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Is Your Mortgage Choking You?

Posted by: Peter Coy on February 23, 2007

For an article in BW, I’m looking to interview people who have subprime ARM mortgages and are feeling squeezed by resets. Please write to me ASAP at Thanks.

Reader Comments


August 16, 2007 4:50 PM

HI, I just found this site. I have a Option Arm Mortage. We were not disclosed everything about this loan, we were only told that the payment would increase annually by 7.5% of the payment amount. We had no idea we were going to have options until our first statement came. We were never told it was a Minumum payment that our payment was going to be. We were in shock, contacted the broker, who did the loan thru Countrywide, and we got no reponses until I contacted the NH Attorney General's Office.

There is no way we can afford the P&I on this loan as our principal has increased $21,000 in 17 months, not to mention, we paid a $17,800 prepayment penalty to get out of our fixed rate mortgage to get into this misrepresented loan.

The NH Banking Commission did not find in our favour! We are choking!

dave albright

August 19, 2007 1:59 PM

I hear this "we Had no idea" claim often. It is a joke that they had no idea. The compliance regs. strictly require documentation the CLEARLY IN 2nd grade PRINT discloses the terms of the loan. not only that there is deferred interest but also that there is a MAX Balance of 110-125%. When that balance is reached, depending on rate and payment pattern, usually 3-6 years. When people make this oh "poor me” claim I feel disappointed that American consumers (myself included) use laziness, greed, and blame as a mode of operation. I hear the poor me i had no idea until it was to late. That bad loan person." I know FOR A FACT that is impossible given the disclosure requirements. SO, i ask, well did you receive anything explaining the terms of the proposed loan in the mail when you applied? did you ever hear think the payment was too low and the math did not add up? On the final loan documents did you notice the big bold negative amortization disclosure page? the truth in lending? the amortization schedule? Or any of the other many forms that the mortgage industry and regulators have put in place to protect the consumer and keep from getting sued by consumers pointing the finger at the mortgages lender for their difficult position of bad decision. The only reason we have to sign 75 page loan packages is because of situations like this. there is a disclosure for a disclosure. A 2nd grader would be able to read the 2 or 3 documents in each and every one of these neg-am mortgages that explain the function of the minimum payment, interest, recast, etc...

I have just been hearing so much lately i felt compelled to say something. I have never posted on a blog. but really.

The problem to begin with is not mortgages. the problem is the spending habits of Americans with credit cards. Unsecured creditors like Citi, MBNA, fleet, American general, etc... willingness to extend higher amounts of credit to consumers. The same consumer that said the had no idea what they signed is the one that these credit card companies gave the high limit credit card to. I am in California. I have seen people with bed credit habits come to me for years. It started with $25k in credit card debt. i would refinance their home and they would cut their cards. the cycle would repeat.

In the past 3 years the average credit card debt balance has tripled.

Consumer / homeowners go out burry themselves in credit card debt. use the mortgage and equity in their house to take a higher mortgage to pay off the cards. the intention is to leave the cards alone. well America is the land of credit. they don’t last 6 months, the cards come out and 12-24 months i have seem the cards max-ed out again. Now they have proven to have no self control. to responsibility and no options. years ago the value of the house would have risen in those 12-24 months to cover up this problem. now people who are choking have no emergency button. they place blame on the big bad loan wolf who sheaped them. The fail to mention the fact that the mortgage person probably said hey cut those credit cards up. they forget to say that they have a problem with compulsive spending on credit cards.

the real problem in America is the use of credit cards. These mortgages have strict disclosure guidelines and settlement procedures. It may not be the story of the consumer trying to point the finger at someone else for their misfortune and mismanagement of their own personal finances. we should blame our k-12 education system for not having curriculum to educate our children on the most important subject, Personal Finance.

Basic math:
$150,000 X 7%= $7,000/12= $937.40 interst charge
Mortgage Calculations
minimum 1.5% payment is $499.88
Full Amortized P&I payment $1048.82

I have compasion for these homeowners the problem must be addressed. I feel it boils down to responsability and accountability of all parties: banks, consumers, realtors, countys, credit card companies, and our legislators (they will just batch it.

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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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