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Post by Big on Mar 27, 2007 23:40:19 GMT -5
Anyone that knows law will know that what is legal today can be illegal tomorrow.
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Post by matclone on Mar 28, 2007 10:35:18 GMT -5
Lots of good points. Laws do not always keep up with the need. Yes, poorer neighborhoods are often targeted by sub-prime lenders, and the elderly are particularly vulnerable. Yes, the decisions made by the lenders are coming down from corporate HQ, which is not your local banker with a stake in the community (which in many places has ceased to exist). I'm reminded by the latter, because I recently took a credit card from Wells Fargo. Everytime I talk to them, they encourage (read: pressure) me to fill up my credit line, and always, always, these cos. want to know if you have equity in a home, and if you do, they want you to borrow against it.
A have several stories about sub-prime lenders but one really sticks in my mind, because it's so egregious and because I met the family. Mom and Dad (not my parents but they could be anyones) live in a working class neigbhorhood in the city. They raise four kids. At about age 40, Mom is struck w/encephalitis, rendering her feeble-minded. Dad takes care of her for many years, but eventually dies. He leaves Mom with a fully owned house--no mortgage.
No-account son (now in jail for other reasons) tells his siblings he's going to move in and take care of Mom. He hooks up with a sub-prime lender, gets Mom to sign a power of attorney, and they both sign the loan. Anyone who met this woman (as I did) would know within 5 minutes she was incompetent to sign any legal document. No-account proceeds to buy a new truck, tools, etc. etc. with the proceeds of the loan. Now that no-account is in jail, Mom cannot afford to pay the loan for all she has is Social Security.
I did not meet the lender, but it's evident to me he engineered the deal. I don't know who approached who first, but the power of attorney evidently was done in connection with the loan (no-account is unlikely to have thought of this otherwise). Shady, shady, shady.
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contini
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The Great Contini
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Post by contini on Apr 5, 2007 7:07:32 GMT -5
Mortgage crisis calls American Dream into question
CINCINNATI (Reuters) - For years, political leaders touted rising homeownership rates as a sign the "American Dream" was being fulfilled but more than a million looming foreclosures have called the dream into question.
"We no longer have a problem with loan availability ... but a lot of our homeowners are one crisis away from losing their home," said Hope Wilson, a housing counselor at Working in Neighborhoods, a nonprofit trying to boost homeownership in inner-city Cincinnati.
There is no shortage these days of tragic stories of homeowners caught in America's subprime mortgage meltdown, as risky borrowing, reckless lending and a slump in the housing market drives millions into foreclosure.
But while statistics show poor and minority homeowners are bearing the brunt of the crisis, the belief that every American can or should own their own home remains so pervasive few politicians admit that it just might not be true.
"The more people who own their home, the better off America is," President George W. Bush said in a 2004 speech. "See, we want more people owning something because when somebody owns something, they have a vital stake in the future of the country."
After stagnating at about 65 percent for much of the 1960s, '70s and '80s, the U.S. homeownership rate has risen slowly in the past 15 years to nearly 69 percent -- a point of pride for Democrats and Republicans alike.
But with an estimated 1.5 million homeowners facing foreclosure this year, Congress is now looking at tighter lending standards to protect unwary Americans from taking on loans they cannot afford.
NOT READY
Despite the crisis, Massachusetts Democratic Rep. Barney Frank, who heads the House Financial Services Committee that likely will set new lending rules, is one of the few politicians willing to admit that homeownership is not for everyone.
"Not everyone is ready ever. A lot are not economically ready now," Frank said in an interview with Reuters.
"This administration is acting as if the only important program to help people with housing issues is to get them into homeownership. I think that overemphasis has contributed to the subprime crisis. People were put into homeownership who just economically should not have been there."
It's a tricky thing to say. Key to the American Dream is the belief that everyone can make it to the top. Restricting lending is expected to disproportionately hurt blacks and Hispanics -- voters coveted by both Republicans and Democrats.
