Saturday, May 24, 2008

I have to say it

I think it's time I gave you my opinion on this whole "mortgage crisis" business. I can't hold back anymore.

For pretty much most of my escrow career I have had a very lender-heavy desk. This means most of my clients were mortgage brokers and mortgage bankers (there's a difference) handling refinances for the entire range of homeowners. You had the customer who was doing some remodeling and using their equity for that, you had the customer doing a "rate-and-term" - generally refinancing to lower their interest rate and payment, you had the customer trying to remove a spouse after divorce, and you had the customer using the equity in their home to pay off consumer debt. I made a huge living off of this lender business, and a lot of escrow purists who preferred doing primarily resale business turned up their noses at me because of it. But I loved it. Lender business was somewhat less involved (in a lot of cases) than resale, and I could close 60-80 files a month compared to a resale desk that closed perhaps 40 in the best of times. Plus, I'm really good at what I do, and care about closing as much as a I can in a month, which results in the clients getting paid. All good.

A big chunk of that business is what we call "foreclosure bust out" or "bankruptcy bust out". These would be loans that, for a higher rate and higher loan fees, would pull a homeowner out of foreclosure or bankruptcy, pay some debt perhaps, and get them back in a position to correct their delinquencies and move forward. Most of the time the new loan would be a two- or three- year fixed rate that turned into an adjustable - but if you kept your payments current during the fixed period you would qualify for a more conventional loan afterward. Conventional meaning the lower fixed rate. The key to all this was following the plan. Pay your bills, control your debt, be grateful you get to keep your house.

I'm not going to say that all of my lender clients were angelic. They made plenty of money doing this sort of work. But the plan WORKED if the homeowner followed the rules. The problem? The homeowners didn't necessarily follow the rules.

For whatever dang reason in this society, we see something pretty and shiney - a neato new car or a big screen TV the size of a banquet table - and we simply must have it (I say "we" because I am a part of this society whether I like it or not. I'm trying not to alienate anyone...). Even if we don't have any money, we think, hey! I'll just charge it! Then I can have all this neato stuff and my credit card payment will only be like $30 a month! Well, kids, it isn't like that anymore. And I cannot begin to tell you the pages and pages of debt I see on your final application at closing. What were you thinking? Seriously I commonly see over $70,000 in consumer debt (credit cards mostly) owed by a homeowner who also had two mortgages and made less than $5000 a month. Good luck with that. One could say, Shame on the credit card companies! But not me. We humans are blessed with that one thing that sets us apart from the rest of the animals - free will. Only YOU know if you can afford something or not.

Which brings me to my bitch. I am sick to death of hearing about the mortgage crisis and what the government is going to do about it. Foreclosures are up right now, and why? Because people are buying houses they cannot afford. If you really could afford it, you wouldn't have had to put zero down and squeeze yourself in with a two-year-fixed rate loan with a three year prepayment penalty and now your rate is twice as high. IF YOU HAD READ WHAT YOU SIGNED, you would have KNOWN that the payment had the potential to jump in two or three years, or five, or seven. So who are you blaming? And why can't you refi into a conventional loan now? What's that? Because your credit is shot after furnishing the too-much-house to look like something on "Cribs"? And you certainly aren't paying your Wickes bill because look what happened to them? And this is WHOSE fault? The lender? The loan officer? THE GOVERNMENT?? No. It is not. It is yours. Because nobody held a flipping GUN to your head and told you to buy a brand new home that was way too much for you and your $2500-a-month-two-kids-stay-at-home-wife ASS to afford. YOU HAD TO HAVE IT, along with your BIG SCREEN TV and WII and all that CRAP and now it is up to the government to bail your sorry ass out. Because when you GOT this loan, you had the LOAN OFFICER explain it to you, you had the ESCROW CLOSER explain it to you, and you had the PAPERS RIGHT IN FRONT OF YOU before you signed them.

