March 06, 2006

The ugliest side of this bubble - immoral realtors and lenders who preyed on the poor (here come the foreclosures)

Excellent (and just awful) series on Foreclosure from the Charlotte Observer.

True, you make your bed you sleep in it. But we all know how some folks preyed on the least economically sound or sophisticated among us during this bubble. "Don't worry - you can afford it! No money down! Pay less than the monthly interest due!

It'll work out fine because housing never goes down!"

No, it won't. Yes, it does.


Foreclosing on the American Dream
Loan defaults a growing burdenfor lower-income neighborhoods

Zero down. No fees. No closing costs. Problem credit? No problem.

Home loan failures have more than quadrupled in Mecklenburg County since 1999. More foreclosures are filed here, per person, than any other county in the state. On average, 11 Mecklenburg houses are sold in foreclosure auctions every business day. The owners are evicted, their credit ruined, and they face thousands in court fees and moving expenses.

Jackie Hendricks wept when a sheriff's deputy came to remove her family from their east Charlotte house in November. "It was terrible," says the 61-year-old. "I hope no one else has to go through it."

How many ways can mortgage go wrong? Plenty
A special committee of the N.C. House received a two-hour education Tuesday on all that can go wrong when a person borrows money to buy a home.

The payments may be more than the borrower can afford, experts told the legislators. The borrower may not even understand the loan terms. The company that collects payments can charge unregulated penalties for late payments, thousands of dollars in some cases, the experts said. And the foreclosure process is streamlined for speed, they said, so borrowers cannot save their home by showing evidence of lender misconduct.

Easy home buy turns risky
Have you considered buying a home?" a stranger asked.

Cassandra Boone had considered it plenty of times. She had hoped for a house, prayed for a house. But it had never seemed possible. At 44, she and her teenage daughter lived on Social Security survivors benefits and her $8.50-an-hour pay as a cashier at a party supply store.
But that day in August 2001, Boone chatted with a customer she'd never met, a woman who was a real estate broker. She invited Boone to a seminar: Buy a home with little or no money down. Free food, games and prizes.



8 comments:

Anonymous said...

This is really sad, for a lot of people.

First, I hate to see someone lose a house. Second, keep in mind that people won bidding wars by taking on too much risk.

Two people make 100K. One insists on going with a 20% down payment, 30-year fixed, and a reasonable income/housing payment ratio. He bids 500K, and loses.

Because another guy didn't bother putting money away, but is OK with a 0% down, I/O arm, 50% income to payment ratio. He outbids the first dude, gets the house.

If prices goes up, he wins. It's his house, he took the risk, it worked out, good for him - and I really mean it. But if the price goes down, interest rates rise, the teaser expires, and he can't make the payments... well then bachelor #1 is waiting to buy his foreclosed house for cheap.

Nobody is going to help the guy who should have bought but didn't.

Anonymous said...

My only comment on this article is "buyer beware".

Anonymous said...

The realtor in the story should be held accountable. How are uneducated people supposed to know when they're being tricked?

This story highlights the real face of greed. When bloggers write gleefully about the bursting bubble, it's important to keep in mind that MILLIONS of those who will be hurt are not selfish flippers, but innocent, naive purchasers taken advantage of by the truly horrible.

Anonymous said...

The counter-intuitive thing about this, is that Charlotte has no bubble. That's because there has been slow, single digit appreciation for years (actually, no appreciation in some parts of the city.)

Don't let this article paint an impression of Charlotte being like Detroit or St. Louis... we just have a slow, stable, sensible market. One where rising values can't bail out underwater borrowers.

Anonymous said...

Sad. Pretty much the same as being stung by a hard-selling car salesman. Can't really blame either side. Just sad.

Anonymous said...

Fraud and misrepresentation has been the order of the day. No other way to keep the warm bodies coming.

If its good enough for the Military recruiters(they were lying before the war!)its good for RE agents and loan officers.

However in this case the Fed will probably go after a limited number of people. Probably just a couple hundred people. Enough to look like they are cracking down on it.

So the poor get screwed...this is nothing new...just the way it is.

Anonymous said...

one day the world will look back and see dr geenspan was the worst central banker in history.

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