First Quarter “Looks And Feels A Lot Like Last Quarter”
Some housing bubble news from Wall Street and the Washington Post. “With college costs looming for their four children, Bryan and Susan Andrews were looking for a way to cut their monthly expenses. The sales pitch that came in the mail seemed perfect: A mortgage at 1.95 percent, fixed for five years.”
“But after the deal closed, in 2004, the couple realized to their horror that the $191,000 loan they got from Bethesda-based Chevy Chase Bank was an adjustable-rate mortgage. They went to court, saying they were deceived. A federal judge has sided with the couple and is allowing a class-action suit involving up to 7,000 borrowers against Chevy Chase.”
“Last month, U.S. District Court Judge Lynn Adelman…ruled that while the borrowers were not eligible for damages, they could be permitted to turn back or ‘rescind’ their mortgages. Recision would permit borrowers to be released from the loans, receive reimbursement of any interest they paid to Chevy Chase and get back their closing costs, too.”
“In other words, the ruling may give some borrowers a refund of everything they have paid to live in their houses for years.”
“The case worries the lending industry because of the potential for hefty losses if other borrowers are allowed to rescind mortgages they claim were misleading.”
From Reuters. “Mortgage Lenders Network USA Inc. on Monday filed for Chapter 11 bankruptcy protection, becoming one of the largest casualties among lenders to people with poor credit histories as the U.S. housing market slows.”
“‘Lenders may be having trouble finding white knights, whether to fund their operations or provide warehouse lines of credit,’ said Keith Gumbinger, a VP at a mortgage information publisher. ‘More trouble is likely in 2007.’”
“‘Recently originated loans are falling into default much more quickly than lenders expected,’ Gumbinger said. ‘It’s tough to tell which lenders are most vulnerable, because underwriting standards are not transparent enough.’”
“Economic development assistance that had been sought by Mortgage Lenders to build a Wallingford campus was halted last month. James Watson, a spokesman for the state Department of Economic and Community Development, said Monday that any aid package is now dead because it was based on a pledge by Mortgage Lenders to create 1,000 jobs.”
“Instead of creating jobs, Mortgage Lenders has left hundreds unemployed.”
From Origination News. “Mortgage lenders dropped 6,500 full-time employees from their payrolls in December. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector declined from 501,200 in November to 494,700 in December.”
“The BLS also revised downward the November and October job numbers, and the statistics now indicate that the industry cut 10,000 employees during the last two months of 2006.”
From Business Week. “FirstFed Financial Corp. may be the riskiest mortgage lender around. In the fourth quarter, mortgage originations plummeted by 66.8%, to $365 million—one of the steepest declines among all lenders.”
“Cash from operating activities dropped into the red in the third quarter (the most recent data available), falling from $49 million in 2005 to negative $77.1 million a year later. Meanwhile, the number of problem loans more than quadrupled last year.”
“The biggest problem: Its mortgage portfolio is packed with risky loans known as option ARMS. All of FirstFed’s mortgages are for homes in California, where prices have cratered and foreclosures have skyrocketed. Also, 80% of its loans have little or no documentation to prove the borrower’s income or assets, according to a recent company presentation.”
“The bulk of FirstFed’s income is derived from noncash earnings, largely from the deferred principal on its option ARMs. That so-called negative amortization constituted $223.9 million, or 68.4%, of the bank’s income before taxes in 2006, compared with 1.3% in 2004. In essence, FirstFed is booking profits on money it hasn’t collected.”
The Associated Press. “Due mostly to the slowdown in new home construction, lumber prices have sunk from a peak of about $1,000 per thousand foot board 18 months ago to around $200 per thousand foot board. In addition, prices for oriented strand boards, or OSB, are at a four-year low.”
“Lumber and building materials supplier Louisiana-Pacific Corp. on Tuesday posted a fourth-quarter loss due to feeble demand from home builders in the sluggish U.S. housing market.”
“‘Fourth-quarter sales declined 40 percent compared to the same quarter a year ago, as levels of building activity dropped to the lowest levels we have seen this decade,’ said CEO Rick Frost. ‘Weakened demand negatively affected volume and pricing in all of our product lines.’”
“Frost cautioned that the first quarter this year ‘looks and feels a lot like last quarter, with lower building activity and depressed prices for our commodity products continuing.’”
“Building Materials Holding Corporation, a leading provider of construction services and building materials to professional residential builders and contractors, today reported sales for the fourth quarter of 2006 decreased 26% from the same quarter a year ago.”
“Robert E. Mellor, CEO, stated, ‘Our fourth quarter results reflect the on-going correction of inventory levels which currently overhang the housing market. The rapid deterioration of our markets during the second half of the year has made for a very challenging quarter as homebuilders curtail production while excess inventory is absorbed.’”
“Mueller Industries Inc., a maker of copper tubes and fitting used in plumbing and refrigeration, said Tuesday the slumping housing market and lower copper prices led to an inventory write down, sending fourth-quarter profits tumbling.”
“The latest quarter included a charge of 26 cents per share to write down inventory that lost value as copper prices fell during the period. Mueller said the slumping housing sector also hurt sales volume.”
“D.R. Horton Inc., the largest U.S. home builder, on Monday said net sales orders in January continued to fall compared with a year ago, but its cancellation rate for the month was about the same as that seen in the most recent quarter.”
“The industry-wide softening of demand for new homes which began in fiscal 2006 has continued into fiscal 2007. In many markets, home price appreciation over the past several years had hurt the ability of some potential homebuyers to afford a home, but the price appreciation had also attracted real estate investors and speculators to the new and existing home markets.”
“As price appreciation slowed, the demand from investors and speculators for new homes also slowed, resulting in an increase in new homes available for sale. At the same time, existing homes offered for sale by investors and speculators increased.”
“In response to higher inventories of both new and existing homes, homebuilders increased the use of sales incentives to continue to sell new homes. During the three months ended December 31, 2006, we have continued to experience a decrease in our net sales orders due to a decline in homebuyer consumer confidence and continued elevated levels of sales contract cancellations.”
“Our use of incentives also contributed to significantly lower gross margins on the homes we closed during the quarter. We cannot predict the duration or severity of the current market conditions.”
“The value of net sales orders decreased 28% for the three months ended December 31, 2006, from the same period of 2005. The number of net sales orders decreased 23% for the three months ended December 31, 2006 compared to the same period of 2005.”
“Our cancellation rate during the quarter ended December 31, 2006 was 33%, which exceeded our typical historical range of 16% to 20%, but improved from our cancellation rate of 40% in the fourth quarter of fiscal 2006. A significant portion of the increase in cancellations above historical levels was due to our prospective homebuyers being unable to sell their existing homes.”
“The average price of a net sales order in the three months ended December 31, 2006 was $261,400, a decrease of 5% from the $276,300 average in the comparable period of 2005. During the three-month period, the largest percentage decrease occurred in our Southwest region, due primarily to price reductions and increased incentives in the Arizona markets.”
“Our net sales orders for the month ended January 31, 2007 decreased as compared to the same period in 2006 at a greater rate than the 23% decrease we experienced in our most recent quarter. Our cancellation rate for the month ended January 31, 2007 was similar to our cancellation rate during our most recent quarter.”
Wow! I thought it was just sleazy independent mortgage brokers who were sticking folks with toxic loans and not disclosing all the terms. Looks like sleazy banks have been doing it as well.
Oops, I just read the WaPo article. It was a sleazy mortgage broker. It will be interesting to see which side ultimately prevails.
Sorry, but the terms are disclosed. They might not have held their hand and walked them through all the details, but trust me, the details were in the paperwork they signed!
I’m not saying they couldn’t do a better job disclosing things…but people need TO TAKE SOME DARN PERSONAL RESPONSIBILITY FOR THEIR ACTIONS!!! If you are going to take out a ‘30 year’ mortgage, it is going to require about 62,400 hours of ‘work’ to pay that off (40 hours week, 52 weeks yr, 30 years). So how come people will not spend even 2-3 hours doing some research and taking an extra 30 minutes at the ‘doc table’ to READ some of the documents for themselves.
— “But after the deal closed, in 2004, the couple realized to their horror that the $191,000 loan they got from Bethesda-based Chevy Chase Bank was an adjustable-rate mortgage. They went to court, saying they were deceived. A federal judge has sided with the couple and is allowing a class-action suit involving up to 7,000 borrowers against Chevy Chase.” —
They were deceived??? They signed the 1-page document that says EXACTLY what the loan is. There are a FEW pages that are important in ALL of the documentation…and they are actually spelled out pretty clearly. The page with the rate and loan details is one of those pages.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Sorry. As the recipient of countless misleading adverts, I hope Chevy Chase gets their butt kicked and an example made of them. You and I are finance professionals; of course we read and comprehend the fine print. My beef is with the marketing of these stinky, sharky loans.
Come on…
What does it take??? How do people that aren’t financial professionals get mortgages then?
If after 12 years of the ‘public school’ system you can’t READ the paperwork you are signing, then I guess you should complain to your congressman that the ‘guvment’ failed you.
I’m sorry, I am just 10000% completely FED UP with the “I’m a VICTIM” act that is used tirelessly in America today. If they had made money on their house, would they be ‘victims’ of not paying enough?
If you don’t understand something you are about to sign…THEN CLARIFY IT, and don’t sign it until you do.
But wait….’everybody’ was buying houses and making money!!
Again, I know there are a lot of sleazy people out there….but guess what, if you do your own research and READ for yourself, YOU will see through MOST of the crap.
These people that won’t spend 5 minutes to read their loan docs will spend an hour reading US Weekly cover to cover…it is called priorities.
Sorry, not feeling too sympathetic today….
SoCalMtgGuy
http://www.housingbubblecasualty.com
I have to agree
Chevy Chase should get their … “hat”… handed to them. These loans are misconstrued. Yes, people should read. But loans with higher downstream payments have been shown again and again to create financial havoc.
And yet, this is just beginning… There is no way with as many defaults coming down the line that brokers, banks, or realtors ™ won’t get sued. Cest la vie. Welcome to the new era.
