The Economy and No Doc Loans

[Just Sold]

This lakes region homeowner's problem is all too typical of what has happened to many homeowners here in the Lakes Region and elsewhere in NH.

Too many people were allowed to do No-Doc mortgages with very easy application process and now we are all paying for the bank and mortgage industries greed.

http://www.fosters.com/apps/pbcs.dll/article?AID=2010704079878

[Eagle]

While I feel very sorry for this homeowner and his predicament, one has to consider that a home is not a piggy bank.:(

[jmen24]

While I feel very sorry for this homeowner and his predicament, one has to consider that a home is not a piggy bank.:(

I have to agree with this statement, so many people did this. If you read the Registry Review, probably more than 95% of the foreclosure list have mortgage dates of 2003 or later.

I guess I would like to know why he was still looking to build the garage with the third refinance when it was one of the reasons for the first refi (he could have just said that I know, but the reporter is not helping this guy by writting it that way). He pulled $205,000 out of equity, where did all that money go.:eek:

[ITD]

"......so when a representative from The Mortgage Specialists in Somersworth called him in 2003 with a chance to refinance and take some cash from his equity, he said, "Why not?""

I guess he is finding out....:(. This guy gambled and lost.

[VtSteve]

This lakes region homeowner's problem is all too typical of what has happened to many homeowners here in the Lakes Region and elsewhere in NH.

Too many people were allowed to do No-Doc mortgages with very easy application process and now we are all paying for the bank and mortgage industries greed.

http://www.fosters.com/apps/pbcs.dll/article?AID=2010704079878

I can almost quote from memory every speech and policy I've heard on this very subject since 2001. AARGH.

[Flylady]

This youtube video shows why it is so hard to refinance if your Mortgage is held by OneWest (former IndyMac) First Federal Bank and other banks that failed and were taken over by FDIC and then assigned to an assuming bank when they had large amount of residential mortgages at sub prime or no doc.
The only mis- representation in the video is that FDIC is funded by taxpayers. Actually it is funded by changing and collecting fees to all the banks covered by FDIC.


http://www.youtube.com/watch?v=_UNkQGyk5uA&feature=related

[fatlazyless]

Last I heard, the head of the U.S. Federal Deposit Insurance Corp., Sheila Bair, who works and lives in Washington D.C., decided to take her Amherst, Massachusetts, home off the market rather than lower her asking price, after it's no-sell, two year old status.

Here's what Sheila had to say: "Lower my price again.....NO WAY!....this is a beautifull house and there's no way I'll lower my price again. I'll take it off the market and just let it sit and wait before I do that!"

[AB_Monterey]

"I know I was stupid...."

That pretty much sums it up, right there.

Are the banks and mortgage companies partially to blame? Of course.

But, at the end of the day, this was one stupid choice after another on his part.

There's plenty of greed to go around in this story.

[VtSteve]

Without the use of House as ATM, last decade's economy would have been flat to down. I would have preferred that personally, but many want to go back to the way things happened from 2001 through 2008. Perhaps to get another stab at it, or perhaps because they still don't get it.

But cheer up, it will happen again, it always does. I made some decent money selling into two bubbles, I'd like another chance as well :D

[MAXUM]

I sometimes wonder why these stories are written. Am I supposed to feel sorry for this gentleman? Excuse me for probably sounding like a total and complete jerk, but I don't. This is a classic case of total and complete financial irresponsibility and I have no sympathy for those that make these kinds of decisions.

Like it has been so said before, use your house as an ATM you're going to get burned. Put yourself into debt far beyond what your current income can sustain (IE that old debt to income ratio) and your going to get burned. What's this guys answer to all this? Where's the hand out! Huh? Um no you made your decisions now live with the consequences. At 61 this guy should have known better. At 61 you'd think he would have a pretty good nest egg of cash and retirement stashed away to draw from, NOT his house. We all hit hard times, bumps in the road of life etc... this is why saving, investing, being frugal and living well below your income is so important. That is a concept apparently not to many believe in these days.

