On today’s page we ran an excerpt from a blog post by Nathan Ballentine, in which he said:
To
put this into an analogy at my paying job at Wachovia Mortgage … if I
inadvertently told an applicant he was approved but later learned that
was a mistake due to a certain part of his application being graded
incorrectly, would I just explain that mistake to that borrower (yes)
or would I then go throw out that section of the application for
EVERYONE that applied that month and let them get a mortgage they
otherwise would not?
Isn’t that how we got into this whole mess with our economy? Some wizards on Wall Street, overthrowing centuries of common business sense, deciding to back loans to lots and lots of people who demonstrably were unable to pay them back?
Or am I missing something? When it comes to business matters, that’s highly possible, because very little of it makes sense to me.
Related Posts
Brad … banks may have caused this mess by ignoring established lending standards, but what about the people who signed those loans, agreeing to pay by the terms agreed upon? I don’t understand why the personal responsibility side of this issue is being ignored. Nobody is bailing me out on my mortgage, because I only borrow what I can afford. If I borrowed more than I could afford, I wouldn’t expect the government (taxpayers) to fix that. Nor would I blame the bank for lending to me.
What makes these mortgage holders so special that they deserve special consideration — at our expense?
I developed an expert used by banks and mortgage brokers to process loan applications, package them to Wall Street, and recommend hedging strategies during the process of delivering those loans ( or failing to ).
I see several causes of this mess:
1. 40% of the mortgages in arears right now are held by speculators who were:
a. buying lot and unfinished new houses in developments at discounts, in hopes of selling them at an appreciated rate.
b. buying foreclosed properties with new notes
c. assuming foreclosed properties with little down, hoping to “flip” them after a little cosmetic fixing.
2. So many of those selling mortgages are not the ones servicing the mortgage. They are just brokers, and have no vested interest in the long-term viability of the loan or the property. They are the ones most tempted to cut a corner.
3. Greed and collusion. The homebuyers are so naive, and they are paying fees that are way more than the work is worth. Lawyers are being paid by the developer for a title check on a the property and the subdividing into lots, then charge each homebuyer as if they did a fresh title search, then usually charge double. The brokers are tacking on interest, and they get more for steering buyers into more expensive loans. Then there are bogus application fees, credit check fees, etc.
4. Interest gouging on ARMS.
A lot of those who were suckered into an ARM could make the payments, had the bank not jacked up the rate from 3.5% to 10%. The bank could do well on 6%, and the homeowner could probably make the payments, but the entire structure of the securities package was premised on a jacking the rate past 6%, and sold to investors on that basis, so the lenders and servicing companies will go in the red if they lower the rate to something reasonable ( see Countrywide ).
Gordon, To answer your question common sense has been replaced by political correctness. Wouldn’t those banks and mortgage companies be mean spirited, racist and pooraphobic to deny people who couldn’t afford a mortgage their dream home?
This goes part and parcile with the replacing of the constitutional form of government by capital/socialist hybrid that now exists as legitimate government. The idea is if you cannot do something for yourself or you make an ignorant mistake not to worry because the government will take care of it.
Gordon, To answer your question common sense has been replaced by political correctness. Wouldn’t those banks and mortgage companies be mean spirited, racist and pooraphobic to deny people who couldn’t afford a mortgage their dream home?
This goes part and parcile with the replacing of the constitutional form of government by capital/socialist hybrid that now exists as legitimate government. The idea is if you cannot do something for yourself or you make an ignorant mistake not to worry because the government will take care of it.
Lee … How does one get “suckered” into an ARM? It’s all spelled out in the mortgage agreement. It’s explained at closing. I haven’s seen anything that says terms of these loans were falsified, misrepresented, or not disclosed.
Stupid is as stupid does.
Gordon: You mean, you read every word and thought through all the implications of every document you signed when you got your last mortgage? If you did, then definitely count me among the stupid. I bought my current home over 10 years ago, and if reading every word had been a stipulation, I’d still be in the lawyer’s office.
… also:
Sorry, but all this “personal responsibility” stuff doesn’t change my point, which is: Stupid, irresponsible folk who can’t afford a mortgage couldn’t GET one if lenders wouldn’t give them one — which is the way it used to be, and that WORKED. Kind of like abstinence: Whatever else you say about it, when used as recommended it definitely prevents pregnancy.
Many of us tried to sound the alarm bells, but no one was listening. The SC Consumer Affairs Agency is the watchdog for the mortgage industry. They were asleep at the wheel…Consumer Affairs is governmental agency full of unqualified people if there ever was one. And nary has a word been said as they allowed the mortgage brokers to rape the public.
The mortgage brokers made zillions…and they skated. End of story.
Gordon, you can bet a lot of those buying ARMS are barely literate. Others just thought they were smarter than the bankers who told them they shouldn’t be buying a house.
Richard Wolfe is right, too, about Bank of America and Wachovia caving to Jesse Jackson and setting quotas for risky loans to blacks and even to illegal aliens. BofA predecessor NationsBank budgeted $200,000,000 in the early 1990s for risky loans, just to pacify black activists. The way they talked about it at the time, they expect a lot of default losses, but it was a PR gambit.
When did anyone hear of the SC Consumer Affairs Commission straightening out a bogus cell phone bill, much less the mortgage industry? They are a toothless joke.
Actually, Brad, I do read stuff before I sign it, especially contracts and legal documents involving lots of money. Silly, maybe, but it’s always worked for me.
Almost forgot. Here’s another tip. If you read something and you don’t understand it, ask for explanation. Then, if you still don’t understand, ask again. It’s an amazing process. I’ve learned all kinds of stuff that way.
Get that explanation from someone outside the room full of mortgage brokers, their lawywer, their real estate broker, and their contracts.
I am more of a free market person than anyone posting here, but everyone here knows some of these lenders were just flipping paper, some were outright predators, and some were ready to cook the appraisals and income statements to get a loan that they knew would be trouble.
Some of the blatant crooks will go to jail. The merely immoral ones will get a job somewhere else. Some upper level architects of these loans will have enough space between them and the mess to keep right on working where they are.
Brad,
The only thing you have to understand on a mortgage is how much the monthly payment is and, if it’s an ARM, how high the payment can go.
That’s not fine print. Sure, banks are to blame for lending money to people who can’t repay it, but the borrowers are also responsible for throwing their life savings away and not bothering to find out what a mess they were getting themselves into.
Gordon’s right on this one. I’ve paid off every mortgage I ever had. I don’t want “stupid, irresponsible folk” getting a better deal than I did with some socialist Clinton foreclosure moratorium. I’m already taking a big enough hit on the bank stock I own.
This is a capitalist country, Brad, not some communitarian communist confederacy. Lending a helping hand to the needy is fine, but the Constitution doesn’t account for purchasing the American dream for a bunch of spendthrift numbskulls.
The current Bush 30-day bailout won’t more than a handful of people, and none of the 40% who are speculators.
Hillary’s proposal to let mortgage holders skate for a year would wreck the securities market and lots of the rest of the mortgage production and servicing industries, as well.
Tell him, weldon. Anybody who doesn’t even understand what their payments will be has no business borrowing.
South Carolina laws do not even require an amortization table to be provided for many loans. That makes it more difficult for unsophisticated borrowers to know where they stand, know their payoff options, and to dispute any attempts by the lenders to demand a bogus, inflated payoff balance.
There is a lot of little simple things SC needs to clean up, before it can effectively regulate payday loans, personal loans, car loans and home loans, just to insure an honest process.