We’ll see a return to down payments and see sub-prime return back to their niche category. Just look at the MBS bond market if you doubt me.
Got popcorn?
Neil
If the rate was “fixed” for 5 years, why has it reset to 8.3% recently? (As far as I know it isn’t 2009 yet)
I could see siding with the mortgage company if the couple were claiming they didn’t know the mortgage would adjust after 5 years, but something seems wrong with the advertising and delivery of this loan.
A few months ago I was going to take out a home equity loan with a large national bank. My place is paid off and it needs work–60 year old kitchen and bath. I figured I do it now since rates are still fairly low and it’s getting easier to get contractors to do work these days.
When I got a copy of the paper work in the mail I noticed that they had my address wrong. They had merged my address with an old box number I had when I used to get my mail sent somewhere else. I called and asked them to fix it. Spent almost an hour with somebody on the phone. She keeps insisting that I’m in a condo. I explain the error until I’m blue in the face. I was assured it was corrected.
When I showed up to close on the loan all the paperwork has the unit number on my address. When it became clear that the woman doing the closing had no clue and kept insisting I sign the papers, I walked and told her to stuff them. She couldn’t comprehend that I wouldn’t sign the paperwork with this error on it. I then went and pulled out all the money I had in my accounts with them.
Still amazes me that nobody came out to my place to appraise it or even verified that my house is not condo.
If the rate was “fixed” for 5 years, why has it reset to 8.3% recently?
In the article itself, it said that the phrase “5 year fixed…” that was written should have said “5 years fixed pay…” but that the word “pay” it was sometimes (conveniently?) cut off during photocopying!
I usually side with the brokers on these things, but this sounds like some sloppiness and possible intentional deception on the part of the broker. Still, weren’t the terms written clearly in other places in the document, even if not on the front page? I know they’re clear in the ARM mortgages that I’ve seen. Then again, maybe I know what I’m looking for when I wade through 15 pages of print.
I’m also wondering about why a “fixed for five years” loan would be resetting now - though, honestly, if it were me I would have taken that “1.95% for the first five years” with a shaker of salt to begin with. What sent me down the bubble blog rabbit hole in the first place was seeing all those broker ads touting loans that sounded too good to be true. We all know what they say about things that sound too good to be true, so you’d think someone with an ounce of common sense would at least read the loan docs before signing on the bottom line.
It is amazing that people are so financially illiterate.
How can a reasonably intelligent adult, able to see that various types of interest rates are at least 5-6% in any newspaper or financial web site, then imagine a 2% loan exists that doesn’t extract the additional 3-4 (or more) %
in one way, shape or form?
Do these “adults” imagine someone out there is handing out (ignorantly) cheap money? Do they imagine they are SMARTER than other people when they see an “unbelievable” deal yet do not look at it very, very closely?
Has any adult EVER examined a relative financial “deal” that wasn’t hosing you in the fine print one way or another?
“If it sounds to good to be true” should be a phrase stamped on kids each year, monthly, in high school (if not tatooed on their signing hand).
People want the goverment to stop fraud. We’ll it can’t, it can only CLEAN UP fraud and abusive financial crap like this after the fact. What government (and parents) can do is pound into people that phrase and publish example after example of how people STILL get hosed.
What the government should do is clearly state that if you get defrauded you are totally out of luck. You’ll NEVER get your money back. Yeah, they’ll still prosecute the crime but there’s NEVER any hope of restitution.
Deal with it. At least then no one would ever imagine someone out there “cares” or will “protect” them from their greed, ignorance or laziness.
How can a reasonably intelligent adult, able to see that various types of interest rates are at least 5-6% in any newspaper or financial web site, then imagine a 2% loan
Indeed. Back in 2005, I was approached by a mortgage broker (husband of a friend) at a party about this. He was insistent that I needed to refinance at 1.95%, and he had just the loan for me. Fixed for three years at that rate, or something like that. Too good to be true.
As the conversation progressed, I realised that he didn’t know half the stuff about the mortgage marke that I knew, and I’m NOT in the business. What’s the index when it floats? And the margin above that index? “Uh, it really doesn’t matter, you can refinance.” Right out of evil-mortgage-broker practice sessions!
That made me (rightfully) suspect that he didn’t know what was going in, either that or he was purposely trying to mislead me. “Yes, it fixed at 1.95% for that long. Really. No points. No prepayment. No strings.”
In the end, I gave him my business card which he put in his wallet, and I told him that if he is indeed selling such a thing, then please just get a sample loan document in my hands first thing on Monday, and THEN we can continue discussions. Funny thing, I never heard from him again.
“If after 12 years of the ‘public school’ system you can’t READ the paperwork you are signing, then I guess you should complain to your congressman that the ‘guvment’ failed you.
I’m sorry, I am just 10000% completely FED UP with the “I’m a VICTIM” act that is used tirelessly in America today. If they had made money on their house, would they be ‘victims’ of not paying enough?”
So then…… a person who goes through 12 years of the public education system is a VICTIM if he/she can’t read and should complain to the government? Why can’t people take personal responsibility…….?
Could be the loan reset because the neg-am had raised the principal or the value of the property dropped below a certain threshhold bringing it over 100% or whatever threshold they used.
Neil, do I need to bring my own snack or something?! I’m in braces and can’t have popcorn!
Stephanie
“How can a reasonably intelligent adult, able to see that various types of interest rates are at least 5-6% in any newspaper or financial web site, then imagine a 2% loan exists that doesn’t extract the additional 3-4 (or more) %
in one way, shape or form?”
Maybe people thought the mortgage was a loss leader or the bank would make it up on volume.
‘Do these “adults” imagine someone out there is handing out (ignorantly) cheap money? Do they imagine they are SMARTER than other people when they see an “unbelievable” deal yet do not look at it very, very closely?’
Yep.
Step 1: Laugh at all the bitter renters for passing up such a great deal.
Step 2: Run crying to the government for bitter renters to bail them out after said deal goes south.
SoCalMtgGuy
Who will replace the existing Mortgage? It was paid off when the new loan closed….how can they get back the ‘old loan’ and its terms?
They can’t get back the “old loan.” It is gone, and that lender was not a party to the lawsuit (as it apparently did nothing wrong), so the court has no jurisdiction to order it to give the borrower the old loan back. The borrower will need to find a new loan. See my comment below for a little fuller explanation.
“There are a FEW pages that are important in ALL of the documentation…and they are actually spelled out pretty clearly. The page with the rate and loan details is one of those pages.”
It would be useful if the Wash Post had made any commentary on this…If there was a page of disclosure, and it did not match the rates the couple expected, why did they sign? Were they physically incapable of speaking, or of getting up from their chairs and leaving the room? Legally disabled–vision impaired, or mentally challenged? I too have no sympathy–and this was not a primary residence and they were not first time buyers. It was an investment bet–for these lazy, would be moguls. When you have to pick up the clean-up costs for these schmucks and 7k others, to start, how long will your sympathy last?
I agree. I think the best we can hope for as taxpayers is that if the courts side with the plaintiffs, then the shareholders of Chase take the ass-pounding.
Of course that raises the question of what happens when the defendants in the sure to be many upcoming lawsuits declare, or have declared, bankruptcy?
I walked from a refi loan at closing that had prepays, impounds and fees that I was assured would not be there.
First time homebuyer and maybe I cut you some slack, but as an “investor” that doesn’t scrutinize docs you are a f*tard, and barring fraud, get no sympathy from me.
“It would be useful if the Wash Post had made any commentary on this…”
Yes, it would be, but then the “victims” would look like the dip $hits they probably are, and the sympathy factor would not come into plany, thereby making the story un-newsworthy. And the papers wonder why their subscribership continues downward. Only good use for 99% of the papers is to start fires.
In empty flipper shacks?
SoCalMtgGuy: Love your blog. I have never bought a house (but I will when prices make sense again). Is it customary for the bank to give the borrower the loan documents prior to closing so that the borrower has the time to read through them? If so, how long before closing do they usually get the loan docs? Any chance that the loan docs that arrive at the escrow office are different from those that the borrower reviewed?
Any insight on this is appreciated, as I will be looking to buy (probably 2008 or 2009), and I will read my loan docs, but I’m just trying to figure out the process and maybe know what types of traps might be out there. TIA
The only docs that really count are the ones presented and signed at closing. Just read them before you sign. Don’t let anyone pressure you. If you’re a slow reader, tough, they can just sit there and wait. If they cop an attitude, cop one back. There is no reason for you to feel “pressured”. If you were supposed to get a 7%, it will say that. If you were supposed to have a 30 year note, it will say that. It really is not that hard, which is why so many here have no sympathy for those who claim “I didn’t know”.
Also, remember that these docs are prepared by people, and people do occaisionaly make mistakes. I was once presented with docs where the rate was wrong. Clearly a typo. “Sorry, can’t sign these, I’ll come back when you have them correct.”
Funny that there were no typos except in the thing that matters the most, the rate.
From what I’ve read, that’s exactly where most typos occur in closing documents. Life’s funny that way, isn’t it……
I think it really was a typo because the dollar amount of the monthly payment was correct (used the correct rate), but the numeric % in the disclosure was wrong, so there was a major inconsistency in the docs. If the error in the % rate had been in my favor I might have been tempted to sign and them call them on it. I might not have gotten the better rate, but it sure would have been fun to watch!
I don’t know if other states do this but in MA you have something like a 3 day “Right of Recission” which means you can return the loan if you choose.
I did this once (can’t remember why). No biggie, just mailed the stuff back return reciept. Got another loan (refinance). Gives you some time to look very closely at the terms and conditions.
On a sale, however, you’d better be prepared going into the closing with the attitude that you’ll walk if everything doesn’t conform with your understanding of the loan.
Yes, 3-day recision on refinancing….NOT on purchases.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Walking away from a house purchase because you do not like the mortgage is not necessarily an option. While house sales are usually based on a mortgage contingency, that contingency will have run out by close date. The buyer is responsible to close and if they do not will likely lose their deposit and can be held to specific performance. It is the buyer’s obligation to ensure a trustworthy lender.
