Just who swindled whom in home mortgages

[whistle]

...<snip>
The great mortgage swindle
September 21, 2007 | Page 12

PETRINO DiLEO explains who benefited from the mortgage boom--and who’s paying for the bust.

MICHELE McINTOSH, a single mother in Far Rockaway, N.Y., used to be happy.

In 2002, she bought a condo for $110,000. Her 30-year mortgage loan, at a fixed rate of 10.5 percent, required her to pay $1,000 a month--expensive, but something she could afford.

Then one conversation changed everything. A mortgage broker promised he could get McIntosh a mortgage at 7.5 percent. McIntosh figured her monthly payments would go down dramatically and happily agreed to the refinancing.

But after six months, the required monthly payments on the new loan began to jump. By October of last year, they had risen to $1,585 a month--far higher than what she had been paying before. The new mortgage turned out to have an adjustable interest rate--the 7.5 percent had only lasted for an introductory period. “I had no idea about this resetting rate every six months,” she told the Queens Courier.

To make matters worse, McIntosh lost her job. Unable to make payments, she reached a deal with Saxon Mortgage, the company that the broker had sold her loan to. In January, she made a $1,300 down payment to Saxon, but her monthly payments soon soared again, to $2,700.

McIntosh quickly fell behind--and on June 13, one day after her 44th birthday, she got a foreclosure notice in the mail.

About 50 miles to the east on Long Island, in Medford, N.Y., Malinda Matus was having a similar experience.

Faced with a growing pile of medical bills due to her brain-damaged son’s hospital care, Matus, too, went to a broker to refinance her mortgage. But instead of the $1,700-a-month payment on what she thought was a fixed-rate mortgage, she began getting payment notifications for $2,049 a month for a floating-rate mortgage.

The papers Matus had signed were for a different loan than she was told about. “I was railroaded--there’s no two ways about it,” the 61-year-old told New York Newsday.


- - - - - - - - - - - - - - - -

THIS IS the reality of the unfolding mortgage mess--a rapidly deteriorating crisis that is ruining people’s lives across the U.S. By the end of the year, estimates are that 2 million homes will be in foreclosure.
Right-wing commentators and politicians claim that irresponsible borrowers are to blame--that they snookered poor, defenseless mortgage companies into giving them loans by lying about their income or credit.

“What is often overlooked,” Nixon speechwriter-turned-actor Ben Stein wrote in the New York Times, “is that many borrowers, people who look at themselves in the mirror every morning, lied like madmen to get their mortgages... would say anything, sign anything, to get a loan.”

Stein has it upside down and backward. In reality, it was the whole rotten system of real estate and high finance that “lied like madmen”--saying and doing anything to satisfy the craving for the super-profits to be made off the housing bubble.

Now that the bubble has burst, some of the filthy truth is starting to emerge.

From the storied Wall Street banks and investment firms, to the big mortgage companies, to the storefront mortgage broker operations, everyone had an incentive to push the boom forward--even if that meant making loans to borrowers who wouldn’t be able to afford the terms, or steering customers with better credit into more unstable mortgages that, at first glance, appeared cheaper.

On the cutting edge of it all were the so-called “sub-prime mortgages”--loans made to people with a poor or nonexistent credit history that were much more lucrative for big business.

The mortgage holders stood to gain millions, whether borrowers missed payments, refinanced their loans or paid off the mortgage too early. Also, the sub-prime loans were enticing to a secondary market that emerged on Wall Street--in which bankers packaged mortgage loans in large numbers and sold them to the biggest investors as giant bonds.

For the brokers at the street level, there were higher commissions dangled before their eyes if they could get a borrower to take a sub-prime loan instead of a prime loan or Alt-A (the notch between the other two ranks).

Countrywide Financial, the nation’s largest mortgage lender, offers an illuminating illustration of why and how the system pushed sub-prime loans on borrowers.

An exposé in the New York Times cited regulatory filings that show profit margins on sub-prime loans sold by Countrywide to investors last year were 1.84 percent, versus 1.07 percent for prime loans--in other words, almost double the return for a sub-prime loan. A couple years earlier, the gap was even greater--in 2004, a 3.64 percent margin on sub-prime loans and 0.93 percent on prime.

It’s obvious why Countrywide valued sub-prime loans over prime. A borrower with a 620 credit rating putting down 10 percent cash for a 30-year, $275,000 sub-prime loan from Countrywide would have payments of $2,387 a month. If the same borrower went instead to the Federal Housing Administration, they would get a loan with monthly payments of $1,829--$558 a month lower.

If Countrywide had good reason to push sub-prime loans, so did the investors in mortgage securitizations--the giant bonds built from pools of mortgages, usually worth $1 billion or more.

For the investment banks, pension funds, hedge funds and other institutional investors who buy these securities, the highest-rated and least risky bonds pay off at lower rates, while the riskier bonds--such as the ones tied to sub-prime mortgages--pay off at higher rates. With the real estate market booming, the higher returns won out over considerations of risk.

So mortgage lenders had a powerful reason to push people into sub-prime loans. They created incentives for their employees and third-party mortgage brokers to deliver as many risky, high-cost loans as possible.

