Posted by Hugh Nations Signing Agents of Austin on 4/10/07 7:06am
Msg #184429

On sub-prime bottom feeders

NY Times editorial:

Losing Homes and Neighborhoods
Published: April 10, 2007

As foreclosures escalate among subprime-mortgage borrowers, lenders defend their willfully lax standards by arguing that such an escalation is the price of expanded homeownership, especially among African-American and Hispanic families. That is the lenders’ way of wrapping themselves in the flag, homeownership being up there with baseball among the things that make America great.

Take away the bunting, and the picture is not so pretty. The nonprofit Center for Responsible Lending analyzed 15.1 million subprime loans from 1998 through 2006 and found that only about 1.4 million were for first-time home buyers. Most were for refinancing. To date, more than 500,000 of those subprime borrowers have lost their homes to foreclosures. An additional 1.8 million are likely to follow as the market deteriorates. That’s nearly 2.4 million lost homes.

That means that subprime lending, which has been so profitable for brokers, lenders and investors, is complicit in a net loss of homeownership for up to one million families. It will take years for many of those families to regain their footing, and some may never recover. In a study from 2004, the Housing and Urban Development Department showed that homeowners who gave up their homes for any reason could take more than a decade — longer for minorities — to become homeowners again.

As families are ruined, whole neighborhoods are imperiled. A Chicago study found that a foreclosure on one home lowered the price of nearby single-family homes by 1.44 percent, on average. The more foreclosures, the greater the effect. Vacancies are a particular problem because home buyers and businesses shun areas with vacant homes, while the cost for abandoned property must be borne by municipal taxpayers, draining resources at a time of need.

Congress and state governments have to assess the extent of irresponsible and predatory lending in the subprime market, and determine whom to hold accountable. They must also come up with rescue plans for families and communities in harm’s way.

Reply by Julie Williams on 4/10/07 8:31am
Msg #184432

Gag me

They (the government) must come up with a rescue plan, give me a break!!!!!!!!!The government is already socialist enough, folks need to be responsible for their own problems and not rely on the government.

As I said previously and as the article mentioned, very few sub-primes go for new housing, they are refi's and we all know the majority are due to credit cards or some type of cash out.

I've done closing in Detroit where they have cell phones and two leased Lincoln Navigators at their home which appraises for $55,000 yet the combined lease payments are worth more than the house!!!!! I'll never ever forget this one on Detroit's east side and Mr. Borrower comes out the side door and doesn't say a word as I walk up the driveway with the two Navigator's parked on it. And he has the nerve to say to me: "Don't touch me Navigators" yet the lawn was a foot high but he could afford two Navigator payments at $750 and the other for $820, yet he cannot mow the lawn to keep up property values. So he has $1570 in car payments, not including fuel but he cannot mow the stinking lawn.

I think the problem is that predatory lending is rampant in the vehicle business--no one ever get turned away from a car and then they let their homes go in favor of the vehicle.

Just too damned much consumering going on.

Reply by SpinClose/MI on 4/10/07 9:06am
Msg #184434

Re: Gag me

This article in today's Investor's business daily may be of some interest regarding what the real cause of sub-prime foreclosure may be.http://www.investors.com/editorial/IBDArticles.asp?artsec=5&issue=20070409

Reply by SueW/Tn on 4/10/07 9:53am
Msg #184442

As I have in the past

I do again agree with Julie although I'm also in agreement with the unemployment situation. I had a closing not too long ago with a couple that came here from Michigan, they both worked for the same automotive plant and told me that after bills they pocketed $600 per week free and clear. They said that rather than save for that rainy day they spent their money on toys, vacations, sports tickets...you name it. They both lost their jobs on the same day...I think what Julie states so well throughout her posts is that BO's for the most part use equity to fund their out of control spending. I heard recently that home owners were responsbile for putting over 3 TRILLION disposable dollars into the economy over the past 3 years. This is nuts! Those dollars came from cash outs to cover out of control spending. In 2 years I've had only a handful of refi's that resulted because of illness or medical bills. To put your home in jeopardy because someone says they'll take it is ridiculous, worse case scenerio is a lien. Now the government wants to bail these loans out...who do you think is going to foot that bill?