The real estate industry and the mortgage industry use statutes in the law to win lawsuits against their clients, based on the law.. This judge had all the documents in front of him, and in a court of law, and used his judicial powers to rule for the homeowners. I know the media likes to beat up on judges, but we still have a judicial system that works extremely well. if the judge says there was deceit, I will bet There Was Deceit on the part of the bank. Sorry, mortgage guy, but your industry is now in the “used car salesmen” category….and they deserve it.
I know the industry is terrible…why do you think I exited the industry when I saw what was REALLY going on. That is why I have done my blog for almost a year and a half now.
I’m not saying the mortgage companies are perfect by any means…but no matter what ’sleazy’ marketing is used on a billboard/ad/postcard, a little personal responsiblity goes a long way to being tripped up.
I don’t know the specifics of this case…but if it is like most that I have heard, and the countless millions you will here the next 3 years, then USUALLY a little due diligence would have prevented the whole thing.
If the banks are falsifying docs…then that IS a problem…but not knowing you had an ARM isn’t really the banks fault.
SoCalMtgGuy
http://www.housingbubblecasualty.com
….a little personal responsiblity goes a long way to AVOID being tripped up.
SoCalMtgGuy
http://www.housingbubblecasualty.com
How about commenting on this little phrase from the article:
“Chevy Chase’s disclosures to consumers showed a “lack of forthrightness” and “would both confuse and mislead an ordinary consumer about the cost of the loan,”
Just putting it in the documents is not enough. It needs to be clear.
Amen, Backstage.
I think loan docs are intentionally misleading, and the loan process leaves a lot of room for mtg originators to change things around after the borrower agrees to certain terms.
I’ve seen it myself, on more than a few occasions. Had one friend where the lender flat-out lied to her. I was trying to talk her out of a neg-am, and even called the lender for her to show her that the 1.5% was not a full I/O pmt…the LO started yelling and screaming, accused me of not knowing what I was talking about, and who was my friend going to believe, some stupid neighbor or a “professional”. Obviously, she found out I was right a year or so later (and over $15,000 down in fees, etc. to refi out). Expensive lesson.
Happened to me, as well, on a purchase loan (we ended up backing out of the deal). Got paperwork that had NO resemblance to what we had initially agreed upon. NONE. I called them up, and the LO said I should sign the docs and send them in. He’d change them afterward. Naturally, I laughed at him.
I’ve heard of these things happening on waaay more than a few occasions the past five years.
Yeah, I don’t want the FBs bailed out (IOW, they should be foreclosed on), but really think the lenders and originators need to do some hard jail time, as well as lose all their personal assets to help pay the final lenders (esp. insurance companies and pension funds).
Fruad is fraud. The lenders are even more guilty than the borrowers, and the lenders do it for a living and know what is standard op for the loans.
Hope Chevy Chase & the others go down in flames.
Again…very seldom will you deal with a LENDER…you were dealing with a broker. The only way you will be dealing with the lender, is if you walk into a ‘branch’ office. There you will be dealing directly with the lender in a ‘retail’ situation.
In your situation, you were probably dealing with the broker or loan officer. They are NOT employed by any lender.
So a lot of the complaints people have should be more directed towards the broker…and not the lender.
SoCalMtgGuy
http://www.housingbubblecasualty.com
You are correct, So Cal. In my case, I was dealing with a broker. However, in my neighbor’s case, she was supposedly dealing with a direct lender (that’s how she said it was explained to her — I just called the number she gave me, but don’t know for sure).
Yes, a direct lender would be much less likely to encourage fraud or get a borrower into a loan without any indication the borrower could repay. Even then, seems many direct lenders are also trying to sell their trash, so not entirely sure how much they try to avoid unqualified buyers (determined by whether or not the borrower can pay the mortgage back based on the worst-case reset AND the borrower’s current income/debt levels).
I agree with you for the most part but there might be at least a few of those that had some parts added/altered after the fact. If those people are saying they signed for one thing but recieved another they have a valid case. Imagine if the broker filled it in with pencil and then erased it afterwards…lol
“Imagine if the broker filled it in with pencil and then erased it afterwards…lol”
With respect, I’m trying to imagine ever signing anything with the blanks filled in pencil…seriously, I don’t think you could slide that past a 6th grader selling chances for a school prize drawing.
I have mixed feelings about this.
My logical brain agrees completely with SoCal. Don’t sign anything you don’t understand. How can you understand it if you don’t read it?
My vengeful side wants the lenders punished big time. Lenders KNOW that borrowers don’t read or understand the fine print, regardless of what they SHOULD do. They mislead with ads, then hold the papers ’til closing, then rush you through the process (you never saw this, did you, So Cal?). Taking advantage of human nature in not illegal. It can be unethical, and probably was here.
My home buying side wants to see the lenders punished, too. The have allowed the ‘monthly-payment shopper’ to push the price of houses out of reach for reasonable, rational buyers. Without the juice and the hype, the buyers would not have run up these prices.
So, by a 2 to 1 vote, I want to see the lenders screwed and have to eat the crap the spewed that caused this mess. Now if we could just get a spoonful or two to the Fed…..
Just to clarify. Everyone in this process should get screwed, because they have caused such a big problem for so many people.
Borrowers will get royally screwed by default, because they at the bottom of the food chain and are pretty much clueless.
Loan origniators should get screwed, too. They are a big part of this.
The Fed was the ultimate cause of this. But AG will be sipping pina coladas on the beach and reading about it in the newspaper. No pain there, except a little tarnish on the old reputation.
You are right that I was never physically present at the doc table. BUT I have heard the countless stories from BOTH sides.
Lets just suffice it to say that the world can be a ‘dangerous’ place, and that the best person to look out for you, is YOU. Why people blindly follow the blabber that comes out of some knuckle-heads mouth with NO ‘fact check’ on what was spewed is beyond me.
Sorry, but research has NEVER been easier. GOOGLE will help you research pretty much any topic out there.
There are thieves and scammers out there…and NO amount of government legislation is going to change that. If there weren’t so many people that could be scammed so easily, then they wouldn’t do it.
Look out for yourself and your family…it is that simple. Don’t understand something…look it up…or find somebody trustworthy that can answer your question to your satisfaction.
Don’t let some ‘hungry for their commission’ chumps who you will likely never see again in your life force you to do anything.
It ain’t always easy…but it WILL save you from being in bad situations.
SoCalMtgGuy
http://www.housingbubblecasualty.com
“Everyone in this process should get screwed, because they have caused such a big problem for so many people.”
Perfectly stated! And as for this comment:
‘Recently originated loans are falling into default much more quickly than lenders expected,’ Gumbinger said.
Sooo, what you’re saying, Gumbinger (nice name), is that the lenders knew full well that these were crap loans that had no chance in hell at being paid off. If you do business with monkeys then you can pretty much expect to have crap flung at you. Too bad for you.
Lets just suffice it to say that the world can be a ‘dangerous’ place
Damn straight. I, for one, will look out for my interests and those of my family. When I go to the closing table next time, I will be ready. Many thinks to the folks on this blog, Ben especially.
Socalmtgguy said above:
Lets just suffice it to say that the world can be a ‘dangerous’ place, and that the best person to look out for you, is YOU. Why people blindly follow the blabber that comes out of some knuckle-heads mouth with NO ‘fact check’ on what was spewed is beyond me.
Sorry, but research has NEVER been easier. GOOGLE will help you research pretty much any topic out there.
People “blindly” follow the crooks’ advice because THEY ARE PAYING FOR IT. The crooks in REIC - realtwh*res, brokewh*res and everybody else eats because the borrowers pay for ALL OF THEM. Along with the paycheck comes the DUTY to do an ethical job and if an industry can’t police its own “professionals” then that industry deserves to die.
Please don’t suggest Google or other places borrowers should research. THEY ARE PAYING for it. The industry and “professionals” should either do an ethical job or not bother.
I for one am glad to see these unscrupulous lenders and middlemen being hung out to dry. Even if it means I lose a few bucks in my 401(k) because some funds indirectly hold some of these lenders’ stock, I don’t care.
LET ‘EM BURN.
PDX,
Very well said! At some point, we have to be able to trust those who claim to be our representatives (realtors and, to some extent mortgage brokers who claim to be getting the borrower “the best deal”). Those parasites take tens of thousands of dollars from the buyers’ pockets. If they don’t have a fiduciary responsibility to the buyer/borrower, then their positions should be eliminated, as they are clearly just sucking resources from the system, without putting anything back.
I vote for full transparency and a lack of middlemen.
I agree with you. Chevy Chase is as compliant as it could be. I am sure the borrower got in over their head and wants to play victim.
The court disagrees:
“Chevy Chase’s disclosures to consumers showed a “lack of forthrightness” and “would both confuse and mislead an ordinary consumer about the cost of the loan.”
From the article:
Chevy Chase argued that there were many other places in the loan documents that signaled the loan was not a traditional fixed-rate product, noting that one section had a bold-faced title: ADJUSTABLE RATE NOTE and that another section was titled “Calculation of interest rate changes.”
In addition, the same federal disclosure form cited by Bryan and Susan Andrews included another box, labeled ANNUAL PERCENTAGE RATE, which noted that the interest rate was 4.047 percent, and said below that the loan had variable-rate features.
The Andrewses should have reviewed the documents more thoroughly, according to McCormick and other bank lawyers. The couple showed “consistent and stunning lack of interest in reading the documents they signed,” Chevy Chase lawyers said. The bank also quoted Susan Andrews as saying in a deposition that she trusted the broker and did not think she needed to “read every tiny word.”
If you read the article the judge herself sounds financially illiterate. My prediction: Chevy Chase wins on appeal.
And also from the article:
According to Chevy Chase’s McCormick, the WS Cashflow reference and the 1.95 percent notation were loan identifiers used by Chevy Chase “for internal purposes,” to identify the kind of loan and that the full phrase that was supposed to be on the document was “WS Cashflow 5-year fixed pay,” but that the last word sometimes got lopped off when the documents were being photocopied.
