Mortage Bailout

[lordscarlet]

Does anyone know where we could find facts on the income ranges of those being foreclosed on?

[Flasch186]

very true, generally everyone was encouraged to stretch beyond their means. the insidious part is even some who didnt need subprime or Alt-A Mortgages were talked into them because they were "flexible" and the lender made more money on them.

From the other thread regarding my parents and the idea of voluntary foreclosure, they are now staring INvoluntary foreclosure in the face. Good times for my family this year and next I suppose.

[molson]

Originally Posted by Flasch186

the insidious part is even some who didnt need subprime or Alt-A Mortgages were talked into them because they were "flexible" and the lender made more money on them.

Is this different than any other sales situation? Like going into jiffy lube and ending up with $150 of services you don't need? Or being talked into buying way more car than one needs or can afford. Obviously the stakes here are higher, but you're still just buying a service. Why would the seller do anything other than try to talk you into the the best "sale" for them? How is that insidious? (I'm not talking about the forging of documents or anything like that).

Why would anyone go into a situation with a lender and think they're acting in your best interest? In this some brand new concept from the last 5 years where lenders have just now started to try to make money? Were they just in it for the love of the business before that?

I think its a culture thing more than anything else. The culture of debt. People don't think anything of it to sign away their financial futures. Our parents and grandparents didn't even take out car loans - they bought used or saved up. This culture is what was bound to blow up eventually.

[Lathum]

I guess this is as good a place as any to ask.

We are in the process of buying a house and have been pre approved for an amount higher then the purchase price.

My wife is worried becaue we borrowed some money from her 401K ( about 17.5K ) for closing costs, down payment, etc...

The thing she is worried about is that we won't get approved because it is $300 extra a month out of her check and we were pre approved prior to doing that.

Now she makes more then enough that $300 isn't a significant amount ( over 100K) she is just a worrier, so I guess my question is should we worry?

We are currently at an extended stay suite and it is getting old.

[RomaGoth]

Originally Posted by Lathum

I guess this is as good a place as any to ask.

We are in the process of buying a house and have been pre approved for an amount higher then the purchase price.

My wife is worried becaue we borrowed some money from her 401K ( about 17.5K ) for closing costs, down payment, etc...

The thing she is worried about is that we won't get approved because it is $300 extra a month out of her check and we were pre approved prior to doing that.

Now she makes more then enough that $300 isn't a significant amount ( over 100K) she is just a worrier, so I guess my question is should we worry?

We are currently at an extended stay suite and it is getting old.

Since you are already preapproved, you shouldn't have anything to worry about unless you are suddenly unemployed. With that being said, does your extended stay suite have a jacuzzi? Because if it does, I would not be in such a hurry to buy a home .

[wade moore]

Originally Posted by Lathum

I guess this is as good a place as any to ask.

We are in the process of buying a house and have been pre approved for an amount higher then the purchase price.

My wife is worried becaue we borrowed some money from her 401K ( about 17.5K ) for closing costs, down payment, etc...

The thing she is worried about is that we won't get approved because it is $300 extra a month out of her check and we were pre approved prior to doing that.

Now she makes more then enough that $300 isn't a significant amount ( over 100K) she is just a worrier, so I guess my question is should we worry?

We are currently at an extended stay suite and it is getting old.

You're technically really not supposed to significantly change your financial status after being approved but before closing.

Honestly - I'd give your lender a call and ask. If you can still qualify fine, then have them re-draw up the papers. You don't want to be hit with this at the closing.

[flere-imsaho]

What Wade said.

[Lathum]

Originally Posted by wade moore

You're technically really not supposed to significantly change your financial status after being approved but before closing.

Honestly - I'd give your lender a call and ask. If you can still qualify fine, then have them re-draw up the papers. You don't want to be hit with this at the closing.

thats what we are doing today.

But isn't a pre approval different from an approval?

It is my understanding that just because you are pre approved that doesn't really mean much

[Lathum]

dola- would $300 a month be considered significant based on 100K + a year?

[RomaGoth]

Originally Posted by Lathum

thats what we are doing today.

But isn't a pre approval different from an approval?

