Category Archives: The Mortgage Meltdown
Seems like it could have been the answer and can be in the future:
Imagine that a few years ago, at a time when you were renting your home, a fast-talking lender had approached you and explained how you could afford to buy your first house. The monthly payments seemed affordable.
At the closing, you were swamped with forms, dutifully signing where you were told. Recently you discovered that one of the forms you didn’t read at the closing explained how your monthly payments would rise three years after the closing. Now that those years have passed, you can’t afford the payments. You have defaulted, and now face the prospect of losing your home.
Now suppose that the process had been completely different. Well before signing the papers, you had to watch a video warning you about the pain foreclosure brings. You were required to work through a budget that took into account the increase in your mortgage payments and helped you understand how much money you would have to meet your other expenses after you made your mortgage payments. A credit counselor explained the consequences of taking out the loan and countered the influence of the fast-talking lender. Might you have decided against taking out the loan? And if millions of other borrowers had had a similar experience, might we now not be in the crisis we are in? (hat tip Consumer Law & Policy Blog)
This is truly pathetic . . .
Secretary of Housing and Urban Development Steve Preston said the centerpiece of the federal government’s effort to help struggling homeowners has been a failure and he’s blaming Congress.
The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, Preston said in an interview. (link)
From the NY Times Editorial Board:
The mortgage crisis that has placed millions of Americans at risk of losing their homes has been especially devastating for black and Hispanic borrowers and their families. It seems clear at this point that minorities were more likely than whites to be steered into risky, high-priced loans — even when researchers controlled for such crucial factors as income, loan size and location.
What’s new right? Well what can we do about it?
The Congress that takes office in January can start to deal with this problem by strengthening fair-lending laws, especially the Community Reinvestment Act, which encourages fair, sound lending practices while requiring banks to lend, invest and open branches in low- and moderate-income areas.
Lawmakers should also extend that law to cover the often fly-by-night mortgage-lending companies that helped drive the subprime crisis. Those companies saddled entire neighborhoods with risky, high-priced loans that borrowers could never hope to pay back, sold those loans to Wall Street and then went out of business.
Congress needs to keep in mind that many of those players are surely to be back in operation somewhere down the line. Some already have returned in the guise of offering to help homeowners avoid foreclosure.
Yes. As an aside, f you are in foreclosure, unless you are in the most rural of locations, there is no reason that you should pay one of these foreclosure assistance groups to negotiate a loan modifciation. These services are available for free by way of city and state funded housing counselors in almost every major city. Most of these mortgage consultants will just take your money and then not do anything. And, in any event, not-for-profits, sometimes funded by your tax dollars, will help you for free.
Think about it. When is the last time you accepted a service by paying thousands of dollars, before you got anything? Most of these foreclosure rescuse places that charge ask for money up-front. Ask yourself, why that’s a good deal. Just a tad of advice for people struggling with their mortgage.
In other sobering news:
55 percent of loans to African-Americans, 40 percent of loans to Hispanics and 35 percent of loans to American Indians fell into the high-cost category, as opposed to about 23 percent for whites. There also were troubling gender differences. Women got less-favorable terms than men.
From the Bush administration? What is going on in the world?
Senior Bush administration officials are completing a plan that could help up to three million homeowners struggling to pay their mortgages to stay in their homes, three people briefed on the proposal said Wednesday.
The initiative could be the most sweeping government effort directed at mortgage borrowers since the financial crisis began last year. Under the plan, the government would agree to shoulder half of the losses on home loans if mortgage companies agreed to lower borrowers’ monthly payments for at least five years, according to the people briefed on the plan who asked not to be named because details were still being negotiated. (link)