Let’s sue Xerox, too
Prediction: Settlement in favor of Andrewses, terms undisclosed, no fault by Chevy Chase.
Andrewses end up with a 6.5% ARM (and still don’t read the documents because their new loan guy is so nice).
And let’s just be straight, here, Phillygal, Chevy Chase’s arguments did not sway the judge. The only thing that matters now is the ruling. Perhaps they can find better arguments to make during the appeal.
Backstage -
My response to DC_Too :
indicates that I think the “lopped off critical word argument” is so much BS.
I’m not a lawyer so I hope one of the board’s legal minds will weigh in. Wouldn’t the burden of proof be on the plaintiff to demonstrate that Chevy Chase intentionally left off the critical word, with malice aforethought and all that other legalese?
I’m sticking with my prediction that Chevy Chase wins on appeal.
(Hey if the Andrews family et al. win, I’ll just have to add to my due diligence: Make sure all loan docs are originals, not photocopies. And get them transmitted as softcopies, too. )
Phillygal: the burden of proof is on the plaintiff, but the plaintiff would not have to prove intentional misconduct or malice aforethought. This case revolves around the terms of the documents themselves. A general rule of interpretation (I’m not sure which state’s laws were applicable in this case, so I’m not sure if the state has this particular rule, although most do) states that in the case of ambiguity, the court will rule against the draftsman (in this case, the bank, since they drafted the language). This rule can be nullified (and I’d be surprised if it wasn’t) by including a clause in the contract that says that this rule of interpretation does not apply. That being said, the bank can’t argue for words that are not in the contract (e.g., because the copy machine cut them off). These documents contain “integration clauses” which preclude the parties from bringing in extraneous evidence. So, if a word is not there, especially when one party has no way of knowing the word was unintentionally omitted, then a court has to interpret the document with only those words that actually appear.
What I haven’t quite figured out yet, as the article was a little unclear, is whether this was a final ruling on this case or if it was only related to whether a class action could proceed, or somehow both (though it would seem strange to do both).
To all those who say “It’s in the documents,” I’m going to post this from the article:
Chevy Chase had violated the 1968 Truth in Lending Act, which requires lenders to clearly explain loan terms to borrowers. Chevy Chase’s disclosures to consumers showed a “lack of forthrightness” and “would both confuse and mislead an ordinary consumer about the cost of the loan,” the judge wrote.
Please take that into account when commenting.
The terms seemed clearly explained in the docs (as per phillygal’s post above).
Almost sounds like the judge overstepped her bounds a little. But, having not read the docs myself, and having not been present for any of the trial, that’s 110% speculation by me.
I’m with you SoCalMtgGuy. These people failed to practice “due diligence”. Before I puchased my first home in Houston, I paid $35 to take a 3 hr. class on “How to buy a House”. I did research on the internet on homebuying in general and sought information for the VA hoops I had to jump through. And as a USAA member, I was sent a folder full homebuying info. I told myself if I still did not understand the process by the time I finished researching that I would find an attorney who specializes in realestate. A couple of hundred dollars for legal advice is nothing when purchasing a home.
Been a USAA member myself for over 10 years. Great company.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Agreed about the lawyer. Use them it you don’t feel at ease reviewing the documents.
Agree about USAA, too.
SoCal (or nnv), do lenders usually let you get the papers ahead of time? I will request a closing date 72 hours after receipt of the final closing docs so I (or my laywer) can review them and we can spend a short time at the closing table.
I will start using a lawyer now. I got burned during the early 90 downturn and I made it a point not to purchase anything above two times my income for the next home purchase (present home).
But I wished I would had a lawyer review the purchase agreement and attended a class like you to get a better handle on what to do at the signing table.
I will request a closing date 72 hours after receipt of the final closing docs so I (or my laywer) can review them and we can spend a short time at the closing table.
———————–
Spot on, as usual, Backstage. In every case I know, the docs came at the VERY LAST MINUTE, and the borrowers were rushed through the signing. It’s easy to tell someone to read the docs thoroughly when the LO/notary is there, but they DO cop an attitude. Not everyone is capable of buffing off a person who insists, “you don’t have to read everything, these are just standards documents. You’ll have plenty of time to read them later.” Heard that MYSELF, so know it’s true.
My thanks to this blog, as well, because I’m much more likely to use an atty from now on. I have a feeling mortgage originators will come to dislike this as more people start doing it.
They have, without a doubt, made tons of money by preying on people’s lack of knowledge.
I believe this is for the best. This will force the lender to be more dilignet and not give loans willy nilly.
What lenders need to do is make a video tape with the borrowers permission stating worst thing that could happen to them.
the one w money
class action scks china and others won’t be dumb enough to offer this type of “relief”
Sleazy bankers. Yes, you should read; disclaimers were in there, but on the other hand, Chevy Chase did everything they could to legally mislead. I hope they lose.
The bank blamed it on the MB and on the borrower. Oldest thing in the book; ‘you sued the wrong guy.’
Right, the broker was acting as an agent of the bank. The bank might want to sue the broker. Oh, he’s bankrupt? Too bad.
How does this effect their taxes if they’ve been taking the mortgage deduction?
Sorry, but the terms are disclosed. They might not have held their hand and walked them through all the details, but trust me, the details were in the paperwork they signed!
I’m not saying they couldn’t do a better job disclosing things…but people need TO TAKE SOME DARN PERSONAL RESPONSIBILITY FOR THEIR ACTIONS!!! If you are going to take out a ‘30 year’ mortgage, it is going to require about 62,400 hours of ‘work’ to pay that off (40 hours week, 52 weeks yr, 30 years). So how come people will not spend even 2-3 hours doing some research and taking an extra 30 minutes at the ‘doc table’ to READ some of the documents for themselves.
——-“But after the deal closed, in 2004, the couple realized to their horror that the $191,000 loan they got from Bethesda-based Chevy Chase Bank was an adjustable-rate mortgage. They went to court, saying they were deceived. A federal judge has sided with the couple and is allowing a class-action suit involving up to 7,000 borrowers against Chevy Chase.”——–
They were deceived??? They signed the 1-page document that says EXACTLY what the loan is. There are a FEW pages that are important in ALL of the documentation…and they are actually spelled out pretty clearly. The page with the rate and loan details is one of those pages.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Just saying…”OK, they are in the documents, borrower owes” is not enough. If the docs are not clear or are misleading, the lender is at fault. That’s the law.
The court disagrees with your intepretation:
“Chevy Chase’s disclosures to consumers showed a “lack of forthrightness” and “would both confuse and mislead an ordinary consumer about the cost of the loan.”
SoCal, from your own blog:
“We have no interest in putting people in homes that they can’t afford” — Some Executive VP
I think that deserves a classic Top Gun “BULLSH!T”
You seem to think that lenders are making loans that aren’t in the best interest of consumers and borrowers. The question, then, is where do we draw the line between personal responsibility and corporate responsibility? Once you sign the papers, does that make a misleading loan OK, even if the disclosure was misleading, confusing and lacking forthrightness?
Would a bank create papers that might mislead and confuse to put people in houses or loans they could not afford? You seen to think so.
Where does the bullshit end. Where does lender responsibility stop? What can consumers resonably be expected to understand?
Personal responsibility is key to making these decisions. But if, as the judge found, that the lender was deliberately trying to deceive or confuse the borrower, the lender must be held responsible.
I am not saying the lenders aren’t guilty of misleading tactics…but they are not breaking any laws. All I can do is look out for myself, and open the eyes of others to do the same.
I also think that people get the lender and the broker confused or think they are one and the same. I was a wholesale rep. I NEVER met/spoke with/ had any interaction with the borrower. Myself and my processor were the conduit to the mortgage broker making the loan.
I heard so many deals go down over the phone…it amazed me how little info people would request, or questions they would ask. Honestly, I think people thought the ‘easy money’ train would go on forever.
The lender responsiblity will start again when they must hold their own paper. Since they are not holding the risk, they will make loans that are legal (however financially stupid) as long as they can make money.
It is against the law to murder people, yet it doesn’t stop anything. You can make all this stuff illegal, but people will still do it. The best way to stop this stuff is for INDIVIDUALS to look out for themselves.
I know it is a pipe dream…but if people would just take care of themselves, then guvment wouldn’t have to do it.
If more people laughed at the 22% interest credit card offers, they would quit doing it. BUT THEY DON’T!
The problem is that irresponsible people are becoming the norm, not the exception. I’m tired of hearing their ‘victimization’ stories. It is like crying wolf too many times. When there is a REAL problem…I don’t come rushing.
Anyway…that is a long enough post that went in too many directions.
SoCalMtgGuy
http://www.housingbubblecasualty.com
I’m not saying they couldn’t do a better job disclosing things…but people need TO TAKE SOME DARN PERSONAL RESPONSIBILITY FOR THEIR ACTIONS!!! If you are going to take out a ‘30 year’ mortgage, it is going to require about 62,400 hours of ‘work’ to pay that off (40 hours week, 52 weeks yr, 30 years). So how come people will not spend even 2-3 hours doing some research and taking an extra 30 minutes at the ‘doc table’ to READ some of the documents for themselves.
They were deceived??? They signed the 1-page document that says EXACTLY what the loan is. There are a FEW pages that are important in ALL of the documentation…and they are actually spelled out pretty clearly. The page with the rate and loan details is one of those pages.
SoCalMtgGuy
http://www.housingbubblecasualty.com
***for some reason my posts aren’t ‘posting’ so if a few posts pop up at once…that is why.
SoCalMtgGuy …I didn’t see your post but as you can see below by my post I agree with your take on this case .I would like to see the disclosures that were given to these borrowers .
No blame should be passed around. Borrowers get foreclosed on and should be foreclosed on if they were not capable of understanding the terms of the loan. Banks and/or investors lose money because of reckless underwriting guidelines. Let’s stop blaming people and graciously accept the face that all parties will get what they deserve.
