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Mortgages and Sub-Prime Whoas

March 21st, 2007 at 10:26 am


I was looking up something on impound accounts and came across this blog. Caught my interest because was about my city. I read it and was not surprised by the least.

But I think this is the perfect example. Is it the lender's fault or the buyers? I don't have much sympathy for a buyer who did not read the paperwork and who bought a home for 8 times their income. Duh. But the lender is most definitely a shady bastard. & of course will likely get away with this scot free. That is just not right. The bank and the lender will get their money most likely. The buyer will be left holding the bag. Even if the bank/lender loses this one, oh well, they made enough off of all these insane loans. Not too worried about them.

Mortgage brokers work for a commission. I have a friend who is a broker but and overall is a standup guy. But he is big on undocumented loans. He has pushed the boundaries a bit since a lot of his business is small business owners, new, with no income. But he still gets the loans. HE has asked me to fudge letters saying these people have been in business 2 full tax years (Which is the rule). No way in hell I want a prt of that.

I don't think he would do anything near this shady. But all the same I would never trust a mortgage broker in the least, not even a friend. You have to protect yourself, because no one else will. When it comes down to it their livelihood depends on how many (& how big) the mortgages they sell.

Of course most of the people I know are looking at houses in the $400k range with a $60-$70k income and I think they are absolutely insane. This blog takes it to a whole new level. Then again I have an acquaintance who thinks she is rich and has arrived because they bought a McMAnsion in a gated community. She got a 2nd full-time job and still can't pay the bills. Now you have to wonder if they even went fixed or not - maybe they are paying interest only - who knows. Never even thought about that. I just find it how ironic she brags about arriving - when clear to everyone else all she has arrived into is something way over her head.

Anyway, my head is still reeling at the thought of a $4700 monthly payment. Yikes!!!!!

Doesn't look like a sub-prime loan but I have had friends who make $60k/year that were eligible for a $400k sub-prime loan (the interest rates on those are insane). It's all in the same realm - the sub-prime factor just makes it that much worse. But the undocumented loans will have similar failings for many who suffer hardship or easily got in over their head. Or more like this case even, simply major fudging of numbers to qualify for twice as much as you probably should.


Oh yeah - as much as I am for home ownership, I also wouldn't have considered buying a home for less than 20% down. If people had to put money down, even just 5% or something, a lot of these current problems would not be surfacing so heavily and so fast. Just saw another wise article on the subject of not getting in over your head. As much as I Am pro-home-ownership. The flip side holds just as true - don't do it until youa re ready!


5 Responses to “Mortgages and Sub-Prime Whoas”

  1. creditcardfree Says:

    Oh, it is amazing what lenders will do and what some mortgage terms some people will accept...usually blindly. My SIL has two subprime mortgages on her primary and rental property. She has a prepayment penalty so not too easy to refinance and her interest rate is variable...every month. I'm pretty sure it has only gone UP. She pays only interest on the primary house, but pays the rental as a 15 year because the rent allows it...CRAZY.

  2. elgin526 Says:

    Holy Hell! What the heck was that couple thinking? The wife at least had a feeling things were off, she should have listened to her gut and refused to sign the contract. Speaking of the contract, didn't they read it? Yes it's full of legalese but you can usually get the gist of things. And if you are still confused, take it to a real estate lawyer. I hired a lawyer for both my purchases and it was about $250 to $400 start to finnish. A lawyer would have been able to explain it to them and saved them more than a thousand times what they hired the lawyer for.

    Yes the loan guy was a crook, but geez, people, read before you sign on that dotted line.

  3. Ima saver Says:

    I do agree. My house is appraised at about $500,000 and we could probably get more. I have no idea how people make those payments. What helped us greatly is that my husband is a builder and did our house in his spare time. Plus, we paid for materials as we went, so our house was free and clear . We have built houses for people with $4000 a month payments. I could not sleep at night! I think $500 a month is a lot.

  4. Saving in So Cal Says:

    This is the kind of transaction I would never do with a friend or a friend. Best to have enough distance that you wouldn't feel bad being difficult if need be. Also, my parents are notaries and most of their business involves going to people's homes to notarize mortgage loan papers. Recently, it seems that the people who actually read the loan papers inevitably find the loan is not what they were promised/expected.

  5. monkeymama Says:

    I just have to clarify a $600k in Sacramento is a BIG FANCY house indeed. I talk a lot about home how you can't even find a starter for that price and I understand a tad bit more people feeling pressed to bite off more than they can chew (though not enought to do it myself!). But it is not quite so bad here in Sacramento. YEt...

    So I have no idea why a 2-income $80k/year family would even consider building their own home like that. Not when it is not even needed to get into a nice house in a nice neightborhood. Extra insane. It's beyond the level I usually see.

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