In-house, this was done through commissions. As a former Countrywide sales representative told the Times, “The whole commission structure in both prime and sub-prime was designed to reward salespeople for pushing whatever programs Countrywide made the most money on in the secondary market.”

With external brokers, mortgage companies also employed a “yield-spread premium” when awarding commissions. Essentially, the higher the interest rate on the loan, the more cash a company would pay to the broker. About 90 percent of sub-prime mortgages involve yield spread premiums, which can add up to thousands of dollars and constitute the biggest part of compensation for a broker.

Thus, Countrywide awarded brokers that delivered sub-prime loans commissions worth 0.5 percent of the loan’s value--in contrast with 0.2 percent of the loan’s value for mortgages rated a bit higher, the so-called Alt-A mortgages.

Anecdotally, borrowers have reported all kinds of shenanigans designed to drive them into mortgages that were more lucrative for the lenders.

For example, brokers would change loan applications to inflate salaries for workers who didn’t make enough to qualify. On the flip side, if a prospective borrower had savings or a credit score that qualified them for a higher-class mortgage, the broker would encourage them not to report the savings, so they could get a sub-prime loan instead.

In probably the most absurd example, a 102-year-old man in Britain was approved for a 25-year, interest-only mortgage.


- - - - - - - - - - - - - - - -

THIS ISN’T the only way the industry cashed in. Mortgage lenders often throw in what are called “prepayment penalties”--fees that borrowers are charged if they pay off their loans early or refinance. Last year, Countrywide generated $268 million in cash through prepayment penalties. According to the Center for Responsible Lending, more than two-thirds of the adjustable-rate loans have prepayment penalties.
And when borrowers missed payments, Countrywide cashed in again, collecting $285 million in late fees last year.

Despite all this, the likes of Ben Stein can’t muster any anger about, say, Angelo Mozilo, the CEO of Countrywide.

Countrywide is scrambling to stay out of bankruptcy after saddling millions of borrowers with loans that can’t be repaid. The company has been stuck holding mortgages that previously would have been sold in giant bonds to Wall Street--but which now can’t be moved for any price.

Mozilo, however, is doing just fine. Since 1984, he has made $406 million selling company stock--$130 million since last December alone.

Looking ahead, the picture does not look promising. Most mortgages enter foreclosure after deceptively low introductory interest rates on adjustable-rate loans “reset” to much higher rates.

And the largest numbers are still to come. The total value of mortgage loans resetting in September was $58 billion, three times higher than January. And starting in January 2008, the number of loan resets will jump again, peaking in March, when $110 billion worth of mortgage loans are due to reset.

Not all loans where the interest rates reset will enter foreclosure, but there surely will be in an increase.

Mortgage Broker Association statistics show that foreclosures in September were above the same level as last year in 47 states. On the sub-prime front, foreclosures are 70 percent higher than the same time last year, compared with a 21 percent increase on prime, fixed-rate loans.

This is the price that is being demanded of ordinary people as the mortgage crisis unfolds--all to pay for a boom that made incredible sums for the likes of Anthony Mozilo and the other loan sharks of Corporate America.

http://www.socialistworker.org/2007-2/645/645_12_Swindle.shtml

[Turbineguy]

1. Ben Stein is filled with shit.

You lie on you mortage application and there are all sorts of penalties including Federal.

[whistle]

3. I know he is and the article says that, putting the lies squarly on the mortgage companies

[MrCoffee]

6. i think he's referring to Stated Income Mortgages

for borrowers who can't meet the full documentation requirements (the most typical being the 2-year income requirement), you can apply for a stated income mortgage.

you can put any number you want on a stated income mortgage application, and the lender only verifies the source of the income, not the amount.

i had a mortgage broker give me the hardest sell of my life on a stated income mortgage. i qualified for $150k under a traditional mortgage, but the broker claimed i could get up to $400k on a stated income mortgage.

[whistle]

12. Well, I've never stated more income than my IRS returns show

...and any mortgage company/broker which fails to ask for an recent tax return and the last several months pay checks is guilty of fraud on the mortgage applications. So that case is a straw man issue. It has been the mortgage companies which have been the liars but not disclosing the real risks to borrowers of these ARm type arrangements.

[MrCoffee]

30. so what responsibility does the borrower have?

isn't it the borrower's responsiblity to know what the terms of the contract they're signing actually are?

[whistle]

33. Responsibility to their stockholders which is to make as money

...as possible

[MrCoffee]

36. not the bank's responsibility, the person borrowing the money

what is the responsibility of the homeowner?

[MrCoffee]

37. so you've got nothing, huh?

fair enough, i guess.

[whistle]

39. Actually I do, I just went to my bank and made a deposit

...that's why I did not answer immediately and also I misread your question thinking that you were talking about the mortgage lender, sorry for my confusion. I gave my response below

[MrCoffee]

44. sorry, didn't mean to sound all pissy about it

[whistle]

38. You tell me, they are the customer and plan to be be for 15 to 30 years

...so they deserve to be treated fairly and honestly, not cheated and thrown out into the streets after 2 to 4 years! They will work and raise their family, pay their bills and be responsible citizens. Certainly, no homeowner ever intends to default on their mortgage payment. So why then are they ever placed into that position? Why have a loan system that offers that opportunity? Explain that please. Adjustable rate mortgages are loan shark traps, just like those free promo credit cards with default provisions.