The sad thing is those that understand the above and have worked hard, gotten decent jobs, lived frugally so that we have a savings buffer and retirement are going to get screwed bailing these people out. Funny, I'm half this guys age and know better than to do what he did.

I mean really look at the numbers in that article....

Sells his house (doesn't include what he made, but lets just say he made at least enough to pay for the land). He has $125K in cash from an inheritance to spend.

He bought the land for his new house outright for 39,900, so that is a 0 liability. He takes 100K of his inheritance and a 55K mortgage out, which leaves him with 25K in cash that we are aware of left over. That's where what seems reasonable ends.

So he decides he needs landscaping and a garage, takes out a 40K loan which brings his mortgage up to 95K, but still should have 25K in the bank right? Then he get's a lien put on the house for 10K, for his wife's medical expenses, why, he should have plenty to pay for that... where did the 25K go? Then we find out he re-fi's 3 times, racks his debt up to $265,000 and still has no garage. Huh? So in other words he has blown through the 25K left over from his inheritance and a total of 210K in cash out of the house. Grand total $235K all in the span of 8 years. That everybody is inconceivable in my opinion, all the while he's obviously not pulling in much making flies for local area bait shops. Not only that no mention again of any savings, and no mention of his pension being drawn as a retired LEO. Feel sorry for him? Heck no. Explain where the $235K went!

[Patiently Watching]

What is the point of this article?

His wife left becuase she obviously realized he was on a path to disaster!

Stories with this along with the FACT that half of the population pays no federal income tax make it very clear why we are in dire circumstances in this country...

[sky_nh]

Back in the mid-80s when I was the marketing director for one of the state's largest banks, I remember my bank's president telling me, "Greed sells." Based on the kinds of "deals" I saw supposedly savvy business people grab onto in order to get loans that eventually led to the worst banking crisis in New Hampshire history, I certainly came to agree with my boss. Unfortunately, lots of businesses went under, some of the largest banks failed, and thousands of people lost their jobs. All because people got greedy.

It's a sad fact of life that most - not all - people are willing to overlook common sense to get a "good deal." It doesn't matter if it's a house with no down payment and ratios that don't make sense, or promises of above-average returns on savings and investments. Most of us are susceptible to feelings of greed, getting something for nothing, or getting something better than we really deserve.

I feel sorry for people like the man in this story because I've seen the same weaknesses in people better educated, wealthier, supposedly with more "real-world" smarts fall victim to other kinds of scams. It's all of a kind as far as I'm concerned.

There are a few people -- evidently all on this forum -- who have the foresight, self-control, and wisdom to escape from making such bad decisions -- or perhaps just the consequences of bad decisions. I admire you!

As for me, I am not about to cast stones at anyone.

-- Sky

[NoRegrets]

I feel sorry for people like the man in this story because I've seen the same weaknesses in people better educated, wealthier, supposedly with more "real-world" smarts fall victim to other kinds of scams. It's all of a kind as far as I'm concerned.

There are a few people -- evidently all on this forum -- who have the foresight, self-control, and wisdom to escape from making such bad decisions -- or perhaps just the consequences of bad decisions. I admire you!

As for me, I am not about to cast stones at anyone.

-- Sky

Thank you for "Not casting stones". It is a fantastic spirit to maintain in forums!

I think the many on the forum that can offer their insite about this case may have learned and are offering their perspectives and thoughts based on past learnings. I know I was burned in 1987, 1993, 2002, and then again in 2007. I might even be getting burned right now based on how our government is squandering my tax dollars. Based on my studing after each event we are virtually debt free (keeping a small credit line to keep a high credit score) and continue to build a retirement program for out sunset days. We live on a cash only budget and stay far away from the situation portrayed in the main story of this thread.

There are many members that I totally enjoy reading their posts and thoughts. VTSteve, Octactive, NoBozo, Maxum, FFL, and too many others to list who add so much to the fabric and color on this site. I look forward to the continuation of participation and interactions on the forum as we move forward into a new boating season and changing political environment!

