By Roger Theriault, a REALTOR

September 1, 2006 07:42 PM | Link to this

Interesting article. Yes, lots of people who took out these loans shouldn’t have and some of them were likely misled. I’d suggest there are a lot of consumers who should investigate before they get misled, because there ARE federal laws forcing the disclosure of the terms of these loans. In Florida, licensed mortgage brokers are fiduciaries and must do what’s in the client’s best interest… and so are technically regulated.

However, there are lots of vultures… one reason some of the better, hardworking, honest mortgage brokers have difficulty is because of the advertising practices of these vultures, advertising teaser rates of 1%. And the failure of our “system” to go after the violators. Just like spam…

As for the banks, they are probably in trouble unless they collateralized their risk (and most do, so I don’t think it will be a crisis). The banks and underwriters try to make sure all the right disclosures are signed and in the file, but they have no idea whether Joe Consumer reads the nitty gritty - and most don’t read everything, it would take days! (However, a savvy and honest loan originator should make things like neg am and prepay penalties clear verbally too)

As for putting the buyer into the right loan product, it’s tough to show who’s to blame. For a boomer in NY with a $1M home wanting to buy a retirement home now and sell the NY home in 5-6 years and wipe out the mortgage, it makes sense, for most other folks it doesn’t work long term.

(I was a licensed mortgage broker from 2002 through 2005. Never did one of these things, never had anyone who really needed one.)

By rdr

September 1, 2006 07:59 PM | Link to this

Short supply of buyers just got shortened some more. Mtg providers now refusing borderline qualifieds that had breezed through before now. Actually better for all long-term, but bad news for anxious sellers.

By curious

September 1, 2006 11:10 PM | Link to this

Here a question I’m hoping someone can answer for me. I’m going to use simple numbers for this. Let say a person has a home appraised at 400K but currently only has a 250K mtg, but takes out a heloc for the remaining 150K and decides to leave the state and let the lenders foreclosure and worry about the sale of the property. Ca the judge at a foreclosure hearing force the person to return the money that was taken on the heloc? Reason I asked this is because i’m in the mtg business and have been seeing a remarkable number of 100% or 95% combo cash out refi’s recently and am aware that people are leaving this state in bunches. I have a strange feeling that people soon will be abandoning their homes and leaving the banks with the houses to sell themselves. Also, what if these people who strip their equity take their cash and deposit it into overseas accounts. How ill the judge know a person may have just gambled this money away and cannot repay the deficiency balance on the foreclosure thus dismissing the debt? Any answers

By to curious

September 2, 2006 07:20 AM | Link to this

i know in forclosure and bankruptcy laws, there is a look back period. i am not sure, but would think you can not obtain a heloc, stroke a check, and then file bankruptcy or let the house go to forclosure. that would be fraud, if done in a certain period of time, i would think. i am curious about some one who know for sure.

By cmgr

September 2, 2006 08:46 AM | Link to this

You are accountable for every dollar during a bankruptcy hearing. If you gambled the money away you would not qualify for bankruptcy, and be forced to pay back every cent.

Banks aren’t stupid; and neither is bankruptcy law. Bush revamped these laws last year to make filing bankruptcy even harder and even more useless in regards to erasing debt.

Believe me: the banks are laughing all the way to the bank. They made trillions over the past six years. And they won’t lose a dime now.

Don’t cry for the Palm Beach banks!!!

Not on your life.

By to much debt for buyers

September 6, 2006 11:51 AM | Link to this

People with all this debt will not be able to buy. The banks are doing very well, and will keep on going making money. People have to learn how to save and make more money. Sellers are not going down in their prices for buyers. What is up for sale now, will either be removed from the market for a later date at a higher price or will be sold. Prices are very low here compare to the rest of the country.