[MrCoffee]

41. they are not blameless

There are some mortgage sales techniques that are despicable, to be sure, but you cannot absolve homeowners/borrowers of all responsibility. They signed the contract. They should be held responsible for it. No one held a gun to their heads and made them sign the mortgage contract without reading it. If you don't understand what you're signing, why on earth are you signing it in the first place?

The sub-prime loan system wasn't foisted on people who were forced to accept sub-prime loans. There was a demand for credit above and beyond what people could get under a traditional mortgage. You cannot place 100% of the blame on the banks and let people who should have known better off the hook.

[whistle]

48. Caveat emptor, right! Wrong, that was for the days of the Roman Empire

...and not for making loan sharking an acceptable institution.

Caveat emptor is Latin for "Let the buyer beware". Generally caveat emptor is the property law doctrine that controls the sale of real property after the date of closing.

Under the doctrine of caveat emptor, the buyer could not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects. The modern trend in the US, however, is one of the Implied Warranty of Fitness that applies only to the sale of new residential housing by a builder-seller and the rule of Caveat Emptor applies to all other sale situations (i.e. homeowner to buyer).(See Stambovsky v. Ackley, 572 N.Y.S.2d 672 (N.Y. App. 1991)) Many other jurisdictions have provisions similar to this.

http://en.wikipedia.org/wiki/Caveat_emptor

In the United States of America this practice of organized loan sharking and usury against citizens has never been considered acceptable until the past five to six years. In fact with the loan sharking and home grabbing activities we now have Caveat venditor which is Latin for "let the seller beware". Homebuyers in these desperate times in order to get out from under these swindle mortgages are getting screwed on the selling end also.

[MrCoffee]

49. caveat emptor applies to structural defects of workmanship (i.e. the roof leaks)

not banking transactions, which are governed by contract law and the Uniform Commercial Code

[whistle]

51. I am not a lawyer, and I am grasping for answers here....

... so does the typical home buyer need protection or not? I mean, no home buyer ever sets down cash payment in full when they buy their home, at least most do not, like 99.6% take out loans in the form of long term mortgages. So, who can these people now turn to to make sure that the loans are fair and equitable and not filled with all sorts of financial tripwires?

We all know that home developers use all sorts of short cuts in construction which will result in those structural defects to which you are referring, and there are so many many documented cases of buyers being cheated and having to spend thousands of dollars in repairs and replacement costs on defective homes. So these mortgage contract laws get right to the heart of the matter, don't they? They favor the mortgage companies and not the borrowers. But more importantly, they have been set up to hide they potential risks to the borrower as we are now finding out.

Bottom line is this. We are going to see 10 million, 12 million, 15 million or more foreclosures coming very soon, maybe in the next 60 days, most certainly early in 2008 and that will be a lot of people homeless and in the streets. What are democrats willing to do to prevent this?

We know what republicans are doing. They are bailing out the swindlers, the hedge funds with 100 billion dollars or more going to Goldman Sacks. But what about those 30 to 45 million homeless people coming? Any solutions there other than "well they should have read those contracts"? That is not how democrats handle crisis situations. Freeze foreclosures now, keep people from losing their homes and keep chartered banks operating. Impeach Bush/Cheney, stop the war now and get people back into productive jobs and let the swindlers pave the streets. I can assure you that there will be far fewer swindlers than there will be homeless people unless the swindlers get their way.

[MrCoffee]

57. i totally agree that homebuyers need some protection

against predatory lenders. the deregulation of the lending industry lead to this mess, and controls must be imposed to prevent this sort of dangerous lending in the future. however, we simply cannot save every homeowner who is either in foreclosure or very near. some people will lose their houses. it's a very sad fact, but it is a fact. we can't rescue them all.

so, what do we do about it. focus on those who can be helped. i'm not an economist or a financier, but i think that letting Freddie and Fanny buy some of those mortgages would be a good start. we need to see massive action in the courts immediately to try to prevent the more draconian ARM's from kicking in.

i don't hold the banks/lenders solely responsible for this catastrophe. There were far too many homeowners/borrowers who bit off WAY more than they could chew. What we need now are reasonable solutions to correct future damage and to help where help would benefit the most. What we do not need are rash quick-fix patches that don't affect any real systemic change to the mortgage lending business and lead to further economic problems.

[whistle]

61. Good, we agree that homeowners need protection, I'm going to leave it at

...what you concluded: "What we need now are reasonable solutions to correct future damage and to help where help would benefit the most. What we do not need are rash quick-fix patches that don't affect any real systemic change to the mortgage lending business and lead to further economic problems."

[leftyladyfrommo]

2. It was a real feeding frenzy in the industry for about 10 years.

I was working in the mortgage industry then. Greed just ran rampant. Realtors made a ton selling homes to people who hadn't qualified before. Loan officers made a ton on commissions. Banks made a ton on exorbitant fees and high interest rates.

FNMA and Freddie Mac loosened the guidelines so that just about anyone with a heartrbeat could qualify for some kind of home loan.

