Mortgage Abuse?

Posted by: Amey Stone on October 11, 2005

I wrote a story earlier this month about how your stock and bond portfolio — not just your home’s value — could take a hit if the real estate market crashes. See, “If Housing Slumps, How Safe Are You?
You may be more exposed than you think, especially if you own financial-services and consumer stocks. Better take a close look at your bond funds, too.”

I link here to the story, not because it’s such a great piece (okay, it’s not half bad), but mainly to draw attention to an interesting reader response. To save you from scrolling down through the comments, here’s the one that took my breath away when I read it:

I am a lawyer and I represent illegal aliens in deportation. In all but one of 35 cases I currently have on docket the illegal owns a home. But it is the loan terms that fascinate me. One lady finished school at second grade, speaks no English, and works for a recycling company binding cardboard boxes. She makes about $30K per year and is a single mom with three children. She has a $430K interest only loan that she used last year to buy a $430K condo - 100% financing - she paid $3,000 in closing costs. I tried to explain that her monthly payments will rise substantially in four years. She does not believe me, did not understand what I said and told me the loan and real estate agents specialize in real estate and would have told her if her payments could go up. If 34 of my clients with risky loans and no school past at best eighth grade are surprised by rising loan payments, we should be afraid. This is the last group desperate lenders pander to, meaning we’re near the end.

Yikes! I find this both frightening and depressing. I hate to think of all the hard-working people who may lose their homes in a few years because they trusted their lender and/or real estate broker.

Reader Comments

David Porter

October 11, 2005 8:33 PM

Yikes is right! How awful! I am sure that this is an extreme case, but there is certainly a lot of irresponsible lending going on these days.

Here in Michigan I am seeing a lot of Negative Amortizing Option ARMS being "sold" to people. How horrible in a flat and/or decreasing Michigan market.

David Porter, President of Pacesetter Mortgage

Anonymous in Chicago

October 12, 2005 10:40 AM

I would like to know 1) how an illegal is making $30K - more than I am, a college grad working a universities 2) how she can afford $430K making $30K with 2 kids. I can just barely pay my rent which is below market value + save money.

Wes

October 12, 2005 11:04 AM

As I said in an earlier comment, I'm looking forward (sarcasticly) to the Congressional inquiries into the mortgage industry and what went wrong with the housing market.

Should provide some interesting news but the real result will be more finger pointing and no accountability for anyone, except rising costs and red tape for middle-class Americans who are trying to make it by.

I see a future of documentation out the wazoo to get a simple 30-year fixed rate home loan for someone with 20% downpayment making $150k a year buying a $200k house. Look what SOX has brought onto us because of the abuses of some executives.

The results will be far more reaching than the stock market bubble due to the sheer numbers of people who own houses (~70%).

Brian R. Smith

October 12, 2005 1:06 PM

What kind of lawyer freely divulges the financial information of his clients?

Peter Hamilton

October 12, 2005 1:11 PM

http://appraiserspetition.com/

Take a read on the following website. Its valid proof that the housing boom is built on lies deception and fraud. You have over 8500 people who will atest to facts. Businessweek should run a story on the practice by realtor on pumping up the prices. It will make Enron and Worldcom look like a cakewalk.

And I quote..
"Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value."

From the website...

The concern of this petition has to do with our "independent judgment" in performing real estate appraisals. We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States, who seek your assistance in solving a problem facing us on a daily basis. Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.

This pressure comes in many forms and includes the following:

the withholding of business if we refuse to inflate values,
the withholding of business if we refuse to guarantee a predetermined value,
the withholding of business if we refuse to ignore deficiencies in the property,
refusing to pay for an appraisal that does not give them what they want,
black listing honest appraisers in order to use "rubber stamp" appraisers, etc.

Another Post

October 12, 2005 1:19 PM

Lenders Clamp Down
On Inflated Appraisals

http://homes.wsj.com/buysell/mortgages/20050527-simon.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage

By Ruth Simon
From The Wall Street Journal Online

With home prices climbing at a double-digit pace in many parts of the country, lenders are increasingly worried about inflated appraisal values -- and some are taking steps to clamp down.

Anonymous in Chicago

October 12, 2005 4:27 PM

I asked another forum about this, and it was reported that Banco Popular gives these type of loans. They include the "other" working adults in the household, although there's just "one" person on the deed. Doesn't sound right according to the article. She's a single mom, no husband no uncle no mother mentioned, but it's possible there are grandparents living in the home with her. Still want to know how she can afford $430K on 30K salary -- and it's a condo! for god's sake, not a house but a condo.

km

October 12, 2005 4:43 PM

That is really bad, lke the checks/(high interest loans) sent in the mail to people who live from paycheck to paycheck. But, hey, I've had lenders (2 in fact) not disclose all of the info to me until the very last concievable moment (apon signing the laon). One failed to tell me that the loan was variable, and the other failed to tell me that the rate had increased 1%. It was really too late to back out of either one.

Joey

October 12, 2005 6:16 PM

Chicago anon...

