I did mortgages for 8 years, it pains me to see people suffer from predatory lending, however the number of victims is considerably lower than the media tends to lead people to believe.

Earlier this year, regulators ordered subprime lenders to make such loans based on the borrower's ability to afford the loan after the reset, not just for the initial two years, as was the common practice. That change, along with tighter guidelines from rating agencies and risk-aversion among investors, has recently prompted major subprime lenders to stop making 2/28 loans. Instead, they are making more subprime loans that carry a fixed rate for at least five years, as well as ones that hold down payments by stretching the payments over 40 years instead of 30.

 

Here's what I don't get. People are inherently stupid. The Government knows this. Why weren't the subprime loans regulated earlier than this year. Analysts had to see this as a distinct possibility when the market was booming, due in major part to these loans. It's irresponsible for lenders to assume that after 2 years, a client's credit (not to mention income) will increase enough to qualify for a fair loan. They should have looked to the 28 year portion, it shouldn't have taken regulation. This is the borrowers fault, but this is also the lenders fault for not cosidering the future of his/her company. Either way, it damages the industry and at some point the industry regulators must set guidelines that prevent stupid people from making SUCH stupid decisions.

Earlier this year, regulators ordered subprime lenders to make such loans based on the borrower's ability to afford the loan after the reset, not just for the initial two years, as was the common practice. That change, along with tighter guidelines from rating agencies and risk-aversion among investors, has recently prompted major subprime lenders to stop making 2/28 loans. Instead, they are making more subprime loans that carry a fixed rate for at least five years, as well as ones that hold down payments by stretching the payments over 40 years instead of 30.

 

Here's what I don't get. People are inherently stupid. The Government knows this. Why weren't the subprime loans regulated earlier than this year. Analysts had to see this as a distinct possibility when the market was booming, due in major part to these loans. It's irresponsible for lenders to assume that after 2 years, a client's credit (not to mention income) will increase enough to qualify for a fair loan. They should have looked to the 28 year portion, it shouldn't have taken regulation. This is the borrowers fault, but this is also the lenders fault for not cosidering the future of his/her company. Either way, it damages the industry and at some point the industry regulators must set guidelines that prevent stupid people from making SUCH stupid decisions.

 

 

Mex, the bolded part is where you and I part company. We have way too many laws that are designed to protect stupid people from doing stupid things. We build such a safety net for them, they don't have to think, thus they can continue to be stupid. And then people think every deal, every salesman is legit because surely the govt wouldn't let some unscrupulous banker make them a loan. We'll never have enough laws (I hope and pray) to stop every unscrupulous person out there. We have lost the need for personal responsibility and accountability in this country because the govt (in all three branches) has decided they have to look out for the stupid and that pops my cork. My dad actually has a fire arm ( a pistol I think) that has a stamping on the barrel that says something to the effect of "Read owner's manual before shooting". Well, duh. No kidding. The gun manufacturer probably did that to try in protect itself from a lawsuit by some stupid gun owner that didn't know he wasn't supposed to aim it at himself when he pulled the trigger. In my opinion, the societal gene pool would have been improved if such a gun owner hadn't read the owner's manual.

 

A little common sense goes a long way. Rockmom, I commend you for using common sense. It's a shame that common sense isn't all that common.

Mex, the bolded part is where you and I part company. We have way too many laws that are designed to protect stupid people from doing stupid things. We build such a safety net for them, they don't have to think, thus they can continue to be stupid. And then people think every deal, every salesman is legit because surely the govt wouldn't let some unscrupulous banker make them a loan. We'll never have enough laws (I hope and pray) to stop every unscrupulous person out there. We have lost the need for personal responsibility and accountability in this country because the govt (in all three branches) has decided they have to look out for the stupid and that pops my cork. My dad actually has a fire arm ( a pistol I think) that has a stamping on the barrel that says something to the effect of "Read owner's manual before shooting". Well, duh. No kidding. The gun manufacturer probably did that to try in protect itself from a lawsuit by some stupid gun owner that didn't know he wasn't supposed to aim it at himself when he pulled the trigger. In my opinion, the societal gene pool would have been improved if such a gun owner hadn't read the owner's manual.

 

A little common sense goes a long way. Rockmom, I commend you for using common sense. It's a shame that common sense isn't all that common.

