Subprime mess, blame, winners, losers?

How many more disclosures can we come up with. We're already cutting down a small forest every time we do a loan in this country.

Good Faith Estimates
Initial Truth in Lending
Truth in Lending
Servicing Transfer Disclosures
Section 32 Disclosures
Borrowers Notice of Right To Cancel (Rescission Notice)

Half of the state's have state specific disclosures also. Just how many stinking disclosures do you have to give someone before they understand how the loan works?

Customers sign a Mortgage (usually multiple copies)...HUD1A's.....Loan agreement's...Riders......and at least a dozen other forms when closing on a mortgage loan. Are people just freaking stupid? Are there people in the closing rooms holding guns to people's heads and forcing them to sign the documents?

How about we just start giving people IQ test prior to closing on any mortgage. Maybe that will cure our problems.

 

I said better, not more. Consumers are overwhelmed with pages and pages of documents written by attorneys to comply with all the laws. Often times, consumers don't see these documents until closing. These documents are written to protect the lender, not the consumer.

Some subprime lenders don't want the consumer to read the detailed disclosures. They intimidate consumers during closing, point to all the places that require their signature, collect their money, and say next customer. I've seen this practice with my own eyes. And it's not limited to the company I worked for a decade ago. It's still happening today.

There is no question that some consumers aren't smart enough to understand the process. The process doesn't need to be so complicated and intimidating. It wasn't like that until greedy people seized an opportunity to take advantage of these people about 20 years ago.

Consumers are ultimately responsible for what they sign. But we don't need the sharks taking advantage of them.

 

I don't work in the business, so I don't know how these things typically work. But, my experience has been just what TigerWins stated. I have bought 1 house and sold that house, and in both instances, these forms were not presented to the buyer until everyone was sitting at the attorney's table for closing. In other words, they were not presented in advance for review. In both instances, large, reputable mortgage companies were used. On the mortgage and attorney sides, it is a rush to have everything finalized at the last minute. The pressure came from the attorney to blindly sign the forms, not the lender. Attorney's have closings stacked up one after the other, so they don't want you to take time to review the documents. Is this the way this is usually handled, and if so, maybe this information should be given out a couple of weeks before the closing? I guess with fewer qualified buyers on the market, lenders and closing attorneys may have more time to do things in advance.

 

This isn't the way my company does business. We're audited monthly to ensure that we are compliant with federal and state laws governing disclosure statements. The fact that some lenders are withholding these disclosures is frustrating. Unfortunately, the sub-prime market gets painted with a very broad brush. Not every sub-prime lender is out to rip their customers off. As a matter of fact, we take great pride in servicing every loan we book. Our company has not sold a loan in over 30 years. We couldn't do this if we weren't being completely up front with our customers during the approval and closing process. Our customer satisfaction scores are through the roof. This is why our company is profitable, and others are no longer in business.

 

I guess the question I have (or two questions actually), legally, when are the disclosures required to be provided to the purchaser for review, and then also, ethically, at what point should they be given to the purchaser?

Oh yeah, the two closings my experience is based on were conventional loans, not sub-prime. So I guess there wasn't really anything to hide, but, I still think the paperwork should be provided well in advance.

 

The Initial Truth in Lending and Good Faith Estimate are two of the most important. Our initial disclosures are sent out by home office within 24 hours of the application being taken. Whenever there are changes to the proposed loan that make a predetermined amount of difference on the figures of the loan, new disclosures are sent to the customers right away.

Another problem with all of this is every one's conceived notion of what a "sub-prime" loan is. It's not necessarily the terms of the loan that make it sub-prime, but the customer the lender is doing the loan for. If your credit (FICO) score is less than a 680, then your loan could technically be considered a sub-prime due to it's reduced value on the secondary market. ARM's (adjustable rate mortgages) are universally considered sub-prime products, but many highly credit worthy customers have them. Fixed rate, 30 year, mortgages with short prepays are normally not considered sub-prime, even if they have a rate above 10%. It's not so much the loan product itself, but who everyone was lending money too that has caused so many issues. For instance, you and your wife could both have 780 FICO's, but if you were BFS (business for self) and most of your income was figured using bank statements and handwritten letters, chances are you were forced to get a "sub-prime" loan....higher rate, most likely adjustable, with a 3-5 year prepayment penalty.

 

It's unfortunate that so many people are so ignorant.

I think the fed playing with the market some & a few new regulations is about all we can do, and most assuredly all we should do because bailing the companies out will only ensure that it happens again.

 

This should be interesting

Study to be released today on mortgage lending

 

It's shocking that we actually needed a study to figure this out. It's no secret that lower income people are more likely to have poor credit, thus having to go the subprime route. And we know a large number of the black population is in the lower income bracket.

The race card is soon to follow. I'm sure they are going to push for some government money to solve this problem.

 

Foreclosure Exposure


I think this report is an attempt to mislead, and I don't buy this definition of "upper income" they are using for this study. Wouldn't creidt scores be a more accurate way of determining whether or not there is a difference?

The way I read this as far as how they calculated their disparities, take Detroit for example. If the median household of Detroit in 2000 was $29,526 By that logic, if I live in Detroit I would be considered upper income if my household income was $35,431? Am I reading this right? I hope not.