2.2 million Americans at risk of losing their homes this year

[wicket]

:scared:

As rates soar, 2.2 million Americans risk losing homes this year

In the heady days of the US real estate boom, it seemed like a safe bet to use her house as collateral for a loan. Today, Sharon Edwardsen risks losing her Staten Island, New York home, trapped by spiraling payments.

Edwardsen, a 47-year-old assistant optician, was tempted to take out a special high-risk loan targeted at people with low credit ratings. Today her monthly repayments have soared to 2,800 dollars, yet she only takes home 1,600 dollars.

She is among 2.2 million people across the US who risk forfeiting their homes by the end of the year as they struggle to meet monthly repayments swollen by rising interest rates, and triggering fears that a financial crisis could sweep US lenders.

"I'm panicking every day. I'm not sleeping because I'm worrying. This house has been in my family forever and I don't want to lose it. But I can't make the payments they are asking me for," she told AFP.

In 2005 these so-called subprime mortgages, offering a short-termed fixed interest rate which then converts into a variable rate of about 12 percent, accounted for some 20 percent of all US mortgage deals.

As the real estate market boomed, they enabled some of the country's poorest citizens to get a toehold on the property ladder. Some of the loans dubbed "ninas" for "no income, no assets," were seen as an innovative way for people to realize the dream of owning their own home.

But now as interest rates rise, one in five borrowers of these high-risk exotic loans is set to default and see their homes seized by creditors. "People don't understand that the loan is going to go up after two years," said Eric Halperin, director of the Washington office of the Center for Responsible Lending.

[Atman]

1. And Bush and his country club buddies are drooling

It'll be a great time to buy! More profit off the misery of others. It's what they do best.

.

[demnan]

2. Glad I refinanced mine after one year

Fixed rate is the only way to go.

[slackmaster]

3. Good move for people who can qualify

My last refinance was in May 2003 - 4.75% fixed for 15 years. I should have the place paid off just before my 60th birthday.

[Wcross]

7. I did a five year refi in 04, will have it paid off by the end of 07!

I bought the place in 2002, 15 acres and a small house in need of a LOT of work. I had to do an owner held mortgage due to the condition of the house. After I fixed it I was able to get a mortgage. I have been putting extra money on the principle every chance I could. I have no debt worries and I feel great!
I have little sympathy for those that thought they could count on appreciation to pay for something they couldn't afford.

[Wcross]

4. I smell something fishy with the story.

"Edwardsen, a 47-year-old assistant optician, was tempted to take out a special high-risk loan targeted at people with low credit ratings. Today her monthly repayments have soared to 2,800 dollars, yet she only takes home 1,600 dollars."

How did she qualify for ANY mortgage with a weekly paycheck of 400.00? She also says that "I'm panicking every day. I'm not sleeping because I'm worrying. This house has been in my family forever and I don't want to lose it. But I can't make the payments they are asking me for," she told AFP."

Was this loan for the purchase of the home that "has been in my family forever" or did she try to do a cash out refinance?

She is an adult and signed on the dotted line. I have sympathy for her bad decision. I am appalled that the mortgage company would allow her to do it. Sometimes life isn't fair.

[havocmom]

6. Lots of Americans were making more $$ when they signed on the line.

Then, they found the economy got outsourced.

[Donnachaidh]

8. she probably owned the house outright

Most banks will allow you to use paid for homes as collateral. And the real estate values on the Island have gone into the stratosphere. Quite literally.

I'm wondering if she was paying attention to the rates as they went up. The charges didn't shoot to 2800 a month overnight. Was there even an attempt at getting the loan re-financed?

It's awful to lose a home, no matter what the circumstances. But I don't think we're getting the complete story on this. And the mortgage broker should have given her an idea of how bad it could get - worst case scenario.

[rumpel]

10. Don't bash the victim

http://www.msfraud.org/
watch the TV News report here

http://www.mortgagefraud.org/

http://www.mortgagefraudblog.com/

[WorseBeforeBetter]

11. She brought this on herself.

According to the story, she was pulling in $1600/month, yet signed paperwork stating she was making $6000/month. That's dishonest - no way around it. She should have reported the lender (big picture -- this affects us all). And when are people gonna learn that there really are no safe bets -- using her house as collateral for a loan was a bad idea since she didn't have the means to cover it. If you can't afford to lose your home, don't put it at risk.