Housing cleaning. $30 an hour and usually all income is not reported for taxes. $30 X 40 hours a week = 1,200 X 52 weeks a year = $62K

Boston Bubble

October 12, 2005 7:59 PM

To the poster who wondered how an illegal was making $30K a year, perhaps the lady has multiple jobs. Working two full time jobs at minimum wage would put one close to $30K in many states. If she earns more than minimum wage, then she may even just be working one full time and one part time job. The point is, she may not be making more than you, she may just be working more hours.

anonymous

October 13, 2005 12:21 AM

Any sucker that makes $30,000 per year and buys a $430,000 condo with 100% financing not only will lose her home but also deserves to lose her home, period.
A 30 year 430K interest-only loan at 5% ARM for 5 yrs is going to amount to about $1800/month. That's roughly 21K/year. How can you pay out 21K yearly for your mortgage when you only gross 30K/year??? Doesn't make any sense, does it?

Libad

October 13, 2005 9:58 AM

Well, Brian, no names were mentioned along with the financial information!

Anonymous2

October 17, 2005 5:21 PM

Only big loser is the Lender. If the illegal making 30K can't pay, she would be foreclosed and just loose 3k down payment. Anyway, illegals face several risks-- forclosure is just another such risk!

Frugal

April 15, 2006 11:23 AM

I am making 60K a year and am sitting on a mortgage of about 75K (bought my house in 1988). My payments take a big enough hunk of my income, what with the cost of utilities, etc. Because I live modestly, I can afford a few luxuries, like vacations abroad and monthly savings for retirement. I cannot even comprehend why in the world would anyone want to buy a house/condo that costs 430K on an income of 30K a year. There cannot be much left over for anything else, for sure. And, how in the world did she qualify?

Frugal

April 15, 2006 11:24 AM

I am making 60K a year and am sitting on a mortgage of about 75K (bought my house in 1988). My payments take a big enough hunk of my income, what with the cost of utilities, etc. Because I live modestly, I can afford a few luxuries, like vacations abroad and monthly savings for retirement. I cannot even comprehend why in the world would anyone want to buy a house/condo that costs 430K on an income of 30K a year. There cannot be much left over for anything else, for sure. And, how in the world did she qualify?

For Sale by Owner Center

April 25, 2006 1:41 PM

This is very common... the (stated income) 2-year interest only and the pay option arms will be causing some significant challenges for homeowners.

The are moving forward making their payments... all of a sudden they receive a notice, that their loan is adjusting because the two year interest only period is up. They are going from 4.5% IO to a 6.5% fully amortized 28 year loan. (We have mortgage calculators for each type of loan: http://www.forsalebyownercenter.com/tools/ to view exact increases)

Payment increases by an average of 60%, they miss making the first mortgage payment on time (because they don't have any savings as evidenced by recent national study). Now they have a 30 day mortgage late... guess what, can't get a mortgage loan anywhere now. They end up going straight to foreclosure. In California these IO loans represent over 40% of all loans over the last two years. Things can and very well may get very ugly.

Preston

August 14, 2006 5:00 PM

I am making 104k/yr before taxes, im 22 years old, and just bought a $300,000 condo, with my monthly dues for living here totaling over $2,600. I didn't go to college, and at work i sit on my ass all day and chat with friends on messenger, or download music, and occasionally attend a meeting or two a week. Anyone want to take a guess at what I do, and what company I work for?

Andres B.

August 31, 2006 11:35 AM

I am a real estate appraiser, and I have taught myself not to give a predetermined value to the banker. Three times a week after I have completed the appraisal I get this bankers who turn into a monster. Its like a pitch they learn in some institution, it goes as follows. For example they say on the report I requested a value Of $550,000 and unfortunately the appraisal came in at $470,000. The broker says I would have prefered you call me and let me know. I may not have had the report done at all. An underappraisal of $80,000 was definitely serious enough to kill the deal. So theyu are saying they would have found another appraiser to break the law. Three times a week minimun I receive this. Followed up with threats to place harm on my license or my fees. What is so crazy about all this is that values have never been higher due to the bubble, and still they need a higher value to pay for their fees. Every day I feel a little more bitter in the way Americans are treating each other.

