This is a subject about which I have often been tempted to put pen to paper, but have shied away from it for various reasons. However, an article in a prominent Arizona newspaper recently has forced me to re-think that decision.
Once again, we are told how a young couple, trying to get ahead in this world, were duped by some big, bad lender. Apparently, they were approached by a lender who told them that he could move them into a much bigger house and that at close of escrow they would receive $20,000 in cash. The article also stated that they signed loan docs in a parking lot and that they were not notarized at that time. The article then goes on to state that even though they could not afford the payments, the lender “promised” he would help them refinance within a couple of months to obtain a more affordable payment. Well apparently the lender subsequently went missing, and now, boo hoo, they cannot keep up the payments. Well, cry me a river!
There were so many warning signs in the above scenario; what could possibly have caused the buyers to overlook them. Oh right, that perennial standby-greed.
I am reminded, in this case, of the many people who are duped by Nigerian internet scams who end up sending vast sums of cash to those predators. They whine how they were taken advantage of, when in many cases the scammers openly admit that they are taking money that is not theirs, and need your “help”. In both instances the “victims” are overwhelmed by their own greed.
Unfortunately, it is a result of the general sense of entitlement that many people possess today. Do you really “own” a home if you are putting no money down? Do you really “own” a home if you get cash back at closing as legal as that may be and therefore have nothing invested in said home? We make it too easy for people to buy homes they cannot really afford, which makes it too easy for them to walk away when times get tough. This is one of the reasons the real estate market in Phoenix, indeed in the U.S.A., finds itself in the perilous state it is today.
Do not misunderstand me, banks are extremely willing co-conspirators in this whole scheme. Watch how they scream for federal assistance as their greed comes home to roost.
Ultimately, if a deal sound fishy, it probably is. If it seems too good to be true, it probably is. Exercise some restraint and take responsibility seriously.
Unfortunately, for some folks who crave the ultimate American dream of homeownership, their zeal and greed impedes their ability to exercise caution, turning the whole exercise into a nightmare.
Please act carefully and responsibly.
Showing posts with label Predatory Lending. Show all posts
Showing posts with label Predatory Lending. Show all posts
Monday, October 29, 2007
Tuesday, March 20, 2007
Responsibility in Home Loans Goes Both Ways
Whilst watching the news on a local Phoenix TV Station recently, I came across a human interest story about a couple who were in danger of losing their Phoenix home as they could not afford the payments. In this case, the homeowners had an interest rate of 9%, we will get to that later, and the mortgage broker who had arranged the loan in the first place had told them that would refinance after a few months in order to get lower monthly payments.
Firstly, they did not have great credit, plus they had no down-payment, hence the aforementioned interest rate. Also, given those circumstances, they were gambling that home prices in the Valley of the Sun would go up, of course they didn’t, which would enable them to refinance with a better loan-to-value ratio, they couldn’t. The fact is, they could not really afford the payments in the first place, and were using their meager savings to supplement them until re-financing. It was a house of cards, and it all came tumbling down. Yes, it is sad, but also quite predictable. If you are paying 9% in a 6% world something is not right. If you cannot afford the initial payments don’t take the loan. Do not take an adjustable rate loan with a low teaser start rate if you know you will not be able to afford the payments when the honeymoon period is over. Do not gamble that your home will increase in value in the next 6-12 months. You don’t know! Nobody knows. Some, but not all, lenders are quite willing, and ethically-challenged enough, to tell you anything you want to hear, in order to get you to sign on the dotted line. This is not an Arizona specific problem, it could happen anywhere.
The second case involved a gentleman in California who re-financed his home in order to finance his home-based used car business. The lender failed to supply, as required by California law, the loan documents translated into the language used predominantly in the negotiation. The borrower claimed he was duped, however he did admit an English speaking friend had read and translated the terms of the loan to him. Now he could not afford the payments and was looking to lay off the blame. In this case, I know for a fact that in order to be a car dealer in California, you must (amongst other requirements) have a storage facility for at least four cars, not at your residence. It must be completely separate. My point is, in this case, the borrower was quite willing, and ably abetted by the lender, to circumvent the rules while it suited his agenda. When he could not make the payments, he cried foul.
In both these cases, the borrowers played a little loose with the rules, or ignored early warning signs in pursuit of their goals. The will both certainly pay a price in the future because of bad credit, late payments and maybe even foreclosures.
Studies have shown that many times ethnic minorities end up paying more for their home loans than other folks. What the P.C. police do not tell you is that in most of those cases the victims were taken advantage of by people of the same ethnicity, that is to say unscrupulous people taking advantage of their own. In the end we are responsible for our actions, but remember everything must be in writing. If the broker “said”, then have him put it in writing. If he won’t, well you know the rest.
Firstly, they did not have great credit, plus they had no down-payment, hence the aforementioned interest rate. Also, given those circumstances, they were gambling that home prices in the Valley of the Sun would go up, of course they didn’t, which would enable them to refinance with a better loan-to-value ratio, they couldn’t. The fact is, they could not really afford the payments in the first place, and were using their meager savings to supplement them until re-financing. It was a house of cards, and it all came tumbling down. Yes, it is sad, but also quite predictable. If you are paying 9% in a 6% world something is not right. If you cannot afford the initial payments don’t take the loan. Do not take an adjustable rate loan with a low teaser start rate if you know you will not be able to afford the payments when the honeymoon period is over. Do not gamble that your home will increase in value in the next 6-12 months. You don’t know! Nobody knows. Some, but not all, lenders are quite willing, and ethically-challenged enough, to tell you anything you want to hear, in order to get you to sign on the dotted line. This is not an Arizona specific problem, it could happen anywhere.
The second case involved a gentleman in California who re-financed his home in order to finance his home-based used car business. The lender failed to supply, as required by California law, the loan documents translated into the language used predominantly in the negotiation. The borrower claimed he was duped, however he did admit an English speaking friend had read and translated the terms of the loan to him. Now he could not afford the payments and was looking to lay off the blame. In this case, I know for a fact that in order to be a car dealer in California, you must (amongst other requirements) have a storage facility for at least four cars, not at your residence. It must be completely separate. My point is, in this case, the borrower was quite willing, and ably abetted by the lender, to circumvent the rules while it suited his agenda. When he could not make the payments, he cried foul.
In both these cases, the borrowers played a little loose with the rules, or ignored early warning signs in pursuit of their goals. The will both certainly pay a price in the future because of bad credit, late payments and maybe even foreclosures.
Studies have shown that many times ethnic minorities end up paying more for their home loans than other folks. What the P.C. police do not tell you is that in most of those cases the victims were taken advantage of by people of the same ethnicity, that is to say unscrupulous people taking advantage of their own. In the end we are responsible for our actions, but remember everything must be in writing. If the broker “said”, then have him put it in writing. If he won’t, well you know the rest.
Subscribe to:
Posts (Atom)