[rumpel]

12. not how I read it

Many people believe that brokers are more savvy and turn to them for advice.

Each time she got into difficulties, her mortgage broker would offer a new deal. From an original loan of 103,000 dollars, she now owes the credit company some 285,000 dollars even though her monthly income has remained the same.

"They took advantage of the fact that I was so desperate that I needed it. I told her (the broker) I had trouble with it. So she said in three months 'we're going to do this again. We're going refinance you again and the money you take out, you going to use it for your mortgage payments,'" Edwardsen said.

"Blinded by their own greed and the incredible amount of money that was being provided by Wall Street, mortgage companies were making loans that were abusive," agreed Ira Rheingold, of the National Association of Consumer Advocates which has taken up Edwardsen's case.

[WorseBeforeBetter]

18. There's plenty of blame to go around, but again...

this woman went from a $103,000 loan while pulling in $1600/mo, which doesn't sound too onerous, to owing $285,000 on a falsely reported income of $6000/month. I have absolutely no sympathy on that issue. She chose to use her home as a collateral for a high-risk loan, which is mistake #1. It doesn't sound as if job loss was involved and the article doesn't mention any sort of medical hardship, etc., so I am curious as to what "difficulties" she kept getting in to. Could very well be the desire for an $80K kitchen and couple of $20K bathrooms. Who knows. But I do know that consumers, within reason, need to wean themselves from the lending teat.

[Wcross]

13. She started out free & clear. She is not a victim.

Read the entire story. Towards the bottom it says she refinanced three times to keep up with the payments.
To me a "victim" is someone who has misfortune brought upon them through no fault of their own. This woman picked up the phone and brought her own misfortune upon herself.

[rumpel]

15. the broker advised her to do so

it also says the broker invented the $6,000 income.

Some companies were filling out false applications to ensure the credit was agreed. In Edwardsen's case, she became a doctor with a monthly income of 6,000 dollars.

The broker makes a hefty commission out of these sub prime mortgages each time. Each time it gets more difficult, their fees go up accordingly - all added onto the principal borrowed - paid out of the equity of the house. It is not uncommon for these brokers to receive tens of thousands out of escrow, disguising it with a fictitious item.

[Wcross]

19. Yes, that explains the subsiquent loans.

The ORIGINAL loan was a request by the home owner. She couldn't make the payments on THAT loan so she signed up for larger loans?

Would you consider me a "victim" if I went to a car dealership and signed up for a car I knew I couldn't afford?

I think we have a disagreement over terminology. I don't see her as a victim of forces beyond her control. To me a victim would be someone who was at work on 9/11 at Cantor Fitzgerald. The store clerk who is killed during an armed robbery, the driver killed by a drunk driver who crosses the center line, the kid sitting in his home in Iraq which is hit by a bomb.
A person who decides to take out a mortgage on her free & clear home without considering how it will be repaid doesn't qualify as a victim in my book. Ignorant, yes. By no means a victim.

[WorseBeforeBetter]

22. She didn't need to accept his/her advice.

If she had reservations, she should have sought out another (reputable) broker. It's a simple matter of right and wrong--lying about income to secure a loan is wrong and it's come back to bite her.

[RaleighNCDUer]

16. She is just as much a victim as anybody who has been convinced

to invest in a gold mine in Nevada that hasn't seen any paydirt since the 1880s.

It's called fraud.

Giving a loan to someone who does not have the capabiltiy of paying is fraudulant.

Do we know why she wanted the loan to begin with? With that kind of income (just about where I am, myself) you are always right on the edge, and you are one crisis away from the streets. She said the home has been in the family forever, so she was probably not borrowing for speculation purposes. Maybe she needed to replace her entire roof, and borrowing was the only way she could pay for it - the option being, let the bad roof ruin the entire house. So she turns to a mortgage lender who is no better than a loan shark as her only option.

Don't blame the victim.

[Wcross]

20. We will never know what she spent the money on.

Do you really think a new roof would cost 103,000.00?

[rumpel]

23. How much of that is broker fees? n/t

[RaleighNCDUer]

25. Of course not, but the fact remains we don't know what prompted

her to take that mortgage loan. And regardless of the reason, the lender would have been aware from the first that she could not afford it, whether she was aware or not. She was conned.

