Tuesday, April 28
Posted 11 a.m. Eastern
It is time to empty out the inbox and post some reader comments to the April 10 post on HUD Secretary Shaun Donovan's interview with The Washington Post. I have interspersed some comments of my own.
"I think you underestimate the degree to which modern mortgage loan products, such as the notorious Payment-Option ARM, were designed to manipulate and mislead borrowers. I recently attended a 2-day continuing legal education training at which a room full of 70 lawyers struggled to figure out how some of these products work."
I am quite familiar with the language of the payment Option ARM loan documents and I won't disagree that it is extremely verbose and complicated. But that just underscores my point that homebuyers owe it to themselves to research the biggest financial transaction of their lives.
"Since you've asked "What do I think -- I think you're full of crap! I'm a professional real estate investor and I know, as you do, that these intentionally unregulated, esoteric, investment instruments were designed to a) circumvent the regulatory structure that would militated against much of the mess we find ourselves in; and b)to confuse the hell out of the "average" homebuyer. Like you, I have absolutely no sympathy for the high-end homebuyers who knew or should have known better. But, for the "working class" stiffs, many of whom have never read as many words in one place as may be found in a typical purchase money contract (and many of these "agreements" were far from typical) they became the proverbial lambs being led to the slaughter, especially with people like you looking down at them from behind the desk giving them all the great sounding reasons they should not have had concerns about what they were signing up for. I know, because I've read many of these so-called agreements, after-the-fact, and listened to the folks who signed them (many or whom don't even speak English) then lost virtually all they had, to foreclosure!
"What I think is that the mortgage industry should step-up to it's fair share of the blame!"
"I have tried to be prudent about my purchases. I felt I was doing what was right for my retirement. I have three houses. I took out what I thought would be temporary interest only loans so I could remodel the one and then sell it so I could pay off one of the others. They were 60 percent loans. Then the market went and am still unable to sell the biggest one that had been our home. I had no trouble getting the loans and did not lie about my income at the time. I am unable to now get new loans because the value dropped so low and my income is not enough. With new loans I could make the payments but will soon have to tell the mortgage company to take the biggest one since I will soon be out of money. It will still be tough. I drive a 1990 Dodge Caravan that is falling apart. I am unable to get a job because of my physical condition. And being retired who would want to. I was not planning to live high on the hog, just live comfortably and visit the kids and grandkids once in a while in other states. We do not take any vacations because we are caretakers for a member of the family that requires us to be at close to home all the time. There is not money for anything but the very basics. All savings will be gone soon. But we are blessed to still have food and shelter."
Unfortunately the government refinance and modification programs are for principal residences only, not investment properties. I e-mailed back to this reader to ask about the three houses, but never heard back.
"I do understand that this Web Site is called BANKrate.com. You can not tell me that the banks did not know what they were doing when making these bogus loans to people that FLAT out should never, ever had been given to these people? Lenders have guidelines and Federal Laws they have to follow when lending money. Or do they not have to follow any laws? This is how all this got started in the first place. Also, you can not tell me that these CEOs of these institutions did not see this collapse of the real estate market coming? There are endless charts all over the Internet that show this coming, starting in 2004. These BANKS did what ever they had to to make a quick buck and get out. But oh-so-many of them got caught with their pants down and want the American people to help them out of THEIR mistakes. Who is helping the American people that got into these loans get out of them. NOBODY. The American people have been abandoned by our government. After the ABA had given $3 million+ in 2008, $21 million 2000-2008, in campaign contributions. I am sure this had no bearing on why they are being helped. That is a really nice ROI. And receive billions in return. SO bottom line, you can not tell me that the BANKS are NOT AT FAULT and the American people are."
I'm not saying banks aren't at fault. Lenders, regulators and borrowers all share blame. My contention is with HUD Secretary Shaun Donovan's position that delinquent borrowers are faultless.
"AMEN! to your comments on HUD's Donovan!"
"You are right on! Thousands watch American Idol or spend time on line, but not to research mortgage options. I give Home Buyers Seminars and when I tell people we calculate mortgage affordability on gross income, not net, that's usually a revelation to them. But what's worse is the eye-rolls I get when I tell them they need to work out their own budget based on their take-home pay and their lifestyle, because I don't know how many times a week they eat out, their gym memberships, vacation plans or if they like to go to Foxwoods Casino. Furthermore, we offer to pre-approve them, but when we estimate a payment, to save that amount for a few months to see what's left. These are completely foreign concepts. But folks who've used credit cards to supplement cash flow end up getting into trouble when the piggybank that was their house is no longer increasing in value. I've lived a modest lifestyle and am not happy to subsidize the consumer zealots out there who have levered everything they own and want a bailout. I am for increasing the LTV to help out responsible borrowers who are upside down, although I was in that position in the early '90s and kept paying the mortgage, never expected government help to bail me out. Politicians will always try to cover themselves when speaking to the masses, which is why I have no confidence that they can solve the current crisis."
"You are spot on with your assessment of Mr. Donovan's responses to The Washington Post. I am really glad that someone is FINALLY saying the irresponsible borrowers (including those who were "upsold" on a house or exotic mortgage product) should NOT be subsidized by those of us who live in homes we can afford and pay our bills on time.
"Thanks!"
"You hit the nail on the head. Need to add Fairfield County, Conn., to the list. We have never been late on our mortgages. Have 3 sons in college and have loans coming due. This plus credit card debt we appealed to our bank for modification, but turned down even after several attempts. If we were late they would work with us!
"How could HUD justify helping others but not us?"