I read this article on mbc.com today, which got me thinking. My home was bank owned. The PO's were not the most savory of characters from what I've been told. They didn't take care of their home as evidenced by the sewage leaking toilet that only needed a $6 wax ring...sewage or $6 which would you rather have? There are numerous things around the property just like that, a leaky roof because of missing shingles that had been blown off but were 6" away, downspouts laying on the ground next to where they go, are some examples. When I think of a foreclosed home I think about my house. People that for lack of a better term weren't capable of dealing with home ownership. The man in this article was smart enough that the judge in the case thought he was a lawyer. They showed pictures of the interior of his home which looked well kept. How then did he get foreclosed on?
If you loose your job which is seeming pretty standard in this economy and loose your home due to that, I get it. Looking at craigs list today there where 3 job postings where normally there are 10 or 15. If you loose your job, there aren't many others to replace it, and many people applying.
The words Predatory Lending are used way too often in these foreclosure cases but what does it really mean? You're saying that the bank was essentially unfare when they gave you a great big hunk-o-cash and expected you to pay it back? You didn't read the contract and now you have a balloon payment and don't know what to do? Mine was pretty long but I knew what was on every page. There was a guy in California on the news when the housing market first went belly up saying the bank doubled his take home pay in order for him to get a loan. Are you kidding? You're really going to blame that on the banks?
In speaking to my boss the other day he didn't know what points are as they refer to a mortgage let alone what it meant to buy them down or why you would want to. I don't know if people just don't care anymore or what's going on. I think the average IQ of the country is being cut in half with each generation. Or maybe it's our sense of self worth. Why should I read this contract when me and my family don't deserve a nice stable home. I see way too many girls with the bumper sticker "if you're going to ride my ass, the least you could do it pull my hair" and if they don't care about themselves how are they supposed to care about pieces of paper with legal mumbo-jumbo?
Everyone is up in arms about fannie mae and freddie mac they're forgetting the main principal don't buy more than you can afford. We seem to have spent that last 5 years doing just that with housing, cars, building our lives on debt not cash. No wonder the bubble burst.
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3 comments:
Love the blog, but got a comment:
If I'm not mistaken, the fellow you're referring to found a number of illegalities in his loan.
Now, if a lender is going to give someone $400k, and the have legal suits 5 rows deep, I think it's only reasonable that they adhere to the law and avoid "predatory" lending practices. They knew their responsibilities, and they failed to fulfill them. The law is quite clear and they tried to get around it, at least as far as we know from Mr. Molina.
Seems he's in the moral clear.
I know, I know, everybody's a victim! Yes, personal responsibility and lick of research go a long way. Both are sorely lacking. BUT...some of these loans, especially the variable rate loans were grossly misrepresented and/or deceptively presented.
I'm a financial guy and a former stock broker. There's a duty to explain ALL the ramifications of an investment product to one's client. The variable rate products were RARELY explained. How do I know? Well, I had one (it was very efficient for getting the house bought and the rehab done).
Let me tell you, I'm pretty wary but it took me several phone calls and a list of questions upon questions to finally figure out that my interest rate was going to go up even if rates fell some. The natural presumption is, if rates stay the same, so will my variable rate mortgage. That's why it seems like a pretty good deal. But that's not the way it works. Now, if I know the score, I can then take appropriate action if I want to lock in a rate as I near the reset time. Or any other, since I know that my rate is almost assuredly going to go up.
But the average joe isn't going to figure that out. I guarantee you that. Not unless he's told explicitly and has it explained to him. Probably more than once. Honestly, I know what I'm doing and I was nearly snookered. This happened to a TON of folks. Any lender who wrote those products and didn't FULLY explain how the loans worked, deserves every bit of trouble they get.
My 0.02
I absolutely agree. More than anything I'm just tired of hearing it. I read recently about another fellow in California somewhere where the bank had forged his signature. I couldn't believe what I read. It's often difficult to discern between the man who ok'd the bank doubling his income and who's been "snookered".
Oh, I'm SURE there are lots of folks playing fast and loose with qualifications.
It's important to differentiate, however between unsophisticated customer and sophisticated loan broker.
I mean, there was a time when you borrowed for 30 years with 20% down and nothing changed. The bank knew you and they held your paper and the loan was simple.
Today, with variable rate products and homes priced much higher relative to income, and securitization...well, In my personal view, many of these loans are more like investment products subject to similar vagaries. I think that those selling those loans to folks should be held to at least the same standard as the fellow selling mom and pop a mutual fund. Heck, they're taking way more risk!
Thanks again for the heads up on the new home buyer credit.
Best,
Mark
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