Predatory Lending and Decadent Spending

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Real Estate Agent with San Diego Previews * Previews Luxury Real Estate

 Yesterday was spent constructing yet another short sale file. A home purchased less than two years ago with 100 percent financing had been refinanced a few months ago with two loans totaling $120,000 more than the original purchase price. I'm sure hefty points were back- ended into the loan, but the buyer pulled enough cash to buy a new car, furniture, and who knows what else--and is in serious arrears (over $50,000) with both loans. Good credit has never been his strong suit.

The home is in a lovely neighborhood and will probably sell fairly quickly--at around $685,000, or what was initially paid for the property. Meanwhile, the seller is out of the country, scheduled to return sometime around the end of the month. I will present the offer(s) to the lenders and will await their reply.

In the meantime, I am wondering about appraisals and shaky credit and investors, somewhere, who are going to get burned. We want to point fingers, but need several to do the job justice. Two would point to brokers and lenders who were accepting easy money and passing the risk on to others. Another would point to ignorant or greedy borrowers who believed property values had nowhere to go but up. Some surely knew what was happening, and took lenders for all they could.  

The bottom line is greed.

The amazing thing is that this partiicular lender (Countrywide) is STILL sending mailed notices to these defaulted homeowners advising that they could immediately qualify for over #100,000 in credit!

Where does the madness end?

 

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Tags:
predatory lending
decadent spending
easy money
short sales

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Rainer
418,631
Maureen Francis & Dmitry Koublitsky
SKBK Sothebynulls - Metro Detroit
SKBK Sotheby's International Realty
I am running into this with my own clients and I hate it.  We have the added "help" of depreciating property values.  Still, when I looked at what one client had been able to borrow, its hard not to be slightly angry at those involved.  Including the client.
October 14, 2006 08:40 AM
Rainmaker
341,410
Suzanne Marriott
Associate Broker, CLHMS, e-PRO
Keller Williams Arizona Realty
I think the lenders have rolled all the expected defaults and short sales into their pricing.  Rather than focus on each deal, they are looking at the overall ROI on their pool of funds....
October 14, 2006 11:35 AM
Anonymous #16
Anonymous
Dave Rosenmarkle

Interesting post & responses. Yes, it's unfortunate that some people are financially irresponsible, but our job is not play tax man or financial advisor. Certainly, we can express concerns, suggest they review their plans with a qualified advisor, but when they come back to you, are you going to provide the assistance or not?

It is diificult to get federal legislation to discourage this type of lending primarily due to the level of campaign funding support provided by banks, mortgage companies and the credit card industry.

This is a phase and, when we have experienced a sufficient level of foreclosures, there will be token  legislation and, more importantly, greater public awareness of houses going on the auction block, families displaced. That will do more to transition to more stable lending practices than anything else.

 

October 14, 2006 06:33 PM
Ambassador
738,333
Jeff Belonger
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans
Social Media - Infinity Home Mortgage Company, Inc

Suzanne.....  yes, lenders have looked at this....but it will catch up to many in the beginning of next year.

Dave.... here is something that I wrote today. A Predatory Lending Bill that is SLATED for 2007 & what does this mean........  I told Roberta after she wrote this that I was actually working on one...deleted it...but I decided to add a little more to this. Your last 2 paragraphs hit it right on the head. I was trying to make that point....but I guess I was beating around the bush....  lol Not really.... just didn't use your words, which were good.

October 14, 2006 07:07 PM
Rainer
17,223
Rob Wills
Gilpin Realty Inc.
I've come across loan officers who get 5% on the front and back. That is really gouging. And the poor people are paying it because they are not educated!
October 14, 2006 11:38 PM
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Rainmaker
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Roberta Murphy

Carlsbad Real Estate and Homes
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