Sub-Prime Lending/Foreclosure etc

[Stephen Eisel]

The subprime market represents about 15% of the total mortgage market in the US. The subprime market boomed along with the Internet in the 1990’s and into the 2000's. The majority of subprime loans are refinances (people cashing in their equity). Most subprime borrowers have poor credit scores. It should not come to a shock to anyone that a higher number of subprime loans are going into foreclosure versus conventional mortgages.


The root of this problem begins with the borrower. It is responsibility of the borrower to understand the terms of their mortgage / contract. If I am not mistaken the House Financial Services Committee has jurisdiction over financial institutions and consumer credit. It is this committee that has dropped the ball for the government.

[Stephen Eisel]

On his way out of office, Taft, at the ninth hour passed legislation to HELP predatory lenders. What is wrong with that picture. That is not a leader of people in any way, shape, or form. Did anyone notice how many appraisers, and title companies popped up in the last several years (many now going out of business). They were all schmoozing each other with dinners, parties, etc. to get the business of the mortgage companies. A lot of people made money off of one loan.

Would the Governor not need the help of the legislation to pass a law in Ohio?

[ryan costa]

The real estate agents are paid whether the buyer defaults a few years later or not. The bank fees and mortgage broker fees are paid whether the buyer or refinancer defaults or not. The various insurances are paid, etc etc. All of this whether the sales prices were speculated up or not.

The mortgages get turned into bonds and stuff and traded at high volumes. So the big wall street guys get paid big money most of the time whether many of the mortgages go into default or not.

You don't have to believe the borrower will be able to repay, so long as you get your cut before they default. Even if they meet the checklist of criteria for the loan, you don't have to believe they will be able to keep up payments.

[sharon kinsella]

Stephen you are making assumptions.

Many of the borrowers who have been ripped off did not have the benefit of having prior knowledge of how all this worked. They did not know anything about what the APR meant or ARM or any of the other jargonistic practices in this type of transactions. By the time they are closed (by professional closers). No idea what hit them. When they got a huge jump in their payments, it wasn't like the lender told them it was going to jump up that high, or that their was a possibility that it would go that high.

Many people have no idea of finances beyond paying the rent and utilities, buying an older car for cash and repairing it themselves and trying to feed their kids at the end of the day.

But, they want the same thing everyone else wants, their own home. The American Dream, which frankly, they really don't have the income fo because in reality, the dream is dead.

So they go for the dream, pour their heart and soul into it and wind up homeless and don't know what hit them. Layoffs, outsourcing and the rest of the things that hit everyone in a recession impact much of the working class, blue collar and pink collar workers much harder than the rest of the groups.

Now that it is trickling up (no trickle down from the upper 1%) the middle class is being eradicated and people are finally jumping on the bandwagon.

Don't immediately jump on the "they should have known better" bandwagon. They didn't and they don't and they lost everything.

[Jeff Endress]

In the insurance industry, agents (who are tested and licensed) are required to provide prospective policy purchasers with a policy illustration. They have to show, in essentially spreadsheet form, the financial impact over the life of the policy, based on the minimum stated returns set forth in the policy. A good agent will also run additional illustrations based on possible higher market returns.

Imagine if that were required in the instance of ARM's. You'd be looking at a chart that in three years, based on a worst case scenario, could see your payment double. Nobody would opt for that.....and, I suppose if they did, then it would be their fault.

Jeff

[Stephen Eisel]

Sharon, did some subprime lenders take advantage of consumers? Yes.. Did the House Financial Services Committee drop the ball on protecting consumers from unscrupulous subprime lenders? Yes.. Did some subprime borrowers fail themselves by not taking the time to understand the terms of their mortgage? Yes... Ultimately, the consumer who signs a contract is responsible for their own actions. But, the government could have done a better job of policing these subprime mortgage companies. Yes, some of these subprime mortgage companies knowingly ripped off an uneducated borrower. It is really hard for me to place 100% of the blame on anyone.

[sharon kinsella]

Stephen -

Yes some of the blame can be on the consumer. But the real heart of the matter is that most blue collar/pink collar workers did not go to college, took one year of math in high school, some of them struggle to balance a checking account. It isn't because they are stupid, they just don't have the skills needed.

Yes there are a lot of resources out there to learn from, but if you don't comprehend what they say and a professional closer is working you over, you're done.

I've seen doctors and lawyers and people who thought that they were very well educated consumers, come in the a car dealership thinking that they would be able to negotiate the deal they wanted. That's not how it always works out, especially for people who come in with the attitude that they know more than the sales person and finance person. I've seen people turned so upside down on lease trade in and straight deal that it wasn't even funny.

By the time they realize what was done to them it is too late, they drove it out of the lot and it is theirs to deal with.

Honestly, in that business and the sub prime business they can see you coming. They can even predict what you're going to say way before it comes out of your mouth. The level of manipulative power of a good closer is almost scary.

A lot of the people were victimized by unscrupulous and immoral practices in an unregulated industry and they didn't even know what hit them. Just like a fatal car crash.

Jeff -

Your idea is absolutely correct, people who have that kind of responsibility should definitely be licensed and regulated. There should be yearly public audits. They never should have been allowed to do what they did.

[Tim Liston]

Jeff, there is. It's called an ARM Historical Disclosure. It shows the terms of your loan and what would happen to a $10,000 payment if the loan became fully indexed (e.g. if rates rose a lot). It's not a totally bulletproof document but it does accurately disclose what could happen, worst case. The biggest problem is that it is based on a $10,000 loan amount, and so often borrowers don't realize or care that the increase in THEIR payment will exceed by many times the increase shown in the historical disclosure.

