Posted by Jahari Davis on 5/14/06 1:37am
Msg #119757

Beware the 50 year mortgage!!!

I saw this article and thought..."It has begun!" A 50 year mortgage?!!! I've heard of some crazy things but come on...a 50 year mortgage? I dont know about you guys but I dont wanna be paying for a house into my 80's. You'd stand a better chance borrowing from a guy named Momo in Jersey. I mean come on. Predatory lenders are salivating at the idea of a 50 year ARM mortgage, because they know they can slap compounding interest for the first 15 years on it at like 12% and call it good...and people that dont know any better will be cool with it!!! Watch and see peeps. Watch and see.

Reply by Kelly M Robertson on 5/14/06 8:46am
Msg #119772

Jahari, no one would keep their mortgage for 50 years. I don't think we've kept a note longer than 3 my entire adult life of owning homes, having purchased my first house when I was 19 for $1 (VA no-no, of course!).

Jahari, everyone has different financial needs that depends on many factors (not just bad credit). For example, I currently have an interest-only loan. The extra money we're saving goes into our retirement account making much better interest than the house would and we got enough cash back to finally get the improvements we've been wanting. I had a ton of equity and owed very little, so for us, it's the best deal around plus a great write-off this past year. For others, this could be their worst nightmare. To each their own and for some, a 40 or 50 year loan would be the only way they could keep their payments down on a new purchase (perhaps their first home!) or a refi. And sumprime lenders are a life-saver for many folks - Bad things happen to good people. Besides, the customer's rate and terms aren't any of our biz anyway as loan signers - poker face it is, no matter what I'm seeing on the docs.

Reply by Sher_AZ on 5/14/06 9:00am
Msg #119773

Kelly you hit it right on the nailhead. The terms of the loan are the borrower & lender's business, not ours. We're only the courier who is there for the purpose of identifying the borrower and notarize the documents, we're not there to be judgemental. Your analysis of a borrower's "needs" is also correct. For some folks, a 50 mortgage would be a blessing and others an unnecessary 20 additional years.

Reply by John_NorCal on 5/14/06 9:52am
Msg #119779

Actually folks, 40 year mortgages came out around 15-20 years ago. I haven't seen much demand for 40 yr loans and I don't think we'll see much demand for 50 yr loans either.

Reply by LkArrowhd/CA on 5/14/06 10:28am
Msg #119783

I've really only seen them on time shares out of Mexico.

Reply by BrendaTx on 5/14/06 4:03pm
Msg #119813

LkA - you are missing the point of this thread...don't feel badly I got suckered into reading it also. It's a political debate bait and switch.

Reply by Jahari Davis on 5/14/06 12:46pm
Msg #119799

Of course we cant say anything at the table during the closing. The laws are pretty clear on that one. However we can spread the word amongst our friends, family, co-workers, contacts...our general SOI. I'm just thinking in terms of how many people are being taken by predatory lenders because of the openings given to them in the bankruptcy bill that passed last year. That bill should NEVER have passed because the banking industry practically wrote it, paid off the congressional leadership via K Street lobbyists to introduce and rally the vote in favor of it and pass it knowing The Decider would sign anything you put under his nose. I know people who have been stung by predatory lenders. I have been a victim. My gf was a victim and her sister was a victim. I had a closing disintegrate because of predatory lending practices that were uncovered by the borrower at the table.
Now this does not mean that all interest only loans are bad, but in my opinion they arent the greatest either. A 50 year mortgage may lower your monthly payments but you'll choke and drown on the interest. Dont believe me, look at the TIL for just your standard mortgage or refi and the total sum of payments. Then imagine that number after 50 years or 600 months of payments and the amount of interest paid. I agree with you no one stays in a mortgage the full term but good God, imagine the people that do thinking the cant get a better deal and feel trapped? Life-debt servitude is NOT the American Dream.

Reply by MichiganAl on 5/14/06 8:25pm
Msg #119840

Jahari, I think you're missing the point.

