Mortgage Madness: payment jumps from $1200 to $5000. - For a Realtor

[Liberal_in_LA]

This is an example of the realty madness that occured over the last two years. (**note, unless this person put down a huge downpayment she should not have been paying $1200 in the first place **)

http://www.dailynews.com/ci_8113738

Valley foreclosures soar 435 percent
Nearly 3,000 families lost homes in 2007
By Gregory J. Wilcox, Staff Writer
Article Last Updated: 01/29/2008 08:22:28 PM PST

**SNIP**

That's little comfort to Realtor Patricia Beltran, who is about to be counted in this year's foreclosure statistics.

The payment on her four bedroom, three bathroom home in Porter Ranch has jumped $1,200 to about $5,000 a month.

She can no longer afford it and is desperate to sell.

"I, like a lot of other people, was under the assumption that after two years I would refinance and my payment would go down

she said.

Beltran, who bought the home 2.5 years ago for $620,000, tried to refinance last summer, but by then credit standards had tightened and the market, and her source of income, was dwindling.

"There's nothing we can adjust for you because you won't be able to pay it anyway," she recalled a loan officer saying last summer.

[madaboutharry]

1. These loans should never have been legal.

n/t

[Joanie Baloney]

2. I think it says

that her payment jumped $1200 a month...not from $1200. Still sucks, though. :)

"The payment on her four bedroom, three bathroom home in Porter Ranch has jumped $1,200 to about $5,000 a month."

JB

[tinrobot]

3. $1,200/month for a $620,000 house?

I don't know who's a bigger fool. She's foolish for agreeing to the terms of the deal, but the bank is even more foolish for offering those terms. A recipe for failure on all sides.

No wonder the economy is tanking.

[lapfog_1]

4. From $3800 to $5000

and that's a big "nut" to make every month ($3800).

Even in the go-go years of the housing market, she should have known better than to saddle herself with that kind of payment.

Hell, I had $200,000 to my name in 2003, and a six figure income, and I didn't buy one of the half-million dollar homes then. Because even if I put down $150K, servicing a $350K mortgage seem like it would be a struggle.

I should have taken that money and bought a small place (for cash) in a different area of the country... but I didn't because I wouldn't know what to do in rural America.

[InkAddict]

40. I think part of the problem here was also that banks

looked back at the applicant's record of employment and earnings instead of looking forward. Perhaps this agent/broker was a real go-getter lister who had her office lined with peer awards. The lenders knew the products they were selling "forward" with/without due diligence would eventually churn backwards. These people just believed in the spin of their own "success".

Meanwhile...

I fretted back and forth over buying in 1988 after the spouse was unemployed for a year. but friends/relatives thought I exaggerated my worries/paranoia about depending on the breadwinner's IT occupation, especially on one who had seen Inslaw's PROMIS being beta'd up close and personal. We followed the story in Baron's and rented an apartment until our house sold Dec-April and then bought another; the new house was just then at the median average with the features and potential we wanted though not in what was thought to be the best side of town, so we signed on the dotted line for a Countrywide fixed 30-year 7-3/4% at the time and settled down to raise the kids.

Since I was finally going to get to return to school(without debt), a two-year one-salary stint with increased earning potential thereafter should have put things in a good position. What really happened is the breadwinner was hit by the mergers, acquisition, reorgs, relocations, of the 90s and no colleges in the state offered a BS follow-on in HealthInfoMgmt, let alone jobs to newbies. I worked in something close - medical transcription (LOL-see why we're not fans of globalization).

Just at that time, the grandparent toy-spoiled kids were in their final years in HS and college-bound. Though difficult, with student aid programs and an ARM refi 3/1 variable sub-prime, then at
8-3/4%, the bills were manageable again and things maintained themselves as we scrambled under Bill for a laundry-list of short-term (6 month-12 month) consulting gigs that ultimately didn't last that long. All was ok for a short while, even though we got Reagan...

