It stomps all over RESPA and is against the law. If they tell you that certain upgrades will be charged to you if you don’t use their lender, then threaten to turn them in. I told one of my clients to do this, and yes, she got her upgrades for free. It’s easy to get railroaded in a real estate transaction. Don’t let it happen.
What about going directly to your bank and not even using a broker? I found the best rate for my NY co-op when it was considered risky by scouring the county records for lenders that lent in low-owner occupancy buildings and then calling around to find who had the best rate. I got a great deal in a building that was tough to finance in that way.
If they’re offering the best deal, so be it.
Going directly to the bank is always a good idea. I always get blank stares when I reccommend it. Mortgage brokers are for folks who have credit or special situations. If you work 9 to 5 get a W2 at the end of the year and have a decent fico 689 and above there is really no need for a mortgage broker.
Actually, I normally beat the local banks and credit unions in my area. That’s why I never have a problem recommending to my clients to compare me with their bank. Although, the reason I’m competitive could be that I’m one of the few brokers that doesn’t have a barrell in the corner of his office he uses to bend his clients over and give them a good old-fashioned corn-holing.
Commercial loans I can typically beat. Loans for residential for someone with a 700 or above Fico. If someone bothered to look I could be beat on rate and fee’s. The banks are real competitive with the brokers out here if not they would starve.
WAMU won’t even accept wholesale loans locally anymore. But they have cranked up the advertising
Thanks for the guidelines, nnvmtgbrkr. We were considering buying last year, and went to a lender with a good local reputation. The loan officer we spoke with was very generous with her time, but she also did a pretty hard sell on an IO-Option ARM (we’d asked for fixed-rate only) and the whole experience left a bad taste in my mouth, as I felt she was either trying to manipulate us or else that she just wasn’t very bright. I definitely want to have a better understanding of the home loan process before we do this again.
I can almost gaurantee you what was going on is what I mentioned above. There is absolutley no reason any LO should be pushing an Option ARM (Neg-Am being one of its options) unless they give you a damn good reason why you would be better off (there won’t be one). Rarely, and I mean rarely, do I close Option ARMs becasue there are very few cases where they actually do the consumer good.
nnvmtgbrkr, once the dust settles and I’m once again in the market to actually buy a house to live in, I’d like to call you first to give you first shake at offering me my mortgage (fixed rate 30 with 20% down of course)
Yeah! Can you do mortgages in FL once all the radioactivity decays from the FL Nuclear RE explosion???
I’m hoping not to be in this business once the dust settles. Unless things change drastically, I’m out.
nnvmtgbrkr, I don’t know…. based on the article on Ben, you may have a nearly captive market of 35,000 folks who I’m guessing would need the services of a good mortgage broker with some scrupples and integrity…such as yourself. That’s an awful lot of potential mortgages to be turning away from.
I second that.
You know, reading all of the great information here from various people, I’m thinking Ben could put out a little e-book on this subject of buying and selling real estate, what to look for on loans, various tips and tricks to negotiating. I would pay $$ for that and would be a nice way to support the blog. For example, I didn’t know what nv just wrote above. There’s so much great information here and there, but it is sort of all over the lot in different threads.
Nnvmtgbrkr. your advise is worth more than it’s weight in gold. thanks !
You should probably know ahead of time what you are willing to pay on a mortgage. That alone will tell you how much home you can buy. For example, let’s say you want to buy a home with an $1,800 total house payment. Assume that $500 covers insurance, re tax, and/or mortgage insurance. This means $1,300 goes to principal and interest. Assuming a 30 year fixed rate is 7%, you would be able to borrow up to $195,000. If the rate is 6%, you would be able to borrow up to $216,000. If the rate is 8%, it would be $177,000. I came up with the figure by using an Excel spread sheet. You would use the PV function with your three variables being rate/12, 360 months, - pi pmt (=pv(rate/12,360,-1300)). The more you are willing to pay, the higher the loan you would be able to afford. You need to do your homework on going interest rates, likely real estate taxes & homeowners insurance premiums before you talk to a loan officer. Some LO’s lowball your RE taxes and insurance to make your house payment look lower than it actually is. You should also know if you have good credit or not. You should probably know your credit score before your loan officer. You can go to http://www.myfico.com and find out. Once you find out how much you are willing to pay and what that gets you, will then prevent the LO from putting you in products in reality you can’t afford and in turn prevent you from being an FB.
