Thursday, March 29, 2007

It's called "HUA," and no, it's not curable.

UGH! I finally decided to read a story about this whole “predatory lending”/”good people losing their homes” thing that’s apparently becoming more of a phenomenon around the country than it ever has been before. I happened to choose an article on MSN that I found about an Iraq war vet who lost his home, and had to move his family into a trailer after their “dream home” was foreclosed on late last year.

Ok, no offense to Iraq war vets is meant by what I’m about to say, but this guy is specifically quoted in the article as saying, “It's not like I'm an irresponsible person," he says. "I'm not a guy that sits back." He says this because he works two jobs, and feels THAT is what makes him responsible. But the problem is being responsible also entails being able to look at your finances and seeing whether or not you can afford a $230,000 house, or if you should stick to getting one that only costs $150,000 instead. The article also states, “The monthly payments on the Howell's two adjustable-rate mortgages started at $1,100, with a 5.4 percent interest rate (Howell says he needed two mortgages to qualify for the necessary loan).” RED FLAG!!! If you need to get two mortgages in order to afford the home in the first place? You might wanna step back and reevaluate the situation a bit. Also, the loans he got were both ARMs, or adjustable rate mortgages, and he did that whole “no money down” thing, which, I’m sorry, is very stupid. (They roll the money you owe into the future payments you make, and spread some of it through the fees they charge on the initial loan processing. You STILL wind up putting money down, but in a spread out manner, with interest being charged to you on it! Not a good idea.)

I have an ARM on my home…I know how they work. Mine is a 5/1, meaning that after the initial 5 years I’m in the home, I’m paying my mortgage down at a fixed rate of 4.75% interest being charged to me, and then it will switch to the adjustable feature, where the rate can go up or down each month without any kind of notice. With the way the economy is right now, chances are that it will go up to at least 7% after that 5 year period is up. How do I know this? Well, my loan officer fucking explained it all to me when I was looking into the best option for a rate before I purchased my house in 2003. I wanted a low payment each month, but I didn’t want to head directly into an ARM, so this was the package that sounded perfect for me. 5 years max in my “starter home” and then I could put it on the market (actually will be doing that at the 4.25 year mark, to give it time to sell…), and move on to the next level home I want to be in. I could have had a lower payment if I’d gone into a 3/1 ARM, or another ARM option, but that wasn’t the right fit for me. So I didn’t do it.

See, I used this thing called my brain when I was looking into purchasing my house. As it came with my body when I was born, and all, I figured I might as well use it now and then in order to help me make informed decisions, and try to do the best thing each day, and to be honest, it’s been working out pretty well for me for the most part. (Except for that break it took back when I was 17, and during all of the years that I was involved in the dating scene.)

What pisses me off is shit like the fact that this guy knew that surges in his interest rate were possible, “…but nonetheless took him by surprise.” And then articles like this one using a source that had a loan through a reputable company like Countrywide, and talking about how “predatory lending” is an issue, as though it should be instantly tied to Countrywide like that…look, I worked for Countrywide for 4 years, with loan officers throughout the Midwest (Iowa, Nebraska, Kansas, Missouri, Illinois…), and they are VERY STRICT about their rules on predatory lending. Having been in such a privileged position as the assistant to the VP of a region, I heard from people on a regular basis that were being foreclosed upon. They cried, they yelled, they needed a sympathetic ear to chew on sometimes, and I did what I could, being that my main objective above all other in that position was to provide stellar customer service no matter who was calling and what their problem may be. It was sad, and always hard to hear, and the people that called us were looking for a solution to their problems…a way out of heading wallet-first into an extended period of very difficult financial issues. But I couldn’t help but think that each and every one of them put themselves in the place they were at. Having gone through the loan process myself with Countrywide, I can say that there is a lot of information to take in initially when considering buying a home. But it’s not like you’re buying a fucking sack of groceries, or something…YOU’RE BUYING A HOUSE!! If you aren’t ready to try to comprehend some, if not most, of what is told to you throughout the process it is NOT the lender’s fault! I actually had a guy call our office once that was mad that he wound up with an adjustable rate on his loan, and he wanted us to fix it. I simply couldn’t understand how this gentleman could obtain a loan, sign all the paperwork involved, and then use the money to purchase a house, without noticing until he received his first statement in the mail that his loan was adjustable. How does that happen? And how the FUCK were we supposed to be held responsible for it? We had the actual documents in our hands that showed his original signature on the page of the loan that explains what your rate is. (For the record, it’s the first page of the loan. At least it used to be when I worked there. It’s not like it’s info that buried 20 pages in somewhere.) We couldn’t help him unless he wanted to initiate a refinance process. And yes, I did think he was an idiot.

This article goes on to say that this Iraq war vet, “…no longer trusts banks. ‘They took advantage of me,’ he says. ‘The big corporate banks and big corporate America has lost touch with the people that drive this country ... It's all about the end result, the high dollar in their pockets.’” No one took advantage of anyone here. This guy feels stupid for not having figured out ahead of time the “what-ifs” and he wants to blame his former mortgage company for what happened to him. When I was buying my house, I was approved for a loan amount of $180,000. Guess what? I couldn’t AFFORD a $180,000 house! I had to look for one that would only cost me up to $120,000, and I found it, thank goodness. So many people make the mistake of getting their pre-approval info, and then finding a house that hits the maximum amount on the loan they have been approved for. I was advised by my loan officer to be careful of doing that, and they explained why. Made sense to me, so even though it would have been nice to have purchased a home for $180,000, I didn’t. Because I wanted to be able to fix it up the way I wanted to, and to afford the utilities, and to have the cash left over each month to pay for emergency issues that might kick up, like a need to replace the breaks on my luxury vehicle, or having to take care of an undisclosed plumbing issue less than 6 months after I moved into my new home.