It is my understanding that just because you are pre approved that doesn't really mean much

Actually, pre-approval really does not mean that much. Lenders will run your credit and check your finances at least once more prior to actually closing on the home and giving you the keys. But like I said earlier, if you are preapproved and your financial situation is generally the same throughout the process, you should have nothing to worry about. Just don't quit your jobs, file bankruptcy, etc.

[Flasch186]

http://news.yahoo.com/s/ap/20080716/..._investigation

Well that ought to put it to bed that only the fringe mortgage brokers we're running roughshod and putting people into loans they shouldnt have from all means necessary including those that we're illegal.

[wade moore]

Originally Posted by Lathum

dola- would $300 a month be considered significant based on 100K + a year?

It all depends on how much you're trying to borrow, your credit, etc, etc.

In getting a mortgage the lender generally assumes that any loan you're paying off whatever that monthly payment is is money you can't pay towards your mortgage.

So if you were borrowing right up to what they said you could pay a month, you should worry. If you were well below, it's not an issue.

How much you make means nothing by itself.

[digamma]

She isn't making $300 less. She's diverting $300 of pre-tax income to a long term savings account that would be factored in as an asset in a credit evaluation by any lender worth his or her salt.

[BrianD]

Originally Posted by digamma

She isn't making $300 less. She's diverting $300 of pre-tax income to a long term savings account that would be factored in as an asset in a credit evaluation by any lender worth his or her salt.

Is that still the case if the money is being used to pay off a debt? It isn't an extra $300 going into a 401k, it is an extra $300 paying off a loan against a 401k.

[digamma]

Originally Posted by BrianD

Is that still the case if the money is being used to pay off a debt? It isn't an extra $300 going into a 401k, it is an extra $300 paying off a loan against a 401k.

It may be counted as additional debt while you repay it, but it is not less income.

[wade moore]

Originally Posted by digamma

She isn't making $300 less. She's diverting $300 of pre-tax income to a long term savings account that would be factored in as an asset in a credit evaluation by any lender worth his or her salt.

I think I misunderstand how a 401k withdrawal/loan works. If this just gets repaid back into the 401k then yeah - I retract what I said and digamma is right.

[digamma]

Originally Posted by wade moore

I think I misunderstand how a 401k withdrawal/loan works. If this just gets repaid back into the 401k then yeah - I retract what I said and digamma is right.

I mean it is and it isn't. It's not a loan that you are going to default on that gets reported to the credit agency, but someone may look at it as debt when reviewing your assets and liabilities.

However, ex-ante, you would definitely consider the 401k an asset.

[Lathum]

thanks for the words guys. It is an exciting time.

Our agent talked to some mortage people he knows and basicly told us if there is something that will hinder us getting aproved the company will let us know it needs to be fixed before moving on with the process.

[Flasch186]

Well this makes it tough to state that these sorts of things dont need regulation or enforced regulation:

Originally Posted by Article

Report: Many Mortgage Workers Had Records
Florida CFO Calls For Top Regulator To Step Down

POSTED: 7:38 am EDT July 21, 2008

MIAMI -- Florida's chief financial officer is calling for the state's top mortgage regulator to step down after a newspaper report found that thousands of people with criminal records were allowed to work in the mortgage industry.

In addition to Don Saxon's resignation, Florida CFO Alex Sink is also calling for an executive order to stop issuing and renewing mortgage broker licenses to convicted felons.

On Sunday, the Miami Herald reported that more than 10,000 people with criminal records were allowed to work in Florida's mortgage industry.

Of those, more than 4,000 cleared background checks despite committing crimes that state law requires regulators to screen, including fraud, rackateering and extortion.

Also makes it tough to assume that the broker will live up to their fiduciary responsibilities.

[wade moore]

So why does this mean we need more regulations when they aren't following the ones that exist?

[Flasch186]

Originally Posted by wade moore

So why does this mean we need more regulations when they aren't following the ones that exist?

you mean theyre not enforcing them. Im fine with the stuff on the books now (much like the EPA regulations) if theyll simply enforce them. If they wont than that should be fixed and that may include new or improved rules.