In the formula I used, assuming a rate of 7%, you would enter =pv(.07/12,360,-1300)
“PV”..Excel..you must be kidding…
We live in a country where people need a “tip card”..
you might buy a book called { how to save thousands of dollars on your home mortgage} by randy johnson i bought on e-bay for $5.00 it will explain all the inside info on home loans good luck azrenter
Hope this helps:
http://www.mtgprofessor.com/
Bookmarked it. Very valuable!
My brother sold his place and is renting from some guy afraid to sell because of the pre pay penalty. Sad part is the FB will lose way more by holding his pig.
“Problem is most of these pre-pays are at least 8K-10K”
NV, I didn’t know this! So, if I am correct, appraisals will start backing-off, underwriting requirements will soon stiffen, and some of these ARMs have big prepays?? This is far worse than I, doomsday bear that I am, could have imagined.
I would ask the bank/investor lender to wave the pre-pay or get a foreclosure in some cases. Banks /lenders do have the power to wave contract clauses .
If the IO loan was designed for the short term investor ,why would that investor go for a note that had a pre-pay on it if the objective was short term investing? I think at some point ,some of these flipper/investors would take any loan they could get ,especially when they were buying more than one property . I think alot of these investors thought they were getting the better of the lenders with the bizarre appreciation that was going on ,but they ended up being bagholders with pre-pays .
Actually, I’m being pretty damn conservative. Most pre-payment penalties are structured to be the amount equal to 6 months interest. So, if your mortgage is $2000 a month and it’s interest only, it’s easy to figure…$2000 x 6 = $12,000. Now we all know $2000 is a low house payment for the East and West coast folk. Start calculating some of those monthly interest payments x 6. Now your talking 20K plus!
Just paid a pre-payment that we were unaware of. 25k on a 245k loan.
You forgot the YSP for another .5-2 pts.
Somebodies gotta do the dirty work of shearing the sheeple.
This is just like the annuity business.
I used to work for an insurance company that had two high-end annuity products: one paid a 7% commission with a hefty withdrawal penalty for seven years, the other paid a 1% commission, 1% trailer and had a 1% withdrawal penalty for the first year only.
No customer in their right mind would accept the high commission product over the 1% one, but no brokers were selling the 1% one. Even though the 1% commission would amount to a lot more money for the broker in the long run.
How would the broker make more in the long run?
I’m so glad to be lurking this blog. How much do you want to bet Mr. FB Snyder fell for one of those “we can get you into this house for X per month” deals and had no idea just how he got in? That vague “INTO” always makes me uneasy. Sure you can get IN, but can you get out?
If I ever apply for a mortgage (first-time buyer), I’ll just ask them to run me up an amortization chart — all 30 years of it — for a few possible interest-rate scenarios. I might not understand that fine print, but the chart will be a real help.
You are more correct than you realize. I suspect that the second you ask for the amort shedule, they’ll know you’re not an GF and will suddenly change their tune.
To borrow from Warren Buffet:
Exotic mortgages are kind of like hell.
Easy to get into and very difficult to get out of.
When I was getting my first mortgage, I had a good amount of money for a downpayment. I was trying to figure out whether prepaying points to buy down the rate made sense. I had an extraordinarily difficult time getting the mortgage broker to understand that I wanted two different ammortization schedules: One for a loan of x amount with no prepayment of points,and One for a loan of x+y amount where y is the amount of prepay to buy down the interest rate. The money to buy down the interest rate wasn’t going to appear magicly in my bank account, it would have to be subtracted from my downpayment. This would seem like an obvious comparision that anyone would ask for but….
N.B. it ended up not being worth it, paying a point to buy down the interest left me behind on the ammortization until about year 27 of the loan. Since I intended to pay $100 extra principal every month I would have ended up behind.
Reading this blog makes you paranoid. In my experience, the vast majority of people (in the real estate, banking etc fields) are all the same - they size you up - if they think you’re savvy, they’ll play straight. If you look like you’re a mark then a few may try to take you for a ride. Just the same as in any human transaction.
Moral of the story here folks.. don’t give loans to people that wear tinfoil hats.
Get a clue!
We are the tinfoil hat people!
I know…. when I talk about the housing bubble with my colleagues in the Bay Area, they look at me like I’m the one with the tinfoil hat.
You arent the only one in the Bay Area with a tinfoil hat.