I don't blame it on the borrowers. Most people dream of owning a home.

I put the blame on the banking industry - just pure, unadulterated greed. And then the house of cards came crashing down. Now the housing industry won't be the same for years and years. But boy everyone sure had a great 10 year run.

[fasttense]

4. It was nothing but a big con game.

The banks conned so much money out of so many people that now the people are going broke. The government cheered on the con. Big surprise there.

[Johonny]

7. I think it was a con game all around

People thought they were conning the bank, thinking they could flip houses before the penalties came in. The mortgage companies thinking they could cash in on the ultra low interest rates, thinking they could flip the bad loans before the rates became too high. And of course the average home owner gets caught up in the con game and gets screwed.

[whistle]

16. All those "get rich quick" real estate investment seminars and home study

...programs which people flocked to by the tens of thousands during the 1990s and early 2000s and paid several hundred dollars to attend and get refresher courses on. They need to rename those courses as RealEstate Flipper Tycoons and Baboons

[Done]

5. Basically Ben Stein is saying that the

banking industry is made up of a bunch of stupid morons who have been conned by millions of sneaky teachers, construction workers, and mechanics.

[whistle]

14. Ben Stein is a shill for the neocons and the right wing

[flashl]

8. The good news is the Countrywide award winning brokers ..

:sarcasm:

are now becoming foreclosure specialists!

[Lance_Boyle]

9. I have some sympathy, really, but

HOW THE FUCK HARD IS IT TO READ THE FUCKING CONTRACT YOU'RE SIGNING BEFORE YOU SIGN IT??? If you're purchasing a fixed-rate mortgage, you might at least scan the document for the word "fixed." Good crispy jeebus - a good first question to ask the closing attorney should be "is this really a fixed-rate mortgage?" How can people signing potentially life-altering contracts be so... trusting?

[MrCoffee]

11. My Trusts & Estates prof wrote "RTGDD" on the board the first day of class

He asked us if we knew what it meant. When no one responded, he yelled "READ THE GOD-DAMNED DOCUMENT!" He then went off on an hour-long rant about how much trouble people get themselves into by not reading legally binding contracts (or wills and trust documents, in that class).


Best advice I ever got.

[SoCalDem]

13. Amen.. It MUST say FIXED RATE-30 YEARS (or 15 or whatever)

and it must say it plainly and on the front page.. When we finally re-fied, I asked them over and over and over and made them put it in writing, and made them sign or initial everywhere the word "fixed rate for 30 years" appeared :) If WE had to initial & sign 50 different places, we made them do it too :)

[dansolo]

72. And the Truth-in-Lending statements for ARMs are bogus

I had an ARM, which I refinanced to a fixed rate mortgage when it looked like I wasn't going to be moving out of my home before the rate would have started to go up. One thing I clearly remember when I got that ARM was the truth in lending statement. What they did was state the fixed amount for the first five years, and then used the absolute minimum possible interest rate for the remaining portion of the mortgage. If you wondered how the APR for an ARM could be lower than the stated interest rate, that is why. I always thought that that should have been illegal.

[whistle]

74. Very interesting, sounds like bait and switch

[ProfessorGAC]

15. Push A Piece Of Paper Under The Loan Officer's Nose

Have three lines on it
1) This is a fixed percentage loan over the entire term.
2) There is no prepayment penalty.
3) Late fees are only assessed at true delinquency (>90 days)

If they won't sign it, it means there's something less than desirable in that loan for the consumer.

Once they sign it, given the fiduciary duty, it's a legal document.
The Professor

[whistle]

18. Please have the U.S. Congress make that mandatory, because you know damn well

...no loan officer can sign anything in a mortgage closing except to witness your signature.

Your suggestion is a great idea and should be Federal Law moving forward.

As for the swindle homeowners have been subjected to since Greenspan got congress to go along with these exotic mortgage "instruments", make it retroactive on ALL home mortgages going back 20 years as a minimum. That will straighten out most of the mess that has been created.

[ProfessorGAC]

19. Well, They Can Sign It As An Affirmation

It doesn't get included in the mortgage contract, but it's still a legal affirmation that the contract is as presented. The officer isn't doing it in the capacity of an agent of the bank, but as a person. A loan officer not willing to attest that the contract is legally what he or she stated doesn't deserve the job.

You're talking agency law. I'm talking about simple contract law. The bank cannot stop a loan officer from attesting to his or her own honesty. They can only prevent signing anything extra in the name of the bank.

Affirmation documents are legal documents and can be something as simple as a signed agreement to merge on a cocktail napkin. That doesn't mean the contracts still don't have to written, signed and filed. But, the affirmation agreement on that cocktail napkin is still a legally enforceable document.

No?
The Professor

[whistle]

20. I really doubt that any loan officer would risk their job when you know that corporate policy

...and Federal Law dictates what the loan closing procedures are.

[ProfessorGAC]

23. That Is Simply Not True

The affirmation is not directly tied to the contract, and the person is not being asked to sign is as an agent of the bank. The bank and the law have no bearing on this request. All the document is asking is that what the loan officer said the contract was and what it really says are the same thing. That's legally disconnected from the mortgage agreement.

