First off I’d like to give you a big fat flemmed filled bubububooyahhhhhhh, cough, cough from the smog filled and vacant home ridden basin of the Inland Empire in sunny Southern California. Yeah, yeah, I know the housing market is terrible here and homeowners are being foreclosed on every corner. New homes are still being built as older new homes sit vacant with for sale signs and no buyers.
I’m going to give you an insider tip here on what happened over the last few years with mortgages.
I don’t know about you but I am on the front lines daily. Fielding calls and emails from homeowners who are trying to refinance out of these toxic loans that have just adjusted 3,4,5% higher and they cant refi, they cant get a loan modification. These are the same borrowers that QUALIFIED for a REAL MORTGAGE using REAL UNDERWRITING GUIDELINES for the lenders to DETERMINE if the borrower that is APPLYING for the REAL LOAN can AFFORD that there MORTGAGE that they are APPLYING for at the BANK using UNDERWRITERS that are EMPLOYED by the LENDER to MAKE SURE that there BORROWER can PAY THEM BACK once they LEND THEM THE CASH.
You see, every loan that is originated has to be sold to the consumer before it becomes and origination. Many loans that were sold over the last few years, as you know, were adjustable rate mortgages. Consumers never say, ” Please put me in an ARM that adjusts in 2 years.” No they were “SOLD” these loans. Here was the typical sales pitch by licensed professionals. ” I know that you didn’t want an adjustable rate mortgage but that all you qualify for. But don’t worry Mr. Jones, I’ll be able to refi you in 2 years and get you into a fixed loan, no problem. This is just a band aid loan because you have tarnished credit, can’t prove income and you don’t have a dime to your name.”
Do you think these same homeowners would have been sold the loan if it went like this? ” Here’s your loan Mr. Jones. It’s and adjustable rate mortgage that will shoot through the roof in two years, your payment will double, you’ll be screwed financially, the bank will eventually foreclosure on you, ruining your credit for 7 years and your life will leave you because she’s sick of you drinking cheap scotch on their dirty linoleum floor.”
I guarantee that if that was the case then we wouldn’t be where we are at now. But what can we do? We can’t turn back time and we must look forward to solutions.
What we have here and I am sure you know is the result of bad lending practices and over speculation by real estate investors. Probably 75% of the mortgages made here over the last 2 years are 2/28′s and 100% loans. A lethal combination as we know.
OK, now that is settled. What’s some type of solution or band aid to this problem? I keep hearing you mention for homeowners to just walk away from their homes, keep their credit cards, car etc. You also claim that a rate cut by the Fed will turn things around for housing and Wall Street. Even raising housing values and turning real estate markets around.
I complete disagree with you in regards to a rate cut by the Fed. Sure it will bring some confidence to the market, but that’s about it. Once investors and Wall Street realize that the cut will not do much for the housing and mortgage crisis, then we will be in a far worse situation from before.
You see I am on the front line and have been in the real estate and mortgage industry now for 9 years I managed one of the largest mortgage brokerages in the Inland Empire and just recently jumped ships to work for one of the states leading experts on predatory lending and also foreclosure prevention. I have switched hats and I am now a paid mortgage expert and consultant for his legal cases. Yes, I know, “How ironic.” Hey, it’s better than working at Home Depot with all my buddies that actually were laid off from Home Depot because of declining sales and we both know from what.
The facts are that there are no mortgage products left with any creativity out there. There is nothing but plain vanilla loans available for homeowners that are living in a Ben and Jerry’s New York Super Fudge Chunk society. These Fannie Mae and FHA programs are the same loans that were created many moons ago for a plain vanilla society.
A rate cut for homeowners that can’t qualify for a mortgage because they don’t fit in the square hole of Fannie Mae and FHA will only cause a blip wall Street and as soon as everyone realizes that it’s much deeper than a rate cut. The market will crash like it has never seen before.
You see Jim. I am talking with homeowners everyday that can’t refinance, are upside down to the tune of $50,000-$100,000 and you know what? Theses people still want to save their homes and save their credit. Many of these homeowner are in those same 2/28′s that have adjusted. Many paid on time at their low introductory rate and as soon as it adjusted they were in trouble. It’s not that these homeowner can’t afford their homes it’s they can afford their new adjusting payment.
Homeowners that speculated and were given loans that they never should have been in will walk away or be foreclosed on. I accept that and they will deserve their fate. But just to let the other 50-75% of homeowners lose their homes and investors lose their investment is just ludicrous.
We need to push for loan modifications from lenders.
Your unpopular asset will be worth nothing if you don’t modify these loans. People can’t refinance and there is zero equity in their homes. Most can’t afford the new adjusted payment. Many will default and be foreclosed on. Most of them could have had loan workout arrangements that would have saved their homes and lenders/investors tens of thousands of dollars. But daily many more become a statistic in the foreclosure madness.