Here is where I got mine.
http://zapatopi.net/afdb/
Good one! I prefer the more traditional design myself.
i prefer to make my own. i’m afraid the ones those companies sell might be bugged.
Now you guys are scaring me…I have that really wierd feeling- like being at the prom and suddenly realizing that you are sitting at the nerd table.
Be afraid, be very afraid.
My tinfoil hat has a cute little old palm tree on top, on account of being here in Florida. My friend’s has an alligator, another friend has a flamingo on their tinfoil hat. We love them. Really makes us stand out in a crowd.
bigdaddy-i think the tinfoil hat humor is just meant to poke fun at how we bubble-believers were called “crazy” for so long for seeing the bubble when everyone else was seeing dollar signs.
“Now you guys are scaring me…I have that wierd feeling- like being at the prom and suddenly realizing that you are sitting at the nerd table.”
I like the nerd table BigDaddy. And I’m not the only one…
Bill Gates recently gave a speech at a High School about 11 things they did not and will not learn in school. He talks about how feel-good, politically correct teachings created a generation of kids with no concept of reality and how this concept set them up for failure in the real world.
Rule 1: Life is not fair - get used to it!
Rule 2: The world won’t care about your self-esteem. The world will expect you to accomplish something BEFORE you feel good about yourself.
Rule 3: You will NOT make $60,000 a year right out of high school. You won’t be a vice-president with a car phone until you earn both.
Rule 4: If you think your teacher is tough, wait till you get a boss.
Rule 5: Flipping burgers is not beneath your dignity. Your Grandparents had a different word for burger flipping: they called it opportunity.
Rule 6: If you mess up, it’s not your parents’ fault, so don’t whine about your mistakes, learn from them.
Rule 7: Before you were born, your parents weren’t as boring as they are now. They got that way from paying your bills, cleaning your clothes and listening to you talk about how cool you thought you were. So before you save the rain forest from the parasites of your parent’s generation, try delousing the closet in your own room.
Rule 8: Your school may have done away with winners and losers, but life HAS NOT. In some schools, they have abolished failing grades and they’ll give you as MANY TIMES as you want to get the right answer. This doesn’t bear the slightest resemblance to ANYTHING in real life.
Rule 9: Life is not divided into semesters. You don’t get summers off and very few employers are interested in helping you FIND YOURSELF. Do that on your own time.
Rule 10: Television is NOT real life. In real life people actually have to leave the coffee shop and go to jobs.
Rule 11: Be nice to nerds. Chances are you’ll end up working for one.
It’s an urban legend that Bill Gates wrote those rules. ‘This list is the work of Charles J. Sykes, author of the book Dumbing Down Our Kids: Why American Children Feel Good About Themselves But Can’t Read, Write, Or Add. (The list has appeared in newspapers, although not necessarily in this book.)’
Thank you, Jay. Friends constantly spam me with that list, attributing it to Bill Gates. Somehow it never sounded to me like something Gates would say. So glad to have the real source.
The words “recently” and “car phone” don’t go together in 2006.
as stoopid as the people were who signed these friggin contracts without understanding what they were committing themselves to, i also think it’s borderline criminal that alan greenspan so publicly encouraged people to get them; not to mention the failure of the media who so enthusiastically pimped the magic of the housing market. and of course, hopefully there’s a special place in hell for the lenders who knew they were dealing with financial illiterates but eagerly shoved those contracts across the table for signature.
i agree with the earlier comment about the extent of this verging on depression-like impact. i don’t see how this won’t be disastrous for the u.s. economy.
(fantastic site, ben. i just found it recently and have become obsessed with reading it.)
Welcome aboard, Linda. It’s an e-ticket ride.
Welcome, linda. This site is *totally* addictive.
…. and in a very good way. 
Btw, where are you? What part of the country (world)? Feel free to give us your observations on what’s happening in your neck of the woods.
BayQT~
>*totally* addictive, and in a very good way.
Yeah, it’s much cheaper than my gambling habit!
According to that article there are 662 billion dollars in ARMs resetting over the next four years. Yikes. Should I be looking to put up an electrified fence and razor wire?
Try again. $2.4 trillion in the next three years. You may mean HELOCs only. :O
i agree — i read several places that at least $1 trillion were to reset in 2007 alone.
A trillion here, a trillion there, pretty soon you’re taliking about some real money!
