Posts tagged "foreclosure"
Mortgage news for Oct. 23
A few bits of interesting news from around the net…
It’s easy to place blame on ‘greedy’ home buyers when trying to understand the collapse of the mortgage market. However, a lot of people going through foreclosure right now just didn’t see it coming-they had good jobs, had owned homes before, and many even had savings in the bank. The New York Times reminds us of real people in financial hard times with this article “After the house is gone”(free registration)
Though not all hope is lost, as WSJ’s the Wallet reports on “Other help for struggling homeowners.”
And finally, on the other end of the spectrum, the Consumerist explains how rating agencies are behind bogus ratings that led to smart investors paying for too much for mortgage-backed securities.
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Ed McMahon, Evander Holyfield at Risk of Foreclosure
The mortgage crisis spares no one, or so it seems.
First came news that pitchman Ed McMahon had defaulted on his $4.8 million mortgage with Countrywide. He explained his situation to CNN’s Larry King this way:
If you spend more money than you make, you know what happens. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen.
![Holyfield: \"Not broke, just not liquid.\"](http://blog.smarthippo.com/wordpress/wp-content/holyfield_evander.jpg "Holyfield: \\"Not broke, just not liquid.\\"")
Then came news that heavyweight champion Evander Holyfeld was also at risk of foreclosure due to his defaulting on a $10 million loan from Washington Mutual.
In the case of McMahon, being famous does have its advantages, however. He claims to have been trying to sell his home for two years with no takers. But after news broke of his ordeal, interest in purchasing him home — asking price $6.25 million — is up. In case you’re in the market, Trulia has details regarding the property.
Mortgage Foreclosure Scams Targeted by FTC
With foreclosures up 75% in 2007 over the previous year, it didn’t take long for con artists to find a way to profit. In testimony to a U.S. Senate committee yesterday, Federal Trade Commission officials described scams in which borrowers typically pay thousands of dollars but end up losing their homes and the money.
This video by Freddie Mac describes what foreclosure fraud looks like and how to spot it:
The FTC has launched investigations in seven geographic areas. If you’ve been the victim or a target of mortgage fraud, you can file a complaint online or by phone in English or Spanish by calling 1-877-FTC-HELP.
The Bush Subprime Bailout: What about the Problems that Got Us into this Mess to Begin With?
The web is abuzz this week with reaction to President Bush’s plan to help homeowners with subprime mortgages who are at risk of foreclosure. Bush announced the plan yesterday, which is aimed at 1.2 million borrowers who are at risk of foreclosure when their “teaser” rate period ends and the rates are readjusted. These borrowers will be able to either refinance their mortgage, have it guaranteed by the Fair Housing Administration, or freeze their teaser rate for a five year period.
MoneyCrashers correctly pointed out that there is enough blame to go around:
My original position stays the same that I believe mortgage brokers, mortgage lenders, and consumers are equally responsible for the collapse in the subprime market. Consumers knew what they were getting into when they signed the dotted line. No one is stupid enough to think that they can buy a $400,000 house with little money down for such a low payment. They had to understand the risk of the rising interest rates in the future. Mortgage lenders knew exactly what they were doing, too. Their philosophy was: just grab all of the business we can during the housing boom and figure out what we did later. I don’t think they were forecasting the amount of foreclosures that we’re seeing and going to see in the future.
SmartHippo has issued a press release stating that while the bailout is good news for consumers who may otherwise lose their homes, the root causes remain unaddressed.
“Let’s face it. Some consumers took on loans they knew they couldn’t afford, but others lacked the knowledge or information to make wise decisions. This was exploited by certain lenders who put short-term financial gain ahead of their customers’ best interests,” said Favvas.
Favvas cited the example of mortgage brokers who steered consumers to subprime loans from lenders paying the brokers higher commissions, even when the consumers could have qualified for lower-interest prime loans.
“The subprime crisis has triggered the beginning of a fundamental transformation which will lead to a more consumer-centric approach to lending based on transparency and accountability,” Favvas said. “The lenders who understand and embrace this transformation are the ones who will succeed in the long run.”
You can read the full press release over at Yahoo! Finance.
Until we empower consumers with the tools to make better financial decisions, and create economic incentives for lenders, we’re just setting ourselves up for a repeat — whether it’s in three, five, seven, 10 or 15 years.
There’s an old adage that says that if you owe the bank $100 and you can’t pay, it’s your problem, but if you owe the bank $100 million and you can’t pay, it’s their problem. You can now add to that if 1.2 million people owe the banks $350 billion and can’t pay, well, then it becomes the government’s problem.
What do you think?