Across the United States, racial minorities are more likely to get a high-cost, subprime mortgage when buying a home than whites, according to a study released last month by fair housing agencies. In six major U.S. cities, black borrowers were 3.8 times more likely than whites to receive a higher-cost home loan, it said.
But it is not just poor and minority Americans who are losing their homes -- many debt-ridden consumers simply were unwise in their loan choices. The suggestion that more regulation is needed to protect Americans from willing but risky lenders is controversial.
"Should we really interfere in a contract between two mature adults over something that involves no deceit?" asked Ron Utt, a research fellow at the right-leaning Heritage Foundation think-tank in Washington.
IMMEDIATE GRATIFICATION
Utt believes tighter regulation by the Democrat-controlled Congress will cut off loans to the same minorities both parties want to help into higher homeownership.
"Subprime mortgages and 100 percent financing opened up homeownership to people who otherwise financially would not be eligible," Utt said.
Housing advocates do not want to see a return of the days when many low-income or minority Americans were shunned by lenders. But credit counselors facing a tidal wave of panicked homeowners say many should not have taken out -- or qualified for -- a home loan in the first place.
"Everyone wants immediate gratification. All they think is 'I want this house now,'" said Joann Brady, director of the nonprofit Home Ownership Center of Greater Cincinnati. "The lender was looking only at the bottom line. The client was not reading the documents. It's both of their fault."
In any case, John Taylor, president of the National Community Reinvestment Coalition, said politicians should not pretend that growth in minority homeownership is anything more than a fleeting increase.
"We shouldn't make believe we're helping people into homeownership by giving them a predatory product that creates a temporary homeownership," he said. "Two years down the road they are on the street and ... in a much worse position.
"Is it paternalistic? Call it what you want. I don't care, I'm not running for office. I just want to keep people in homes they can really afford."
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Post by matclone on Apr 5, 2007 11:31:13 GMT -5
"Should we really interfere in a contract between two mature adults over something that involves no deceit?" asked Ron Utt, a research fellow at the right-leaning Heritage Foundation think-tank in Washington.
Contrary to his assertion, deceit is rampant. This is like the obesity debate: all of a sudden there's a huge spike in irresponsible people? Is there something in the water? don't think so. In reality, lenders will approach and push a loan on any warm body they think can make payments. Congress should do something about it. In fact, Congress helped make predatory lending possible in the early 1990s when they passed a law (the name is not in my head at the moment--starts with a D) that in effect overrrode state usury laws.
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Post by matclone on Apr 5, 2007 11:35:45 GMT -5
"Everyone wants immediate gratification. All they think is 'I want this house now,'" said Joann Brady, director of the nonprofit Home Ownership Center of Greater Cincinnati. "The lender was looking only at the bottom line. The client was not reading the documents. It's both of their fault."
Well, yes, except they're not on a equal playing field. The lender is holding most of the cards. There are a lot of people that don't understand the complexities of home financing, and never will. Does that mean they shouldn't own a home?
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Post by matclone on Apr 5, 2007 11:38:48 GMT -5
In any case, John Taylor, president of the National Community Reinvestment Coalition, said...
"We shouldn't make believe we're helping people into homeownership by giving them a predatory product that creates a temporary homeownership," he said. "Two years down the road they are on the street and ... in a much worse position.
He's right. And think of the effect on our communities, with neighborhoods of foreclosed homes, and neighbors with busted credit.
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Post by skipster on Apr 10, 2007 22:05:33 GMT -5
"Everyone wants immediate gratification. All they think is 'I want this house now,'" said Joann Brady, director of the nonprofit Home Ownership Center of Greater Cincinnati. "The lender was looking only at the bottom line. The client was not reading the documents. It's both of their fault."Well, yes, except they're not on a equal playing field. The lender is holding most of the cards. There are a lot of people that don't understand the complexities of home financing, and never will. Does that mean they shouldn't own a home? To say here that the lender is holding most of the cards is to say that the lender knows more about the product (loan) than the buyer. At what point is the buyer responsible for knowing what he is voluntarily jumping into? Also, no one is passing judgment on who should or who shouldn't own a home. 'Should' is very subjective. I am only saying that a buyer is no more entitled to a home without just compensation to the seller as the seller is entitled to the money of the buyer without just renumeration to the buyer (receipt of stuff). As for those foreclosed homes, they sure do make good housing opportunities for alert buyers. There are a lot of reduced price homes available now. Those who overbought are supplying me with my next home.