On another note it certainly backs up the case that many people were hoodwinked into loans they couldnt afford or were misrepresented to them as.

[wade moore]

I'm saying how do we know the regulations don't work? I can get behind enforcement of them but creating new regulations to fix problems that regulations exist for already makes no snese to me.

[Flasch186]

how do we know they dont work?

The fact that we are in a foreclosure crisis. The article above where people shirked their fiduciary responsibilities. The fact that mortgages were securitized and bundled as worth more than they were. The fact that underwriting standards were ignored. The fact that appraisers were pressure to lie or outright lied about homes worth. etc. etc. etc. etc.

It is plainly obvious that the regulations within the mortgage industry either were lacking or unenforced. Wouldnt be the first time but I'd bet those who aren't for regulations are consistent in that regard and dont feel regulations are needed in most places or industries.

What Ive found is that where there is a lot of money to be made those in power either choose to not enforce the regulations or tell others to not enforce them. Bush to the EPA, the Immigration Czar on borders, Comptrollers on insurance applications, mortgage oversight during a "boom", etc.

[wade moore]

I'm not saying there shouldn't be regulations.

I'm saying that i don't like knee-jerk reactions that we "need more regulations" when things went wrong and we found out the existing regulations weren't being enforced.

Perhaps we should spend time/money enforcing the existing regs and seeing how they work rather than creating new ones to not follow.

[DanGarion]

This is one beautiful graph. American's save $392 a year....

American Savings: Americans Save an Average of $392 Per Year. Total Consumer Debt is over $2.5 Trillion. The Dark Knight of Debt. » Dr. Housing Bubble Blog

[lighthousekeeper]

Originally Posted by DanGarion

This is one beautiful graph. American's save $392 a year....

American Savings: Americans Save an Average of $392 Per Year. Total Consumer Debt is over $2.5 Trillion. The Dark Knight of Debt. » Dr. Housing Bubble Blog

Are 401Ks considered 'savings'?

[lighthousekeeper]

Dola, I blow that 'avg american mortgage balance' clear out of the water.

[Flasch186]

So I have to assume that those against helping out the individual in this thread are also against any sort of punitive action against UBS and the other banks that marketed Auction Rate Securities as anything but what they were. They marketed them to individuals as cash equivalents when they were not and the practice continued after the senior executives knew that they were practicing fraud (nothing has been proven yet but the case seems pretty thick). I mean I assume that everyone remains firmly entrenched in their stances and are consistent in the sense that some believe that executives and big business need to be regulated because they do not, have not, and never intend to regulate themselves (especially when they know they'll be bailed out) and the other side will think that individuals should never trust anyone, including those that are deemed as experts, for advice and direction.

Originally Posted by Headlines

NY attorney general Andrew Cuomo files multibillion-dollar suit against UBS in auction-rate securities probe. More soon.

[BrianD]

Are we not allowed to think that individuals shouldn't be protected from their own stupidity but they should be protected against fraud? I'd like to think that this whole crisis was made up of many different people and many different problems rather that just all stupid people or all fraudulent lenders.

[Flasch186]

Well on the spectrum, and Im deeply involved in it, I can tell you fraud in cities that had big bubbles in them was far more rampant than those on the other side of the aisle want to admit or fail to recognize. Unfortunately, in this arena, I feel I have more intimate knowledge than they, so it gets me riled up when they camp in a space surrounded by, what I deem to be in some cases, incomplete or inaccurate information.

BTW, I must say that unfortunately due to my licensure, during those times, I was required by law to sell to someone if they could provide financing. I had no choice and could not give my opinion. Just wanted to put that out there.

[flere-imsaho]

Flasch - since it now appears that Florida, specifically, had some very egregious problems with mortgage fraud, I think you need to recognize that it may not have been the same in all other parts of the country.

[Flasch186]

It's certainly regional BUT I would bet $ that the areas with the most severe upswing in valuations also had the most severe run up in fraud cases and the most severe decrease in underwriting procedures and break down of the system(s). Therefore where we're feeling the most problems that some say is the cornerstone of the greater economic issues we're seeing we're built upon a house of cards of fraud, greed, etc. etc. To say it didnt exist or it was the individuals stupidity/ignorance is a sliver of what is going on in the whole pie.

