Many people have went through all of what they did have saved if they were lucky enough to have a savings and others have sold off everything of value that they could just to try and save their homes until they could find a job.
The government has come up with payment-options that some people may be eligible for but not everyone and most of the plans a home owner must be ready for foreclosure to even apply for the help. One of the plans is an adjustable rate mortgage which allows the home owner to lower their payments by having lower interest rate to start off then it will gradually go up as the years go by and the difference of the debt will be tacked on for a longer loan period.
By the end of the year 3.2 million households will get a foreclosure filing and only about 1/3 of them will find out about the government help available and only about half of them will even qualify for the help that is available.
This blog is prepared by a paralegal student as a class project, without compensation. The content of this blog contains my opinion, and is offered for personal interest without warranty of any kind. Comments posted by others on this blog are the responsibility of the posters of those messages. The reader is solely responsible for verifying the content of this blog and any linked information. Content, sources, information, and links will most likely change over time. The content of this blog may not be construed as legal, medical, business, or personal advice.
This whole housing thing I knew it was coming. I worked for a bank that offered some creative options for people to purchase homes they could not afford. For example, we had a product where you could finance a new home before you sold your old one and delay making payments for up to 1 yr it was called a Bridge Loan or the ARM (adjustable rate mortgage)or a loan where you made small payments for 10 years and then had to make a balloon payment. This was putting the cart before the horse. They based what they could get on what they would make in the future. The problem was private consumers were not the only ones using smoke and mirrors. It is unfortunate that the businesses did, now that our economy has fallen apart we seemed surprised. Lesson to be learned, dont put the cart before the horse.
ReplyDeleteI agree with the statement "This whole housing thing I knew it was coming." I sold a house about three years ago. The people who purchased it had secured a loan where they did not have to supply proof of the amount of income they made; therefore,their income and debt ratio was not even looked at. In addition, they told their mortgage company that they bought the house for ten thousand dollars more than they did, so they could apply that ten thousand to their closing costs/down payment. The strangest thing was their realator was involved and advising them every step of the way. I think it was inevitable that this loosening of mortgage loans would put us where we are today. It is a very unfortunate situation.
ReplyDeleteI think that we need to address the problem of predatory lending. Many of the elderly and uneducated were victims of scam artists who sold them adjustable-rate mortgages, but failed to explain that they would probably not qualify for re-financing once they reached the higher rate.
ReplyDeleteI know some people did knowingly buy more house than they could afford, but many were victims of predatory lending.
I was a real estate salesperson. When other real estate salespeople would come to me with problems on a deal, I would remind them: in a real estate transaction, everyone wants it to happen. The seller wants it sold, the buyer wants to buy the house, and both realtors want the sale to go through (because they get a commission). The mortgage broker and loan originator want their commissions, too. At one time, the mortgage loan company’s underwriters were the last line of defense against foolish or fraudulent financing. When the banks and mortgage companies started packaging and selling the loans, they stopped caring about prudent decisions, too.
ReplyDeleteI saw many people who were advised by others that this was the way things were done. Buy a big house, prices will go up, and you can refinance or “flip it.” And who wouldn’t want to live in a nice place, especially when told that the risk was minimal? But when prices fell everywhere at once, and credit dried up at the same time, things went haywire.
Add the problems at this level to the problems created by securitizing and insuring the mortgages, and you have a perfect storm that nearly wiped out the financial and insurance industries.