“Roughly $137.5 billion in residential mortgages will face payment resets this year, with an additional $524 billion resetting over the next four years, according to a recent analysis by UBS AG that looked at loans sold to investors who buy mortgage-backed securities.”
Holy… I did mistake a comma for a period and the number I quoted was only for what ‘UBS AG’ looked at. Maybe I’ll add an underground bunker to the list.
http://bigpicture.typepad.com/comments/2006/03/coming_soon_mor.html
Thanks for that link. I was thinking maybe a million loans (probably a very conservative number) for the $662B in the article. Are we looking at 4 million ARMS resetting higher?
Something like 25% of the &cong $10 T mortgage market is due to reset over the next three years. Refi or die in many cases.
More inventory!
I love more inventory!
http://tinyurl.com/ecpod
You may have missed this over the weekend: The Saturday WSJ reports that “More than $2 trillion of U.S. mortgage debt, or about a quarter of all mortgage loans outstanding, comes up for interest-rate resets in 2006 and 2007, estimates Moody’s Economy.com, a research firm in West Chester, Pa.
I need to double check the WSJ because I thought it was $.5T for 2006, $1+T for 2007, and $1+T for 2008. But I am starting to doubt my memory.
Mort:
The original source for $2T in 2007 was the NYTimes.
In the last 30 days someone published the 2006 ($500B) and 2008 ($1.5T) numbers.
Either way ass-poundings for FBs.
How about this quote:
“More than 30 percent of mortgage brokers believe their clients don’t understand the mortgage product they selected, according to a recent survey by Macquarie Mortgages USA, a unit of the Macquarie Group.”
From the article:
“More than 30 percent of mortgage brokers believe their clients don’t understand the mortgage product they selected, according to a recent survey by Macquarie Mortgages USA, a unit of the Macquarie Group. ”
Yep, those friendly mortgage brokers are certainly there to help as they take your money.
Many people in real estate are no better than the local used car dealer…
a bit OT, but i think the rate pause yesterday officially stuck a fork in this thing — from any which way you look at it: the housing bubble has popped. now the deluge.
Wierd, huh? Slightly counterintuitive. But when you think about it, it’s like Ben B. saying “yeah, although inflation has been launching into orbit I guess the economy isn’t really looking so hot and real estate is really screwed.”
Pop.
Thats the way I see it.
“‘If I had been aware both loans were interest-only, I would have probably turned the loan down,’ says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him. ‘I believe this loan is built for failure. There’s no means to build up equity.’
You mean equity can be built up by paying back the loan? I thought by the very fact that you owned a property guaranteed that you gained equity because why pay the principal to the bank when you can keep that principal and “invest it” (I overheard a fellow LO explain this to a propsective borrower, same LO by the way who has 3 mortgages on their home).
Borrowers have to take some responsibility too. I have had recent conversations with prospective borrowers running figures for them that qualified them for lower loan amounts than they were looking for. I haven’t heard back from them. I’m sure they will come across an LO who will put them into a “creative” financing program they gets them the higher loan amount they are looking for, but I don’t want to hear this borrower complaining about their mortgage two or three years later.
Hindsight 20-20. Gee, if I knew I was gonna lose money on this deal I woulda stayed home. Would he like a little cheese with that whine?
“Patti Vaughan, an agent with in Temecula, Calif., says in recent months she has begun to get calls from borrowers looking to unload houses they can no longer afford. ‘They’ve upgraded their houses, put in a pool and bought themselves Hummers and BMWs,’ she says. ‘Now they can’t get it refinanced and they can’t sell.’” ”
bwahhhhaaaaaa. The JIG is up FB’s and GF’s.
I walked into Panera this morning in lovely Mira Mesa to get some coffee and what did I see on the USA Today Cover page in a nice pretty graphic? Average Rent is 1/2 average Mortgage payment.
That’s it…MSM is really beginning to tear into this because they know this is where the tearjerker stories are going to originate from for the forseeable future. It’s done. It’s over. There is no more denying it.
Isn’t Nina and her partners in the Palm Springs-Temecula area? Sell to them!!! hehehehehehehehehe
by the time Great Depression II hits, there won’t be any more Panera’s… it’ll be back to Dunkin Donuts
Act 2, Stage 1 - Enter “The Lawyer”
….who will quickly determine that the broker made a hefty fee(s) from the transaction….the appraiser rigged the value of the home….the RE agent was in cohoots with both…..
