From the Journal News:
The tales of woe keep coming. A Peekskill woman overspends fixing up a condominium; she puts it on the market just as real estate sales slow. Now she can’t sell or repay the debt. Then there’s the couple in Cold Spring that was confused or, perhaps, misled, by the terms of their mortgage refinancing. They now owe more than their house is worth. In Pomona, a family facing illness and in need of a quick cash infusion shops for a modest loan, but sees their 6 percent fixed-rate mortgage morph into an adjustable-rate mortgage of more than 9 percent. The new rate now makes the home unaffordable.
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The numbers of new foreclosures this year in Westchester, Putnam and Rockland counties are staggering. As of November, there were 1,975 foreclosure filings in Westchester, an increase of 38 percent over the previous year. In Rockland, there were 1,045 filings as of October, an increase of 16.2 percent; and in Putnam, foreclosure filings increased by a whopping 44.3 percent as of October, some 368 homes in all. Each of those represents immeasurable family disappointment, fear and, ultimately, upheaval.As staff writer Jerry Gleeson noted in an article yesterday, more than 6.2 million homeowners nationwide took the gamble with subprime mortgages, about half of which were adjustable-rate mortgages. Economists now predict that about half of the subprime mortgage holders – or 3 million homeowners – could default on their loans.
Massive defaults threaten the financial services industry and even unrelated companies that traded in real estate holdings. Add to that the rippling effect of job losses – the related layoffs are coming now to Wall Street and our Main Streets and it explains why federal and state officials are rushing to help. Foreclosed properties undermine the value of even unrelated property. Accordingly, even secure property owners and even renters in mortgaged property – have a stake in seeing troubled homeowners stay above water.
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But these will be too little, too late for many borrowers already in arrears. They required help on the front end – from watchdog regulators and a mindful Congress. We are now seeing that they truly were on their own.
Subprime disaster: Lenders, borrowers face new requirements
For mortgage brokers, a more complex future looms.
A raft of legislation at the federal and state levels is seeking to prevent a recurrence of the conditions that have led to sharp increases in mortgage delinquencies and foreclosures across the nation.
One common denominator in many of the bills is greater regulation of the mortgage broker industry. Critics have accused brokers of recklessly drawing consumers into loans they couldn’t afford in the interest of obtaining the higher commissions that subprime mortgages commanded.
“They clearly were steering people into the subprime market who couldn’t afford to be there in the first place, or in any mortgage market,” said state Sen. Jeffrey Klein, D-Bronx, whose district includes portions of southern Westchester.
Klein has introduced a bill that calls for mandatory consumer education for borrowers using subprime mortgages. The bill also calls for a fiduciary responsibility between brokers and consumers.
“When someone sits down with a mortgage broker, they should be able to breathe easy that that person has their best interests in mind and is going to put them into a mortgage that they can afford,” Klein said. “I think that’s key.”
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The question of how the state would define the brokers’ fiduciary responsibility to consumers is a concern to him. The bonding requirement in New York already serves as a powerful deterrent to misbehavior, Soliz said, because the inability to get bonded would put a brokerage out of business.That lenders were willing to offer loans for 100 percent of the cost of homes, and without income verification, is overlooked when blame is being assigned to the mortgage brokers, Soliz said.
“This industry has been used as a scapegoat. They provided the liquidity. They provided the securities,” he said. “If you don’t have the product to sell, you couldn’t have sold it.”
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But it is harder now for first-time homebuyers to enter the market, he added.“I’m not saying people have to put 20 percent down. But certainly the days of putting nothing down are gone,” he said.
Pomona man trusted refi deals, now may lose home
Since Mario Dorelien can remember, he has worked hard for everything. No handouts or wealthy parents here, he says with his rich trademark laugh. His four-bedroom home with front and back yards, two children in college and another working his way there, all came by the sweat of his brow.
That’s why it’s all the more frustrating to him that it may all end as if none of that mattered – that the tortoise and the hare meet the same fate.
In the coming months Dorelien may lose his home to foreclosure, and with it the respect of his wife and children. Dorelien says a shark-like mortgage broker steered him toward a subprime mortgage that has threatened to put his family on the street.
Peekskill mom dreams of escaping subprime mortgage
Once upon a time, Judy Becker owned a spacious house in Croton-on-Hudson, with plenty of room for herself, her husband, two children and their pets.
After a divorce slashed her budget, she settled for a cramped condominium in Peekskill and began looking for her first full-time job in decades.
Now, the 60-year-old risks losing even her downsized dreams, as payments on her subprime mortgage rise beyond her means and a yearlong effort to sell her two-bedroom townhouse has yielded no offers.
“I accepted an adjustable-rate mortgage, thinking, ‘I’ll only be here a few years, it’s just a place to land,’ ” she explained. “But then, the real estate market fell apart, and things just stopped selling.”
I’m sorry but I have no sympathy for the folks that took out ARMs and are now claiming they didn’t know what they were getting themselves into. They were sure quick to sign their names away for money and now that it’s time to pay the piper, they claim fraud. Nonsense! Noone held a gun to their heads – it was their own freewill that got them into this mess. Perhaps a dose of reality is what these folks need. I could have gotten myself into the same fix but didn’t. I’m no math wiz but I would never trust a loan that adjusts the monthly payment because of uncontrollable, outside forces. It always seemed like an unfair deal to me and to this day, I cannot imagine anyone risking everything for it. I guess the allure of a bigger home with marble counter tops was too much for the conscience to bear.
They should suffer the consequences for not doing their homework or at the very least for not controlling their impulses.