Reply by Hugh Nations Signing Agents of Austin on 4/10/07 2:25pm
Msg #184496

Re: Gag me

***They (the government) must come up with a rescue plan, give me a break!!!!!!!!!The government is already socialist enough, folks need to be responsible for their own problems and not rely on the government.***

Considering the $60-100 billion that the fatcats, who were already well-heeled, ripped off from us during the savings & loan scandals via the government bailout, I don't mind tossing a few bucks at those who actually need some help.

I sorta like the socialist bent of our government; you know, things like helping kids pay for college, ensuring that children and the elderly get medical care, helping middle class people own homes through government-insured loans. I'd much rather see that than billions of dollars paid to corporations, like agricultural giants such as Archer Daniels Midland, to buy or lease land, let it lie fallow, and get paid for it.

Reply by Susan Fischer on 4/10/07 2:55pm
Msg #184499

Right on, right on. n/m

Reply by Dorothy_MI on 4/10/07 3:13pm
Msg #184501

Re: Gag me

Hugh, like Julie, I've been doing closings here in MI for over 5 years. Only one time do I remember doing a sub-prime loan closing for someone who had had medical problems. He was an accountant that had by-pass surgery with complications. Couldn't work in about 3 years and lived off his credit cards. Finally was well enough to go back to work, but even though he was paying about 10% interest rate on his home loan, it was still much less than 50% of what the interest rate was on his credit cards. ALMOST EVERYONE else I remember was doing it to pay off their credit dards, their 60" flat screen plasma TV, a Lincoln Navigator or similar car, their boat(s), etc. All this in a house that the appraiser must have been stretching to appraise for $150,000.00. Some of these people have been on TV moaning and groaning about "I didn't know it was an adjustable rate!!". Sure, when the largest font on the note is the words "Adjustable Rate Note". Even if the NSA didn't point it out to them, how could they have missed it. With the falling housing market here in MI, the houses won't appraise high enough to pay the balance owed, even if their job situation hasn't changed. They either can tighten up their belts and make the new higher payments or let the house go into foreclosure.

And it isn't just Michigan borrowers who do this, I've done a number of loans for people visiting here in the summer from CA who refi'd their homes every two years to finance their life style. As long as people want it all and want it NOW, the sub-prime lenders had a ready market.

And we won't even go into all those "upside down" loans that were done in the last couple of years. Unless things really turn around and turn around fast, those people are going to end up owing more than they borrowed on a house that will not even appraise for the original amount borrowed.

Reply by SueW/Tn on 4/10/07 3:24pm
Msg #184502

Good post Dorothy

I truly believe that we need to get a grip on our spending habits and I think this is a completely different situation than having some S&A scumbags run off with all the money. Those investors deserved government help, they WERE paying, saving...trying to get themselves into a position for retirement. Most of my BO's are early to mid 30's with no thoughts to the future, just now and what they're lacking in the material world. And I also agree with the huge fonts proclaiming ADJUSTABLE RATE NOTE" and that other nasty "BALLOON PAYMENT".

Reply by Hugh Nations Signing Agents of Austin on 4/11/07 4:58pm
Msg #184700

Re: Good post Dorothy

***Those investors deserved government help, they WERE paying, saving...trying to get themselves into a position for retirement. ***

Yes, those Halliburton investors with friends in high places who have garnered billions upon billions in taxpayer dollars -- far more than low-income Detroiters with skewed priorities will ever rake in from Uncle Sam -- were indeed saving for retirement, except that their retirements will be in $15-million villas on the Riviera.

The original response in this thread complained of our "socialist" government, and people who don't take responsibility for their actions. The answer to that response pointed out that among those "socialist" actions of our government is insuring middleclass home ownership, a practice that underwrites much of the income of everyone on this board.