….and the poor little FB should now be allowed to receive some type of “relief” from the crushing debt burden resulting from the above referenced FRAUD!
Watch, we’ll see this played out many times over the next few years.
…you forgot to mention the part about the FB lying about how much they make. Oops.
What’s really amazing is the lack of personal accountability in the article. I’m paraphrasing “Had I known, I would not have signed it” just how friggin stupid is that statement. Why would you sign on for that amount of debt and not understand in entirety what it entails. How could a accountant even be quoted saying something that friggin asinine. Someone tell me just what is the barrier of entry to become an accountant. Hopefully she didn’t have CPA attached to her name. Unbelievable. I would just once like to see one of these moron’s be honest and stare at the reporter and say “I f***** up, it’s no ones fault but my own.”
But instead it let’s blame the lender, the mortgage broker, the realtor, the fed, anything but looking in the mirror.
we’re seeing more and more of “you do what for a living? and you’re how screwed by your mortgage(s)??”
apparently occupation has no bearing on bubble savvy… for example, there’s a bankruptcy lawyer near me that is utterly f’ed… we’re talking “addiction behavior” level of speculation. math teacher, accountant, engineer okay, but bankruptcy lawyer?? that takes the cake.
Rewind the tape to 2001/2002 …
Poor, victimized investor (PVI):
“How could I have known that Pets.com was going to zero? My mean old broker told me to buy all those shares with my life savings. He said it would go to the moon. It’s his fault it went down. If I had known this company was shipping 40 lb. bags of pet food over the Internet, I never would have bought the stock. Waaaaaa….”
Judge:
“But didn’t you read the prospectus?”
PVI:
“What’s a prospectus?”
And so it goes. Sigh…
“‘If I had been aware both loans were interest-only, I would have probably turned the loan down,’ says Mr. Snyder, who says that the terms of the mortgage were never properly explained to him. ‘I believe this loan is built for failure. There’s no means to build up equity.’”
Mr. Snyder still doesn’t understand his loan. He would build up equity if the value of the house kept rising and as long as he kept the principal amount the same by paying at least the interest off every month.
The problem with his loans is that they are adjustable and he can’t afford the monthly nut with a higher interest rate.
This is what kills me now that he is about to slide down the barbwire wrapped pole to financial ruin he figures it out. A little late I think
Interesting how things are changing.
1 year ago we on this blog were ‘doom-and-gloomers’, ‘being negative’, ‘Chicken Littles’, even ‘America Haters’ (I always liked that one in particular…being informed and actually thinking things through now made us people who hated our country).
All of a sudden we’ve become the smart ones! How many times have you heard someone finally admit…’ah, I think you might have been right on the real estate thing..’
Reminds me of an old joke:
When I was 18 my father was a complete idiot.
However by the time I’d turned 40 it was amazing how much smarter the old man had become.
‘America Haters’ (I always liked that one in particular…being informed and actually thinking things through now made us people who hated our country).
It seems to be a recent fashion to disguise “disagreement” as “unpatriotic”. Very strange turn of events in our country.
FYI, your quote was Mark Twain (and is one of my favorites, he stole the words out of my mouth 100 years before I was born…) : “When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.” -
The ages have been adjusted for the “extended adolescence” in modern society.
“‘We’re in a very bad situation,’ she says. ‘The payments are just killing us.’”
Now if this is not slavery what is? I know they were ignorant enough to sign on it but were they informed adequately by the bank, I doubt it. Those sharks with the RE cousin killer whales eat the Average Joe alive. Greedy-ass flippers are not less tp blame either.
“If the american people ever allow private banks to issue their currency, first by inflation then deflation, the banks and corporations that grow up around them will deprive the people of their property until one day their children wake up homeless on the continent their fathers conquered” Thomas Jefferson, 1819 during debate over recharter of 2nd U.S. bank.
Federal Reserve = Private cabal of banks
http://www.freedomtofascism.com
Can’t say you weren’t warned!
And we thought he was just kidding us?
Sorry to repeat myself, but replace the word “housing”, “home”, or “condo” , with the word “stock” and you are suddenly transformed to the year 2000. Usually it takes a good 20 years or so in between bubbles this large. Only 6 years and the general public has a case of mass amnesia.
Bears repeating, BigDaddy, since there are new people joining the site every day.
