The madness of crowds
Okay, I know that the last thing anyone wants to read on a holiday is a set of BusinessWeek articles on mortgages, but it's important. The articles lay out the full depth of the problem with various mortgage products -- specifically option ARMs but also no-docs, >100% mortgages, etc. -- that have been marketed to people who clearly can't afford them and won't, in the post-bubble real estate market, have the home equity to make good even in a foreclosure situation. Oh, and the revenue's already been booked by the lenders, even though the lenders are, in effect, lending the people the money to make those payments.
Yet money is still pouring into this impending train wreck of uncollectable insufficiently-secured debts. It's not like the US government will bail out companies that make ill-advised real estate loans...oh, right, it has before.
Yet money is still pouring into this impending train wreck of uncollectable insufficiently-secured debts. It's not like the US government will bail out companies that make ill-advised real estate loans...oh, right, it has before.
5 Comments:
Good article -- explains a lot, like how some peole I have known of with unsavory backgrounds got into the mortgage industry . . .
I'm checking to see if we've closed any of these type mortgages. I don't recollect any . . .
See, I had assumed that option ARMs were almost entirely used by upper-middle-class homebuyers in overheated markets -- the folks for whom such loans are risky and ill-advised but not delusional. But it sounds like the real problem is the refi market. Just curious, Dad, does a refinance get closed the same way a regular purchase does, or is there only a bank attorney involved in that case?
Depends. Sometimes the bank will agressively pursue a refi, and will assume the closing costs--make it easy to sell, and usually the mortgagor is unrepresented. The bank's attorney does the work. If the mortgage has been done in a routine manner, the mortgagor will usually be represented, as the mortgagor does the title work, etc. Now, of course, the banks have begun to do their own title work, so that is beginning to change.
Joanne tells me we have not closed any of these types of mortgages. Not very progressive here . . . thank goodness!
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