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Post by matclone on Apr 11, 2007 10:09:21 GMT -5
To say here that the lender is holding most of the cards is to say that the lender knows more about the product (loan) than the buyer.
That's right.
At what point is the buyer responsible for knowing what he is voluntarily jumping into?
At some point.
Also, no one is passing judgment on who should or who shouldn't own a home.
That's the implication by that woman's statement. Essentially, she's saying the buyer and seller are on an equal playing field and if things go bad, cie la vie. If I have a 6th grade education, I'm unlikely to understand the financing, or to ask the right questions, or to get a straight answer if I insist.
'Should' is very subjective. I am only saying that a buyer is no more entitled to a home without just compensation to the seller as the seller is entitled to the money of the buyer without just renumeration to the buyer (receipt of stuff).
That's not at issue. Cheating, high-pressure sales, and loan sharking are. You can choose to say they don't exist, but we have a whole body of laws and literature that say otherwise. Hopefully it never happens to you or someone in your family.
As for those foreclosed homes, they sure do make good housing opportunities for alert buyers. There are a lot of reduced price homes available now. Those who overbought are supplying me with my next home.
Good luck with the new opportunities.
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contini
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The Great Contini
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Post by contini on Apr 11, 2007 16:58:49 GMT -5
To say here that the lender is holding most of the cards is to say that the lender knows more about the product (loan) than the buyer.
The lender writes the non-negtotiable contract, does it with legal assistance, puts in the provision that they can change the rules whenever they want. Not to mention that this is what they specialize in: they process several of these per day and have the experience of understanding all the subtle consequences of the rules that they make. So I say yes, both statements are true: the lender holds the cards and they know more about the product than the buyer. You cannot expect every buyer to have the knowledge and experience that the lender has.
At what point is the buyer responsible for knowing what he is voluntarily jumping into?
At what point does the seller need to be held responsible for deceptive or unethical practices?
It is interesting to watch the way some legal and marketing departments work together. The marketing departments like to write up simple, easy to understand brochures making the customer believe that everything is great -- while the legal department will write up in the fine print with legal vernacular in the "Terms and Conditions" document which often contains details quite the opposite of what the customer understood from the marketing brochure. Of course, the legal department reviews the marketing brochures to make sure that what the customer is intended to believe from them is not explcitly stated, so that they are not legally liable for the (intentional) misunderstanding. I would say that the majority of credit card companies work this way. The marketing brochure is what you get in the mail that tells you to sign up for their credit card, with all the benefits written in bold. But the real facts are in the Terms and Conditions / Product Disclosure Statement which few people read since few people can understand all the subtleties and legal terminology. Here is one specific example. Usually these credit card companies tell you a very low interest rate for the first 6 months, say something like 1%. Then after 6 months the interest rate goes up to something larger, say 10%. If one does not pay off their credit card after the 6 months, then that person will accumulate some debt with 1% interest and some debt with 10% interest. Now customers will expect that when they make a future payment, the higher interest rate debt is paid off first, since it was the most recent debt. But in fact I can almost promise you every credit card company does the exact opposite. The low interest debt is paid off before the high interest debt, which effectively makes the low interest debt "transfer" to high interest. This is just a very mild deception, and one that is common practice and accepted as okay in America. There are much worse deceptions happening in practice.
Now let me just say one last thing. I don't accuse all companies of behaving this way. But many do. In my mind, that is the difference between a "good" and "bad" company (very subjective, I know). A good company will have the legal team writing contracts that support what the marketing team wants to sell, whereas a bad one will have the legal team having different aims as the marketing team.
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Post by matclone on Apr 16, 2007 15:46:17 GMT -5
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