[molson]

Originally Posted by BrianD

Are we not allowed to think that individuals shouldn't be protected from their own stupidity but they should be protected against fraud? I'd like to think that this whole crisis was made up of many different people and many different problems rather that just all stupid people or all fraudulent lenders.

I've tried to make that distinction but people would rather lump it all together.

The stuff DanGarion posted about debt in America is amazing. It's aboslutely ridiculous what kind of mortgage/student loan/credit card debts people are taking on. Even if there were a minimal amount of fraud out there - the whole thing would have come crashing down eventually. Even we regulate the shit out of everything and agressively enforce the regulations, people will manage to live beyond their means. Maybe we don't let them borrow as much for a house - they'll spend it on a car or boat instead. You can't protect people from themselves.

[Flasch186]

back to Brian D, it was neither or all of the above and in some cases none of the above. Youre leaving out the bad/fraudulent appraisers, the fraudulent Down Payment assistance programs, etc.

[Galaxy]

Originally Posted by molson

I've tried to make that distinction but people would rather lump it all together.

The stuff DanGarion posted about debt in America is amazing. It's aboslutely ridiculous what kind of mortgage/student loan/credit card debts people are taking on. Even if there were a minimal amount of fraud out there - the whole thing would have come crashing down eventually. Even we regulate the shit out of everything and agressively enforce the regulations, people will manage to live beyond their means. Maybe we don't let them borrow as much for a house - they'll spend it on a car or boat instead. You can't protect people from themselves.

And guess who gets to pay for it, when they want Uncle Sam to give them help?

Look, all parties are guilty in this mess.

[Lathum]

question for those in the know...

My sister called me yesterday and said she got a notice saying they were forclosing on her house if she doesn't pay what she owes by 8./21. apparently she hasn't paid her morgage in about 3 months ( or all of it at least) and owes roughly 5K

This came as a huge surprise to me and I wish I knew sooner, I really don't want me or my parents to have to give her 5K but whats done is done.

I told her that the first step should be to call the bank and see if something can be worked out. She has about 3K she can give them in the middle of august, unfortunantly that includes her august payment which is about 1900 and will have to be late on her september payment.

So I guess my question is will the bank be willing to work with her or should me or my parents prepare the check right now?

FWIW she is a widowed mother of 3 kids under 9, so this has been emotionaly taxing to say the least.

[Flasch186]

um....

She should call the bank immediately and try to work something out to stay in the home letting them know that she wants to pay up. hopefully they'll work something out.

Generally when they say they are foreclosing on them it doesnt happen overnight and will be a process. It is expensive for the bank so they will hopefully want to keep her in the home but if youve read the last 6 pages of this thread you'll see that the banks have truly fallen on the sword when it comes to contacting those in need of help. If they would be more diligent they could help themselves out too however I had a banker friend of mine tell me that the government and people are asking the lenders to do more in the way of work while all the while the banks are slashing their payrolls and doubling, tripling, and quadrupling employees workload so it's not that easy. This is besides the point at hand.

You and whomever wants to help should be prepared to help by paying money but the bank may be able to work some sort of bi-weekly payment thing to get her caught up. Or pay a lump sum now of 1/2 and we'll work a payment schedule out for the rest etc.

That being said, if she truly cant afford to pay even once she's caught up then perhaps letting go of the home (like my parents) is the best option for her wherein she can go rent something that she could. Unless someone in the family wants to subsidize which more and more american's are doing for their family members.

Y'know I sell to foreigners all the time and they have no qualms about having many extended family members in the same, generally, big home where they all share and split the bills and I think that this may be a trend we see more and more with Americans over the next 5-10 years.

However all of the above should not be taken in lieu of getting advice from a paid professional who specializes in these sorts of matters. Do your own due diligence.

[Chief Rum]

Originally Posted by Flasch186

It's certainly regional BUT I would bet $ that the areas with the most severe upswing in valuations also had the most severe run up in fraud cases and the most severe decrease in underwriting procedures and break down of the system(s). Therefore where we're feeling the most problems that some say is the cornerstone of the greater economic issues we're seeing we're built upon a house of cards of fraud, greed, etc. etc. To say it didnt exist or it was the individuals stupidity/ignorance is a sliver of what is going on in the whole pie.