Who wins there? Where is the sense in that? How many more months can we go before it affects every homeowner?
Let’s face it. Most American homeowners are not sitting in their homes with lots of equity and cash to spare. Most are close to tapped out of the market completely. Many are in debt to their eyeballs. The house of cards keeps falling.
Please push for loan modifications Jim. Along with a Federal Reserve Rate cut. If we can organize an effort to promote this, then the collateral damage can be somewhat controlled. Take the ball from these lenders that have placed us in this mess that we are in now and run Jim. Americans needs your help and voice to get the message out. A massive loan modification campaign is the only way to save some face.
Sincerely & Respectfully,
Moe Bedard
Founder & Homeowner Advocate
LoanSafe.org
LoanWorkout.org
951-271-6283 Direct
800-734-8819
I think it’s great that the adminsstration is finally stepping up, my concerns are how will they streamline these programs in Bush statement he said in ordet to qualitfy you will need at least 3% of equity in the home. I myself did a 100% finance so and I know I don not have that much equity. My mortgage has already increased by $577 and is due to reset again 2/08 I was hoping to have least made some type of headway by then. I also signed up for NACA they talked about this great product to offer borrowers. I have so called been a member since May, paid my dues but I am not sure if i qualify for the program.
I really havent heard any good stories comeing from the NACA. Meaning success stories. I would not have all my eggs in one basket. Loan modifications are the only way.
How true, Moe. My law firm represents borrowers against the big banks, and our telephones have been ringing off the hooks (okay, that expression shows how old I am… the phones are actually making those annoying electronic ring tones all day long… I miss the sound of a real bell being hit by a small metal hammer, but I digress). Many of the callers have similar stories. They saw the equity in their home increase and wanted to use some of that equity for a remodeling project or to buy a car. The loan officer was so “helpful,” he/she was able to get them not only enough money for the project or car but a lot more cash out than they had wanted telling them not to worry because home prices are rising… plus, interest rates are so low, now is the best time to do this. While a few of these borrowers should have known better, many were not sophisticated in the real estate world and trusted the advice of these so-called professionals. Also, many did not speak English and relied on the loan officer for translation of the loan terms and documents. The huge commissions paid to these loan officers for the ARMs, the Neg Ams, and putting a hard three year prepay on the loan was nothing short of disgusting. In their defense, these predators made so much money from these loans it was probably hard to do the right thing. And, I’m sure many of these so-called real estate professionals really believed that the market would go up forever. After all, many loan officers are young adults who jumped into the business with little or no experience and were immediately handling transactions involving hundreds of thousands of dollars.
- Paul
Hey Sandy,
I too have been a member of NACA for the last few months and I went through that long class and paid my dues. You know that they actually told me i did not qualify because my mortgage was some lates on it. I am considering filing a false advertising claim against them because I discussed this with them and they said that it was not a problem. I wrote a complaint to the owner (Bruce Marks) and the Board or Directors. I want my money back and money for my time wasted. I was working on a repayment plan too with Homecomings, which is another lender that needs to be watched becuase they put Countrywide to shame, but my payment went from $847.00 to $1429.00 within 6 months and will change again in 5 months. My rate is now at 13%. It is killing us but we are still trying to keep our heads up. Good luck and I can give you NACA’s addresses if you want.
Marcus
Loan modifications are a bit tricky. A few, or maybe more than a few, years ago when the typical loan was a 30 year fixed that left 20% equity in the home, modification was allowed when the borrower hit a temporary hardship. That is, loss of a job, medical illness, or some other temporary financial setback that would likely be remedied within a few months. The lender would look to the unexpected hardship being faced and decide to forgo a few months of payments or make the payments lower for a few months and then tack on the cost at the end of the term. Today, things are different. The “hardship” now facing most borrowers is the exploding ARM, that is, the huge jump in the monthly payment at the end of the teaser rate period. This is not the same kind of hardship. This hardship is not unexpected, unless there has been fraud or misrepresentation about the loan terms (which is, sad to say, more common than it should be). Thus, lenders are faced with making changes to their policies on modifications, and as is the case with all huge corporations, change in policy takes time and many committees to approve the changes. Thus, today’s loan modifications take a bit more sophistication and experience when presenting the case to the lender. A modification may be more difficult at present, but over the next few months the lender will likely have better guidelines and be more willing to help themselves from becoming property owners. And, that is what we have to keep in mind. Lenders like to be owed money, not own property.
- Paul
Yes, these kids were sometimes just out of high school and trained boiler room style. Now, they are gone and so are the offices that employed them and we are left with the mess they left. Hopefully we can all help clean it up before it’s too late.
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