[DRH]

This youtube video shows why it is so hard to refinance if your Mortgage is held by OneWest (former IndyMac) First Federal Bank and other banks that failed and were taken over by FDIC and then assigned to an assuming bank when they had large amount of residential mortgages at sub prime or no doc.
The only mis- representation in the video is that FDIC is funded by taxpayers. Actually it is funded by changing and collecting fees to all the banks covered by FDIC.


http://www.youtube.com/watch?v=_UNkQGyk5uA&feature=relatedYes, you are correct. Many people think the FDIC is funded with taxpayer money, but in actuality it is completely funded by banks themselves. All FDIC insured banks must pay periodic "assessments" to the FDIC based on their insured deposits.

[MAXUM]

There are a few people -- evidently all on this forum -- who have the foresight, self-control, and wisdom to escape from making such bad decisions -- or perhaps just the consequences of bad decisions. I admire you!

As for me, I am not about to cast stones at anyone.

-- Sky

It's not really a matter of wisdom, it's a matter of common sense! Look I bought my first house at the ripe old age of 25 years old. Now I knew nothing about houses other than building them, I used to work construction... but I digress. The thought of having a house that was all mine did not cloud my judgment as to what I could afford, why you may ask. Simple, I have always been of the thought (mostly gained by simple observation) that improper money management can and does lead to a whole lot of problems, many times failure at an early age can last a lifetime. Look around - it doesn't take long to find folks who are living way above their means and can't get that paycheck fast enough before it's already spent and gone. I never have lived that way and certainly was not about to put myself into a bad situation. I was about to get a piece of the American dream and nobody was going to take it away once I had it. So I did my homework, did tons of research and made a budget to determine what I could afford comfortably per month, not what the bank though I could. Ironically that number was more than double what I calculated. Like everyone a house mortgage is the largest debt you'll probably ever have to pay and therefore it should not be entered into on a whim and a prayer. Anyone who does and actually thinks a lender is looking out for their best interest is foolish. That is what the gentleman in this article did, and there are consequences to his actions. It's not casting stones, it's simply emphasizing that his failure to identify what he can afford lead to this, nobody forced him into this situation, he signed the dotted line willingly. Ignorance is no excuse. What more is there to say?

[jmen24]

It's not really a matter of wisdom, it's a matter of common sense! Look I bought my first house at the ripe old age of 25 years old. Now I knew nothing about houses other than building them, I used to work construction... but I digress. The thought of having a house that was all mine did not cloud my judgment as to what I could afford, why you may ask. Simple, I have always been of the thought (mostly gained by simple observation) that improper money management can and does lead to a whole lot of problems, many times failure at an early age can last a lifetime. Look around - it doesn't take long to find folks who are living way above their means and can't get that paycheck fast enough before it's already spent and gone. I never have lived that way and certainly was not about to put myself into a bad situation. I was about to get a piece of the American dream and nobody was going to take it away once I had it. So I did my homework, did tons of research and made a budget to determine what I could afford comfortably per month, not what the bank though I could. Ironically that number was more than double what I calculated. Like everyone a house mortgage is the largest debt you'll probably ever have to pay and therefore it should not be entered into on a whim and a prayer. Anyone who does and actually thinks a lender is looking out for their best interest is foolish. That is what the gentleman in this article did, and there are consequences to his actions. It's not casting stones, it's simply emphasizing that his failure to identify what he can afford lead to this, nobody forced him into this situation, he signed the dotted line willingly. Ignorance is no excuse. What more is there to say?

You said it perfectly.

I personally know more than a half dozen people that bought homes with Interest only loans, refinanced more than three times in the last 5 years (that took all the money out, rolled the old cars into the loans, then bought new ones).

Casting stones, you bet, I cannot understand this mans situation, because I am not in it, for a good reason. Because in the same time frame I have not doubled my mortgage and have reduced my mortgage payment (standard 30yr fixed) to the point that one bi-weekly paycheck covers it, with escrow. But my family is fortunate enough to have kept both our jobs, but that was not an issue for the man in this story, he was retired.

If you go to work everyday and do not have enough respect for how hard you work or the things you have, that you will take a chance and lose them all, I am not going to feel sorry for you, I have more respect for my money than that.

Life is not about the hand you are dealt, but how you play it.