I am somewhere in the middle ground on all this, but jut to point out a basic historical fact: where there is money to be made, to there the crooks go.

I would guess fraud was no higher than usual in markets that began to boom early on, but certainly as it continued and became more apparent, criminals showed up in droves to take advantage (or previously good people fell into crime).

Just saying if there is a cause and effect with respect to higher fraud rates and boom areas, it isn't necessarily all in the fraud--->boom direction.

[Chief Rum]

Originally Posted by Flasch186

That being said, if she truly cant afford to pay even once she's caught up then perhaps letting go of the home (like my parents) is the best option for her wherein she can go rent something that she could. Unless someone in the family wants to subsidize which more and more american's are doing for their family members.

It was in the middle of his paragraph, so I wanted to pull this out for flasch to highlight it for Lathum. It really is critical your sister do an honest evaluation of her finances and ability to pay and to pay going forward. If your family helps her and she ends up just delaying a foreclosure down the road, you're just throwing money away (and so is she).

The bank should work with her, because there aren't so many eligible buyers out there for foreclosed properties at the moment, and banks aren't in the business of owning property. Not only is the foreclosure process expensive, but if there are no takers and all the bank does is take on title until it can pass that property on, it is a money sink for them, requiring maintenance and upkeep, and forcing them to pay taxes on it, pretty much none of which they will ever get back even when they do find an owner. So the bank is looking at a pretty big cost to them to actually foreclose. Plus, I think the government is asking banks to work with mortgagors/trustors more, although I have no idea if they are taking that to heart. So the bank should be willing to work with your sister (and especially if she doesn't have a history of going into foreclosure--she doesn't, right?).

[astrosfan64]

Originally Posted by Lathum

I guess this is as good a place as any to ask.

We are in the process of buying a house and have been pre approved for an amount higher then the purchase price.

My wife is worried becaue we borrowed some money from her 401K ( about 17.5K ) for closing costs, down payment, etc...

The thing she is worried about is that we won't get approved because it is $300 extra a month out of her check and we were pre approved prior to doing that.

Now she makes more then enough that $300 isn't a significant amount ( over 100K) she is just a worrier, so I guess my question is should we worry?

We are currently at an extended stay suite and it is getting old.

You are fine. I did the same thing when I bought my house.

[kcchief19]

Originally Posted by Flasch186

um....

She should call the bank immediately and try to work something out to stay in the home letting them know that she wants to pay up. hopefully they'll work something out.

Generally when they say they are foreclosing on them it doesnt happen overnight and will be a process. It is expensive for the bank so they will hopefully want to keep her in the home ...

QFT

Have her contact the bank ASAP, be prepared to pay what she can, and work on a schedule to get caught up. If she can't afford the home, 9 times out of 10 she's better off selling the house herself than letting it foreclose. If they have gone to foreclosure, more than likely the she's avoiding talking to them, and that's the worst thing you can do when you owe a bank money. The banks I work with are 100 times more likely to work with someone who comes to them up front and says they are in trouble and need help, as opposed to someone who ignores the problem.

The housing bill could have possibilities to help her refinance to a lower payment. But even if not unless she's completely upside down in the house valuewise, she's so much better off getting caught up with the bank and selling the house to get into something cheaper.

[Lathum]

I basicly told her to call the bank, and she is at my parents today working with them since I live 3,000 miles from them all.

As for if she can afford it or not I'm really not looking for common sense advice, basicly she had to pay for summer camp and fell behind, things snowballed, etc...

thanks to all those who replied, it pretty much confirms what I already told her.

[Tekneek]

Having just finished a book about the collapse of Enron, I see a lot of simularities in the way mortgage derivatives were moved around lately and the way Enron destroyed themselves with their assortment of derivatives. When people found out why Enron went down, some prominent people came out in favor of regulations that would prevent companies from spreading these derivatives around without proper collaterialization. Of course, the Bush administration and big business fought hard against this and they won...which played a big part in the meltdown that happened later.