There are plenty of situations where a 50 year mortgage would be perfectly acceptable and beneficial to a borrower. The average person only lives in the same home for five to seven years. Who cares if it's a 100 year mortgage if they move in five years? They're barely knocking any principal off anyway, so they might just want to keep the monthly payments low. Plenty of people with poor credit are looking for a short term fix to give them a few years to get their credit in shape. That's why plenty of people do two or three year ARMs. So again, who cares if it's a 50 year loan? If it lowers their monthly payment and they know they're going to refi in a year or two, it does what it needs to do.

Beware of the 50 year mortgage? Okay, well beware of interest only loans, too. And beware of balloon notes. And beware of ARMs. Beware of anything that isn't a fixed note because they can all be dangerous if you don't understand what you're doing. They're all tools that can be used wisely or abused.

Beware of predatory lenders? Sure. Understand your situation and the best options. Of course. Beware of the 50 year loan? Nah.

Reply by sue_pa on 5/15/06 7:09am
Msg #119879

I don't know of any 'clear' law that says we can't tell someone at the table they're getting a bad loan - not good for you if you want to stay in business but it's not against the law. That said, why in the world would I want to unilaterally 'spread the word' to everyone I know that a loan product is bad for them - it's none of my concern and I assume most of them are intelligent enough to determine what is acceptable for their situation at the time.

Reply by BrendaTx on 5/15/06 8:02am
Msg #119881

Re: Beware the 50 year mortgage!!! sue - I totally agree

**I don't know of any 'clear' law that says we can't tell someone at the table they're getting a bad loan - not good for you if you want to stay in business but it's not against the law.**

BTW sue - it is really good to have you drop in. I miss you. Sure enjoyed your no nonsense input from when I started doing this.

sue is one of the most experienced ones in this business.

Reply by Julie/MI on 5/15/06 8:26am
Msg #119886

Sounds like you are the Ralph Nader of mortgages, Jahari.

Sounds like you have a gripe with 50 years mortgages.

Seems to me you cannot be impartial. Why people do a 50 year mortgage is not your concern. Seems odd that you, your girlfriend and your girlfriend's sister have made poor choices--how can all three of you have problems with preditory lenders? Did you every hear of a credit union?

The Michigan Supreme court had an opinion that mortgage documents are of the everyday nature and no attorney is required. People need to be responsible for their financial own financial decisions.

Can you go into further detail about how you were at a closing and the mortgagor uncovered preditory lending practices?

Reply by Jahari Davis on 5/15/06 1:48pm
Msg #119938

They read the Balloon note and the TIL and saw what their final payment would be on a $28000 line of credit and that they would suffer harsh prepayment penalties if they paid it off sooner. Their total sum of payments...nearly $70,000. That alone killed the deal and they took it into recission. I hear what Al is saying and it makes a lot of sense. My comments arent specific to mortgages alone. I just hate loan sharking and that seems to be the norm with lenders lately.

My experience with predatory lending came when I received for a loan for Microsoft training courses. I had to take out two loans, one of which had a rate of 15% with an 8.9% origination fee and a 25 year term. My payment was between $65-70 with only $4-5 of it going to principle. Back then I didnt know any better and thought it was the only way I could get the money needed for my technical education. Now, I wish I'd gone through Sallie Mae. To this day I still have that debt and I've refinanced it with a consolidation loan at a lower rate. My girlfriend had run-ins with Discover and Chase and her sister...I just cant comment on because I dont remember all the details.

As to the laws...here in Michigan we are not allowed to give advice or consent on anything we are witnessing. By law I cannot say "Good lord I wouldnt sign this. You're getting ripped off." I can only point and say sign here and maybe explain what a particular form is or what something means. Beyond that, I'm Vanna White with the forms.

In reference to Julie's question about credit unions...yes!!! I looooooove my credit union!! Credit Union...GOOOOOD!!!
Banks....BADDDDD!!!!

As to Darth Nader...please dont ever liken me to him in any way shape or form. Thats just wrong.

Thanks!!!

Reply by Anonymous on 5/28/06 5:42pm
Msg #122901

Answerr to the Fed

The Fed wanted the credit card companies to stop issuing interest only cards or ones where the borrowers never repay the principal.

Lenders also tightened up on some interest only loans.

Now some are offering 50 year mortgages.

Why do people object to 50 year mortgage when you can get interest only loans as well?

They must not understand finance very well.