Then things fell apart all over again as outsourcing and H1Bs tsunami'd the dot.com/info tech sector and Bush and 9/11. Ordinary Americans with credit problems were rightly or wrongly judged to be of greater security risk than foreigners and could not obtain the mandated security clearances required to obtain a place working on government systems updating for the "new realities." All the IT that was left in Dayton was at WPAFB. This needed credential was eventually frozen by the Feds, locking out vast numbers of otherwise eligible IT personnel except, of course, for those employees/candidates that would WINK w/the Neo-Cons. Every time the bills were on course, the spouse would be RIFd; how were we ever to obtain that desired 15-year fixed on 6-month consulting gigs. Being in a low-turnover neighborhood, it never occured to us that the banks had gone crazy in lending or it might have been accomplished. (Results probably the same or worse). With my last $500 in savings, we journeyed to DC for the January protest on going to war in Iraq. We know how that went...

Eventually, the breadwinner went through a two-year lapse of employment that exceeded the term of benefits. With no prospects on the horizon during this time, spouse took an $8.50 hr job that would also accommodate a schedule necessary so this "only" child could attend to the needs of his elderly parent who had taken a "que sera, sera" attitude to his golden years, never investing/planning for other than that he'd pass quickly and quietly, and was now in progressively terminally declining health. Though we took turns getting him to doctors/overseeing his hospitalizations/finding a situation for what needed to be 24/7 monitoring care, the finances continued to suffer. The spouse found a work-at-home gig that helped bring the mortgage current, but the rest of our finances were completely shot, having had to get a private loan from a relative for Dad's care, we were up the creek without a paddle. Dad passed. We rented an apartment, and rented our home to catch up the bills. First tenent was evicted for non-payment with the costs that are incurred in getting someone out, and the mortgage was back in arrears. We found a new tenant quickly by subsidizing the rent:mortgage ratio, and this worked well for awhile. Then the work-at-home gig ended. We moved, filed, and got new jobs. How long will things hold together this time???

See how the "mighty" have fallen.
Bite me, Agent Mike!

[Sadie5]

6. Banks are out of control

A smack down is needed badly. Clinton offered her plan for the banks today. Haven't seen Obama touch the subject yet.

[madaboutharry]

7. That sounds crazy to me too

$1,200 for a $620,000 house seems out of sinc to me as well. These loans were dependent on the most rosy of scenarios.

[Arger68]

9. Her payment went up $1200.00 per month, it didn't

start there. The article is worded poorly. It went from $3800/month to $5000.

[Warpy]

12. 2 years ago the market was still a go-go market that showed

no sign of slowing down unless you did what I did and drove around counting "for sale" signs. She had every reason to expect that her house would appreciate to the point that refinancing for a 30 year fixed this year would be easy.

Woops.

[rucky]

36. It's called an "exploding ARM"

and yes, they're all fools.

[Ichingcarpenter]

5. I meet a carpet/tile installer which has the same problem

Not educated, but a hard worker and independent contractor.
Bought his house, 3 years ago, for $400,000 put $25,000 down and then about $10,000 in improvements, His realtor told him she could get him financed since it was his first house and she arranged the loan, which he could hardly read to find out where to sign.

Payment went from $1200 to $4500, he has it on the market for $245,000 but nothing is moving even at that price.

[Warpy]

8. Eventually these fools are going to realize that forcing

people into foreclosure is going to cost them a lot more than modest rate adjustments instead of huge jumps do. They're going to realize that abandoned properties soon become blighted properties and drag down the value of the whole area. They're going to realize they can't get blood out of stones, and settling for minor profit over obscene profit is a way to survive while the later is a clear road to ruin for everybody.

The longer a mortgage outfit can keep people paying interest on an unpside down mortgage, the better off they will be in the long run.

People who got sucked into balloon mortgages thinking the runup in housing prices would last, if not forever, at least until paper profits would allow them to refinance are going to be badly hurt until lenders get an attack of reality.

[madrchsod]

17. yes when they inspect the property and find out everything that

is salvageable is stripped from the house. that`s not the damage of a house being not kept up against the weather or the squatters.

[Libby2]

28. My son is house hunting,

and that's what he is seeing. Everything stripped out of the houses.

[sinkingfeeling]

10. A 30-yr. fixed at 5 5/8% would have resulted in $3500 a month on the full $620K, so we

know there was probably no money down. What we should outlaw is 100% financing.