And quite frankly, if the person wouldn't sign a statement that swears they have told the truth, i'd get a different loan company. If corporate policy insisted he or she not sign something that wasn't directly part of the loan agreement, i wouldn't borrow from them.

And, the federal law doesn't cover what i'm talking about. I called the lending VP at the bank where i'm a director, and he said he would sign something like that. He was certain it did not violate the law, and the only bank policy on this subject was that they had to do everything the law required. No law against it; no corporate policy against it.
The Professor

[whistle]

29. So who would you sue, certainly not the mortgage company and if the

...loan officer thinks he might be sued, I doubt he or she would ever sign such a paper, unless of course it was Federal Law to do so.

As a representative agent of the mortgage company, anything the loan officer signs does hold the company liable, so the standing instruction is, not to sign anything, even if everything in that contract complies with those three statements, which I doubt any mortgage contract would in fact fully comply. That is not the case regarding verbal explanations.

Otherwise those terms and conditions would be part of the contract.

[whistle]

21. Also, if a mortgage closing falls through, the consumer is the one who is hurt

...by being reported to all of the credit rating agencies of which there are now four major ones, so sticking an affirmation document under a loan officer's nose to sign would be tantamount to being Black-listed for further credit. Come on, you know the dirty ricks these people play. Get your suggestion to become law and stop the deceptive practices.

[silverlib]

42. There is something additional that I experienced...

And I hate to say this, but I still do not understand the ramification possibility of what I did.

I got a call from my loan company about refinancing - 5.9% fixed rate -

The loan officer said the company was being proactive to keep their current customers as this was a couple of years ago when everyone was refinancing. No closing cost - 5.9% fixed rate - (we were at 8.25$) and no prepayment penalty.

We signed the papers and everything has been fine - but not until I got the package in the mail after closing did I realize it was a home equity loan. I have always despised these hel (short for hell as far as I am concerned), but since I have not had a problem making the payments and no, this is not a second loan, I have had no ramifications. The taxes and insurance are not escrowed in the loan, but I understood this was so at the time of closing.

What could the ramification of this entail? I am really offended because I felt I had been had and I can tell you that I'm not easy.

[whistle]

50. I don't know, what does the contract say, perhaps they have a clause which says

...the loan can be called at any time without cause, which means they will cancel the loan, that is "call" it, and you will have to pay it off within a certain time frame in full, like 30 or 60 days. Now if you have enough savings, or even investments like CDs which can be converted to cash sufficient to cover the obligation, then you will be okay. If you don't they will put you in default, raise your interest and add charges and penalties and the swindle will then be in full gear. You will be harassed and called regularly until such time as you can pay off the loan or you are placed in foreclosure.

You see it could have been structured with a balloon payment after say fives years. At that point, the bank will notified you and ask some embarrassing questions about your current financial situation and if they think you are still a good risk, they'll have you take a new loan with them at a much higher interest. Either way you will lose. They set up the payment as a 25 year or 30 year fixed interest loan, I'll bet, but put in a balloon. The balloon payment is the swindle tripwire!

For your sake, I hope that is not the case.

[silverlib]

55. Thanks for the input...

I actually got the papers out and read every line. 180 equal payments - a lot of default possibilities, but rather standard I think - nonpayment, no insurance, delinquent taxes; a rather strange thing about not renting the property without permission? (maybe standard). So, I guess I should be grateful, as my interest rate went down and I lessened the remaining years on the mortgage. The loan company said they were only offering this deal to current clients who had never been late on the current mortgages.

Just on principled philosophy, I would have never done this is I had realized it was a home equity loan.

Thanks again - you helped me know what to look for.

[whistle]

59. 15 year fixed rate mortgage, that is very good, you are very fortunate

....keep your fingers crossed that your bank stays in business and honors the full conditions of that mortgage agreement and does not turn around and sell it to the likes of a hedge fund backer like Goldman Sacks or the Bank of England who would then find some obscure reason to call the loan.

[silverlib]

76. Well, that could be a reality - it's WAMU

I've heard they are having huge mortgage loan problems.

[JerseygirlCT]

17. I have to agree.

Without letting bad lenders and brokers off the hook in the least (I think if a lender makes a bad loan, they should also suffer for it -- why should they be protected beyond the terms of the agreement?) I don't understand how people can enter into an agreement that they haven't read and aren't clear about.

I'm no financial genius, but I certainly know the difference between a fixed rate and adjustable mortgage.

I've also seen a good number of people being easily talked into loans above their ability to manage. Again, I hold both sides there responsible. Don't borrow more than you can pay, and don't offer loans to people that they cannot pay.

It's a mess all around.

[earth mom]

32. Sorry-but those loan sharks are VERY persuasive & will say anything to get you to sign.

It helps that I read DU & other news and knew what was going on with these loans.

Because we really wanted to fix up our house and had one guy who tried to sell us one of those overpriced b.s. loans using every trick in the book & who still sends us cards for every season & holiday!

Oh yeah, he had my husband sold! But once I added up just how much of our homes equity he and the lender would get-my hubby said Hell No too!