 

You would appreciate http://www.darwinawards.com/. By the way, I understand and agree with you to a point. I understand the threat of the Government's hand getting heavier by creating a law for every occassion. I just get frustrated, b/c it seems that stupid people need something to protect themselves from themselves. I mean, this family made $90,000, combined, and bought this house while owing $700 for their cars. What??? What makes a mortgage lender say, "Man, this is a great client."? At what point does the buyer say, "Man, that tree over there might not grow dollar bills all year long."? Here is where I was coming from, these idiots deserved each other, and if they could take down themselves in a vacuum, great. I'll get some popcorn and watch it. My problem is that this hurts the whole economy and my investments. That's the part that burns me. We need to protect the idiots so that they don't hurt us.

^^Again, many people were taken advantage of by unscrupulous lenders...a lot of fly by night shops set up to rake in easy money in overzealous refis...people who don't believe there was a lot of shady predatory lending going on aren't seeing the whole picture...

 

Regulators can and do set guidelines to protect the consumer, as they do in every other industry as well...

You would appreciate http://www.darwinawards.com/. By the way, I understand and agree with you to a point. I understand the threat of the Government's hand getting heavier by creating a law for every occassion. I just get frustrated, b/c it seems that stupid people need something to protect themselves from themselves. I mean, this family made $90,000, combined, and bought this house while owing $700 for their cars. What??? What makes a mortgage lender say, "Man, this is a great client."? At what point does the buyer say, "Man, that tree over there might not grow dollar bills all year long."? Here is where I was coming from, these idiots deserved each other, and if they could take down themselves in a vacuum, great. I'll get some popcorn and watch it. My problem is that this hurts the whole economy and my investments. That's the part that burns me. We need to protect the idiots so that they don't hurt us.

 

 

I understand where you are coming from. But don't fret too much about this hurting your investments. The market will bounce back. About the only way you could get burnt in the short term is if you were looking to take out a sub prime loan (which as gryche pointed out, are kind of hard to get these days) and if you were, it probably is a blessing that you can't get such a loan. Assuming you are young, your investments will be fine in the long haul. If you are old and close to retirement, then you should already be in investments (good conservative fixed rate paying bonds or solid dividend paying stocks) that are somewhat immune to the effects of this stuff.

 

And by the way, I love the site for which you provided a link.

 

And you can only fall to a predator if you allow yourself to be prey.

^^Again, many people were taken advantage of by unscrupulous lenders...a lot of fly by night shops set up to rake in easy money in overzealous refis...people who don't believe there was a lot of shady predatory lending going on aren't seeing the whole picture...

 

Regulators can and do set guidelines to protect the consumer, as they do in every other industry as well...

 

Balogne. Lenders are out to make money, and they can do as they please within the limits of the law. Is it ethical??? No. Is it legal??? It walks a fine line, but if you have a claim, bring suit. A house is an enormous investment...ENORMOUS. If a person does not take into account all scenarios before getting into the investment, than they allowed themselves to be taken advantage of. The lending was shady, and it was predatory, however, there would not be any victims if the borrowers had done their homework. If it doesn't feel right, and you don't know what you are looking at, don't sign it.

Balogne. Lenders are out to make money, and they can do as they please within the limits of the law. Is it ethical??? No. Is it legal??? It walks a fine line, but if you have a claim, bring suit. A house is an enormous investment...ENORMOUS. If a person does not take into account all scenarios before getting into the investment, than they allowed themselves to be taken advantage of. The lending was shady, and it was predatory, however, there would not be any victims if the borrowers had done their homework. If it doesn't feel right, and you don't know what you are looking at, don't sign it.

 

I agree with you, again...just pointing out consumers aren't entirely responsible for this mess...mortgage lenders have paid millions in settlements for breaking the law...even our very own AG Greg Stumbo prosecuted one of the biggies on behalf of some Kentucky citizens and got a very big settlement...

I agree with you, again...just pointing out consumers aren't entirely responsible for this mess...mortgage lenders have paid millions in settlements for breaking the law...even our very own AG Greg Stumbo prosecuted one of the biggies on behalf of some Kentucky citizens and got a very big settlement...

 

And if they break the law, they should pay huge fines. If you reread my posts, you see that I blame both sides. I feel upset, not b/c someone was taken advantage of, but b/c it affects the economy in which I live.

