Monday, January 28, 2008

My Laymen's View of the Mortgage Mess

Millions of lenders took calculated risks and gave money to homebuyers who couldn't afford such high mortgages.

Corporate firms invested heavily in mortgage based securities. Again, like the lenders they took a risk, hoping to make big money.

Homebuyers (some individual investors) bought properties hoping to make a buck. The bubble burst and they got screwed like everyone else. We all could see the bubble burst coming but ignored it.

Other homebuyers (those that took sub-prime mortgages) were stupid, greedy, or more likely both. They were getting mortgages they could hardly afford at low rates and then just assuming the rates wouldn't go up.

They had a news piece on the whole thing last night. Like usual they trotted out some moron who got a sub-prime adjustable rate mortgage and now can't pay it. He could barely make the initial payments and now he "just doesn't know what to do." These are the people Hillary Clinton wants to bail out? Great, let's just reward their stupidity.

I'm only 22, but I know there are a few things you need to know before you sign that mortgage contract on a new home. You are signing a contract for tens or hundreds of thousands of dollars. It's kind of an important decision. One, how much does the house cost? Two, what is my monthly mortgage payment going to be? What type of mortgage is it? If it's fixed, what is the rate? If it's an ARM what is the initial rate? Does the ARM have a cap and where is that set? Can I still handle payments if rates are at the capped rate? If it's an ARM with no cap do I have the capital to deal with payments that could increase substantially in a small time-period. Do I really want to take that risk?

It's not the lenders fault if you sign an ARM without READING THE CONTRACT. If you don't understand it then find someone who does Before signing away thousands of dollars. Otherwise don't give me your damn sob story about how "you didn't know what you were doing" and "You were just trying to help your family."

The lenders and corporate banks are certainly at fault here, but it's a two-way street. Consumers are to blame for the mess as well. If you're stupid the government certainly shouldn't reward you for it.

1 comment:

creditxp said...

Lenders and how we get them to listen!
As many borrowers know from their own experience is that the resistance from
their lender is high and just getting through to the appropriate person is very
difficult. However, when MyRecast is
involved it seems as if the calls start to get answered and the letters are
responded to. On our MyRecast Team we have the best HUD advisors involved, state
wide attorney representation and the BEST sub-prime underwriters to QC / and
audit the original files.
We use powerful laws like the Truth in Lending Act (TILA) and the Real Estate
and Settlement Procedures Act (RESPA) to bring lenders to their knees. So,
naturally, the lenders will be very amicable to working and negotiating with
MyRecast Team for a modification of the note and work out to more
affordable terms to avoid costly
litigation. Not to mention your credit and
how this will affect your ability in the future.