While in the airport today, I picked up the WSJ and saw this article.

 

To be clear, in NKY this house is probably a $100k house MAX. Its really small in an average neighborhood. $570K???? Yikes.

 

The article said the family grossed about $90k per year yet their mortgage was $38k per year and would go up to $50k per year after 2 years. That does not include the $6k per year in property taxes.

 

Why do people live in SoCal?

While in the airport today, I picked up the WSJ and saw this article.

 

To be clear, in NKY this house is probably a $100k house MAX. Its really small in an average neighborhood. $570K???? Yikes.

 

The article said the family grossed about $90k per year yet their mortgage was $38k per year and would go up to $50k per year after 2 years. That does not include the $6k per year in property taxes.

 

Why do people live in SoCal?

 

I was thinking the same thing. I have customers in New Jersey and they talk about the cost of living around the city. It's insane!!!

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.

These people know. It is clearly stated to them and they signed on the dotted line even before closing. That is what disclosures are for. This information MUST be made clear to them. Many people this this happened to were just glad they were able to get a house with a 540 credit score and didn't worry about what would happen with it adjust after 2 or 3 years. I blame the market for most of the problems that are happening right now. They are lowered the standards and allowed these people to get loans they couldn't pay back.

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%...

It all depends on the LIBOR and it is impossible for it to jump that much in a year. The most in can go up in a year is 2%.

It all depends on the LIBOR and it is impossible for it to jump that much in a year. The most in can go up in a year is 2%.

 

Some people who got loans in 2004 at 7% are now paying 13%...

Some people who got loans in 2004 at 7% are now paying 13%...

Yes now they might be but I thought you meant a one year jump.

These people know. It is clearly stated to them and they signed on the dotted line even before closing.

 

"Clearly" may be a bit misleading.

"Clearly" may be a bit misleading.

It is if you read what you are signing your name too but I know what your saying.

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.

 

Mex- your house is too often looked at as your biggest investment. Yes if you live in an area where you can gurantee appreciation but to me a house is one of my biggest expenses. YOu need to take into consideration not just the monthly mortgage payment but also the taxes and insurance that come along with it. You also need to take into consideration things like water usage, sanitation, maintenance, slush fund for repairs, etc.

 

Too many borrowers do not look at it like this, they go to a lender and say, I want this house because I thinnk I can afford this monthly house payment. Well, maybe they can but they can't afford the other things that go along with it. Not to mention little Johnny's school fees :mad: , dance tuition, soccer fees, FOOD, car insurance, credit card bills, etc. This is where the "Double Digits" (IQ below 100 in case you didnt get it) come into play. This is where the Mortgage lender needs to be a little more scrupulous in what product they put them into. Trust me, the minute I hear my customer say hello on the phone when I call them I can tell whether or not they are going to need an education on financing or whether they are knowledgable and understand.

 

One other misconception is that all folks that are Sub Prime Borrowers are stupid or don't have high paying jobs, etc. This is absolutely WRONG. I have done Sub Prime loans for Doctors who earn upwards of $500K a year as well as CEO's, yes CEO's of companies. Its hard to believe but sometimes I think when you make so much money you get this mindset that the bills can be paid when I want to pay them. Too many people do not understand how important your credit rating is and how it is determined.

 

My kids are in a great school system learning about US History, doing pre-calc, etc but one thing they do not learn and I will drill into their heads as they get older is how important credit is and how keeping your nose clean and not drowning in debt will get you a step ahead of the next person. It will also get you cheaper rates when you need to borrow as well a feeling of power.

These people know. It is clearly stated to them and they signed on the dotted line even before closing. That is what disclosures are for. This information MUST be made clear to them. Many people this this happened to were just glad they were able to get a house with a 540 credit score and didn't worry about what would happen with it adjust after 2 or 3 years. I blame the market for most of the problems that are happening right now. They are lowered the standards and allowed these people to get loans they couldn't pay back.

 

Great point Hammer- Most borrowers will tell me when they get the GFE's (good faith estimates) that they don 't care what it says. We are just happy to get pre-approved. I generally will inform them that they need to understand what the terms are but they are not obligated to the terms until the loan is at the closing table, they sign and the recision period runs its course. This is why they have a 3 day recision period as well as issuing the GFE on the day the credit is pulled to determine a loan product.

 

Look, 2-3 yrs ago when the rates dropped to 4.5-5% (for conforming borrowers) and Sub prime borrowers were getting 6.25-7% they were dancing jigs and jumping into loans that actually were feasible. Taking on adjustible rate mortgages was their own stupid fault because that is where the market is getting killed. Folks that cannot make the payments once they adjust.

 

Lets not forget several other factors that go into Foreclosures. The demise of the family (Divorce), Loss of Job, Drug addiction(out of control still in our society, Meth, Oxycontin, etc), keeping up with the Jones' and drowning in debt(just throw it on a credit card and worry about it later, get little Susy the Abercrombie clothes, IPOD, T-Mobile, etc). Purchasing the Caddilac Escalade and GMC Yukon so I can have a $600 and $700 car payment on a depreciating asset. These are all factors that will never go away and play a huge part in people losing their homes. Which in turns kills the housing market.

 

Ok, I enough on this for today. I gotta sell something !!!!

It is if you read what you are signing your name too but I know what your saying.

 

I work with car dealers and they catch a lot of crap. There are some that are not the best when it comes to business practices but as a whole they're great businessmen and women. This mortgage industry is right up there if not having surpassed the car guys.

 

Too many borrowers do not look at it like this, they go to a lender and say, I want this house because I thinnk I can afford this monthly house payment. Well, maybe they can but they can't afford the other things that go along with it. Not to mention little Johnny's school fees :mad: , dance tuition, soccer fees, FOOD, car insurance, credit card bills, etc. This is where the "Double Digits" (IQ below 100 in case you didnt get it) come into play. This is where the Mortgage lender needs to be a little more scrupulous

 

I was in a chainsaw accident years ago and I can still count on one hand the number of brokers who are going to say "hold on, my friend, are you sure you're taking everything into account? Are you sure that this mortgage isn't too big?"

 

Lying on the chainsaw part - not the second part.

It is if you read what you are signing your name too but I know what your saying.

That's the whole problem. Many people have no idea what they're reading, let alone signing.

I work with car dealers and they catch a lot of crap. There are some that are not the best when it comes to business practices but as a whole they're great businessmen and women. This mortgage industry is right up there if not having surpassed the car guys.

 

You are making a blanket statement here. Yes there are shady Mtg brokers out there but educating yourself and questioning their shady practices is something that you can do to avoid getting shanghai'd by a broker. Probably the best feeling in the world is calling out a Mortgage broker or salesperson when you know your getting ripped off. Allowing yourself to get ripped off and then complaining about it is ridiculous.

 

Also, getting ripped off IMO does not include a Mortgage broker charging points on a loan. They have to eat also and they are providing a service to find you the best product available. Hiding points and disguising them as other fees, putting upsell's in the margin of an adjustable rate, changing terms and not disclosing them to the customer, that is shady.

You are making a blanket statement here. .

 

Of course I am. That's why I made the generally accepted blanket statement about the car dealers. Car dealers have nothing on mtg brokers.