A responsible lender would have refused. It is as simple as that.

People are similarly conned every day - whether they think to make a quick profit, or to resolve some finincial crisis, according the article there have been 2.2 million such stories. Sure, some were speculators who were caught short, and they knew the risks, but the vast majority are undoubtedly people like us who were talked into something that they were uniformed enough to not recognise the inherent dangers of. People trust 'experts'. She was advised to take a disastrous course and thought her advisor was working for and with her, not simply looking out for himself - she had no contrary advice to inform her that he was going to make a shitload of money whether she kept her home or not.

Predatory lending is fraud.

[rumpel]

26. Exactly n/t

[rumpel]

5. The practice of the mortgage industry is not much different

from the credit card companies - if you missed the recent hearing on credit card companies - you saw the tactics used.-

it is called Mortgage Servicing Fraud and is a big problem.

there should be hearing on this one, too

edited to clarify

[WorseBeforeBetter]

9. "She became a doctor with a monthly income of 6,000 dollars"...

when she really was an assistant optician taking home $1,600. This issue really frosts me. Wall Street greed plus homeowners thinking it's a "safe bet to use her house as collateral for a loan" is a dangerous combination. If you can't afford to lose your home, don't put it at risk. And it's a bit late for US financial authorities who "toughened up conditions for approving such high-risk loans." And reactionary Congress will now do what? Common sense is truly gone in this country - no one can say they didn't see this coming. This may be an unpopular sentiment, but live within your means and if it takes drastic steps to do so, then do so.

[rumpel]

17. when people get desperate

they don't think clearly, predators swoop down to make a fast and quick buck...

Watch out when your lender sells your mortgage to a servicer and they add something what they call a "forced insurance" of some $6,000, and place it into an "escrow account", you originally did not have with the original lender, even though you have insurance. Added to that some future property taxes - you were paying yourself before, into this new escrow - for which they tack on added payments to the original fixed payments each month.
These servicers do not seem to receive your payment on time either, so you incur late fees, too.
...and you do not receive a response from them to clarify and correct.

You do not need to refinance, or cash out - it only takes your lender to package and sell your mortgage to Wall Street and a subsequent mortgage servicer which is acting fraudulently.

[WorseBeforeBetter]

21. I need to know what caused her "desperation" - the article leaves out...

quite a bit of info.

[rumpel]

24. true, maybe she responded to the incessant ads: lower your

monthly credit card debts... etc

correction not debt "bills"

[thethinker]

14. The bankruptcy law

that many of our democratic congressmen voted for is making this worse. In my state you used to be able to file a bankruptcy and stall a foreclosure. People sheltered in bankruptcy so they could figure out how to handle the situation. With the new law, after a foreclosure is filed, there is not time to file a bankruptcy. They just lose the house.

If you think the banks aren't making money on these foreclosures, think again. On most foreclosures, the banks come out way ahead if they foreclose on the property.

The government needs to step in and force the banks to take less interest rates, and less fees, and work out a plan that the homeowner can live with. The banks made these mortgages with their eyes wide open. They are suppose to be professionals. The government should not bail out the banks. They should just pass a law to lower their interest rates on the loans and change the foreclosure laws.

The government also should put some caps on the rates and fees that credit card companies can charge. They also need to rework the bankruptcy law they passed for the benefit of the banks.

[InkAddict]

28. All that , but more importantly, they need to stop

outsourcing American industry (mfg. and service). I'm more ambivalent about the legal H1B workers if their numbers are controlled, Gates be damned! It's totally immoral to mandate children be responsible for the well-being of a parent who stubborn enough in that macho kind of way to imagine he'd never develop chronic frail health and so needed a plan of his own for that eventuality, but would simply drop over dead--and then American employers, both private, public, and defense, to deprive the caretaker(s)from an income that consumes all. Yup, it was never anything "personal" just business GOP style sans regulation, oversight, and accountability. As for those good X-tians: good examples of faith inaction: they offered not a bit of childcare, a single casserole over two years and a prayer.

Talk about frustration and loss: home, retirement savings, health care--all gone! We will never recover from this ongoing double-whammee in our lifetimes. And we're set up to now be that same burden on our kids. (whistling the M.A.S.H. theme song), and/or the greater social fabric of America.

[wicket]

27. kick

:kick: