Posted by Raimond on 3/25/06 10:30am
Msg #108496

Balloon Payments?

I have had 3 no signs this week due to unexpected Balloon payments being found at the table.

One did give in and sign the following day as he already had the cashout $ spent. The other two are waiting on new docs.

Anyone else seeing this happen?

Reply by Glenn Strickler on 3/25/06 11:29am
Msg #108505

Yes. I have learned to look for these and when I contact the borrowor, I briefly read the terms of the loan before I make the appointment so if something is unexpected, then the borrowor can address it before we go any further.

Many, many loans have balloon payments especially sub-prime loans. Usually (in my limited experience anyway) it is a borrowor with bad credit getting an ARM with an interest only payment for a couple of years thinking that they can re-fi to a fixed with better terms,after a couple of years when their credit is better or they plan on selling the house in a couple of years.

The surpsise at the table is from the loan officer not doing his job, or not being candid when he / she is explaining the terms to the borrowor. You learn to know what compaines tend to have problems by name. When I am hired, the first question I ask is "Who's the lender?" By the answer, I know what to charge ahd how to proceed.

Reply by Raimond on 3/25/06 12:08pm
Msg #108506

Thank you Glen

That was a very helpful reply!

Reply by BetsyMI on 3/25/06 12:38pm
Msg #108510

I also had one last week where the borrower thought he was getting a 30 year fixed and the paperwork was for a 15 year balloon. I was afraid they were going to back out right then, and I had driven 70 miles in one direction so I really wanted to complete the closing then. After a few calls to the LO, and a little encouragement from me about the RTC, they did sign, but I wouldn't be surprised if they cancelled later. I already got paid for the job though, so I'm happy about that.

Reply by janCA on 3/25/06 1:52pm
Msg #108517

Same here. I had 3 signings yesterday, 1 was interest only; the borrower had absolutely no idea about any of the terms of the loan. Said his son had a friend that was a loan officer and he put the package together and the other two were ARM's with the balloon payment. They all signed. Pretty sure one will rescind, the other, well, they were just too young and naieve (sp) to really understand the whole concept of the balloon. Just kept stating that they're going to refinance in another 2-3 years.

Reply by MichiganAl on 3/25/06 3:56pm
Msg #108539

I do balloon loans several times a week for a sub-prime lender. There are many situations where these loans can serve a purpose. If they're trying to keep their short term monthly payments low, they plan on refinancing again at some point, they plan on moving at some point, or if it's a second they plan on rolling into their first once they build some equity, it can work for them. These used to scare me. I didn't understand why in the world someone would agree to this kind of loan. But I've learned to see their value. The key is that the borrower understands that the purpose of the loan isn't as a permanent solution. Most people who are dealing with a sub-prime loan should understand that their loan is a short term fix and a balloon payment in 2036 isn't going to come into play.

Reply by Raimond on 3/25/06 5:29pm
Msg #108555

Al,
Thanks for you input....

But when the SA shows the BO the HUD and the BO was expecting a 30yr fixed..only to find a Balloon note.... Thats when we get into a no sign situation.....

Hopefully Monday will not contain any major surprizes!