Some people got ARMs because they couldn’t afford to buy under any other sort of mortgage type.
Not that they are blameless, but they didn’t all do it just to get a huge house with granite countertops. The lady at the end of the story did it just to buy something after her divorce. She probably should have just rented a small apartment, but our culture is so into this “ownership society” thing, that owning a home is security.
Again, not saying all are blameless, but some weren’t doing it to buy a McMansion. While we have freewill, our government should have been regulating these loans more. But people were making big money off them, and money is king.
Ann Says:
…Again, not saying all are blameless, but some weren’t doing it to buy a McMansion.
Whether it be a McMansion or a small home that is beyond your fiscal capabilities is the exact behavior that fueled this bubble. Both scenarios are the same in nature. Taking on mortgages knowing one cannot honestly afford it, in the name of advancing your living situation is simply for vanity. Being able to afford a higher living standard is one thing. Crossing your fingers in the hopes you will get a raise, is another.
By the way, I said nothing about McMansions. Plenty of modest 2 bedroom cape cods have been refinanced with ARMs to install said marble counter tops amongst other things. I know families who’ve bought luxury cars, on top of renovations, with their home equities and are now crying the blues. This woman in the article could have rented or opted for a more affordable home. Obviously she fell for the trappings of living in a home that was priced above what she could afford or she wouldn’t be in this predicament. She only has herself to blame.
I agree, government turned a blind eye to the fraud however the fraud would not be as prevalent if the average person maintained a little restraint or heaven forbid googled “mortgage calculator” to punch in the numbers themselves.
Ann Says:
…Again, not saying all are blameless, but some weren’t doing it to buy a McMansion.
Whether it be a McMansion or a small home that is beyond your fiscal capabilities is the exact behavior that fueled this bubble. Both scenarios are the same in nature. Taking on mortgages knowing one cannot honestly afford it, in the name of advancing your living situation is simply for vanity. Being able to afford a higher living standard is one thing. Crossing your fingers in the hopes you will get a raise, is another.
By the way, I said nothing about McMansions. Plenty of modest 2 bedroom cape cods have been refinanced with ARMs to install said marble counter tops amongst other things. I know families who’ve bought luxury cars, on top of renovations, with their home equities and are now crying the blues. This woman in the article could have rented or opted for a more affordable home. Obviously she fell for the trappings of living in a home that was priced above what she could afford or she wouldn’t be in this predicament. She only has herself to blame.
I agree, government turned a blind eye to the fraud however the fraud would not be as prevalent if the average person maintained a little restraint or heaven forbid googled “mortgage calculator” to punch in the numbers themselves.
I bought eToys in ’97 with money I really couldn’t afford to lose.
Where’s my bailout?
/rhetorical question
Home ownership is NOT a right. Matter of fact, I may only be RIGHT for a small percentage of Americans. Here’s a test: If you have to borrow to buy a house and the loan has terms and conditions that you cannot understand now, and may regret having agreed to later, then you should NOT take that loan.
I’m not saying the people who got themselves into their mess are blameless. Not at all. Just saying that many of them took the ARMs with good intentions, not as a way to keep up their SUV, marble countertop lifestyle.
Are the people who took the loans blameless? Not at all. But there are plenty of people with their guilty hands in this cookie jar including the realtors, banks, mortgage brokers and lawyers, and it was all fun and games when everyone was getting rich.
The government would have done us all a favor by regulating these more carefully, wouldn’t they?
Overall, I think we desperately need to teach personal finance in high school, to reach as many people as we can before they get out into the real world.
This from the Wall Street Journal:
The Oropezas arrived at Calle Canon Road in 2004. … “It was labeled as the new Orange County,” Mrs. Oropeza says. Public records show they paid $557,000 for a four-bedroom house and took out a $500,000 mortgage. Her husband is an area manager for an auto-parts retailer and she is a purchasing manager for a firm that sells dietary supplements.
As property values skyrocketed, they refinanced three times, most recently in late 2006, for $835,000, Mr. Oropeza says.
The couple say they used some of the money they pulled out of the house for home improvement, such as a backyard waterfall. But Mr. Oropeza says the bulk was used to pay off credit-card arrears. “We were in a vicious cycle of refinancing our home to get out of debt,” he says. “We banked on selling the house, but that’s where we failed.”
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The couple stopped making their Corona mortgage payments in June, triggering a notice of default 90 days later and starting the countdown to foreclosure. The family is now living in Texas.
Read the rest here:
http://online.wsj.com/article/SB119785633408932917.html
This is a vicious cycle of spending yourself into foreclosure, not because you’re buying food, but because you’re buying junk you don’t need. I mean a backyard waterfall? How on earth can anyone feel sorry for these people?
No one is asking you to feel sorry for this particular family.
There are plenty of other stories out there that could be dug up. Stories of mortgage brokers who lied, along with the realtors.
I can’t condemn everyone who got an ARM and find themselves in trouble now. I don’t know all of their situations. I believe that some of them took the ARMs either out of ignorance or miseducation.
Maybe our gov’t should have required mortage brokers to put a big fat disclosure written in plain old English on top of that loan paperwork before people signed up. But that probably would have killed the good times.
#8 Ann Maybe our gov’t should have required mortage brokers to put a big fat disclosure written in plain old English on top of that loan paperwork before people signed up. But that probably would have killed the good times.
They already do.
They do? Written in plain English? I’ve never seen one. I’ve seen the regular mortgage paper work of course, but I never saw a big disclosure (i.e. warning) right on top.
So do you think that people really understood what they were getting into? Everyone? Maybe they did.