Well, your probably correct that they should have known but the judge found sufficient confusion in the paperwork to allow the case to proceed. Looks like it’ll hang on the banks internal coding which had a photo copy accident, according to the bank’s lawyer. Their lawyer should have foreseen that using internal coding of words similar to the terms could lead to confusion. People have heard of fixed rate, fixed pay, not so much. Or was he a asleep the day they taught that a contract consists of all markings on the page?
Probably won’t go to far but if it makes it to a jury, the bank will be in for a whipping. By that time the RE failure of 2007 will be well established history and the people will want a pound of flesh from the evil bankers. But even if it is tossed aside, the banks are paying attention and might rightfully stop pushing the “exotic” loans. That’ll help push down prices as the RE price run up is dependent those “low payments” that got everyone into this mess.
Between the lawsuits, the new interest by regulators, the coming Congressional meddling and increasing defaults, I feel a credit crunch coming on.
It’ll probably be reversed on appeal. Maybe this judge is up for reelection. I can’t see it being upheld if all the proper info was presented on the docs.
I don’t think the banks will need to consciously “stop pushing the exotic loans”. I think the market will take care of it. More and more of the institutions that sold these loans are getting stuck with them when the loan originators can’t afford the buybacks. Investor appetite for these MBS will weaken, and lenders won’t be pushing them as much because they won’t be able to sell them.
I don’t get the photocopy aspect of the case . When you sign loan documents you are reviewing the original loan documents aren’t you .
I tend to side with business people and think that people should educate and conduct themselves with circumspection. After reading the article in the Post, I can offer the opinion that this isn’t such an easy case and based on the law I am not even convinced that the lender deserves to win. Financial products have become such a minefield in recent years that I find it difficult to believe that the lenders and those who buy receivables haven’t taken care to insure that problems like this one don’t come up. It appears to me that the mortgage broker deliberately deceived the borrower–after all who on earth could possibly take a loan with an interest rate fixed for one month? I’m wondering how wide spread this problem is.
MrtGuy asks people to take responsibility for their actions, which they should. But, if they did, they wouldn’t be borrowing at sub-prime lenders.
Something tells me folks commenting on this article have not read the article. Yes, personal responsibility is a factor. However, if you read the article, you will see the bank’s explanation, quoted by its General Counsel. Specifically, the Truth In Lending Statement showed the interest rate followed by the words ” …five year fixed.” The banks says it should have said “…five year fixed pay…” meaning the PAYMENT was fixed, but not the rate or the interest accruing to the back of the loan. The bank further explained that the word “pay” was “inadvertantly” cut off by a copying machine. Personally, I have never heard such bullshit in my life from someone paid $400 per hour.
Folks, we are all going to have to come to terms and balance personal responsibilty against our broader, society-wide best interests. These banks are lending depositor’s money, which we are all on the hook for. Knowingly pumping out loans with very little chance of ever being paid back ultimately hurts everyone.
I am not a financial professional but have bought and sold real estate in the past. At every closing I’ve ever been to, I have had to deal with surly, impatient, intimidating personalities whose purpose and behaviour is designed to discourage a close look at any of the paperwork. I have had to explode and verbally rip the head off title officers to shut them up long enough for me to read the documents. Not everyone is capable of that.
It’s too bad, but the whole drill, from start to finish, is designed to screw the buyer. Blaming the victim doesn’t, in my book, cut it, at least not all the time.
Done the same thing and once threatened to walk if a lawyer didn’t indemnify me for multiple gaps in their “title search”.
Anybody can do it DC, but you’re right, too many are intimidated. In my case someone smugly said; “so you are willing to let this property go?”. I said; “Yep”.
The room went awfully quite after that and the lawyer left, and shortly returned with my guarantee. You see, he knew he faced a suit from me for a variety of costs I’d suffer and he knew he’d lose.
For our last refi (into a 5.5% 30 year fixed Jumbo/Whooper my hopefully last mortgage), we requested that all the paperwork be sent to us to read and sign, We then had them properly notarized and returned by the requested date. I waited as the escrow officer reviewed that all had been signed correctly (ten minutes) and I left.
“The bank further explained that the word “pay” was “inadvertantly” cut off by a copying machine. Personally, I have never heard such bullshit in my life from someone paid $400 per hour.”
UFB
I am not a financial professional but have bought and sold real estate in the past. At every closing I’ve ever been to, I have had to deal with surly, impatient, intimidating personalities whose purpose and behaviour is designed to discourage a close look at any of the paperwork. I have had to explode and verbally rip the head off title officers to shut them up long enough for me to read the documents. Not everyone is capable of that.
I don’t get why the general public seems to be so intimidated by the white collar goons.
I too have held up a closing or two in order to carefully examine documents. My attorney now knows to just sit down and STFU when I decide to take my time. (He’s a good guy and helped me a lot through the years, but he’s always got some athletic event to attend.)
A question for the board: Can closing documents be ordered (a half day or so) in advance for the express purpose of prior examination? (this would not preclude another once-over at the closing table.)
Its all so disgusting. How can people be so stupid?
You didn’t look at fee’s, amoratization, rate caps, adjustment times, ballon payment.
This damn judge just set the bar for stupid a little bit lower. Its just basic simple math… you got a lower initial payment and higher future payment.
The best part was “what what what.. its an ARM? you tricked us!”
I don’t know who to be more disgusted with…
That’s the problem, and it isn’t going to change. It doesn’t do any good to say people “should” read the paperwork or the bank “should” do more to warn the customers about the bad terms of the loan. They won’t. You have to have a reasonable level of regulation in consumer lending if you want to have financial stability.
Well, if people are not going to do the work to ‘protect’ themselves, then I have NO sympathy for them, and good for the ’sleazy’ broker that made money off of them.
That is the problem with this whole country….NOBODY wants to take ANY sort of personal responsibility.
If you don’t care enough about yourself, why should anybody else? More regulation usually means higher costs and unintended consequences.
Let the MARKET sort this out, with no government involvement.
I’m sorry, I am all out of compassion for stupid/lazy people. They ARE becoming the masses.
SoCalMtgGuy
http://www.housingbubblecasualty.com
They always were the masses and always will be.
Well I’m thinking too bad for them. That is like going in to a casino and being shocked that you lost money.
Duh.
I have been asking for most of my adult years how dumb can your average adult be. The older I get, (only 44) the more I see that for the most part, people ARE dumb.
Not trying to insult anyone, that’s just the way it is. The people ruling this country,and the rest of the world for that matter,count on the population being dumb. It’s all about control of the masses. The first time I made a home purchase, I spent literally weeks reading about the terms and process of buying a home. In this age with the access to information that we have, there is no excuse for not educating yourself. But look what has happened. Bunkferd is right on the money when he/she states that a smart person would never have considered this type of loan in the first place. I still recall the loan officer commenting on the fact that I read every single document from top to bottom before signing. He didn’t rush me, I think he was smart enough to figure out that pressure tactics would not work.
And I’m a petite woman of color, who was single at the time. Yes, there are still plenty of stereotypes those trying to take advantage of you take into consideration. Only sheeple allow the wool to be pulled over their eyes!! heh,heh,heh…………..
Your posts are delayed because of your link to your blog. They have to get out of moderation jail. The goal is to prevent link spammers from glomming on to popular sites. Maybe if you put the web address as text, not linkified, your posts would appear immediately.
I am famaliar with ‘moderation jail’…but I had never had a problem here before. I though it was my connection or something. Also, one URL will usually not land you there unless it is explicit.
I think it was just a wordpress hangup…same thing happens on my site.
SoCalMtgGuy
I agree that people should be responsible for reading their documents. The problem is that people rely on what their mortgage broker tells them, and this information can be wrong because of deceit or incompetence by the broker. I see this often. I lose business because brokers give “incorrect” quotes or tell people their rate is such, when it is actually their payment that is fixed for some time. Big difference when your rate is accruing at 8.5-9% and your “payment rate” is much lower. I am refinancing people now who have option ARMs who relied on their RE agent who recommended a mortgage broker and have these ARMs with high rates.
Regarding FirstFed, I can tell you that the loans I see with the highest margins, pre-payment penalties and origination fees are from loans brokered to this bank. This is not a scientific statistic, just an informal observation of mine. And many of these people are “A” borrowers who could have gotten a better deal had they shopped around.
The problem is not that the people rely on their mortgage broker, the problem is that the mortgage broker actively deceives them for his own profit and their detriment.
Active, human verbal deception is not counteracted by fine print, nor should it be.
Shortly after I started to annoy my friends with bubbletalk, one of my friends told me about his coworker’s experience. Basically he was buying a house, and the mortgage lender seemed all nice and acted on his side. When he sat down to sign the document that was supposidly what was just discussed, a number caught his eye. I’m not sure what the actual figure or what it was, perhaps an insane pre-payment penalty, or interest rate shift… but my friend’s coworker tore up the document and left… but it supposidly hit him pretty hard as it screwed up the home purchase, screwed up his trust and so forth… People still have the idea that since the lending industry is putting so much money on the table, the brokers are trustworthy and looking out for both parties interest. The un-bubble-educated wouldn’t think that the mortgage broker would be okay if the loan defaulted in a year. Most people probably think the loan default would somehow negatively impact the mortgage broker, which isn’t the case after a few months as I understand it.
There is a simple solution to protect lenders from claims of fraud. All they need is a one page summary of the loan terms, including potential maximum interest rates and payments for each year of the loan and any pre-payment penalties, to be signed before any other documents are presented at closing. Of course, the bad lenders aren’t going to want to do this, because they depend on the buyers not really understanding what they are getting into when they sign the mass of papers at closing.
Speaking of fraud, this link needs to be reposted. Ocrenter posted this link on the last thread, but it needs to be put up again for anyone coming on board. Information like this needs to go “viral” so it can be exposed. Great work ocrenter!
http://bubbletracking.blogspot.com/
nnvmtgbrkr is correct….Boy oh Boy, if this kind of fraud occured in any significant way the market is in big trouble….Everyone should look at the link if you have not done so already….Nice work OC….
