Thursday, April 15, 2010

A house is just a place to live

A story at another blog bewails the victim of a “predatory lending” system and begins, to just slightly shorten some of the flowery wording,

Alicia and her family have now become the victim of the same predatory lending and harvesting practices that have become so common…

Long story short, our sister in arms has been living in the same house in Sherman Oaks, CA for nearly 20 years. It’s a house that was first bought by her husband in 1983. Well, some time ago, her husband took out a loan on the house to the tune of $400,000 (far more than the house has ever been appraised).

The deal was, you pay back the loan by making obscenely high mortgage payments for a year and a half ($3500 a month), every month without fail, and we’ll modify your loan and renegotiate your mortgage. To paraphrase Alicia, they pulled the money out of their asses even when they didn’t have it and didn’t miss a payment.

And the renegotiations didn’t come through, resulting in foreclosure.

You know what, I feel as sorry for Alicia and her family as I do for people who have fallen for the Nigerian email scams. The con man relies on the greed of his victim; if his victim is not sufficiently greedy the con game fails.

If Alicia felt that mortgage payments of $3500 per month were "obscenely high," why did she sign an agreement to pay them?

And what, exactly, did they lose? Alicia’s husband took out a loan, on a home he’d owned for more than 20 years, for far more than any appraisal than the house had ever earned. He was part of the con game, and when the scam fell apart he happened to be the one holding the bag. But it wasn’t an empty bag; Alicia and her family got $400,000, paid back $63,000 and are walking away $337,000 to the good.

Minus a 26-year-old house of unknown actual value.

Update: Here's another one, from a different site,

In December of 2008 I missed my first mortgage payment on my Option ARM loan because it had increased due to the addition of an escrow account to cover the property taxes. True enough, I hadn't paid my property taxes, but that was because my husband had lost his job the previous January and my home business wasn't doing very well. We could only afford to pay our mortgage payment, the utilities, and get food. I explained all of this to my servicer, IndyMac, but they refused to listen and attached the escrow anyway. The irony of this whole thing is that if they had refrained from attaching that escrow account, I would still be current. In California, there is no danger to the property unless you go 5 years without paying.

Does it matter to her that if the property taxes are not paid then the mortgage holder is required by law to attach escrow to the monthly payment? Not to mention that her husband has been jobless for more than a year, her "home business" is failing and she wants to keep the house while running up five years worth of property tax arrears.

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