Real people, real mortgage nightmares - CNN.com
I have been hearing more and more about foreclosures these days. I have said for about 2 years now "In a few years, there will be a lot of foreclosures", and I was correct. Now people are scurrying, and I hear politicians politicking about helping people save their homes. Screw 'em. Why should the gov't bail them out?
The CNN link has a story of the Pents. I completely don't understand why it's newsworthy at all. The refinanced a $207k loan with a two-year adjustable rate mortgage. Then "life" happened:
With their new payments, a sequence of events left them unable to keep up. First Connie's mother moved out and stopped helping out with mortgage payments. Then her husband Timothy lost his job at a mobile home factory because of the housing industry slump.
That's newsworthy? They depended on someone not obligated to pay towards the mortgage, and the guy lost his job. If I lost my job and couldn't pay my mortgage, would I get an article written about me as an example of the rise of foreclosures? Dumb.
Then, the Rasmussens. A sad story about people wanting out of the trailer park and into a home. The lender they chose (which did 100% financing) folded before they closed. Boo hoo.. save your money for a down payment. Do people not know to do this?
The Marshalls, with their 7 (SEVEN) children were taking out a $365,000 loan.
Jeanna Marshall, 36 and disabled, receives $1,500 in Social Security payments a month, while her husband Vernon, 41, is a driver for UPS netting about $3,000 a month.
You know, I make more than both of them combined, and I wouldn't be so stupid to a) have 7 kids, and b) take out a $365k mortgage. Not only did they not read what they signed and ended up with a two-year interest-only adjusted rate mortgage, but they were obviously borrowing much more than they could afford. Boo hoo. On $4500/month, any "what can I afford" calculator will tell you it's not a $365k mortgage loan. Maybe they should have purchased the Rasmussens' trailer.
Sharon Reuss of the Center for Responsible Lending, a nonprofit organization that works to eliminate abusive practices in home mortgages, says loans that give borrowers a fixed payment for the first two or three years before the monthly obligations adjust sharply upward -- dubbed "exploding ARMs" -- have been particularly troublesome.
What's troublesome is that people bought into these loans. If the loan says anything about "ARM", "Balloon", or "adjustable"... find another loan. Don't have good credit? You should still be able to find a no-doc fixed-rate loan (I did when I moved to NY originally). You can shop for these things. If something falls through, find another lender. If you trap yourself into an ARM, I'm not sure that isn't your own fault.
I have no sympathy for people who signed onto "creative" loans without fully understanding the ramifications. I don't feel sympathy for people who trust their lender and don't get advice from their agent and especially an attorney. I do feel sympathy for people who can afford what they have, and maybe lose their job or get ill and fall behind. I do think banks should be flexible in times of need like that. But, if you signed on to a subprime loan and now your payment is skyrocketing... you should have known that when you signed on the dotted line. I knew it would be happening, which is why I knew this would be the season of foreclosures.