I think this stuff we become more evident everday that passes by. This bubble will become the biggest case of fraud and deception in history.
AZdude is right. The last 22 transactions I examined, 15 were blatent fraud. And I have not even begun to look diligently yet.
Is this even fraud? I wondered if only the final transaction would actually be considered fraud. The rest of it might just be the bank not doing any homework.
California has a Truth in Lending Law (Reg.Z ?) that requires this disclosure….
look how well it’s working there !
highest toxic mort rate in the country
truth in lending
The newest oxymoron
The problem that I have with the Courts ruling against the Bank is that this couple took to long to cry foul . . In other words ,I find it hard to believe that the borrowers did not notice the interest that was being added on to their mortgage . You get monthly statements showing you what is being added to your loan balance . Come on ,can anybody believe that this borrower didn’t know that a 1.95 % interest rate would not last for long .
Unless the lender gave these borrowers totally fraudulent diclosures on the loan ,I really wonder about this case and class action lawsuit .
Why is it that when property is going up up up that you never hear FB’s complaining about the loans they got or the terms ?
Now all the speculators and gamblers are going to be screaming foul play because they didn’t get the in the bag 20% appreciation.
Actually, it looks like they cried foul pretty early. They closed the loan sometime in 2004. The article states that they sued about two years ago (which puts their lawsuit in late 04 or early 05 - less than a year after the loan closed). So, I wouldn’t say they waited too long.
As to the merits of the case, well it’s one where I honestly wish I could see both sides lose. Both sides seem to have some culpability - lenders need to spell things out more clearly, and borrowers need to take the time to try to read and understand the paperwork.
wapo is always going to blame the capitalists-everyone else is the victim
There are so many documents that they signed that spell out the terms of the loan.
a Truth in Lending
An amortization schedule
the NOTE
among others
Then to top it off the borrowers had a 3 day right of recission! They could cancel without any penalties within 3 days of closing. This is a BS lawsuit.
Waiting in OC…..I can now see what you mean about the disclosures being ambigious . This case will go to the high court most likely and they will end up ruling on what a reasonable person would of thought .
The part that gets to me is how could the borrowers think that a 1.95 % rate could be fixed for 5 years . The banks would go broke if they made loans like that . Anyway it will be a interesting case / I would also like to know if the bank in bad faith refused to re-write the loans right away causing the borrowers to seek legal remedy .
Sometimes it’s suprising how the High Court rules on cases (if it goes that far ).
The blame game has started. The banks will probably win, they got more lawyers and the GF’s signed the documents.
You have to be a fool not to hire a r/e attorney for a couple of hours to review any r/e deal, regardless of whether you are a buyer or seller. A couple of hundred bucks well spent ahead of time.
No matter who wins, the MBS holders are still the losers - they are going to lose part of their interest payments and principle.
The class action thing puts things on a more level playing field. That’s all this ruling does, opens the way for a class action suit.
“All they need is a one page summary of the loan terms, including potential maximum interest rates and payments for each year of the loan and any pre-payment penalties, to be signed before any other documents are presented at closing.”
That would hurt sales and commissions, though…
If I was on a jury, I would just have to see how clear or unclear those bank disclosures were .Again I think part of this goes back to people not even reading the loan docs. and trusting the loan agents sales hype . It would be good for the banks to have more disclosures also ,especially when your dealing with interest rates that can change during the life of a loan .Also I think borrowers need more time for document/contract reviews because the industry puts the pressure on to sign quick .
If you were the bank, would you want a jury of folks from Cedarburg, WI determning if your legal documents were clear?
Can you say settlement?
Oh, I think I realized what happened here. The judge is out to make a name for herself amoung liberal circles as a friend of the people. So, even though this was a bogus case (perhaps) she decided to stick it to the lender. Draws a lot of attention and though it may be over turned on appeal gives the “issue” some exposure. Plus her buddies (probably fringe liberal democrats) will love her for this… too much of the “I’m a victim of the system” stuff in that group.
Too many people in the U.S. are still unaware of the reason why over the past thirty years or so, our dollar has been buying less and less – dooming much of what used to be the middle class, into poverty.
Since the internet is still neutral turf (unlike TV, newspapers, and radio), the internet is the only means our group (which includes some very prominent politicians, as well as many Chicago-area bankers) has available for getting the following message out to the masses:
It is said that fewer than one in a thousand people are aware of what our true monetary system is. The vast majority of people have been kept in the dark about this by our bought-and-paid-for media, so they still believe that our monetary system is the dollar. The entire world’s (including the U.S.) monetary system is called FRACTIONAL RESERVE BANKING — or FRACTIONAL RESERVE LENDING. The reason it is a difficult concept for people to understand (even the ‘experts’ have yet to make heads or tails of it), is because it was deliberately set up back in the early part of the Twentieth Century by the top one percent on the economic ladder (read: Rothschild, Rockefeller, Warburg, Morgan, Schiff — did I miss anyone?) to swindle and impoverish the masses in order to make themselves rich and powerful beyond belief.
In 1916, just three years after the Federal Reserve System went into operation, President Wilson (among many others) suddenly realized what a virtually uncontrollable power monopoly had been vested in the nation’s new Federal Reserve System. He wrote:
“A great industrial nation is controlled by its system of credit. Our system of credit is concentrated [in the Federal Reserve System]. The growth of the nation, therefore, and all our activities are in the hands of a few men…. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world-no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of small groups of dominant men.” (Quoted in “National Economy and the Banking System,” Senate Documents Co. 3, No. 23, Seventy-sixth Congress, First session, 1939.)
The American Monetary Institute (as I have already said — the group is comprised of many Chicago-area bankers as well as some prominent politicians) will be meeting again this year in Chicago for four days at the end of September. Anyone out there who wishes to be part of this rapidly growing movement toward monetary reform is welcome to attend.
In the meantime, I found a link to a very simple explanation of our nation’s (and world’s) corrupt lending system. It’s a video done by a University of Vermont student. He looks like your average college kid, but he is very intelligent, and has found a creative and simple way to explain a monetary system that even confounds many bankers. Here is that link:
Jake Explains the Fed
Can I wear my tinfoil hat at the convention?
wow … it’s like Lamb Chop teaching me how it all works. Takes me waaaaaay back and I would laugh except the message is so damn depressing!!!
The only problem is that he has it wrong…..
If the bank has $1,000,000 deposited, and it must keep 10% reserves, that does NOT mean it can lend out $10,000,000. Another rule is that the bank must have assets equal to liabilities.
“cash and other reserves” + “loans” = assets
“deposits” + “capital” = liabilities.
So when $1,000,000 is deposited, it is added to “cash and other reserves” and to “deposits”. At that point it can loan out $900,000, moving the money from “cash and other reserves” to the “loans” section of the liabilities, in order to keep to %10 in reserves.
The number one error when people talk about fractional banking is that they think that the bank can lend out “more” than is depositied.
they do loan out more than deposited, how do you think they made money? they only have like 2-3% of the money. the bank only has enough each day for daily withdrawals. that’s why there are bank runs.
if they didn’t, what explains the explosive growth in the money supply?
if they lend out less money than is deposited they still grow the money supply. If bank a has $1000 deposited, then lends out $900, the money supply is now $1900, which is larger than the $1000 deposited.
If banks could lend more(especially the 10x more), here’s what the money supply would look like.
day 1 - 1 million
day 2 - 10 million
day 3 - 100 million
day 4 - 1 billlion
day 5 - 10 billion
… etc
Yes, that’ s more or less exactly what’s happening.
how can a bank lend more than it has? it can borrow but it has to borrow at lower rates than it lends and this becomes a problem sometimes. and it means that another bank has to have the money in order to lend to bank a
ahem ahem BASIL II is coming to town! europ 2007 US 2009 Welcom virtual reserve banking…
I think he meant the bank can create 10 million from the one million deposited through repeated deposits and loans from the initial deposit…
you might want to read this well research article about fractional reserve and why m3 is so out of wack
http://www.itulip.com/forums/showthread.php?t=292
“Due mostly to the slowdown in new home construction, lumber prices have sunk from a peak of about $1,000 per thousand foot board 18 months ago to around $200 per thousand foot board. In addition, prices for oriented strand boards, or OSB, are at a four-year low.”
And so now with more margin to work with, builders can be freed up to drop their prices even further. For all of you who bought into these nice new developments over the last few years, sorry….you’re completely hosed!
Yup…And next is the labor rates given most trades are now non-union…The question is, will labor and material (and land) costs fall as fast a market values…???
Raw materials prices have dropped like a rock, but the prices are still sticky. All they’re doing is giving away a free $50K pool, which costs them about $15K. I want to see real price drops.
I’m not sure what lumber the article is referring to. The Random Lengths Framing Lumber Composite Price was in the neighborhood of $400 18 months ago, and as of Jan ‘07 was a little less than $300.
“Due mostly to the slowdown in new home construction, lumber prices have sunk from a peak of about $1,000 per thousand foot board 18 months ago to around $200 per thousand foot board.”
This is a HUGE drop. Funny thing, it HAS NOT shown up in home pricing, or raw land for that matter. Land owners in the PNW always charge a premium if there is “marketable timber” on the property. Think they have adjusted down because of this decline? The answer is an emphatic NO! I cannot understand why anyone would be buying a house or land right now. Buying is throwing your money away.
I agree with bcj. I’m a purchaser for a tract builder and my numbers don’t reflect that sort of drop either. Maybe 20-25%, certainly not 80%.
Well, now you know you are overpaying. Sounds like you need to renegotiate your purchase prices.
It would seem to be an interesting situation to rescind the mortgage. Couple cancels mortgage A from provider A, aand takes mortgage B with provider B. Provider A has been “bought out” and will not give back mortgage A with previous terms, and mortgage B has been “turned-back.” Does the couple have to find provider C “buy out” mortgage B? Or does Provider B have the right to the house because couple in effect, cancelled the mortgage. Anyone with any insight on this?
