Posted on 08/20/2007 9:56:04 AM PDT by Hydroshock
What was the after-improved value of the home? Might not be such a bad deal.
If you know that going in, that’s one thing. Too many didn’t either out of ignorance or bad/deceptive marketing.
There is a place for a negative-amortization loan. That place is for investors who have a LOT of net worth and are leveraging their money.
They’re NOT for Joe and Jane Smith living paycheck to paycheck or barely better than that.
Everything has SOME risk. Some of us are more tolerant than others.
Buying a home zero-down, with no reserves in cash, at 9% interest on a monthly variable is just dumb.
Using a 5 year ARM because you’re 99% sure you’ll move, is a moderate risk, but not stupid. There are levels of risk.
So you don’t invest in a 401k either, right?
Yes I am giving the minimum to getthe maximum matching i 401K. And yes you can not idiot proof everythig, but if the contracts were written about 7th grade english, about what a newspaper is written in. So the the majority can understand what they are signing. Nothing is idiot proof (the universe is actively developing better idiots) but it does not have to be written in legalize either.
I agree! Unfortunately, a lot of Joe/Jane Smiths became convinced that "they could get rich quick" (watching too many infomercials, etc.). Sadly, the "Ever Skyrocketing Real Estate Values" are not skyrocketing enough (sic) to allow them to make their fortunes by selling to a "greater fool"!
Mortgage brokers were more than happy to write any manner of mortgages for them and pass the "trash paper" on to CMO "Wizards" who, in turn, have "passed the trash" to investors who really don't know what they truly own now (and won't for quite some time!)
Well, I can not post excerpts from the source. FR regulations, you know? But it seems that some very smart people think the markets are in a total 'fear mode.' Market Geee Gaaaws driven by profit taking and fear is about right. IMHO: The old Wall Street 'pump and dump con game is in full force. Yada, Yada.`
That would be tough. Especially if the terms of the mortgage are accurately explained in writing on the document you signed.
It turned out the home was full of mold and termites. Still want that loan?
I wouldn’t touch anything like that, neither would I advise my clients to.
However, that’s more a function of the property itself than a loan program.
A lot of the other folks with bad ARMs are first-time home buyers, and largely uneducated in real estate or finance. Not necessarily stupid--it can be very difficult to know what questions to ask of a lender. Too often buyers rely on the advice of their real estate agent, which is the worst possible mistake to make. Agents are interested in 6% and nothing else. Once you sign that mortgage, they don't give a damn what happens to you.
I must admit, it has been my own lack of education with regard to finance and real estate that has saved my butt (yes, I am calling myself stupid!). I know I'm not an expert, so I ask every possible question I can dream up, great big long lists of them. I don't sign anything until I have all of those questions answered in language I can understand. Then, I do the math, figuring out every possible scenario. If there is any possibility that a mortgage is too risky five years down the road, it is too risky now. Kind of funny, really--I am quite a thrill-seeker in so many aspects of my life, but when it comes to finances I'm the most sober person you'll ever come across.
Just an aside: The house next door to me was foreclosed last summer (4bed, 2 bath, 1700 sf Vic). An Arbor Mortgage franchisee bought it two months ago for $50K and just yesterday put it back on the market. I don't know what they have it listed for yet. They haven't done one minute of work on the place, and it needs some attention. Along with their "For Sale By Owner" sign, they have a "Zero Down" sign.
The more things change, the more they stay the same!
It does seem odd. However, I’d have to see the whole deal to see what was up. Did they in fact know about the mold and issues? Were they just releasing all the cash, or were they requiring proof it was actually being used to repair the property?
Do you invest in stocks? Mutual funds? 401K?
I’m curious. So many who would put $10,000 into a speculative stock are scared to death of a variable rate mortgage...when the former is a LOT risker than the latter.
I'm not scared silly about ARMs--like I've said, I have an ARM on my primary mortgage, and I am satisfied with it. I did my research before signing, though. I don't see that as caving in to fright, I think of it as responsible investing.
The part of the story that made me weak from anger was the young man said his real estate agent was a Christian and she was praying about it for him. That caused him to put complete trust in her. He was only 21.
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