promised to lower their mortgage payments by $100 a month. Instead, the couple's mortgage doubled

[NNN0LHI]

http://www.suntimes.com/business/863649,CST-FIN-mort27.article

Attorney general's lawsuit alleges deceptive lending practices by mortgage broker

MORTGAGE CRISIS | 'I WANT MY HOUSEBACK'

March 27, 2008

BY FRANCINE KNOWLES [e-mail]

Retirees Ozell and J.W. McBee are in disbelief. They never expected to be forced out of the home where they have lived with their three teen grandchildren for years, and they're left clinging to hope that an Illinois attorney general office's lawsuit will help restore their shattered world.

That's where they found themselves after agreeing in 2006 to refinance their home mortgage with Advantage Mortgage Consulting, a Chicago-based company that promised to lower their mortgage payments by $100 a month. Instead, the couple's mortgage doubled, they couldn't afford the payments on their fixed income and that led to foreclosure on their South Side home, they said.

"I never would have believed that a human being could do another human being the way Advantage Mortgage did us," J.W. McBee said Wednesday.

Attorney General Lisa Madigan filed a lawsuit Wednesday against the company and its president, Robert Enright, accusing them of engaging in deceptive lending practices.

"Those people don't deserve to be in business," J.W. McBee said. "They are hurting people. They are destroying people."

[RB TexLa]

1. You know some smart lawyers starting out without any clients could do very well

by advertising "before you sign a mortgage contract bring it to me." Offer a $50 review and then let the people know what everything is, what could be hidden, best and worst case scenarios and such.

[sergeiAK]

2. Or people could just read the document themselves

At the age of 19, I could read, understand, and explain the terms contained in a mortgage contract. It's really not that hard. If you do basic research (it's called google, people), financial documents become much clearer and easier to comprehend.

OTOH, that does sound like a decent business opportunity.

[RB TexLa]

3. True, but there are many people who are not intelligence enough to do that

this country is full of ignorant.

[SharonAnn]

4. Please remember that half the population is below the median in IQ.

That's the definition of "median". The word "average" is often used when we really mean median.

And, those of us on this board are probably significantly above the median.

Couple that with what seem like thousands of papers to sign at a closing, with no time to read them (and I'm a very fast reader) and it's easy to see how people can be defrauded.

What's criminal is that we permit it.

[flvegan]

5. I don't know what state you're regarding that has such simple loan papers.

As a finance major who has spent the last 15 years in the title insurance biz looking at these documents day in and day out, I still had to read my mortgage and note twice before signing.

I think that many folks are going to gloss over after trying to read and comprehend 30 pages of legal boilerplate BEFORE even getting to the Prepayment Penalty Rider, etc. It's not that people are stupid, it's that the docs are written in legalese meant to be somehow ironclad in court.

In the long run, it'd be cheaper and safer to pay a lawyer to sit down with you for a couple hours and go over it. Hell, if it's big money, have him/her attend the closing with you.

[sergeiAK]

7. I had to read it a few times too

But isn't that just good practice when signing a contract dealing with a substantial portion of your life savings? Just seems logical that you should be absolutely, 100% sure that it means what you think it means before signing. If you aren't sure, consult a pro. It's the wise thing to do if you do not possess the ability to understand

Really, isn't 3-10 hours (or ~$150) a rather small amount of time (or money) to spend analyzing a potentially life-changing decision? Or am I just too used to long/complex paperwork?

"I think that many folks are going to gloss over after trying to read and comprehend 30 pages of legal boilerplate BEFORE even getting to the Prepayment Penalty Rider, etc. It's not that people are stupid, it's that the docs are written in legalese meant to be somehow ironclad in court."

If you're not willing to take the time to either read and understand, or, alternatively, consult an unbiased professional, you are stupid. Period. If you don't understand, DON'T SIGN THE DAMN THING. It really can be that simple. But people get dumb, and figure that the lender wouldn't screw them, and you end up with situations like this.

[truth2power]

6. You will please excuse my testiness in this regard...

but I recently had the misfortune to be in a discussion with a young lady (early 20's I'd guess) who works for a debt collection agency. No, she wasn't trying to collect a debt from me. We happened to both be present at a community gathering.

What started out as an attempt, on my part, to engage in small-talk, ended up providing me with some truly appalling insights.

This young lady seemed to believe that she had the world by the tail, and, IMO had an attitude of contempt toward anyone who wasn't her . As the conversation turned, somehow, to the sub-prime mortgage mess, she opined that anyone who was facing foreclosure had brought it on themselves and that they were just "stupid" (her words) for not reading their mortgage contract more carefully.

I replied that most contracts are, by their nature, filled with "legalese" and are difficult for the average layperson to understand. Thus the need for lawyers, versed in contract law, to parse the language and make it understandable to their clients. This is even more the case given that the companies involved in the sub-prime debacle were promoting what was, in fact, a giant Ponzi scheme, and were certainly not motivated to provide transparency in their contracts. Nevertheless, she persisted in her initial position.

Well, on and on it went. When I expressed regret that there are so few social programs anymore and that individuals who find themselves in dire straits, financial or otherwise, ought to have some assistance, she said that there were too many social workers in this country and that the lack of programs was a way of "thinning the herd".

