Foreclosure fix faces murky future

fxashun · 04-10-2008, 10:39 AM

You are an idiot if you sign a $500k variable rate, interest only loan and didn't know your payment was gonna explode when the "real" payments hit.

highway80west · 04-10-2008, 10:46 AM

Quote:

Originally Posted by nuttyjoe

Correct, H80. There are also many things that the ordinary citizen could not and cannot control; that doesn't mean that these people are idiots or dopes. Uninformed definitely. Unfortunately, many of those uniformed are trying to climb out of a deep hole by digging it deeper! That does not; will not, and never will work!

And there are only those credit counselors, but what can they do? As I said earlier, the developers need to shoulder the blame for building the houses if they think that people can afford them.

This is pretty much getting out of control. What do the developers think when they see, say, 1/3 of the houses they built that sits empty when people could not make their payments and their house foreclosed? It is sad that the dwellers had to leave their homes and move onto a cheaper place or move in with family or become homeless.

If a community sees that a 1/3 or 1/2 of housing area sits empty, then the cities should tell them not to build until those houses become occupied, and the people who can comfortably make the payments, unless they paid in full.

That article which appeared in the USA Today newspaper last week showed the number of empty houses in a community. So say the developers plan on building another community nearby. The city of Denver should tell them not to build until maybe 3/4 or more of those houses become occupied.

I don't know, but I think congress and/or the senate really need to clamp hard on those lenders who would loan money to people who really can't afford those payments. With everything in $$$$ shooting to the moon, is it any wonder that this country could be broke? Like we should get our troops home, stop funding the war in Iraq, and help our neighbors instead?

nuttyjoe · 04-10-2008, 12:39 PM

Quote:

Originally Posted by highway80west

And there are only those credit counselors, but what can they do? As I said earlier, the developers need to shoulder the blame for building the houses if they think that people can afford them.

This is pretty much getting out of control. What do the developers think when they see, say, 1/3 of the houses they built that sits empty when people could not make their payments and their house foreclosed? It is sad that the dwellers had to leave their homes and move onto a cheaper place or move in with family or become homeless.

If a community sees that a 1/3 or 1/2 of housing area sits empty, then the cities should tell them not to build until those houses become occupied, and the people who can comfortably make the payments, unless they paid in full.

That article which appeared in the USA Today newspaper last week showed the number of empty houses in a community. So say the developers plan on building another community nearby. The city of Denver should tell them not to build until maybe 3/4 or more of those houses become occupied.

I don't know, but I think congress and/or the senate really need to clamp hard on those lenders who would loan money to people who really can't afford those payments. With everything in $$$$ shooting to the moon, is it any wonder that this country could be broke? Like we should get our troops home, stop funding the war in Iraq, and help our neighbors instead?

A good post, H80; but there is enough-more than enough- blame to spread around for the housing crisis. I do not believe we can penalize a builder for putting up new homes or developments. Part of their problems was that they did not do good research to build homes within the median income level of the area that they built in.For example: why would you build $1,000,000 homes say, on the south side of Chicago- or just off of Crenshaw Boulevard in South Central Los Angeles? Not a smart investment; I say. But not an illegal one.
Now, do banks and mortgage companies shoulder some blame also? Without a doubt. There are many people who have been steered into mortgages with extrememly high payments and harsh terms of repayment including those nasty adjustable rates. But I've not yet heard of a bank or mortgage company putting a gun to anyone's head to make them agree to these terms. They must be held to a standard that mortgage applications cannot even be submitted if the applicant's debt-to income ratio is over say, 33%.
So what can we do right now to ease the problems going on now? For starters, I would propose a forebearance for those whom are in "pre-foreclosure". If one has just fallen behind in their payments recently, and is just trying to get caught up; taking the past due amount and putting it back on the end of the loan will help the homeowner-without punishing the original lender. This forebearance would favor those whom have incomes freom employment or otherwise, and also allow time for others to sell their homes, or trade down to something more affordable if necessary before losing them on the "courthouse steps". But it keeps the money in the housing market.
Another thing I have suggested is the total abolishment of Adjustable Rate Mortgages. These instruments serve no good to anybody, as they allow one to think that their mortgage payments can be reduced. In actuality, they rarely, if ever; have. Simply, these payments have either stayed the same or risen (most likely).
I still point to financial education for the American public. Too many have not the slightest clue as to the basic financial knowledge needed in order to survive.

highway80west · 04-10-2008, 12:51 PM

Quote:

Originally Posted by nuttyjoe

A good post, H80; but there is enough-more than enough- blame to spread around for the housing crisis. I do not believe we can penalize a builder for putting up new homes or developments. Part of their problems was that they did not do good research to build homes within the median income level of the area that they built in.For example: why would you build $1,000,000 homes say, on the south side of Chicago- or just off of Crenshaw Boulevard in South Central Los Angeles? Not a smart investment; I say. But not an illegal one.
Now, do banks and mortgage companies shoulder some blame also? Without a doubt. There are many people who have been steered into mortgages with extrememly high payments and harsh terms of repayment including those nasty adjustable rates. But I've not yet heard of a bank or mortgage company putting a gun to anyone's head to make them agree to these terms. They must be held to a standard that mortgage applications cannot even be submitted if the applicant's debt-to income ratio is over say, 33%.
So what can we do right now to ease the problems going on now? For starters, I would propose a forebearance for those whom are in "pre-foreclosure". If one has just fallen behind in their payments recently, and is just trying to get caught up; taking the past due amount and putting it back on the end of the loan will help the homeowner-without punishing the original lender. This forebearance would favor those whom have incomes freom employment or otherwise, and also allow time for others to sell their homes, or trade down to something more affordable if necessary before losing them on the "courthouse steps". But it keeps the money in the housing market.
Another thing I have suggested is the total abolishment of Adjustable Rate Mortgages. These instruments serve no good to anybody, as they allow one to think that their mortgage payments can be reduced. In actuality, they rarely, if ever; have. Simply, these payments have either stayed the same or risen (most likely).
I still point to financial education for the American public. Too many have not the slightest clue as to the basic financial knowledge needed in order to survive.