[Stephen Eisel]

Stephen -

Yes some of the blame can be on the consumer. But the real heart of the matter is that most blue collar/pink collar workers did not go to college, took one year of math in high school, some of them struggle to balance a checking account. It isn't because they are stupid, they just don't have the skills needed.

I would not call the majority of them stupid.

[sharon kinsella]

I know you wouldn't call them stupid Stephen.

I do feel that we need to be supportive of the people who are losing everything because they were taken for a ride.

This is so sad. Remember in History class and what some of our parents tolds happened in the Depression? It's starting to happen and it's affecting our town and our neighbors.

[ryan costa]

Perhaps Donald Trump could help. He or his businesses have hit or skirted bankrupty multiple times, but he is still a professional billionaire.

In America consumers are trained from an early age to want a lot of stuff they cannot afford. This helps them use credit cards and fall for the constant stream of junk mail offering credit cards and offers to cash in on the equity in their homes, and also to vote for the Reagan and Bush.

The industry relies on its ability to skirt details of the loans past their clients attention and consideration. We will probably see a lot of prime loans going bad also.

[Justine Cooper]

www.shakersquare.net

“Foreclosure on a family home is the American dream lost. Foreclosures uproot families, destroy credit and lock individuals out of the housing market while destabilizing neighborhoods and lowering property values.â€Â￾
Jimmy Dimora, President of the County Board of Commissioners

On Sunday, December 17, 2006 PD consumer reporter Sheryl Harris reports

"In a single day, they [lame duck Ohio House and Senate members] tore the heart from the state's 30-year-old Consumer Sales Practices Act and crippled the state's tough new predatory-lending law before it even went into effect."

A Plain Dealer editorial of December 20 asked the Governor to end his term on a positive note by vetoing this bill, but Governor Taft left office without vetoing or signing the bill. Right after his inauguration, Governor Strickland went to his office and vetoed SR 177.

[Justine Cooper]

The root of this problem begins with the borrower. It is responsibility of the borrower to understand the terms of their mortgage / contract. If I am not mistaken the House Financial Services Committee has jurisdiction over financial institutions and consumer credit. It is this committee that has dropped the ball for the government.

That is the most bizarre statement I have read on all the research on predatory lending. The root of the problem DOES NOT begin with the borrower and if you read some of the stories of people who actually worked in that industry, they are trying to tell you that. There was so much deception you would not believe it could exist. That is not to say, that some borrowers also committed fraud with their loans!! But the ROOT of the problem lies with the companies held responsible for the biggest investment people make, and the ROOT of the problem lies with those companies that did commit fraud. There are banks that are ethical and honorable, and mortgage brokers who also are and now will have a bad name because of the rotten apples. And trust me, there are enough rotten apples to go around. It is too single minded to say the ROOT of this enormous and devastating crisis is "the borrower".

There were a lot of hard-working and honest people who did make money during the height of this housing boom where anyone could get into a home, some real estate agents, some title cos., some appraiser, builders, companies such as Tim's, contractors, etc. Many of these people are also displaced now or have dropped tremendously in income, which also hurts the economy as a whole. Furthermore, some of these people who could once afford their home, may not have the income to afford it now. The domino effect is so far beyond a single homeowner's mistake or fraud. There would not be the legislation going on now Stephen, if the root belonged soley to the borrower. Many borrowers were duped, taken advantage of, lied to, for the mighty buck. To ignore that is a crisis within itself.

[Justine Cooper]

Sheryl Harris: A list of Ohio politicians who sold you out
Posted by Sheryl Harris October 05, 2007 07:57AM

Originally published Dec. 24, 2006

I wanted to give you a present.

A keepsake you could clip and save.

I thought long and hard, and this is what I settled on.

It's a list of the Northeast Ohio legislators who voted to curtail your consumer rights:

/blog.cleveland.com/pdextra/2007/10/sheryl_harris_a_list_of_ohio_p.html

This IS black or white, you either vote for the consumer, or vote for the big companies allowing leeway to rip of the consumer.

[Stephen Eisel]

The root of this problem begins with the borrower. It is responsibility of the borrower to understand the terms of their mortgage / contract. If I am not mistaken the House Financial Services Committee has jurisdiction over financial institutions and consumer credit. It is this committee that has dropped the ball for the government.

That is the most bizarre statement I have read on all the research on predatory lending. The root of the problem DOES NOT begin with the borrower and if you read some of the stories of people who actually worked in that industry, they are trying to tell you that. There was so much deception you would not believe it could exist. That is not to say, that some borrowers also committed fraud with their loans!! But the ROOT of the problem lies with the companies held responsible for the biggest investment people make, and the ROOT of the problem lies with those companies that did commit fraud. There are banks that are ethical and honorable, and mortgage brokers who also are and now will have a bad name because of the rotten apples. And trust me, there are enough rotten apples to go around. It is too single minded to say the ROOT of this enormous and devastating crisis is "the borrower".

There were a lot of hard-working and honest people who did make money during the height of this housing boom where anyone could get into a home, some real estate agents, some title cos., some appraiser, builders, companies such as Tim's, contractors, etc. Many of these people are also displaced now or have dropped tremendously in income, which also hurts the economy as a whole. Furthermore, some of these people who could once afford their home, may not have the income to afford it now. The domino effect is so far beyond a single homeowner's mistake or fraud. There would not be the legislation going on now Stephen, if the root belonged soley to the borrower. Many borrowers were duped, taken advantage of, lied to, for the mighty buck. To ignore that is a crisis within itself.

Maybe you are not objectively looking at this situation? The terms, fees and repayment schedule are spelled out in the mortgage. Am I missing something?