So let that shyster waste his time & his stamps because I will NEVER have anything to do with that bastard or any like him-EVER! :grr:

[whistle]

34. ...but will never sign anything themselves that will expose their

...fraudulent practices...right?

[tammywammy]

52. When I closed on my house a few months ago

this was my first home purchase and I was nervous/excited at closing. Anywho, the paperwork clearly stated exactly what my mortgage and I had agreed on. It was right there. It said what my payments is, no penalty for early payment, etc. And neither the title company nor my realtor rushed me when I was reading the paperwork either. My realtor even caught a mistake the title company had on my home warranty.

[whistle]

56. You are lucky and I assume you are able to afford the payment now

...and right up until you make the final payment 25 to 30 years from now? No balloon payment coming say in 5 or 7 or perhaps 10 years from now? No periodic reviews where interest rates can be changed by the lender? No special conditional charges if and when you want to sell your home, or even pay-down the mortgage principle should your income warrant such a prudent measure on your part? How about if you credit score changes to some level less than what it is now? Or if you home owners insurance is canceled for any reason, or if the mortgage is sold to another company? Anything in any of those actions which could directly affect your monthly payment and possibly put you at risk? Does the mortgage holder have the right to call your loan at any time and make you pay the outstanding balance or risk foreclosure?

[tammywammy]

73. Actually, yes I can afford my payment now

Yes, I did actually read the entire stack of papers with my mortgage. I have a 30-year fixed loan. I can afford my payment now. I purchased a foreclosure and it was well below the tax appraised value. I made a whopping $25,000 last year, and have an excellent credit rating.

I have all my bases covered with the mortgage, and there's not a balloon payment snuck in there. I can go online right now and see the exact payoff on my house. There are no penalties if I way to pay down or pay off the mortgage early either.

[Gormy Cuss]

66. Limited reading skills, limited language skills, and the naive thinking that mortgage lending was

well regulated.

Some of the lowest forms of pond scum in mortgage lending were the immigrant brokers who played their former countrymen for suckers, translating the terms for them, lying on the stated income declarations, or steering them to subprime loans when they could qualify for a nice low risk 30 year fixed.

As for attorneys, here's a shocker. When I moved to California I was told by everyone (realtors, lenders, coworkers, friends) that I didn't need to hire an attorney because the title company made sure everything was legal. I hired an attorney.

[whistle]

70. Perhaps, but most are red blooded Americans

[Gormy Cuss]

71. Yes, I am well aware that some native born Americans have poor reading skills

or a lack of understanding about the level to which regulation protects them from predatory practices.

[Warpy]

10. When I sought to lock in a rate 11 years ago

as I was beginning the house search, the lender really pushed an ARM at me, "You can get a much better house! Rates can go down!"

Since the sales pitch was rising to a crescendo, I started to gather my papers and put my coat on, ready to leave. They stopped in mid crow and got more realistic and suddenly found an FHA mortgage that was almost as cheap as their ARMs.

It's really sad that they don't teach this stuff in schools, along with balancing checkbooks and making change without a computer. Ignorance can and will bite you in the arse eventually.

I've often felt like developing a curriculum and opening a School of Hard Knocks, teaching a three month crash course in life skills. I might get rich quick!

[knitter4democracy]

24. They teach some, but a good curriculum would be a good idea.

Most kids honestly have no idea how to read a credit card contract by the time they graduate.

[slipslidingaway]

25. Financials basics should be mandatory in high school, esp.

since more people are in charge of their own retirement accounts.

[whistle]

54. High Schools got rid of home economics courses back in the late 1980s

...because they were getting into home management and finance and budgets. Then they were cut out completely! Why?

[slipslidingaway]

65. I never even knew they were teaching basic financial

management in HS so not sure about it being cut. They may have touched on a few items, how to reconcile a checking account, but not the big ticket items, a house, a car and retirement. It used to be that companies would invest money for retirement and then pay someone a pension, now people are given a narrow list of choices in which to invest and most times do not have the skills.

Sorry I'm getting slightly OT here :)

[knitter4democracy]

22. Whom to believe on this: someone who can generate a pile of unreadable legalese

Or the borrower trying to get a house to live in?

For this house, we got to closing, and the paperwork was wrong. Did our realtor catch it? The title company? Nope. I did. I looked through the first couple of papers and realized they'd sent us an adjustable rate mortgage, not the one we'd agreed to (fixed with part of it ARM, not all ARM). They had to pull all the stacks of paper, I had to call the credit union and have them fax over new paperwork, and it was a mess.

When I tried to open up my own yarn shop, I went to a well-respected business bank in town. They loved my business plan, and all went well until closing. We'd just signed everything when we came to a document at the end that said nothing kicked in until we'd gone through our ten grand. What ten grand? That wasn't part of the deal. Three bank personnel had missed that, so they agreed to put everything aside until it got straightened out with the manager. He called me and tried to talk me into lying to the SBA to cover their mistake. I refused to base my business on a lie, and they agreed to shred all of the paperwork, since one of their guys screwed up and no one had caught it until I did at closing.