Also: do the banks/lenders carefully, and I really do mean carefully, check the credit history and score of the potential borrower? Do they check and see how they are scored by Equifax, Experian, and TransUnion? I know they do. But as P.T. Barnum once said, "there is a sucker born every minute."

The lower the score, the higher the payments can be, and the higher the interest can be, if the lenders actually do loan the applicants the money. People who really want to mortgage their home should always look for a credible bank and use a fixed rate and lock it in. Wells Fargo, Washington Mutual, and US Bank come to mind. Countrywide appears to still be in a hole.

I can't envision any $1M homes in South L.A.

nuttyjoe · 04-10-2008, 01:09 PM

Quote:

Originally Posted by highway80west

Also: do the banks/lenders carefully, and I really do mean carefully, check the credit history and score of the potential borrower? Do they check and see how they are scored by Equifax, Experian, and TransUnion? I know they do. But as P.T. Barnum once said, "there is a sucker born every minute."

The lower the score, the higher the payments can be, and the higher the interest can be, if the lenders actually do loan the applicants the money. People who really want to mortgage their home should always look for a credible bank and use a fixed rate and lock it in. Wells Fargo, Washington Mutual, and US Bank come to mind. Countrywide appears to still be in a hole.

I can't envision any $1M homes in South L.A.

I wouldn't envision those homes in South L.A. myself, but it wouldn't be againt any law that I'm aware of for any builder or developer to put them there.
And yes, the lower the FICO score, the higher the interest rate. We cannot punish those whom earn more money and have a better credit history by charging them more than those without such. That doesn't make any sense.
As a loan officer years ago, I can personally assure you that more regulation is needed in this area. It is actually easier to obtain a mortgage than certain department store credit cards!
I spoke of abolishing adjustable rate mortgages. This is because I know that this is a two-sided street. It is speculation in its worst form for the homeowner (or prospective homowner).

garysher · 04-10-2008, 01:12 PM

Quote:

Originally Posted by nuttyjoe

You are very correct, Gary. The US economy does rely on credit. But that doesn't mean one should be so foolish as to purchase goods and services at usury rates.
Credit is not something to be taken lightly. It is a neccesity in today's world. Individually, we cannot worry about national politics when we purchase goods and services. We must be diligent in searching for the best terms possible; and in knowing exactly we can realistically afford in payments when using credit. This is why I'm such a strong advocate of putting financial education in school cirriculums. Our country's current financial crisis just underlines my belief in why this must be done. There are way too many things that a little education and common sense could have solved (actually prevented beforehand) for many of our citizen's financial problems.

You are absolutely right Joe but if your guidelines were followed and everyone was sensible about credit then the economy would grind to a halt!

knot_e_lady · 04-10-2008, 01:33 PM

I think a good part of the problem are unscrupulous lenders that sucker people in who wouldn't normally qualify for a home. Mortgage brokers that don't tell you, or just out flat out lie to borrowers about the realities of ARM's. So, people think they can actually own their own home, and for the first 2 years, that 5% rate looks good.

They don't tell you that after 2 years they can bump that rate 2% every six months.

fxashun · 04-10-2008, 01:53 PM

Quote:

Originally Posted by knot_e_lady

I think a good part of the problem are unscrupulous lenders that sucker people in who wouldn't normally qualify for a home. Mortgage brokers that don't tell you, or just out flat out lie to borrowers about the realities of ARM's. So, people think they can actually own their own home, and for the first 2 years, that 5% rate looks good.

They don't tell you that after 2 years they can bump that rate 2% every six months.

Yes they do, it's all in the "truth in lending" documents. If it's not there, it's illegal. And if you don't read your documents or understand your loan, it's not the banks fault. Adjustable rate mortgages are not new, illegal, nor unscrupulous. They were created for a purpose.

highway80west · 04-10-2008, 02:57 PM

Quote:

Originally Posted by nuttyjoe

I wouldn't envision those homes in South L.A. myself, but it wouldn't be againt any law that I'm aware of for any builder or developer to put them there.
And yes, the lower the FICO score, the higher the interest rate. We cannot punish those whom earn more money and have a better credit history by charging them more than those without such. That doesn't make any sense.
As a loan officer years ago, I can personally assure you that more regulation is needed in this area. It is actually easier to obtain a mortgage than certain department store credit cards!
I spoke of abolishing adjustable rate mortgages. This is because I know that this is a two-sided street. It is speculation in its worst form for the homeowner (or prospective homeowner).

And as FX correctly posted yesterday about lending companies soliciting on the web, that is not the way people should look for a lender. That creates more problems than the ad shows. As I said, if anyone wants to borrow money to remortgage or mortgage their house, they should look for a credible financial institution, not the other way around. And they should get as much information on the lender as well.

And I think the best way to go is to sit down with a loan officer, show him/her what you have in a way of credit card bills, mortgage bills, your w-2's, 1099's, etc. That may be hard work, but it is better than having to talk with someone on the phone or exchanging emails with an online lender.