By this time I was so traumatized that I shortly took my leave. I don't know this young lady, and I probably will never encounter her again. But I would welcome the opportunity to tell her that she should pray to whatever gods exist that she never, for example, gives birth to a child who has special needs and finds that there are no "programs" to provide assistance.

Furthermore, since spending one's days harrassing people to pay their debts is not exactly a "career track", I hope she doesn't find herself on the street with no income, no unemployment insurance and no golden parachute when the company she works for decides to downsize to increase their profit margin. She might then reflect on the necessity for a "social contract" in any civilized society to provide help to those in need.



* * * * *


I realize that I have digressed, somewhat, in my response to you, which was intended to say that people cannot always be left to their own devices, especially in the present economic climate, where corporate predators abound. Note the thread on DU's homepage today:

Chase mortgage memo pushes 'Cheats & Tricks'
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3244586


Oh, and I agree with you about the business opportunity for new attorneys.

[sergeiAK]

11. Eh, I'm used to it

You're quite nice compared to some.

As for that lady, she'll figure things out eventually. People always get what comes to them.

She was (partially) right about the subprime crisis though. People (borrowers and lenders both) took risks they knew they shouldn't have. The lenders made bad loans to people they should've known stood no chance of paying, and the borrowers took out loans with rates that could be adjusted at will by the lender, which (to me) means "rates are gonna rise, and quick". If your loan was "subprime" to begin with, isn't that a sign that you might want to double check the terms of it?

People need to either learn to survive on their own, or learn when they need to seek outside help. There's nothing wrong with consulting a pro when you need one. If you do neither of these, there's nobody left to blame, unless you were coerced/fraudulently enticed into signing.

As for the Chase fiasco, let the courts deal with them. Fraud is a legally-sound reason to break a contract. Here's hoping they get nailed to the wall over this.

[Froward69]

8. I am in the business

of exactly that. (landlord and real estate speculator) I do Read closing documents... and walk away when I see something slipped in, or that I do not agree with. I must say of my 20 year career I have walked away from more than a few companys that 1) slipped something in at the last minute. 2) refused to allow me time to review the closing docs before signature. 3) treated me like theirs were the best offer out there.

I am a professional who does this all the time. Those who only plan to buy the one house are those who are getting screwed, by the predatory lenders.

[sergeiAK]

13. I'm not a professional

At least in real estate. But your three conditions to walking away seem like common sense to me. Why is it unreasonable to expect an average person to either understand the document they sign, or hire an unbiased professional to explain it to them, or just walk away if something seems fishy?

If the lenders committed fraud, or coerced people into signing documents, by all means, toss them in jail. But if, as is the case in many of these situations, the borrower gambled by choosing an ARM over a fixed rate, and lost, why should the government step in?

[Froward69]

15. for joe avarage buyer

closing is SCARY! they are made to feel lucky just to have gotten to closing. walking away is easy for a seasoned vet.(like me) not so much for that first and (hopefully) only time buyer. its the predatory aspect of the lenders/brokers that needs to be addressed.

[Scriptor Ignotus]

9. the lawsuit claims that certain terms were not in the documents

so your argument doesn't mean much in this particular case. In general, you are correct. Floating rate loans are a gamble, for example, and people shouldn't be rewarded for being on the losing end of the gamble. It's a risk-reward world out there, with winners and losers.

"The lawsuit accuses the defendants of using deceptive refinancing schemes and alleges they padded loans with higher than stated fees, failed to disclose prepayment penalties and brokered adjustable-rate mortgages for consumers who thought they were agreeing to fixed-rate mortgages."

[sergeiAK]

12. If that's the case

If such allegations are true, the lender belongs in jail. Though it would be interesting to see them try to foreclose based on things not in the contract the borrower signed. A halfway competent lawyer would have a field day with such a lender, and rightfully so.

[LanternWaste]

14. My pal (a Realtor) tells me the language used in contemporary mortgage contracts

My pal (a Realtor) tells me the language used in contemporary mortgage contracts are intentionally designed to mislead and deceive the signer.

And, I imagine that since most mortgage contracts are well over 500 pages en toto, it wold be quite easy to slip in numerous deceptions.

[KharmaTrain]

10. Worse Are Those Stuck With Two Mortgages...

I just read of a couple who lost their home thanks to getting suckered into a "creative" second mortgage...they re-fied at a lower variable rate (that doubled) and also got cash from the deal with a loan attached to that that also shot up...the got snowed under and had no place to turn...other than to move in with her parents.

There are those who tried to "move-up" into bigger and better homes, thinking their old place would sell quickly and went ahead with the deal and now are stuck with paying for two places.

We still haven't begun to investigate the predatory lending and land speculation games the big banks have played that the American taxpayers are now having to cover for. It was the ultimate Ponzi scheme that went on for nearly 20 years and the greed and debt grew. The bubble has burst and nothing will be done while this regime tries to throw their fiscal irresponsibility under the rug.

It'll be interesting if Congress is forced to pass some kind of bankruptcy protection...and how the GOOP will react to it.