Donna Marie

April 30, 2008 4:48 PM

I am a Small Business Consultant, whuch includes working on Personal Credit Reports. I was recently introduced to a 87 Years Young Lady whom is retired, had the best FICO score. She originally wanted to let some Friends of 20 years the down payment on a townhome. This was her "Death Bed Money" as she calls it. She has a modest duplex in town that she has a reverse mortgage on, she does not charge her Nephew whom lives in the other half full market rent.
Than Country Wide came on the seen. First they say they tried to quality her friends of 20 years, well their Credit Report needed some work. Then there eyes got big and wide when they found out Mother Allen had this property (duplex). THANK GOD Mother Allen stuck to her guns and said" My duplex is not involved". Country Wide folks ended up taking the 87 Year Old Ladies $20,000.00 bucks, and put this Interest Only Adjustable rate Mortgage in her name. She has no income, she should of never qualified. The Friends made the monthly mortgage that was climbing every 6 months. Last count these Freinds stop paying the Adj. when it went to $ 3,500.00 a month. Twice a year they paid about $ 4,000.00 in taxes. Now this home is in Flreclosure of course, Mother Allen's Credit has tanked and no way is she getting her $ 20,000.00 death bed money back.
This person from Country Wide was slick, while the Mortgage was in the process of Escrow, he actually came over brought her flowers, vacummed her rug and brought her food. Now, I cannot even get this JERK on the telephone. I just got invloved 1 month ago. I am going to turn them all in for Elder Abuse.
This Young Lady has turned 88 during this time and had multiple health problems. Now it seems every Attorney I speak to wants $ 6,000.00 for a retainer. This woman has trouble buying food every month.
I have all the paper work for this Mortgage. After I started looking at the stuff. I noticed a total difference in signature and intials, well it turns out most of them were forged.
This is an absolutely GROSS example of GREED. Now, they hound Mother Allen 7 days a week as late as 8:00pm. She has fallen on the floor trying to get to the telephone. I know I called the fire department for some assistance for her. This has happened more than once.
These folks disgust me.

Crystal Jacquez

October 24, 2009 1:53 AM

San Francisco, CA

WHY PEDOPHILES ARE FALLING IN LOVE WITH SINGLE MOMS

Pedophiles are learning to love single moms. Not because these predators are changing their sexual preferences, but because many single moms are inadvertently creating happy hunting grounds for that subspecies of pedophiles who like their prey young – really young.

“Think of it” says Crystal the Jacquez, managing editor of Guys That Lie.com, an online back grounding site. “If you’re one of the tens of thousands of pedophiles with a taste for really young kids, how do you get to them? Children under five or six are just too young to be online by themselves.”

“So what does this most dangerous form of pedophiles do?” asks Jacquez, “He surfs social networking sites looking for the pages of proud single mothers just aching to show potential dates how beautiful their children are and just hoping to attract men who will not only will love them, but will love their children too.

Well, the single moms who put photos of their pre-school kids on their social networking homepages are certainly attracting at least one type of child-loving guy – pedophiles”

“And single mothers almost always do it.” says, Jacquez. “Just look at the pages of Facebook and MySpace. It’s not only incredibly dangerous but worse, most single moms have absolutely no idea that it’s dangerous at all!”

Literally, millions of single moms are now on social networks like Facebook and MySpace -- and almost all of them proudly show off photos of their kids on their homepages and profiles.

So if you’re a pedophile stalking preschoolers, half an hour of searching out single mothers on social sites and you’ve got a dozen lush candidates – photos and all - just a few key strokes away”.

Not only that, continues Jacquez, “but the predators know that these kids are often protected only by lonely, vulnerable women. WHAT AN OPPORTUNITY! It’s a pedophile’s dream!

Read this excerpt from a report in the journal American Psychologist, published by the American Psychological Association, regarding pedophiles stalking pre-schoolers on the internet:

“Finding prepubescent victims directly (on the Internet) is quite rare; such offenders use the Internet in other ways. Pedophiles typically get access to preschool victims through online contact with parents”

“If you have pictures of your child on line,” says Jacquez, “don’t be too surprised to get a message like the following from some nice sounding guy”:

“Hey! I just saw your profile on Facebook and you are one great looking lady --- and that little girl of yours is just marvelous looking! She looks so bright etc. etc. etc!”

“You’re going to have a new best friend very soon,” she says. “Count on it!”

Who hasn’t heard of Lolita, one of the most famous books in America, in which the pedophile gets access to the prepubescent daughter by courting her divorced mother. You can still see the movie on cable TV with James Mason and Shelley Winters as the grown-ups and Sue Lyon as Lolita.?

Jacquez also cites the following statistic from: Offender Characteristics, U.S. Department of Justice, Bureau of Justice Statistics re. Victim-offender relationships in sexual assault regarding who sexually assaults children under 6 years old.

Who assaults children under 6 years old:

Trusted family members: 48.6%
Strangers: 3.1%
Trusted family acquaintances: 48.3%

“If a pedophile targets your child’s photo on your homepage, trust us,” says Jacquez, “they’ll become a ‘trusted family acquaintance’ soon enough. “

“Don’t close down your social network homepages” Jacquez says. “Just get those photos of your kids off them!”

“One thing more thing,” says Jacquez, “when you meet a new guy online, check him out immediately with us at Guys That Lie.com (www.guysthatlie.com). Our site is free and was built in order to empower women to check out the backgrounds of guys that they meet online.

“First, check our Child Molesters Section where we access the photos and home addresses of over almost 1,000,000 registered sex offenders. Then check him out in our Criminal Records Section. Then check to see if he’s using a phony name. After that, check out all his claims about his background. There is no way,” she says, “that you can be too careful.”

Guys and Lies also has a special page on Facebook at www.facebook.com/guysthatlie and on MySpace at www.myspace.com/guysthatlie.S

Jacquez asks you to please forward this article to single moms you know who have their kid’s photos online..

Contact:
Crystal Jacquez, managing editor
Guys That Lie.com
415 678-8610
crystal02@guysthatlie.com
http://www.guysthatlie.com

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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