Mortgage Mess Hurts Main Street, Beyond-(bundled up brokerage loans/security hard to refinance)

Yahoo News & AP ^ | August 25 2007 | By Dave Carpenter and J.W. Elphinstone, AP Business Writers

[Flavius]

The walls are bare, the closets are empty, and Connie and Timothy Pent and their two teenage children are living out of boxes as they wait for a dreaded knock at the door of their three-bedroom house in Ocala, Fla.

snip

he problem, he said, is that the lender may not have any authority to redo them because of the way loans are now bundled and resold, with repayment risk changing hands several times.

"It's unlike the old days where the bank you borrowed from just kept your loan on the books," he said.

David Downs, a professor of real estate at Virginia Commonwealth University, believes blame for the current quagmire falls on all involved. But he says the consumer should be held accountable first and foremost for failed loans.

"If somebody takes on financial risk, it's incumbent on the consumer to understand that," Downs said.

[Flavius]

"If somebody takes on financial risk, it's incumbent on the consumer to understand that," Downs said.

[mtbopfuyn]

Many of the victims are subprime borrowers

No, the rest of us are the victims of their stupidity and laziness.

[CRBDeuce]

while the 70’s were great, perhaps consumer protection has gone overboard...
“If somebody takes on financial risk, it’s incumbent on the consumer(borrower) to understand that (risk for which they alone have assumed 100% responsibility),” Downs said.
...parenthetical remarks my own!

[Oldexpat]

Shortly it will be hurting city hall with both lower property tax and higher municipal borrowing costs.
It is going to hurt all around. The Finance guys on Wall Street kind of out did themselves this time..and all of us will pay the bill.
The good news is that the market system will sort it out eventually.

[Earthdweller]

"No, the rest of us are the victims of their stupidity and laziness."

I'm thinking you can't say the banks are without sin...after all, they made a pretty penny off all those interest only loans, while it lasted.

[Mark was here]

If they promise you a fixed loan and then change it at the last second to an adjustable, punch them in the face. Real hard. You wont get the loan, but you will wind up saving a fortune.

[mort56]

Others were sold on too much house, piled up huge loans based on the inflated value of their property and didn't fully understand the interest rates they would have to pay.

Excuse me?! People were sold too much house? The AP makes these people out to be victims or some amorphous evil house seller when in truth they are victims of only one thing, their own greed and folly.

[Sender]

When I was shopping for a refi, several brokers kept pushing the 2/28 ARM real hard. I kept telling them I only wanted a fixed loan but they kept saying no, you should get the 2/28. One even got angry with me when I kept refusing. I assume there was some financial incentive for them to push the ARM so hard.

[ItisaReligionofPeace]

Of course. They are merely simple sheeple and BIG (fill in industry here) took advantage of them.

[Earthdweller]

This sort of pressure would be difficult for say a young person who is naive to resist.

I learned in my twenties that a salesman is not your best friend. Luckily I only bought a water softener for ten times the going price and not a 30 year loan.

[Gay State Conservative]

Whatever happened to the 20% down,thirty year fixed rate mortgage?

[Earthdweller]

"Whatever happened to the 20% down,thirty year fixed rate mortgage?"

The libs told us we were not being "fair" to those who could not afford the down payment...so we changed it. Isn't that special? Now those people are going to loose part of their life savings.

[Earthdweller]

loose = lose. I hate that word.

[Iwo Jima]

Shortly it will be hurting city hall with both lower property tax and higher municipal borrowing costs.

I strongly dispute this statement.

For years, government has charged grossly excessive property taxes based on these falsely elevated "market values." Even people who bought their property 30 years before for very modest prices suffered because the taxing authorities appraised their property at these absurd "current" values.

If we return to sanity, the government will only have lost something that they never should have had, and people who have lived responsibly and made all the right decisions may actually be able to afford and continue to live in their homes.

[Iwo Jima]

I agree that those consumers who took out these loans will have to pay the price. There's simply no way around it.

But as a lawyer I can also tell you that there are many things hidden in the fine print of, not just loan documents, but all sorts of legal papers that not even a lawyer can understand. They are specifically written to be that way.

For example, my bank sends me things all the time. I no longer even try to read them. When I tried once, I couldn't understand them and knew that it would make no difference if I could because the bank makes the rules. You have no choice.

[Hydroshock]

And if you notice in the past that as they loosen up on lending standard the prices seem to jump. Now you see shacks goign for 1/2 million.

[Earthdweller]

Not here. We live close to an airport. When the Airlines got rid of tons of employees after 9/11 our housing prices plummeted after they left their homes empty and moved away in hordes.

Our equity has been practically static for six years. Just another example of why you don't speculate yourself into a quagmire.

I tell my children to only go fixed on your 30 year..but of course, I was mugged real good at an early age. :)

[Vince Ferrer]

If we return to sanity, the government will only have lost something that they never should have had, and people who have lived responsibly and made all the right decisions may actually be able to afford and continue to live in their homes.

Actually they'll just raise taxes on something else in order to "pay for" the tax cut in property taxes.

[Earthdweller]

"Actually they'll just raise taxes on something else in order to "pay for" the tax cut in property taxes."

Bingo...In a Republic, a big money problem will bite us all somehow. We might as well just start trying to figure out where we want the teeth marks.

[Alice in Wonderland]

Last year I sold 2 older singlewide mobiles on 3.08 acres in Marion County for $90,000. It’s in the same county as Ocala. The fellow gave me 20% down and I’m holding a 20-year, 7% fixed rate mortage with monthly payments of less than $500. The fellow immediately pulled off one of the mobiles and brought in a 3,000 sf triplewide Palm Harbor to replace it. If it had been me, I would have paid off the mortgage before buying a McMansion-on-Wheels. Both singlewides were livable and had been used as rentals.

Now he’s defautling on the mortgage. I received no payment for August and the fellow won’t talk to me at all: won’t return my phone calls and is either away or in the shower when I’ve gone over to the property. I hope he’s read his mortgage note carefully. He only has a 30-day grace period. I’ve already sent him a Notice of Default and have spoken to an attorney. I’m prepared to begin foreclosure in a few days.