[bpj62]

18. Option Arms and the Libor

Many people got ajustable rates based on the English stock market (Libor rates. They were supposed to be short term loans and then the person would either sell or refi into something more conventional.The Libor index went crazy back in May and that is what started the downward spiral. Not everybody is an idiot. Some people tokk ou these loans to help purchase a new home some people did these loans to help with the budget. Tell me one person who said that the bottom would drop out like it did. Many people predicted a slow down in the housing market but no one predicted this. I am in the real estate settlement business and I have never seen anything like this in 25 years. A lot of the blame goes to the fed for loosing the underwriting guidelines and the rest goes to the mortgage brokers in the business who took their fees and ran away. In Virginia loan officers are not licensed so there is no code of conduct or ethics.

[sinkingfeeling]

30. Well, some of us have been saying that homes in the USA have been over

evaluated for years and some of us have seen the 'writing on the wall' about this country's belief that debt has no bearing on anything. Apparently, we've raised an entire generation or two who don't think they should have to put any of their own money into their homes or cars or TVs. If the credit card bill gets too high, just ignore it. If the mortgage goes up, just don't pay it because you don't have any equity in it anyways. And of course, no body wants to pay taxes.

[NashVegas]

22. What We Should Outlaw (via Self-Discipline) Is Buying More House Than We Can Afford

With more demand for $300k homes (kind of ridiculous, even at that amount, in most places), there will be more supply of 300k homes.

[Liberal In Texas]

35. I disagree with you on the not allowing the 100% financing thing.

I don't think the amount of down payment (even if it is 0) has that much to do with the ability to repay the loan.

What is a bigger problem is that they were qualifying people for loans that are way over their ability to pay them back. I know that in '01 when we bought our present house, we were qualified for over twice more than would have been realistic for us to pay per month.

It was tempting to buy more expensive, but we gave ourselves a reality check and bought a house we could afford without being "house broke" all the time, and didn't even consider an ARM loan. Today, we're very glad we did what we did. Now the only things that can go up per month are the taxes and insurance.

[lonestarnot]

11. Terrible.

But wasn't that a little too much house for one person?

[El Pinko]

13. Sucks to be her. nt

nt

[Javaman]

14. Let the reset games begin!!! nt

[fed-up]

15. she was greedy (foolish) when she bought and still living in lala land regarding her sale price

She will most likely not sell at the price she is asking-peak prices were at beginning of 2005, she started out asking $150K more than peak price, now is down to "only" $100K more than peak in a DECLINING market....she's still got a long way to go...


"Beltran, who bought the home 2.5 years ago for $620,000, tried to refinance last summer, but by then credit standards had tightened and the market, and her source of income, was dwindling.
..snip

She listed the house four months ago for $765,000 and has since dropped it to $719,000."

[Duer 157099]

16. I don't understand this part:

"Prices would have to fall by half to even get to the 2001 (level) and that's a huge drop. I don't think it's going to go that far," he said.

Why? Why won't it go that far? Have wages increased by 100% since 2001? Why should housing prices rise by twice, but incomes haven't, and yet when the reversal comes, why doesn't it normalize to where incomes were before the insane run-up occurs?

Can anyone explain?

It's similar to how, when gas prices increase by 10 cents a gallon, there's news about it, of course, but there's equal news coverage when the price drops by 1 cent. WTF???

Is it because Americans are so mathematically challenged? Is that it?

[NashVegas]

19. People With Vested (and Unvested) Interests Are Being Propped Up

Those people include the leadership of both political parties. They and all the corporate masters would face a full-scale revolt by the educated middle & upper middle class, who will be righteously pissed off to see their "investments" melt away.

To avoid that scenario, interest rates are being recut.

[lonestarnot]

21. full scale revolt? Naw too many twinkies.

[NashVegas]

24. I Think

If we have enough people who find themselves making $500k mortgage payments on $225k homes, yeah, we will see some change.

[lonestarnot]

25. LOL

We are seeing the bottom fall out of the housing industry and the FBI vestigat'n the mortgage cos., and bankers allegedly cooperating in those vestigation' that would be some change, and not small change. Bridges and normally dry river bottoms will be seeing some new tent dwellings, that would be some change. **no spell check necessary vestigations is what i mean. :evilgrin:

[napi21]

37. I think, to understand that statement, you have to realize they

seem to be talking about two different things. First, there were specific areas of the country that had this severe housing price jump. THOSE homes would have to fall by MORE THAN half to reach 2001 prices. But I think when they state that it's not going that far, I think they're taking the houses everywhere. Believe it or not, there are homes NOW that are not only maintaining their value, but even appreciating at a slow steady rate.

