Special report: The Mortgage Mess

http://www.msnbc.msn.com/id/17929461/

I already posted this in Economy, but thought it would be a good read for the "they have no one but themselves to blame" crowd.

This article alleges criminal activity among lenders, brokers and others. A highlight:

"For some, the lesson learned is: “buyer beware.” But a series of interviews with subprime borrowers, mortgage lenders, appraisers, current and former regulators, and the inspector general of the Department of Housing and Urban Development paints a different picture — of a widespread pattern of questionable lending practices and outright fraud that has already sparked a wave of criminal and civil actions against various players in the $10 trillion market for residential mortgages.

Questionable mortgage practices can take on many forms, but they fall into two broad categories:

Predatory lending. In this case, complex mortgage terms and interest rate risks were not fully explained AS REQUIRED BY FEDERAL LAW. (Caps are mine.) The borrower is usually the victim.
Mortgage fraud. In these cases, often carried out by sophisticated swindlers, the lender is typically the victim. (Wasn't aware of the second type of swindle.)"

One thing that is glaringly obvious to me is the lack of oversight. Regulation and enforcement have been relaxed under Bush (they'll police themselves). Stupid borrowers aside, the rest of us have been thrown to the wolves.

The S&L scandal produced a boom in commercial construction, especially the construction of unneeded office buildings and luxury resort developements. When someone finally noticed the buildings weren't attracting tenants and the only ones to make any money were the developers, the whole house of cards fell down and we suckers got to pay the tab.

This one has produced a glut in housing, especially luxury housing, with speculators driving a speculative bubble in hyperinflated housing prices.

We now have more housing than we need, much of it sitting empty while the owners wait for prices to rise again so they can make a quick buck. It's also generally the wrong type of housing: big, hard to heat barns with multiple living areas but few bedrooms.

Undoubtedly we the suckers will take it in the wallet again, bailing out banks while we the suckers lose everything.

Plus, it will be one more thing to point at when they tell us the country can't afford basic necessities like health care.

This whole sub-prime mortgage thing is just an awful mess and my heart goes out to the people who were mislead, BUT if you can't get a mortgage from a reputable company warning sirens should be going off in your head!

My husband and I were married 4 years ago and of course we wanted a house. I did my research and realized we need great credit, 2 years at the same employer and 10% (at least) down in order to get a good mortgage. We could have went to sub-prime but that would be STUPID! We waited, we did everything right to enhance our credit and we saved. We could buy now but of course the housing market is in the toilet so it was a blessing in disguise that we needed to wait.

Because of all of our hard work and patience we are in an excellent situation which has opened up a world of possibilities.

I hope everyone does the same no matter how long it takes.

But those who broke the law shouldn't be let off the hook, as I'm sure you'll agree.

they are animals that fed on the weak and the poor. I just don't ever want anyone to fall for it again.

I got a loan to pay off CC debt I ran up while ill. I knew I had bad credit and was desparate to get the collection agencies off my back.

I was told my loan was fixed rate, I was also encouraged to "overstate" my income.

At the last minute while we were at the title company signing papers I discovered the interest rate was 1/2 percent higher and that it was fixed for only two years. I also have the papers I was given that day showing that expected payment in two years when ARM went into effect would be the same as the current payment. Nothing about a potential 50% increase in payment.

I managed to get the interest rate down 1/4, but could do nothing about the ARM. I so wanted to avoid bankruptcy that I signed on the dotted line.


Luckily I sold my house last Nov and bought down, thanks to lots of warnings here on DU to get out of debt, and survived the subprime collapse.


May the predatory lenders all rot in hell!