BayQT~
“problems stem largely, or in part, from the structure of their mortgage, housing counselors say”
The main reason people are getting into trouble isn’t necessarily the structure of the mortgage, but rather the AMOUNT of the mortgage. For example, if most people were simply borrowing 100K, it really wouldn’t matter if the loan was a resetting i/o, neg-am, option arm, they would still be able to make the payment.
The bubble pricing itself is the main reason people are getting into trouble and the “creative financing” was mostly developed as a means to keep the party going in spite of outrageous prices that nobody could afford. This is a little like a chicken and egg argument.
True ‘dat! So obvious that the prices are the seed of the problem, the loan product was created to feed the prices. But truthfully, there is a lot of blame to go around, from the stupid sheeople to the lenders, realtors, appraisers & government. One big circle jerk to the top and now everyone has shot their load, so to speak.
Well, it turns out that people are responsible for their commitments after all. Too bad for some of the individuals, but they shouldn’t have signed if they couldn’t make the payments in all foreseeable future conditions.
I didn’t think I’d see Elizabeth Warren’s name in a story about the housing bubble for at least another year. This is wild.
She is a nationally known consumer bankruptcy figure.
A good friend sent this to me:
How to lose $350,000
http://flippersintrouble.blogspot.com/
Ben, I don’t know if you’ve already seen it or not but FICC had an ugly earnings report out today (ugly in the sense that it shows rapidly rising delinquencies, talks about a tightening secondary market, especially for second-lien mortgages, etc.). I posted about it in more detail at my blog:
http://interestrateroundup.blogspot.com/
My take: Everybody was looking for tighter lending standards to slow an already slowing market. Now that appears to be getting underway ever so slightly.
What a great blog, Mike in FL!
I’m hoping you will keep a close watch on the MBs’s as they start flowing back and quit getting bought?
That’s my biggest hope for quickly and completely bringing down the house of cards so every shred of info is welcomed.
“I agree strongly! How many IDIOTS sign anything in this me now …got to have it society.”
I don’t know. Those documents I signed at closing were pretty long. I counted on my lawyer to make sure I wasn’t hosed.
Have you clicked “I accept” without reading a whole software agreement lately?
I blame the press. This should have been on Entertainment Tonight (which is all the news most people watch) two years ago so the morons would be warned.
I don’t know. Those documents I signed at closing were pretty long. I counted on my lawyer to make sure I wasn’t hosed.
Good idea. Mine were long, too. That’s why I demanded ALL of them, every page, a full day before the closing. And it was soooo boring reading them myself (but worth it because on one instance I discovered a “new” $400 ripoff charge). Once I even threatened to delay closing by a day if they couldn’t deliver the docs by the day before. Boy were they annoyed!
Me: “Well if you can’t get them to me today, let’s just postpone the closing.”
He: “But we’ll have them early tomorrow so you have lots of time.”
Me: “No good, my lawyer is busy then but free at night.” (Said lawyer is me.)
He: “But.. we’re not sure if we have time.”
Me: “That’s why we should make the postponement decison now, so you have plenty of time to rework all the numbers.”
[long pause]
He: “Uh, OK, we’ll have them for you today.”
And this just happened to be the one with the bogus charge in it. Of course.
The agreed upon interest rate on my fixed was wrong on my contract. I had attempted to fix that thru 3-4 earlier versions…showed up at closing…still wrong in banks favor. Also escrow withdrawals also did not reflect our agreements.
“Two years later, however, the interest rate on her loan has jumped to 8.75 percent, her loan balance has climbed to $324,000 and her minimum monthly payment has risen to $2,257. She says the terms of the loan weren’t clearly spelled out.”
That payment still doesn’t cover the interest. It looks like her LO charged the max margin to get 8.75%.
The terms were spelled out if she took the time to read them. She shouldn’t be mad at her loan officer, she should be mad at whomever trained her to be an accountant.
“She says the terms of the loan weren’t clearly spelled out”
Uhhhh, yes they were, you just didn’t read them.
One top realtor in our area told us that when we sold in Aug of 04, that we were going to lose $100,000 in appreciation per year by selling. She thought the party could not possibly end.
I think we’ll be seeing Gloria Allred coming into the picture pretty soon to represent some poor FB! (Maybe Jesse Jackson and AL too!)….who got taken by those greedy banks.