I happen to think that ANYONE who didn't realize that housing prices ANYWHERE couldn't possibly continue to appreciate 50%-100% in a year or two was greedy, dreaming, or just plain stupid! The lenders realized it, they just ignored the facts, made their $$ while they could, and sold the loans to someone else!

[NashVegas]

20. So ... These People Were All Counting On Gaming the System

In for pennies, count on refinancing.

[cobalt1999]

23. Sometimes it's hard to feel sorry for someone.

My god, she was right in ground zero for the housing over inflation. She had to know about financing options and risks.

Dumb, dumb, dumb.

I remember a bank offering me $2million credit at the height of the boom, I looked at them as if they were crazy (apparently they were). No way someone in my income bracket should be borrowing $2 million dollars. I guess some people don't think.

[SoCalDem]

26. Porter Ranch..hah!

and to a Realtor who KNEW better.. I have little sympathy for her.. If she was any kind of a "good" realtor, she made PLENTY of commissions in the years leading up to 2.5 years ago...she could have easily paid cash for a place a little less pricey, and still in a fairly decent location..

She hopped on the gravy train she was selling tickets for, and she too though it would keep chugging along.. It's on a siding now..dead still..

[K8-EEE]

29. Porter Ranch = BushVille

Just sayin'.....

[carly denise pt deux]

27. whew! I am glad I was never talked into one of those mortgages

I have a fixed rate mortgage.

I watch tv shows like House Hunters, What you get for the money, etc...and cannot help but wonder "HOW DO THESE PEOPLE MAKE THE PAYMENTS FOR SUCH HIGH PRICED HOMES?!" I have a small mortgage by US standards, but still pay 600.00 month, and think it's still highway robbery.

Carly

[RB TexLa]

31. And bailing out either the companies or the home owners just tells people and the industry

don't worry, the government will take care of it. There will be more regulations and they'll ask you to set underwriting qualifications more tightly but just start stretching the underwriting again in a couple of months because there will be another bail out if needed.

Only way to get buyers and mortgage companies to adhere to the underwriting is for there to be consequences to not adhering to them.

[mvccd1000]

32. My ARM just reset....

I refinanced $130,000 in 2002 at 5.875% on a 3/1 ARM. That loan gradually made its way up to 8.0%, but it just reset to 6.25%, dropping my monthly payment by nearly $200. My neighbor's ARM reset in November; they wanted to raise her payment by $400/month, so she refinanced to a 30-year fixed. I think I'll stick with mine for a while and see what happens when it resets next year.

[RB TexLa]

33. The part you don't hear from many of the people with the huge increases

is they signed on with the "teaser" rates that were far below what their credit warranted, with interest only portions. They signed on with two things supposed to be done, pay extra toward the principle each month and work to make their credit better so they could refinance before the interest only period ended. And guess what? Many of them are now saying "well, I didn't think I really HAD to do those things, you mean I really needed to pay off those credit card charge offs?"

[mvccd1000]

34. Very True. nt

[WinkyDink]

38. That's why they call it "adjustable".

[knitter4democracy]

39. She was part of the problem, and now it's hitting her.

When Hubby and I had to move almost three years ago, I had to fire two realtors. They kept telling me we could afford homes in the "doctor" neighborhood and kept trying to show me homes that were above my limit. It took awhile, but I found a guy who listened to me and respected me. He found us the perfect house--undervalued for its cul-de-sac and worth, fits us great, and it's perfect. We're not planning on moving for a long time.

I had realtors telling me we could afford more, that there wasn't anything in this market in our budget area like what we were looking for, and that we were looking in the "wrong" neighborhoods. Then, the credit union tried to screw us at closing and sent the wrong paperwork (instead of 30 year fixed for 80% and ARM for 20%, ARM for all of it). I made everyone wait while they faxed over the right papers. Yes, we had to go with a zero down (no savings after med school and residency), but I wanted to make sure most of it was fixed.

I keep wondering about those houses they tried to get us to buy. Michigan's tanking, and I see all sorts of for sale signs around. We have a house in our cul-de-sac that's in foreclosure, and there's talk of another if it doesn't sell soon. This is in a decently priced neighborhood, too.

[OPERATIONMINDCRIME]

41. Well, She Completely Brought That One On Herself.

This isn't someone who was swindled, taken advantage of or otherwise. She simply made an irresponsible and foolish decision and is now being held to account for it.