Just to make sure that I’m following you, I assume that in the Washington Post case we’re talking about Provider A being the original lender and Provider B being Chevy Chase. If the Chevy Chase mortgage is rescinded, then the court basically tries to put the parties back to where they were before. Obviously, Provider A has, as you mention, been bought out and is under no obligation to give the borrowers their old loan back (since the Provider A was not a party to the lawsuit and has apparently done nothing wrong).
Now, to put the parties back to where they were before the loan from Chevy Chase would mean that the borrowers would have to give back all of the principal borrowed from Chevy Chase, and Chevy Chase would have to give back all of the money collected from the borrowers. The court will simply net these amounts (i.e., give the borrowers a credit of the amounts they paid against the principal borrowed). So, the borrowers are going to have to either come up with the cash themselves or find a lender that will loan them the money to give back to Chevy Chase. Chevy Chase will not have any right to the house, as part of the rescission will involve rescinding the deed of trust (as this was supported by the promissory note that is being rescinded, and the court is basically trying to put the parties back into the position they were in just prior to closing on the loan - so this would include rescission of the deed of trust).
I hope this helps.
at 2 % why should they get released from back interest ?
receive reimbursement of any interest they paid to Chevy Chase and get back their closing costs, too.”
flatffplan: The nature of rescission is that the court attempts to put the parties back in the position they were before. So, this would include the borrower returning all of the money borrowed from the lender, and the lender returning (actually, it will just get credited) all of the money they collected from the borrower (whether it be closing costs, interest paid, interest accrued, or whatever). It’s basically an attempt to turn back the clock to the moment before the loan closed. I’m not saying it’s right or wrong, I’m just trying to explain that rescission would require this.
It will be interested to see how many lenders are eager to work with these folks who, obviously have a limited ability to conduct business on their own behalf.
Maybe the court will also appoint a guardian to handle their finances for them.
“‘It’s tough to tell which lenders are most vulnerable, because underwriting standards are not transparent enough.’”
I think they’re pretty transparent actually. I just think the buyers of loans aren’t looking and don’t care to look.
The bulk of FirstFed’s income is derived from noncash earnings, largely from the deferred principal on its option ARMs. That so-called negative amortization constituted $223.9 million, or 68.4%, of the bank’s income before taxes in 2006, compared with 1.3% in 2004. In essence, FirstFed is booking profits on money it hasn’t collected.”
I am too lazy too look it up, but I wonder what their allowance for doubtful accounts looks like. I am sure it their have properly reserved for a “small percentage” of non-payment?!??!
Of course they have. This is reflected in their stock which is trading at near-all-time highs. Short/put option here? I thought about buying puts on them 6 months ago and glad I didn’t now.
Holy Google, Batman! Google’s FED page:
http://finance.google.com/finance?q=FED
It lists this article as a news (well, blog) source.
The stock chart looks like a winner. Maybe BW is wrong?
Here’s part of the Edgar filings for FirstFed. Note especially the $12.4M in “loan loss provisions”, against $215.8M in booked, but not received, negative amortization. Talk about ugly.
“Negative amortization, which results when unpaid interest earned by the Bank is added to borrowers’ loan balances, totaled $215.8 million at December 31, 2006, and was $62.6 million at December 31, 2005. Negative amortization increased by $38.0 million during the fourth quarter of 2006 and $153.2 million for the year ended December 31, 2006. Negative amortization has increased over the last two years due to an increase in short-term interest rates.
The portfolio of single family loans with a one-year fixed monthly payment totaled $4.6 billion at both December 31, 2006 and December 31, 2005. The portfolio of single family loans with three-to-five year fixed monthly payments totaled $1.8 billion at December 31, 2006 and $2.7 billion at December 31, 2005. Due to interest rate increases during 2006, negative amortization as a percentage of all single family loans with fixed payment periods in the Bank’s portfolio totaled 3.44% at December 31, 2006 compared to 0.86% as of December 31, 2005.
A $3.0 million loan loss provision was recorded during the fourth quarter of 2006, the same as the third quarter of 2006 and less than the $4.0 million recorded during the fourth quarter of 2005. A loan loss provision of $12.4 million was recorded for the year of 2006 compared with $19.8 million for the prior year. Net loan charge-offs totaled $90 thousand and $190 thousand for the fourth quarter and year of 2006. This compares with net loan charge-offs of $36 thousand and $1.4 million recorded during the comparable periods in 2005. The ratio of non-performing assets to total assets was 0.21% at the end of 2006 compared with 0.05% at the end of 2005.”
“A $3.0 million loan loss provision was recorded during the fourth quarter of 2006, the same as the third quarter of 2006 and less than the $4.0 million recorded during the fourth quarter of 2005. A loan loss provision of $12.4 million was recorded for the year of 2006 compared with $19.8 million for the prior year”
Thanks!
So less provision for loan losses. WTF? They must feel more confident now than they did in 2005? Time for some FED puts!
Even better, their net income for 1985 was $129.1M. So, combine that with $215.8 “income” from negative amortization. Sounds to me like they actually lost about $115M. But, I’m not an accountant.
Here’s the link:
http://biz.yahoo.com/e/070126/fed8-k.html
“Net income for the year ended December 31, 2006 increased to $129.1 million or $7.64 per diluted share of common stock compared to $91.7 million or $5.43 per diluted share of common stock for 2005. Net interest income increased 23% during 2006 compared to 2005 due to an 11% increase in average interest-earning assets and a 0.17% increase in the net interest margin. For 2006, loan prepayment fees totaled $30.4 million compared to $20.5 million for 2005. Also, gain on sale of loans increased to $6.2 million during 2006 compared to $125 thousand during 2005. Loans sold increased to $481.6 million during 2006 compared to $12.8 million during 2005.”
Do they have to pay taxes on the phantom neg am income? Sounds like they may be digging deep.
Wow! The pain being inflicted on the mortgage lenders is yet another fascinating thread of stories.
In talking to people, it still seems the psychology of “renting is just throwing away money” is all pervasive. It will be interesting to see how long this belief is held if real estate prices keep declining.
What good is it to keep pointing out stabilizing, or even falling, cancellation rates time and again? Would fewer cancellations not be another indication of an overall decline in buyer interest? These guys are really grasping at straws.
“Our cancellation rate during the quarter ended December 31, 2006 was 33%, which exceeded our typical historical range of 16% to 20%, but improved from our cancellation rate of 40% in the fourth quarter of fiscal 2006. A significant portion of the increase in cancellations above historical levels was due to our prospective homebuyers being unable to sell their existing homes.”
I think they are pushing it when they try to make a 33% cancellation rate sound like good news since that would mean they have 33% of their inventory needing a buyer, not counting those houses they built on spec. Its like the Captain of the Titanic saying “Good news, this hour we are only at the same rate we were sinking last hour”
As backlogs go down (down 50%+ in some cases), cancellations should decrease as you would think that the buyers at the end of last year were probably a better class of buyers.
“Recently originated loans are falling into default much more quickly than lenders expected,”
There is just so much wrong with this statement.
Well it certainly appears that the misunderestimated how many would go bad quickly enough that they’d have to take them back. THAT’S the main reason the Implode-o-meter is spiking.
how do you buy timberland? what are the basic metrics to see if land is overvalued and to evaluate the value of lumber on land. anyone have a website and etc?
This is gonna sound weird, but try contacting the county agent or local dept of agriculture. Each state has it’s own regs, and local conditions are EVERYTHING. (Used to have some acreage in east texas, and I still wince at the words ‘pine beetle’.)
former subprime darling hits the skids:
http://finance.yahoo.com/q/bc?s=NFI
That chart implies everyone finally woke up to this mess in December.
Check the divvy on this puppy. 25.8%. You pays your money and you takes your chances.
Soon to be 25% of zero. No chances with this one.
Personally, I like the 1 yr $29.33 target estimate for the stock price.
“In other words, the ruling may give some borrowers a refund of everything they have paid to live in their houses for years. The case worries the lending industry because of the potential for hefty losses if other borrowers are allowed to rescind mortgages they claim were misleading.”
Great to hear the courts are beginning to take a stand against fraud. Too bad many of the subprimes may go bankrupt before paying legal damages.
This does create the problem of tightening credit.
Oh… as a buyer with a large down payment I like that.
Got popcorn?
Neil
Exactly Neil. While I agree with SoCalMgtGuy, I kinda like seeing the lender get hit hard with this. Guess who sits on jurys? That’s right good ole J6P!
Another judgement like this and option ARMs and other “creative” financing will dry up leaving even fewer buyers. Why would a lender take the risk of paying back 2 YEARS of interest payments?
2007 is the new 1929.
Got butter?
Sales gimmicks from a realtwhore blogger and pathetic suckup comments from the like minded….with one exception.
http://activerain.com/blogsview/41979/How-to-Sell-Your
I jumped in and ruined their flower talk.
I bet they delete my post.
I just read your comments, Les. Beautiful!
BayQT~
Good lord, what a bunch of complete suckups. It reads like some Saturday Night Live satire of some crappy California affirmation workshop.
How sad there RE. agent was not with them at the signing. On many sales if I could make it to the signing… I went. That way I could get a look if anything looked fishy or incorrect. A good decent agent will go with their clients to the signing… to help out their client because things are confusing and sometimes you need someone there for support. Unfortunately in this day and age agents are to busy with the next new client to care about what their closing clients are signing. Most clients on the big day have mixed feelings…. they are nervous, happy, overwhelmed and confused by the TON of paperwork. You expect lenders, agents, title rep’s and all who participate in the purchase of a home to be honest. I am sure what these people signed had all the info but they trusted and probably signed every piece of paper without even reading it. It is hard for me to blame them but in this world you have to read everything you sign….NO MATTER how nice the broker, agent, title rep whoever the person is! READ & COMPREHEND before signing!