Page after page with several people staring at you while you skim through it--that's what closing's like. No one's happy if you take forever reading it, and if your reading level isn't college level with some knowledge of accounting and contracts, I could see someone signing it, hoping everything's okay. Who's more likely to lie on the paperwork--the borrower trying to get a home to live in or the mortgage company trying to make money?

[whistle]

26. Ten to one that was a deliberate error in the hopes you would miss it

...and sign it.

The small business mortgage was a swindle where the bank thought they had you by the gonads for ten thousand dollars! Free enterprise means freedom to larceny!

[knitter4democracy]

28. Oh, I know. No one was happy when I put the brakes on it all.

The bank manager was really nasty about the business loan. They'd agreed to 100% financing (this was a few years back before they all stopped that practice), all of my paperwork said 100% financing, but apparently the SBA'd said no and no one caught it. The idiot who signed that contract with the SBA had neglected to tell my loan officer what he'd signed or anything. I was so disgusted by the incompetence on all levels there that I ran away from the whole thing. The manager actually wanted to loan us the ten grand, wait for disbursement, and then have the SBA loan pay back that loan at disbursement. Problem was, I'd just signed nine pages of 8pt. font of all the ways the SBA could take my house, and I was pretty sure that scam was on there somewhere.

The credit union usually gets everything right. I have no idea why they sent the wrong paperwork or why it was missed by everyone.

[JuniperLea]

27. Where are all those signed "truth in lending" statements?

Every time I've ever acquired a mortgage or a re-fi, I signed one.

I think people are just plan stupid to go with a stated income!! I think the banks were stupid for making funds available to people who really didn't qualify.

I think there is plenty of blame to go around.

[whistle]

31. Already garbled in the legal language and exception clauses

...which clutter these contracts, page after page after page, all requiring a signature and/or initials.

[JuniperLea]

35. I'm no lawyer...

And I read them all. What I didn't understand, I asked about. That's called being fiscally responsible. Anyone who enters into an agreement they do not understand is no doubt going to get exactly what they asked for, whether they realize it or not.

[whistle]

43. Most of us are not lawyers and also, we do not enter into that many long term

...contractual agreements in our lifetimes, what perhaps three, four homes, maybe an automobile every three to five years, maintenance contracts, credit cards, replacement appliances under warranties. Sure, we should read those agreements, but most people operate under the assumption that they are pretty much all the same and the last automobile purchase agreement I signed stretched out for 10 feet of small print and most other consumer type agreements follow that same kind of format. You just know they are filled with all sorts of legal language which are for the benefit to the seller not protection for the buyer. My last big purchase was my automobile in 2003 and I actually signed my mortgage back when Clinton first took office and made mortgage rates much lower after Bush Sr pulled that same shit in his presidency, back shortly after February-March 1993.

My guess is that under Bush II things have become much worse for buyers and far easier for sellers ands lenders to take advantage of buyers.

[Froward69]

40. Thank you for this

Countrywide wants me to refi to a lower rate but wont send me the paperwork to verify. I am happy with my current loan 30yr fixed. I am mustering princeipal payments now. after doing the math i just realized that ill be saving just as much as if I refi. without the extra debt and without the prepayment penalties.

[whistle]

46. Sure, they'll suck you into one of their ARMs, 30 days after you sign they will

..sell that paper to some speculative hedge fund group who will then pull out all sorts of creative ways to get you to begin this borrower's roller coaster ride, i.e. send you a letter stating after a review of your credit score, they have found you below their acceptable lower limit and thus will jack up the interest rate. You will not be able to pay off the mortgage without a substantial penalty, and thus they will have you in their grip and you will be subject to whatever they wish for you to pay until the end of the mortgage term. Consumer homeowner is screwed!!!! Go there anyway and see what the contract says. I'll bet you find that wording in there. That's the swindle and Greenspan and the republicans in Congress made that possible, and the cowards in Congress who call themselves democrats, let that happen on purpose.

This is why Congress must put in place the Homeowners and Chartered Bank Mortgage Foreclosure Protection Act at the Federal level across all states. Such resolutions have been introduced in some 12 to 15 states in the last 45 days and word must be spread across all states to get this legislation passed as soon as it can be.

[lovuian]

45. you notice Housing was the one safe place to put your money

in America ... then we went through skyrocketing prices
I know a bunch of us were going where are these people getting the money

now I can see mover uppers but then you saw the banks wanting to get in on the rising housing prices

nobody could lose as long as housing went up

:nuke:

Greenspan was very much a part of this with the easy money

[whistle]

47. That is why these blood suckers have gone after people's homes

...it has been a national swindle

[TimBean]

53. if the mortgage company broke the contract

then they are at fault 100 percent.

If the contract didn't work out for the homeowner as she planned, we'll then it's somone else's fault.

[whistle]

63. Could you elaborate please, the mortgage company sees these mortgage

...contracts as assets, that where the problem is. And thus as assets, they can do anything they want with them so they sell them to someone else not for face value, not for twice what they are worth, or even ten times what they are worth, but at a capitalized rate that could be a thousand times the face value. Why has that been allowed? That never used to be the case in chartered banking. But after Alan "Swindle-Master" Greenspan become the Federal Reserve chairman in late 1987 through when he left in early 2006 all that changed to create this huge swindle called the real estate bubble.

