Sub-prime Lending Should Be Stopped

KentWhitten

This was in the paper the other day about buyers who have less than perfect credit. It's like bait and switch. You think you're getting a good loan and at the last minute they change the rates or some other slimeball move to make just a little more money.

My wife and I were unhappily roped into one of these things. we were getting ready to buy our house that we did a spec loan on. The business loan time was running out and we needed to make a move quickly. Lending Tree (oh man, that just hurts saying it) got us hooked up with none other than Centex mortgage. Centex homes, one of the biggest if not the biggest home builder in the US, same company.

Everything went smooth, the paperwork sent looked all set to go, had to do the obligatory jumping through hoops stuff, got ready for the closing, Centex calls. "Hey, everything going well? Great! Now we'll tell you what the rates are and your payments are gonna be"

WHAT????? I freaking flipped on this woman. I was yelling into the phone, I was ticked to say the least. This was MAYBE hours before closing. Our mortgage rate jumped so much our payments went from a reasonable 1800/mo to 3200/mo. We had no choice. We were at the end of the line. We had to take it and they knew it.

We suffered as do alot of people with this type of scheme. These SOB's should not get away with this. It's a blatant ripoff and hugely deceptive.

hrscammisa

I cant believe you just put this up. On my way to work today I was thinking how bad it is right now out west. Every one is loosing there homes. My older brother just lost his because of these kinds of loans they should go to jail for what they are doing.I was going to post a thread and ask if you guys knew the housing market had crashed out west. I'm talking 1000.00 of H.Os out on the streets. In Modesto Calif alone there is 900 forclosure. In the bay area 1500-2500 more and thats not counting down south it is real bad my brothers loan was going from 1800-2700 so he tride to sell the house but it had dropped 90,000 in 8 months. One client's brother just moved here from L.A. and I said well he'll do good here with all that money he made wrong left with the shirt on his back. I dont know what the banks are going to do with all the homes. I hope they loose there A----s too And if my bro did sell it they wanted 18,000 for early out so he did find a buyer. and told the bank he would only sell if they waveed the 18,000

ruskent

There is nothing wrong when banks issue sub prime loans!!!!! Yea people are loosing their homes now. Woopie. Homeownership is not something that is owed to you. These people loosing their homes would not of been able to get mortages to begin with, if it wasnt for sub prime loans. These people either had bad credit or where trying to get much more then they could afford. How is this the banks fault? Either way people will think the banks are the bad guys. If they don't give out mortages people think the banks suck. If they give sub prime mortages people think the banks suck.

Frankawitz

Dude that is nothing in a three county area here in Michigan we have had 42,487 foreclosures and your talking 900 big deal, but hey if these folks bought into to this type of loan, they have no one to blame but themselfs. that why when it comes to real estate you had better do your home work and if you don't well you get what you get.

wackman

This is true. Lot's of the sub prime lenders are going bankrupt right now because so many people aren't making their payments. They were getting people into homes who came in with under 500 credit scores, no down (not even closing costs), interest only, stated income or NO income, reverse ammoritization, ARMS, etc...

If you have rentals then get ready to raise your rents cause it's a landlords market again.

Sorry, but there's usually a reason when someone has a credit score under 600 and that's that they just aren't good at paying their bills on time. Might be good people but just not good at budgeting.

Teetorbilt

When the market is hot, everybody wants in however they can do it.

I do feel sorry for the younger people (first timers) with no understanding of the process or terminology.

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hrscammisa

I dont know I feel sory for all that lost there dreams. Ruskent how about a tent for you and your family. Or your mon and dad damn dude.Over the state it is about the same Frankawitz sad times for all. I moved from Calif right before it hit I think we saw it coming when a 3 bd 2 bth was 600,000 And it was 40 years old. Came to N.V and paid cash for ours. some times you do what what have to not what you want to.Left all the famly there.but we feel secure now. never know...

Tscarborough

I feel for you personally, but let's be realistic, here, Framerman.

dougchips

Good post, took some nads in this crowd.

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Susan Betz

I don't think subprime credit is necessarily bad. When the leading cause of bankruptcy in this country is *medical* bills (most of the time with people with health insurance!), when bad things happen, sometimes the credit score is the last thing people are concerned about.

With that said, I think subprime lending needs to be straight up. If the rate's going to be 12%, just say it. Don't say, "here, buy this house at 4% for two years!" without saying the rate will jump to 15% after two years. The deceit in the mortgage industry is unforgivable.

I also think subprime buyers need to have a down payment and be able to show recent good history. The way the credit industry is set up now, a bad credit history screws you up forever and the only escape is bankruptcy. That needs to change.

But a second chance is sometimes all people need.

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KentWhitten

Realistic about what? Letting banks get away with deception? They give these things away to people with questionable credit. It's a situation that will implode and the banks know it. At the time I had good credit. I had no idea it was a sub-prime loan.

We don't get to the start of a job and tell the client "oh btw, your price just went up because we feel like you're credit rating is sketchy"

They have preyed upon the poorer people in this country, which includes pretty much all of us here, and I hope it blows up in their face. From the article I read in the paper, it sounds like it just might.

They took a chance on lending people with bad credit and surprise! foreclosures. hmmmm, now what went wrong there.