Note, this is in no way directed at anyone that has lost their job or got sick, that is an entirely different animal and some very hard working and well meaning individuals got screwed out of the life they had.

[lawn psycho]

So some people here forget that they may have lucked into their position and want to castrate those who got burned.

We bought our first house right after I got out of school. I used my VA loan with nearly no money down. I didn't have any but I use a benefit I earned for living on a black sewer pipe (submarine). Market took off over the time we owned the house and all the improvements I did were cash. Bigger deck, upgraded to granite steps instead of crappy wooden ones, landscaping, etc. No major upgrades but you get the idea. We sold that house for more than double what we paid for it. My improvements added curb appeal but not anywhere near double the price. Great planning? Nope. 100% luck on when we bought.

I changed jobs and we moved into another house in a big subdivision with nice homes. Market crashed and luckily we had put 75% down on the house and when we sold, we lost more money on it than I can bear to type but still had money to walk away with. We bailed early, luckily. Some of my neighbors in that subdivision are trapped as even with large chunks down they still are under water and the market dropped even further. Houses dropped about 40% in that subdivision. One job loss or need to move and they're sunk as they can't sell.

The guy in the article made some bad choices, no doubt. However, many people make good decisions and can still get hosed.

If anyone believes they are an ace with real estate and that bad things can't happen too you, guess again. One death of a spouse, debilitating injury, etc can squash even the most conservative person.

Find any true real estate investor and they will all share the nightmares, boom times or bust.

[NoRegrets]

Those that approached a somewhat conservative approach and did not get caught up in the “no doc” process or use your personal home as a source of income will probably not worry about the gas price fluctuation much as you have probably figured out that line item when you purchased your vessel.

The next reality check is that Uncle Obama's team is going to bail out many of the home owners and institutions by eliminating (giving them money) for up to 30% of their mortgage. The example that was presented to the Senate by the finance committee to show how this new program would work was: A couple had an $800,000 mortgage. They had a combined income of $160,000 per year. The house is now valued at $525,000 so they qualified to get a grant (the cash) of $240,000 to lower their principle. This would eliminate the foreclosure. That money is coming from us! This is sick irony.

Lawn Psyco - We went to the lawn site and are discussing the top soil and proper seed to redo out yard. Thanks so much for the lead and info!

[jmen24]

So some people here forget that they may have lucked into their position and want to castrate those who got burned.

We bought our first house right after I got out of school. I used my VA loan with nearly no money down. I didn't have any but I use a benefit I earned for living on a black sewer pipe (submarine). Market took off over the time we owned the house and all the improvements I did were cash. Bigger deck, upgraded to granite steps instead of crappy wooden ones, landscaping, etc. No major upgrades but you get the idea. We sold that house for more than double what we paid for it. My improvements added curb appeal but not anywhere near double the price. Great planning? Nope. 100% luck on when we bought.

I changed jobs and we moved into another house in a big subdivision with nice homes. Market crashed and luckily we had put 75% down on the house and when we sold, we lost more money on it than I can bear to type but still had money to walk away with. We bailed early, luckily. Some of my neighbors in that subdivision are trapped as even with large chunks down they still are under water and the market dropped even further. Houses dropped about 40% in that subdivision. One job loss or need to move and they're sunk as they can't sell.

The guy in the article made some bad choices, no doubt. However, many people make good decisions and can still get hosed.

If anyone believes they are an ace with real estate and that bad things can't happen too you, guess again. One death of a spouse, debilitating injury, etc can squash even the most conservative person.

Find any true real estate investor and they will all share the nightmares, boom times or bust.

LP, I agree with you. Some things are truely out of our hands to control. All we can do is control what we can, the best we can.

[Newbiesaukee]

Nothing is simple.

I agree that many people made poor choices knowing that they were poor choices. They believed what they wanted to believe; even though they really knew that they couldn't afford the house,car,etc. I understand the anger of those who did the "right" thing and lived within their means and now are expected to bail out the irresponsible ones. I share that anger.