What I found interesting was the volume of replies on ‘understanding or not understanding’ the mortgage. For me, the prime issue is the price someone was willing to pay for a piece of property in the first place.When property was purchased with good fundamentals in place (location, use, future value, structural integrity,etc)mortgages were not the problem, nor where increases in interest rates. However, with greed, ‘how much’a it a gonna cost me a month’, and I’ll out bid anyone just to get into the house mentality, it’s no wonder mortgage bankers were lining up to hand out mortgages that no one cared to read or understand. In fact, if you were a minority and were refused one you’d probably have been sued. Yes, now the fun begins, but when lawyers get invovled it will be years before things run their course.
What I struggle to understand is why those who know, (the US government, the Fed, the banks etc) allowed this debt insanity to develop.
My theories;
1. The US is at war and the appearance of a prosperous thriving economy is important for morale on the home front.
2. The Fed was so shite scared of Japanese style deflation that it decided to inflate, inflate, inflate and inflate some more while your at it, to avoid a similar fate.
3. The US is run by a bunch of anarchist lunatics, hell bent on its destruction.
4. All of the above.
This whole thing should prove interesting once the defaults start rolling in. I wonder how much of those loans have been securitized and sold to investors? Also, what kind of credit default swaps are floating around out there? Where are the financial reports for FNM? The collapse of the housing bubble will cause significant stress in the financial system besides the financial destruction of the obvious players.
Please tell me these morons don’t vote, drive, or reproduce.
End FB suffrage!
That is all they do.
They are stealing my oxygen.
Really at some point there needs to be a significant culling of the herd.
….hmmm…. GW and the neo-nuts, road rage over “dissing”, and LOTS of little kids at the cage fights…. Oh wait… I can’t tell you that
True story.
I was at an open house about 3.5 years ago. Really nice new house (sold May 2003 565k). Anyway, there was a mortgage broker on-site and she mentioned this “great” loan package that was being offered. It was a 10 yr I/O were the rate was fixed at around 2% for the first five years and then adjustable for the next five and at the end of the ten years, the loan would convert to a fixed rate 20/yr (wish I could remember what the rate would be)..Anyway, I remember saying to her that I wouldn’t sleep for the first ten years, to which she replied, “oh you sleep for the first five, it’s the second five that will keep you up at night”. We went on to further discuss the loans and how people were buying the big homes, etc. blah, blah, blah…Anyway, as it turns out she had been on the REO (not the band) side of the business, before being on the mtge side…well, here it is about 3.5 years later..if I had taken that loan package I’d be staring at some HUGE payment increases in 18 months.
The house is back on the market now…lister 80 days ago..reduced from 695K to 675K..
If I really wanted to stretch to 36% of gross, I could swing it on a 30yr fixed…and sleep at night
Moral of the story: You don’t always get priced out forever.
Wait another 3.5 years and pick it up for $350k.
What worries me is who is holding all this mortgage debt. How do I know companies are not pumping up their earnings by lending money for mortgages, while borrowing short?
Because know one seems to know exact who is holding this debt, I worry a may have inadvertent exposure to it.
Oliver
I used to get calls from sleazy loan officers and got asked what is that worth or how much value can I get out of that property… I called them reverse enginering loans… I would say order the appraisal and I will do it as fast as I can but I really need to inspect the property first. Then I would never here from them again.. thank god.
The chickens have come home gentlemen..
This commercial is playing here in MA and pisses me off to no end. A year ago they were saying you were stupid if you have a fixed rate. People are over extended. I would set up a time/day to due the appraisal and the borrower would already be on vacation before they got cash out of there house/ATM. The kicker is when I would go to the garage and flicked on the light I would see a SUV and a BMW. I am tracking foreclosers and will pick something up on the cheap like I did in 92.
Sorry the link didn’t paste
http://www.lnxloans.com/johnad.mp3
“Ms. Cordova-Holmes and her husband chose a so-called option adjustable-rate mortgage, which gave her multiple payment choices each month. ‘I had a lot of financial obligations,’ says Ms. Cordova-Holmes.”
Mr. Snyder says he was stretched even before a rate adjustment on his ARM boosted his monthly payments by $200 in May.
Doesn’t sound like they were in a position to buy the homes with any type of loan - with “a lot of financial obligations” and being “stretched” even before the ARM readjusted.
Boo hoo hoo! Some irresponsible person digs herself into a ditch and wants us to feel sorry for her.
None of us here would have taken an “option” mortgage!
She had to work HARD to get into this mess. Why not rent an apartment with a roommate if you have financial issues and can’t afford a home?