Dibi

I believe the sub-prime loans are the tip of the iceberg. How about negative amortization loans and adjustable rates? They may not be far behind.

I was in banking 15 years prior to construction. My customers relied on me (as the "expert" just like you're the construction "experts") to steer them towards a product that fit their situation. Most individuals do not look at the difference between lenders and brokers and look at the bottom line - not the hidden fees (often rolled over into the lower payment anyway) or the potential of the loan to grow to unrealistic proportions.

In FL, the housing market was so hot that buyers finding themselves in this position could re-finance using the huge amount of equity they now had or sell at a huge profit. This situation has rapidly changed. I feel for those that got stuck in this situation.

bill r

Back to the original post, I have to wonder if Lending Tree is aware of the methods being used by their partner. It sure doesn't seem to match with Lending Tree's TV advertising. Perhaps if you contacted Lending Tree, they could get the other party to clean up their act. The other thought is that this stuff is usually pretty heavily regulated by state govs. God knows we all pay enough for these state govs; maybe you could get some value back from all those taxes by getting the state banking regulators to look into it. Bankers are supposed to be professionals; what you describe is not professional.

Edited to add: you can always refinance. There's always plenty of money for good family housing.

carolinaprowash

It's not the subprime lenders......it's the predatory lending that takes place. The subprime lenders are hit equally as hard as the homeowner - they don't want the house. The paperpushers are crooked as snakes - just want their commission checks. We struggle our collective butts off to make our horrific mortgage payments that should never have been approved. Our "fix the credit" loan has crucified our current credit but you do what you have to. New homebuyers I do feel sorry for but the information is out there if enough research is done. I did mortgage lending for 3 years - I disappointed many an applicant but frankly would have rather done that than stand up in foreclosure court saying "well it seemed like a good idea at the time". Predatory lenders are baaad people.

Just my .02 worth.

oldgoat

I feel sorry for the people that are losing their homes, but they do bear part of the responsibility. However I think more ought to be on the realtors and the lenders. People are paying a commission to the realtors for their expert advice. People generally trust bankers. When you are in a situation where you aren't familiar with, as in buying a home probably for the first time, you rely on that advice. If they are telling you that it is a good deal and you are worried for nothing then there is a good chance that you will bite. The realtors weren't interested in being honest or helpful to their clients they were worried about that check. The bank, I don't know if they work off commissions or what, but they were offering loans that they knew weren't in the best interests of their clients either. I know a couple years ago we were looking to buy another home and the realtors wouldn't listen to what I wanted and when I went to the bank they were just interested in me signing on the dotted line. Ended up telling everybody to forget it, I would just remodel. The point is that realtors are worse than used car salesmen and loan officers at banks aren't a whole lot better.

Susan Betz

And this is a *terrible* situation! I sold used cars for a couple of years and I am proud of that time, it was well-spent. If I'd been selling people predatory lending packages I couldn't sleep at night.

There's a big difference between selling the package that will land you the big commission and selling the package that's right for the customer.

Real banks say "no" too often. You're not 10 years past bankruptycy? Riiiiiight. When a mortgage broker (who works for the sub-prime lenders) steps in and says "yes", people sign. Who's to blame? The lender, who wants to make the loan? The client, who wants to take the loan because they want a house?

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Tscarborough

The person who signs the bottom line bears the responsability. I am a strong believer in Caveat Emptor, and if you sign a note that you have doubts about being able to pay, who is at fault?

"My wife and I were unhappily roped into one of these things. we were getting ready to buy our house that we did a spec loan on. The business loan time was running out and we needed to make a move quickly." -Framerman

Read that carefully. Who is at risk? Who is at fault?

ruskent

I get a kick out of the way some of you seem to past the blame on to others. With the internet the way it is today, there is not reason for anyone to ever be 'short' on information, no matter what the topic.

Yea people go to banks and want good honest advice. The bankers give the people the only type of loan possible for their situation! The people want to get a into a home no matter what. They take the risk of the sub prime lending because its the only way for them to own their own house.

Why should i feel sorry for those people? If they did not know what they were getting into, ITS THERE OWN FAULTS!!! Maybe they should of read all the documents or done some research on the net.

In American everyone seems to have this NOW NOW NOW complex. People hate waiting for anything. Now thats great for people like us who are in business. Its just not always the smartest decision for the buyer.

KentWhitten

The loan applicant is the one at risk and even partly the bank. But you not knowing every detail leading up to why we had to make the move and suggesting that we were solely at fault is not true.

They gave us one price, the paperwork, fixed rates, everything. It was a done deal. Everything was acceptable. It was something we could afford. The last minute they changed it on us. We either had to accept it or walk into unknown territory of what the current bank was going to penalize us for.

We had no idea. We had no time. They f'ed us. Period. How is that our fault?

Being short on information is not completely relevant. People get screwed every day. There is no way to educate yourself on every single angle on every single subject.

We got stung and I accept what happened. It's over. I just think that this is completely unfair to deceive people into thinking everything is going to be alright and then pulling the rug out from underneath them. "Oh that's too bad, you can't make the adjusted payments?"

Tscarborough

Did you sign the dotted line? Did you sign it knowing it you were getting screwed?