On the other hand, there are folks who "tried" to make the right choices. They bought a home which was within their means, ASSUMING that the job they had worked hard at for 20 years would still be there or the health insurance they paid for would cover the catastrophic illness. These were not unreasonable or irresponsible assumptions There is no doubt in my mind that many of these good, reasonable people are now in dire straits through no fault of their own. There but for the....

The problem is, in our present situation are we mostly bailing out the good guys who are our hardworking neighbors or are we bailing out the bums? If we knew the answers it might make the discussion of what should the country (we) do now a little clearer.

Anger at injustice is always justified and can spur us on to better things. Anger at everything just blinds us to what we need to do and distorts our better selves.

[jrc]

Dennis Miller sums up my feelings on this

"I wanna help the helpless, but I could careless about the clueless"

[BroadHopper]

Seems like the banks do not want to help those who are unfortunate because of the job situation. I tried to get the bank to refinance my home because I fit the criteria sort forth by the affordmyhome.gov website. It's been over seven months and the bank have not made a decision.

Now I am trying to buy another condo, which is not only cheaper, the condo fees are less than half what I pay now. Unfortunately, I can't find a bank to give me an interim loan to buy the other property while I am looking for a buyer. I need to sell this one first!

They want to fill their pockets and not want to help those with good credits and good intent.

[SIKSUKR]

Just refinanced for 4 5/8 15 year fixed. Apparently I didn't borrow enough money because the rate would have been 4 3/8 if I borrowed 70,000 more. Huh? I don't want to borrow more!

[secondcurve]

Seems like the banks do not want to help those who are unfortunate because of the job situation. I tried to get the bank to refinance my home because I fit the criteria sort forth by the affordmyhome.gov website. It's been over seven months and the bank have not made a decision.

Now I am trying to buy another condo, which is not only cheaper, the condo fees are less than half what I pay now. Unfortunately, I can't find a bank to give me an interim loan to buy the other property while I am looking for a buyer. I need to sell this one first!

They want to fill their pockets and not want to help those with good credits and good intent.

Broadhopper:

I don't mean to preach to you but buying a second property before you sell your first property (which apparently you feel is too costly for you) wouldn't be the wisest move. Cut the price on your primary home and make it go away before you buy a second property. Fortunately, the banks are no longer making bridge loans like the one you seek.

[secondcurve]

Just refinanced for 4 5/8 15 year fixed. Apparently I didn't borrow enough money because the rate would have been 4 3/8 if I borrowed 70,000 more. Huh? I don't want to borrow more!

It's called a volume discount and happens in virtually all businesses!

[lawn psycho]

Broadhopper:

I don't mean to preach to you but buying a second property before you sell your first property (which apparently you feel is too costly for you) wouldn't be the wisest move. Cut the price on your primary home and make it go away before you buy a second property. Fortunately, the banks are no longer making bridge loans like the one you seek.

I would give a big fat DITTO on that advice. In this market, you have no idea how long it will take to sell unless you do a major price drop to undercut everyone. Last thing you want is MORE debt when you are trying to cut expenses. (This advise does not apply to governments, however:rolleye2:)

We were dropping our price in $25k increments and when we got close to the magic number, the buyers started coming. Felt like the worst 7 months of our lives and I could not image buying a new house and still have the stress of trying to unload the previous boat anchor.

[fatlazyless]

"Don't Miss the Bottom"....as advertised by Caldwell Banker-Moultonboro's outdoor sign board on Route 25. What do they know? Sounds like another line of real estate sales puffery!

[BroadHopper]

To Second Curve and Lawn Psycho:

You are both partly right. In reality, foreclosures, auctions, separations, and death place an important part of the market. All bring the prices of RE down even further. And that is a quote from an RE appraiser.

In my case the gentleman next door to me committed suicide. The house was sold at half of its market value, furnished! Something about liquidating the assets to settle estate liabilities. I didn't know about it as it was sold quickly to someone that knew beforehand. According to the appraiser, that alone will drive RE prices for the neighborhood down for at least 6 months.

If I was to sell my unit it will be a substantial loss. I was hoping to 'carry the same mortgage value' from the current home to the other. The only way I can get a loan from the bank as I am on pension.