And if they break the law, they should pay huge fines. If you reread my posts, you see that I blame both sides. I feel upset, not b/c someone was taken advantage of, but b/c it affects the economy in which I live.

 

:thumb:

Balogne. Lenders are out to make money, and they can do as they please within the limits of the law. Is it ethical??? No. Is it legal??? It walks a fine line, but if you have a claim, bring suit. A house is an enormous investment...ENORMOUS. If a person does not take into account all scenarios before getting into the investment, than they allowed themselves to be taken advantage of. The lending was shady, and it was predatory, however, there would not be any victims if the borrowers had done their homework. If it doesn't feel right, and you don't know what you are looking at, don't sign it.

 

 

Why is it even unethical? If the paperwork clearly says that your loan payments will be X for the first two years, but will go to 2X thereafter and you can read, what's unethical about that (and if you can't read, you had no business signing the paperwork anyway) ? If the mortgage broker that tells you not to worry about the 2X payments because you'll be able to refi in two years because you'll have built up some equity due to the property values going up, I don't consider that unethical either unless the mortgage broker could have looked into a crystal ball and seen the problems coming in the real estate market. Heck, in most markets at the time a lot of these loans were made, it was probably logical thinking by the mortgage broker that property would continue to appreciate. But for a borrower to count on that happening, to the point the property owner could lose their home if it didn't happened, just isn't very bright in my opinion.

Why is it even unethical? If the paperwork clearly says that your loan payments will be X for the first two years, but will go to 2X thereafter and you can read, what's unethical about that (and if you can't read, you had no business signing the paperwork anyway) ? If the mortgage broker that tells you not to worry about the 2X payments because you'll be able to refi in two years because you'll have built up some equity due to the property values going up, I don't consider that unethical either unless the mortgage broker could have looked into a crystal ball and seen the problems coming in the real estate market. Heck, in most markets at the time a lot of these loans were made, it was probably logical thinking by the mortgage broker that property would continue to appreciate. But for a borrower to count on that happening, to the point the property owner could lose their home if it didn't happened, just isn't very bright in my opinion.

 

They didn't say your payments would go to 2X...and a lot of people were not warned...many people didn't realize their rate could go from 7% to 13%...

http://www.kentucky.gov/Newsroom/ag/ameriquestrestitution.htm

 

Ameriquest paid $300MM in restitution in July....so that was in the works even before it got this bad...

 

A result of the uninformed meeting the unscrupulous...

 

Under the settlement, more than 481,000 borrowers who were customers of Ameriquest Mortgage Company, Town and Country Credit Corporation, and AMC Mortgage Services, Inc. (formerly known as Bedford Home Loans) between January 1, 1999, and December 31, 2005, are eligible to receive the restitution payments. Restitution payments nationwide are expected to total over $300 million.

To clarify, most of what we are talking about here was done by non-bank lending institutions...

Why is it even unethical? If the paperwork clearly says that your loan payments will be X for the first two years, but will go to 2X thereafter and you can read, what's unethical about that (and if you can't read, you had no business signing the paperwork anyway) ? If the mortgage broker that tells you not to worry about the 2X payments because you'll be able to refi in two years because you'll have built up some equity due to the property values going up, I don't consider that unethical either unless the mortgage broker could have looked into a crystal ball and seen the problems coming in the real estate market. Heck, in most markets at the time a lot of these loans were made, it was probably logical thinking by the mortgage broker that property would continue to appreciate. But for a borrower to count on that happening, to the point the property owner could lose their home if it didn't happened, just isn't very bright in my opinion.

 

Because people are idiots. We do not know how the picture was painted to these people. I believe that a mortgage broker should explain all options, courses of action, and possible consequences. Too many times that interferes with the sale, so it gets glanced over. It isn't unethical in the sense that it was a lie, it was unethical in that it didn't educate the buyer completely. Which is there fault, but as a sales person myself, I try to paint both sides of the story. Then again, maybe they did represent all of the facts. Do not get me wrong, it is not the lenders responsibility to educate a buyer on fiscal responsibility. I just believe, and assume, that not everything was clearly explained. While it is not a responsibility legally, I find it to be one ethically. Again, I believe it is both sides fault.