Now, it appears that even the most secure homeowner is vulnerable at the discretion of these big mortgage lenders. Where is the protection?

[TimBean]

77. Elaboration

I mean a mortgage is a contract. x amount of dollars will be paid every month. X can be a pre set rate, or can be related to other rates the move up and down. Who the money flows to does not matter. What matters is if what is being expected of the borrower is fully disclosed in the contract or if it is not. If not, then it is definetely fraud and the borrower is a victim.

[Mike03]

58. About Ben Stein

This is a man who is not to be taken seriously on any level. Twenty-five years ago or so he was scrambling for a job in banking and was turned down by every serious employer for reasons I won't go into. The guy is a loser. He is in the same category as Ann Coulter and that traitor who deserted Clinton and has gone on to become a "respected" political pundit in spite of having been a customer of call girls.

The housing bubble issue is incredibly important, and it's somewhat complicated because the contributing factors are various and the forces behind them rather diverse.

EDITED for discretion.

[whistle]

75. Absolutely and the foreclosure crisis involving millions of current home owners is

...very real as well. It is coming and there are no firewall protections in place and entire communities will be impacted at a level not seen in the country since the great depression of 1929 to 1933. Since the current Federal Reserve Chairman helicopter Ben believes the solution is to drop hundreds of billions of dollars from helicopters down onto America's front lawns, we also face hyperinflation of the U.S. dollar on the level of the German Wiemar Republic between 1921 to 1923 when the Deutschmark became worthless and a wheel barrow full of money would not buy a loaf of bread.

[spanone]

60. gov't oversight has been gutted in every industry thanks to junior

george's administration allowed this to happen

[whistle]

64. Yep!

[mtnester]

62. We have had ARM's throughout the years, as well as fixed rate mortgages

we usually stayed on top of our ARM's...we got a little busy/lazy last year and our payments went up $200 a month, but that was our fault and we refinanced to fix that...However, what I do not understand on the OP story...how is the HELL did she get to $2700.00 a month on ANY legal rate on a borrowed amount of $110,000.00? I mean, I know what we are mortgaged on, and what the current ARM rate is on it, and it is nowhere NEAR that, although our financed rate is well above the person in the story.

I must be stupid to not understand how getting to that kind of monthly rate on that amount financed can be anything but predatory and beyond what is legal.

[whistle]

67. Well, it has to have been a worse case scenario which unfortunately is not explained

...but I would suspect that she might have had been charged cash penalties which she could pay, so those were rolled into the principle along with added fees and perhaps even interest, maybe she lost her job and needed cash to live on as well, that was advanced and again rolled into the principle, and then her credit score went down, thus allowing the lender to automatically adjust the interest rate upward to some large usury level like 18% or 22% which of course no normal homeowner would ever expect and there you go, along with legal fees, yes I can imagine an impossible scenario like that on the most vulnerable. How would an individual stop that once they are hooked into it? Even bankruptcy costs several thousand dollars to file, an amount that many of us today would be hard pressed to come up with. In larger areas like NYC, LA and Chicago, the lawyers are much more expensive and so those filing fees could be in the $5k+ range, so you see that these people are helpless.

I can see this happening to many millions of Americans in the coming months. What about those troops over fighting Bush's Stupid War in Iraq and Afghanistan, how many of those families are now exposed to being at risk of losing their homes? There is no provision for any of these people who might have signed into such mortgages thinking they would go do their patriotic duty, win the war and be home. Now they are seeing the war dragging on into and endless, hopeless situation and can not do anything to protect their families from being evicted. More subprime victims and there are a lot of them.

[distantearlywarning]

68. I don't get that either.

We have about a 100K FHA loan, and our mortgage payment is in the $600 range at 6.5%. Is her rate like 18% or something?

[KoKo]

69. Lots of Blame to Go Around...but we all know there's NO Consumer Protection under Bushie/Fascists

like what was put in after the 70's where the "Truth in Lending Laws" were put in place to stop the abuses like are accounted in the OP's Article.

YES...the WHOLE WHORE MEDIA...told People...GET YOUR MORTGAGE WHILE IT'S HOT! No MONEY DOWN...REFI...! REFI!!! FEFI!

Now folks on this thread want to BLAME THE CONSUMER? After what we've seen under BUSH...you WANT TO BLAME THE CONSUMER for the HYPE? Folks are working two and three jobs...families are very different and so is the education level in America which has been sold CREDIT CARD DEBT///DEBT/DEBT is GOOD! by EVERY MEDIA OUTLET!

And, there are folks here who blame those who didn't have the expertise to READ? You've gotta be KIDDING ME! BLAME THE VICTIM and not the PERP of the CRIME! Makes me sad to read through this thread for those who BLAME/BLAME/BLAME... Not realizing that Bush II has TAKEN AWAY THE SAFE GUARDS all of US BACK THEN MANANGED TO GET INTO LEGISLATION! How quickly we forget what has gone before and those who worked for Consumer Protection...and those who don't support BUSH ...swallow the REPUG LINE...of BLAME THE IDIOT VICTIM...because they were stupid or uneducated for not READING THE CONTRACT.

Makes me :puke: