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Originally Posted by LordFu  Who's fleecing the lenders? Is there any evidence of people allowing foreclosure because of a negative change in the value of the property? I've never heard of it, and if anyone is doing it, they're fools. If they signed up for an ARM, they're fools, anyway, so it's not outside the realm of possibility. It's not in their interest to default on a loan, regardless of changes in the value of the property.
Sub-prime lending is nearly predatory by definition. They were well aware, as all lenders are, of the financial position of those seeking the loans. The individual loan officers push people into loans without any consideration for the reality of the situation. It's great salesmanship, as most loan officers are paid based on the initial loan, but it's a poor lending practice. No one else, the consumer or the lender, benifits from a loan doomed to foreclosure.
I don't have much sympathy for either side of this debacle, and it's hardly the huge issue that they claim it is. I heard someone on the radio commenting on what percentage of the housing market these loans made up, and it is very, very, very small. I don't remember the exact number, but I believe it was less than 1%. |
You are right, it's not that big a deal - only 5% of subprime mortgages are in foreclosure.
The Democrats are the ones talking about fleecing the lenders.
I'm not sure that the foclosing buyers are stating as a reason that their property devalued, but the figures show the forclosures are happening most where that is the case more so than because they can't afford mortgage payments at higher rates. I'll revisit the column where I saw that info make sure I'm remember my facts correctly.
We bought our house about 4 or 5 years ago. I'll agree, those lenders are slimey lot, and they did like pushing these ARMs. We sort of used it to our advantage tho. We grabbed a 80/20 loan with no down payment with a nice fixed rate on the 80 and ARM on the 20 which started out crazy low, like 1.3% or something. We had the 20% downpayment ready, but if I recall, wouldn't have been able to get a fixed rate on a conventional mortgage as low as we did on the 80%.
So, we let it go with a 80/20 and once the rate slid up past what we were earning on the 20% we had invested, we paid off the 20 part and were left with a nice rate on the remaining 80%.
Anyway, I hope the result of all this will be that high risk borrowers won't be able to take out a loan.
It reminds me of that ATM thing in California a few years ago. The nannys decided its unfair for banks to charge non-members $2 to use their ATMs. So they got a law passed that banned the practice. The next day, the banks made it so only members could use their ATMs. The law was repealed shortly after.