Go read one of the handful of good books about what happened at Enron and you will see how the biggest problems didn't get fixed by stuff like Sarbanes-Oxley, due to lobbyists/political influence keeping the trading of derivatives from being regulated. Who started the ball rolling on this unregulated derivative business? None other than Wendy Lee Gramm, the wife of Phil Gramm, who was the head of the Commodity Futures Trading Commission at the time. She later joined Enron's board, oddly enough. Go figure.

[stevew]

Which enron book? I picked up 24 days a few years ago but never finished.

[Tekneek]

I just finished _Pipe Dreams: Greed, Ego, and the Death of Enron_ by Robert Bryce.

[Flasch186]

Just another sign that the shit involved with the CDO, securitized debt dealing, mortgage garbage went to the heart of the fact that these companies do not and will never self regulate and the capital structure must be balanced with a regulatory force that can insure and protect the public:

Originally Posted by article

Citigroup to be charged by Cuomo, faces SEC probe
Friday August 1, 4:14 pm ET
By Joseph A. Giannone and Jonathan Stempel

NEW YORK (Reuters) - New York Attorney General Andrew Cuomo plans to imminently charge Citigroup Inc (NYSE:C - News), accusing it of fraudulently marketing and selling auction-rate securities, and destroying documents that had been subpoenaed.


In a letter on Friday to the largest U.S. bank by assets, David Markowitz, chief of the state's investor protection bureau, accused Citigroup of having "repeatedly and persistently committed fraud" by falsely representing to customers that auction-rate debt was safe, liquid and the equivalent of cash.

He also charged that Citigroup destroyed audiotapes of phone calls on auction-rate debt that were subject to a April 14 subpoena. The New York-based bank learned in mid-June about the destruction, but failed to tell Cuomo's office until June 30, the letter said.

Cuomo has left open the possibility of a settlement, but any resolution must require Citigroup to buy back the affected debt at face value, pay damages to investors, and include a "significant penalty" for its misconduct, the letter said.

A Citigroup spokesman had no immediate comment on the letter.

Auction-rate securities have rates that set periodically. The $330 billion market was once considered safe, but part of it remains frozen after a February meltdown in which brokerages abandoned their role as buyers of last resort.

Regulators nationwide also are examining auction-rate sales practices at other financial services companies, such as Bank of America Corp (NYSE:BAC - News), Merrill Lynch & Co Inc (NYSE:MER - News), UBS AG (VTX:UBSN.VX - News) and Wachovia Corp (NYSE:WB - News).

Earlier on Friday, Citigroup revealed in its quarterly report that the U.S. Securities and Exchange Commission has opened a formal probe, which gives it subpoena power, into the sale of auction-rate securities.

SEC spokesman Kevin Callahan declined to comment. Citigroup said it also is responding to subpoenas from Massachusetts and Texas over the securities.

Citigroup spokeswoman Christina Pretto said the bank is cooperating with the various probes, and has been working with issuers, investors and regulators to create liquidity for holders of illiquid auction-rate debt.

Separately, Citigroup said it is cooperating with government and regulatory requests regarding its Falcon fixed-income and its ASTA and MAT municipal arbitrage funds.

Citigroup in February provided a $500 million credit line to the Falcon funds, and in March invested $661 million in its Municipal Opportunity funds, which accept investments through ASTA and MAT. It moved the Falcon and Municipal Opportunity funds onto its balance sheet because of these commitments.

Shares of Citigroup rose 18 cents to $18.87 on Friday on the New York Stock Exchange.

(Additional reporting by Kim Dixon; Editing by Gerald E. McCormick and Carol Bishopric)

[CU Tiger]

caveat emptor...

In all things.

[flere-imsaho]

NPR's Marketplace had a guy from the WSJ (not exactly a bastion of left-wing economic thinking) on last week who said we should expect more regulation of the financial sector in the coming years given that Wall Street has shown itself utterly incapable of self-regulation, and that this would be a good thing.

[Tekneek]

They must be catching on that investors are losing faith and see regulation as a way to keep the investment coming in.

[Lathum]

Whew, we got word everything was aproved and we are good to go!