Been a mortgage broker and a real estate settlement attorney for a bunch of years. While not knowing all of the facts, I can betcha that Chevy Chase is about as innocent as you can be. I’ve closed a lot of their loans . My experience with them is that they are straight shooters. Their doc package is as standardized and as generic as all of the big wholesalers. Chevy Chase’s mortgage department is about 600 miles from Wisconsin. They never would never have had ANY direct contact with the borrowers before closing. EVERYTHING would have gone through the mortgage broker. If the borrowers were deceived - which I find extremely unlikely- then it would have been by the mortgage broker and possibly a complicit settlement agent who wanted continued referrals from the broker. HOWEVER, there can’t be a single person on the planet that doesn’t know what’s going on when they get a no-doc option ARM with a hard prepay. What we have here is a bleeding heart judge who is bending over backwards to stick it to an out-of-state bank. Got news for you, this kind of stuff happens.
That is my take on this case so far ,and I think this case is going to go higher up .One would have to look at the disclosures and ask if they were clear enough that any reasonable person reading them would know what they meant ,also in context with all the other disclosures that were given,(I’m sure there was more than one disclosure given . Like you said , this could of been a case where you had a loan agent deceiving a bunch of borrowers .
Sometimes I wonder if disclosures were withheld from some borrowers by these creeps .I guess every case is different .
The court disagrees:
“Chevy Chase’s disclosures to consumers showed a “lack of forthrightness” and “would both confuse and mislead an ordinary consumer about the cost of the loan.”
Mortgage companies screwing borrowers also happens. When there’s too much money sloshing aroung everyone tends to want to grab a hold of ‘their share.’
This is just one Judges opinion to allow the case to go forward . I would have to see all the disclosures given ,including the original disclosures .
I’m just wondering why so many people didn’t read their loan documents or didn’t question ambigious language .
Also, sometimes Judges make rulings because they want the case to be taken to a Higher Court so the big guys can rule on it .
Nice post by Mish on Fannie and Freddie massaging the stats on loan delinquencies..
Footnote No. 12 says that if Freddie Mac renegotiates the terms of the loan with someone who is delinquent, then, voila, that person is no longer delinquent. It seems to me that since about June of 2006, Freddie Mac is struggling to keep this Ponzi scheme afloat.
Fannie Mae has its own guidance on delinquencies:
“First and foremost, Fannie Mae tries to avoid foreclosure.
“Fannie Mae has instructed its lenders and servicers to avoid foreclosure whenever possible by offering borrowers who get behind in their mortgage payments various alternatives, including temporary forbearance, loan modification, and preforeclosure sales.”
Mish Translation: Keep this stuff off the books as long as you can. Cross your fingers and toes with David Lereah and hope the bottom is in.
http://www.whiskeyandgunpowder.com
Sorry but if you don’t read and understand the contract LINE by LINE, it is no ones fault but yours. If you don’t understand it then you need to hire a lawyer to interpret it for you.
People have to take responsibility for their actions PERIOD
Would you guys short FED now?
You better have an iron stomach and be able to stay the course, both financially and psychologically. You also better look up the current short interest - I’ll bet it’s very high. If anybody, or any institution with a sizable short position panics (and covers) the stock will go WAY up. You might consider waiting until close to the next quarters reporting date.
good point, thanks
You got that right, Yahoo Finance shows short interest at almost 40% of the float. Woof, that’s a lot of players on the short side!
“As the Flippers Flounder”
This week, as our little RE melo-drama unfolds, a Cederburg, WI Carpeter and a Registered Nurse tag team that that CAN’T Read or do Basic Math Scream Foul to the Judge. Is he 3 degrees off of Plumb or is she Miscalculating her own medications ? Were they mislead or just beached Flippers? Is the Evil Banker or Broker to Blame? Or was it Slick Suzanne, RE Agent Extrodinaire that set our dynamic duo up from the start ?
http://www.washingtonpost.com/wp-dyn/content/article/2007/02/05/AR2007020501415.html
Stay tuned and consider buying a newer, bigger and Improved 42 inch HDTV SuperPlazma for this soap opera.
Our own Goodtime Charlie is waiting over in Financing with our Easy Own Details and Papers. Just sign and ENJOY FOLKS !
if I was the lawyer for the bank I’d ask what they thought intertest rates were at the time ?
er 5-6%
so why were you do 2% with no cost in the future?
case closed
make them pay the dif and then they can recind
The judge ruled that the disclosure statement about the loan terms was confusing,ie, the words “five-year fixed” in the statement were not referring to the rate % terms, but rather, minimum payments….ie five years of fixed minimum payments of $701. Also, she faulted the bank using the Truth In Advertising Act.
Without reading the contract, it’s hard to understand exactly why they were confused, but the judge apparently thought it was a misleading transaction from advertising to contract.
And Shiloh’s comments are really the key:
- If the lender wrote a clear disclosure and the borrowers failed to read or understand, sorry borrowers….Pay up.
- If the lender did a poor job or misled the borrowers, sorry bank….Pay up.
Which was it? Were the borrowers stupid? Were the lenders crooked or incompetent? Now how can we decide this?…HMMMM….how about in the courts!
Yep, everyone here is pontificating on it but nobody here has actually READ the contract and disclosure forms as signed. And of course the borrowers NEVER thought that they were getting a fixed rate loan, just one that was fixed for 5 years.
“The biggest problem: Its mortgage portfolio is packed with risky loans known as option ARMS. All of FirstFed’s mortgages are for homes in California, where prices have cratered and foreclosures have skyrocketed. Also, 80% of its loans have little or no documentation to prove the borrower’s income or assets, according to a recent company presentation.”
Did a Housing Bubble Blogger stage a coup over Businessweek’s editorial board?
OT. A nice feel good story about FNMA.
http://www.marketwatch.com/news/story/fannie-mae-could-lose-29/story.aspx?guid=%7B843C8E17%2DB688%2D452B%2D96A8%2D524381ACC223%7D&tool=1&dist=bigcharts&symb=NFI&sid=44864
Rather than being knee-jerk about stupid borrowers, READ the article before commenting. The article says,
“According to Chevy Chase’s McCormick, the WS Cashflow reference and the 1.95 percent notation were loan identifiers used by Chevy Chase “for internal purposes,” to identify the kind of loan and that the full phrase that was supposed to be on the document was “WS Cashflow 5-year fixed pay,” but that the last word sometimes got lopped off when the documents were being photocopied.”
BANK ADMITS - Word lopped off .
BANK CLAIMS - Its a “photocopying error”.
Those are the bank talking.
Yes. Photocopying error. How convenient. My a$$
Crooked lenders also should get their due.
Responsibility is not just for borrowers, it’s for everyone.
No mercy to anyone - lenders, borrowers, and brokers.
The article also said that the borrower admitted that she didn’t read the loan documents - that she relied on her mortgage broker. So if she never read the document, how could having “one world lopped off” convince her that this was the loan that she thought she was getting?
“But after the deal closed, in 2004, the couple realized to their horror that the $191,000 loan they got from Bethesda-based Chevy Chase Bank was an adjustable-rate mortgage. They went to court, saying they were deceived. A federal judge has sided with the couple and is allowing a class-action suit involving up to 7,000 borrowers against Chevy Chase.”
And so it begins. I wonder how many of the jackazz’s went in knowing full well that their arms would in fact reset and that they were convinced that the appreciation would bail them out at that time. Correct me if I’m wrong but isnt there something called a good faith estimate? It’s the American way these days to have no responsibility for our actions what-so-ever.
You missed it, but here it is.
Read the article again, my friend. There are details on the case you seem to be unaware of.
test
test
The part I don’t get is how could 7 thousand borrowers have photocopy errors regarding the class action nature of this case ?
Site has been updated on the Madison, WI bubble site:
http://madisonhousingbubble.blogspot.com/
I “Googled” the Judge handling the Chevy Chase Bank case. He is, as I suspected, a little to the left of Karl Marx. On a couple of blogs he is referred to as “Looney Lynn”. Trust me, I’m no apologist for any wholesale mortgage lender, but it looks like the Judge is hosing Chevy Chase. My guess is it will look that way to saner judges on the appellate bench who are familar with the good Judge Adelman.
Yeah right, the judge is hosing the bank and all the paper pushing middlemen in the system, who conveniently chop off the end of a line in photocopying docs, to bait and switch the ordinary Joe borrower.
It’s funny how so many financial inductry/REIC types here are blowing gaskets left and right over this. Where were all this selfrighteousness when your cohorts in the industry were robbing their own CUSTOMERS?
What goes around, comes around. No sympathy for unscrupulous, unethical, deceptive and manipulative ‘professionals’ from me. Maybe this will remind them where their bread is really buttered - the blood, sweat and tears of ordinary folks. Unfortunately the crimes of these folks will take down a lot of innocent people.
Holy crap - I called the good Judge Adelman a “she” in an earlier post. One of those confusing androgynous names I guess.
I also think Chevy Chase will win on appeal.
Does Chevy Chase still hold the lien against the Andrews’ house, while this appeal process plays out? And another poster asked about the mortgage interest deductions that presumably were already taken.
This case brings up so many questions.
And you are a little to the right of Ceasceau
I second Housing Wizzard’s question Was the photocopy also wrong on the other 6,999 borrowers who are part of the class action lawsuit? It wasn’t just this case, they are just the people that the Washington Post choose to spotlight.
i think this case is only at the stage where the Judge has decided that there is enough evidence to go forward to jury trial ,(unless they agreed to a Judge decision case instead of a jury trial ). The Banks will appeal the decision .
I would love to be on the jury in that case ,but alot of big social impact cases end up being decided by the Appeal Court .The Banks in general cannot afford to have all their loan contracts voided ,so it’s likely they will fight this tooth and nails .
That being said , I believe that many borrowers were taken advantage of in the loan process because they didn’t do their due diligence .Usually under contract law there is a high requirement to not sign unless you read those contracts . During a RE mania I wonder how many people just didn’t take the time to protect themselves out of trust for the professionals verbal BS .
Also there will be the issue of the loan rep. being a agent for the lender ,so there might be some implied liability there when they get going on all these lawsuits . What I don’t like about cases like this is people jump on the bandwagon and claim they didn’t know what kind of loan they got ,when they knew very well,but not to say that some cases aren’t very valid against the banks .Just my 2 cents .