It’s not the banks that this guy should be wary of; it’s his misperception of the term “responsible.” He should be wary of himself and his own judgment, as I’m sure he is now and I’ve no desire to rub his nose in his mistakes, actually. I DO have a desire to point out to him that blaming the bank for his bad judgment calls makes him sound like he’s not ready to own up to his responsibility in the matter. (Oops! There’s that “responsible” term again! Someone get him a dictionary, just in case…)

This is not to say that there aren’t plenty of lending companies out there that are looking for unsuspecting victims that they can take advantage of with loans that will gouge them out of a possibility of financial success in their future lives. There are. They are despicable, and they should be called out on their tactics, and for the most part, they are eventually uncovered and licensing is taken away. This is not to say that even Countrywide hasn’t employed some rather shady characters in their past, and probably will in their future as well, as they come in all forms and can charm the pants off of any unsuspecting manager of an office and get them to hire them. I worked with plenty of those types when I was with CHL over the years, but the best part was that we had a loan processing system in place that caught anything fishy, and we had to review and take care of them at the VP level I worked at, if not send them higher for review if necessary. Usually those types of loan officers (I called them the “used-car salesmen” of the loan world) were discovered quickly, watched closely, and fired if they didn’t shape up in a very short period of time. I didn't see more than half a dozen of them in the 4 years I was there. And we had over 300 employees in our region, so that's saying something, I think.

This tirade isn’t meant to be an ad for CHL, or any kind of statement on the mental capacity of the men and women that are fighting in the war for us over in Iraq. Nuh-uh…not at all. Even the most brilliant of people that I know make terrible mistakes on a daily basis, and they have to pay for them, sometimes dearly. They’re still frighteningly smart. This article could have been about anyone…a lawyer just starting out, a med student, a teacher, or a politician. Just happens that they interviewed a military guy to place as their “victim” in this process. I just think it’s shitty that anyone who knowingly purchases a home that they probably can’t afford can just blatantly place the blame on someone other than themselves for the financial position they’re put in after foreclosure has to happen. Apparently, 1.26 million foreclosures were filed in 2006 in the U.S., and that’s a pity. I just wonder what percentage of them can be blamed on the “used-car salesmen” lenders out there, and which ones can be blamed on people who just didn’t plan ahead accordingly. I hate for people to be mislead, regardless of the form the misleading information is taking…

9 comments:

Alisha said...

I agree, Faith. There is such a mentality out there that you have to get your "dream home" right away with no thought to the costs. Lot's of people are up to their ears in debt because of it. We aren't buying a house or building for some more years because we are aware (sometimes painfully) of our financial position. When we are ready to purchase something we will be sensible and we will be able to comfortably enjoy our new space. Maybe we'll even call on you for some extra insight into the loan process.

SmedRock said...

Or you could just skip all that and get a fixed rate. As a vet myself, thier are options such as the VA housing Loan program and other option available. Sound like to me, the soldier's wife was not keeping up her end either, and reading the contract too.

You are right 2 mortgages just to move in. crazy. I don't trust arms, and with a soft market in housing now, I wish you the best of luck in getting out of that house to your upgrade. :)

Good luck and thanks for the ariticle. You did your hoemwork.

Faith said...

I know, Smed, it's a scary thought these days. My fiance suggested last night that we might try renting it instead of selling, but that just scares the crap outta me, with the thought of the change in insurance involved, and wondering if the tenants will be good tenants, and having to refinance in order to keep a stable rate anyway...it doesn't seem like a smart investment idea at this point.

But we're hoping for a turn in the market in the next year...we won't have it on the market until next March. And with its location and everything that I've put into it improvement-wise, I'm hoping it'll go in less than 3 months, maybe. Keep your fingers crossed! :)

And Alisha, all my advice towards new buyers begins with the "do NOT fall for the lure of the zero down pitch!" It's not a good idea. Bad, bad, bad...

Brad said...

Wow, that was one great read. Nice work, Faith. Keep it up.

FaithsTwin said...

I have bought several things in my 33 years that required signing contracts. There is absolutely NO REASON for anyone to NOT read what they are signing...and when someone goes through and says, "This is what this says and I need you to sign and date it here..." and expects me to not read it? They've got another thing comin'. I read every. thing. I. am. signing. Period. And if I don't understand it? I ask fucking questions!

I agree: fantastic read dude. Nicely done.

Faith said...

Aw! You guys are making me blush! I didn't think I could do that anymore...

Xavier Onassis said...

Never fuck with a smart woman! Nicely done.

I agree that people need to not only read, but COMPREHEND before they sign ANYTHING.

However, I also think that a lot of these "creative" mortgage options that have cropped up in recent years give a lot of people the ILLUSION that they can afford to buy a house when they really can't.

If their only option was a 20% down payment and a 30 year fixed, they would be forced to live within their means and work towards that first home.

Faith said...

You're right on with that, XO. If only it worked that way...

Heather said...

I remember reading this article thinking, "What a dumbass". I think they tried to go the "he's a returned Iraqi war vet and look at how The Man has shafted him." Whatever.

Good old conventional loan here (waves hand)!

I can't fathom how he qualified to buy a such an expensive house. Last I checked, military guys weren't in it because the pay was that good.

No sympathy here. I actually read my contract when I signed it.