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Let me get my horn! Too little, too late Mr. Chairman!
Where were these people back when unscrupulous lenders were putting people into houses they couldn't afford? Now that foreclosures have reached an alltime high with no end in sight.....they want to tighten lending guidelines? People like Hilary Clinton and the Fed, amongst others, are only hoping to further their own careers in an attempt to 'help' those who are being forced out of their homes. They all pretend like they weren't aware lending practices were questionable. Give me a break!
I knew five years ago that this is where the housing market was headed. I watched every day in my line of work, borrowers being approved for housing loans that were going to be a surefire disaster in a market downturn. Companies like DiTech, Lending Tree, and even big name lenders created this mess we are in today.
Most first time homebuyers trusted their realtor and especially their lender to do right by them. After all, a bank isn't going to approve financing if the borrower doesn't really qualify, will they? You bet they will. And you bet they did!
Adjustable rate mortgages and 80/20 loans gave buyers more buying power, thus, a larger loan. I was told, 'it's creative financing.' It's creative alright. Alot of homebuyers, primarily 1st time buyers do not fully understand what an Adjustable rate mortgage is and they certainly don't understand the ramifications of an 80/20 loan. So, consequently, when the interest rates on those Adj. rate loans went up, and up again, homebuyers were unable to afford their mortgage. And those with 80/20 loans, have two mortgage payments to make, often times with an adj. rate on the 1st one.
Inflated home prices? You betcha! Thank you Mr. Realtor scumbag. The realtors drove the prices up....and the lender made the loan happen. They (realtors and lenders) were pocketing huge profits, smiling all the way to the bank.... but guess who's left holding the bag now that the market has softened? Mr. and Mrs. average, hard working, trying to survive, American.
The Fed has no problem bailing out the failed lending institutions, (creating a bigger deficit) but notice those same lending institutions are not bailing the homebuyers out? Oh, they are offering refinancing options to some qualified borrowers...but now they've made it next to impossible to be a 'qualified borrower.' Despite the fact that they are the one that originally put borrowers in the loan..'sorry, no can help.'
Example: 1st time homebuyer buys a $200,000 home in 2004 with an 80/20 program. They have a $190,000 loan ($1500 1st mortgage payment) and a $10,000 loan ($1,000 2nd mortgage payment). Plus...they put nothing down. Already, they're in too deep, with zero equity, but hey, the lender approved financing, so it must be okay.
Now, it's 2008: The 1st mortgage payment has gone up to $2500 (adj. rate), and the 2nd mortgage payment has gone up to $1500. They now owe $195,000 combined. Unfortunately, their income has only increased 3%....and they have their first child on the way, or maybe their oldest is ready to start college. Oh, yes, and the cost to heat their home has gone up 33% along with gas for their vehicles and rising food costs.
Well, maybe they can refinance and combine both loans into 1 loan? Nope, that won't work because the value of their home has now dropped and is worth only $190,000...so they DON'T qualify for the refinancing option...the rules have changed.
Try again. Maybe they will sell their home and get out from under all of it. No, again. They currently owe MORE on the mortgages, than their house is worth.
Last option: Struggle to make the mortgage payments, cut back on other expenses. But, eventually, they are behind too much, and the bank starts foreclosure proceedings. The Notice gets posted on their house, they've got 90 days or they're out.
And I haven't even touched on Home equity lines of credit! That's a nightmare in itself. Another time. BlackJack wants to go outside and I could use some fresh air.