TAKE. RESPONSIBILITY. Where I come from, your signature says you agreed to it. If you don't understand it, don't sign it.

The good news about all this is I don't have the readership to spark a huge debate or offend a bunch of people, but I will again say that THIS IS MY BLOG and I will SAY WHAT I WANT. Trust me, if anyone WERE to argue this, you will not win with me. But I would love for you to try.


At 9:27 AM, May 24, 2008, Blogger Brenda said...

I so totally agree with you.

At 10:43 AM, May 24, 2008, Anonymous Melissa said...

I think that one of the biggest lessons my parents taught me was to live within my means.

$70,000 worth of consumer debt? That means that these people bought several thousand dollars worth of stuff????? Nope, no pity for them at all.

Both sets of my parents have very nice things, and lots of things, but they still manage to live within their means...they just have more than I do.

It really stuns me to see young women my age, driving fancy new cars, wearing lovely clothes, and probably not earning very much.

At 10:53 AM, May 24, 2008, Anonymous RiverGirl said...

Bravo! Great post! It's great to have someone say all that so succinctly.

At 1:39 PM, May 24, 2008, Blogger Theresa in Mèrida said...

Personal responsibility? what a concept! I agree with every thing you are saying except, I think there were unscrupulous people who targeted the ignorant and out and out lied to their clients. That said, those people should be prosecuted for fraud and be forced to make restitution.The government still shouldn't be bailing anyone out.
I believe in things like FEMA, but when I got some financial help from FEMA, I had to sign a document stating that if I ever lived in a flood zone again, I would have flood insurance otherwise I was no longer eligible for FEMA. There is a big difference here.
When I worked in a doctor's office, we would have people who wanted a discount because they were "poor" but still had enough money for cell phones and manicures!
Wanting and needing are not the same thing.
Okay, I think you hit a nerve here.

At 8:33 AM, May 25, 2008, Blogger JJ said...

Thanks for your comments, all. I like a good argument if I get one but I know most of my readers are sane so it's doubtful I'll get one on this post. And I'll add in response to Theresa that yes, there were/are plenty of unscrupulous loan officers out there - I worked with many of them. With the subprime market in the toilet a lot of them went away and are probably back to selling used cars again. I agree with you that they were a huge part of the problem, but as I told Rivergirl in an email, the terms are spelled out right there in the note, and the note is a short, easy to read and understand document. I think when I get to work on Tuesday I'll scan one in and post it, just to prove my point (blacking out any personal information of course). It will drive my point home while shocking the crap out of a lot of people. I am not sure where my desire to get this point across to my 17 readers is coming from...

At 10:27 AM, May 25, 2008, Blogger Mexico Way said...

I'd like to argue with you just so that you have some to argue with.

But I only use credit cards for convenience and because well for some things you just have to.

My dad always said that if you don't have the money in your pocket, you don't buy it.

It's stuck with me and I'm one of those people without the fancy car or the fancy clothes and high-tech this and that. And let me tell you, I still think I'm pretty lucky.

At 3:18 AM, May 27, 2008, Blogger ARrrrrr said...

Wish I could argue with you. I am not even stateside, and have to hear about it on the news.

At 6:35 AM, May 27, 2008, Blogger Prodigal daughter / sister / friend said...

Feeling very fortunate to be one of those lucky 17 who get to read your blog ;o)

me and dia del niño, you and credit crisis...even if you're so right that there's space for only marginal arguments, still feels good to get it off your chest, right?

way i see it, blogging is the rational person's preventive mental health system, replacing all need for expensive therapy, self help books and anti-depressants..... and now I come to think of it, thus making us more financially solvent too!

At 7:50 AM, May 27, 2008, Anonymous heatherinparadise said...

You are totally right, but if the reporting is right and the situation is as dire as they are saying it is, I don't think there's any way the goverment can't or shouldn't get involved. It's an epidemic that will affect not only those who overextended themselves, but will have lasting repercussions on everyone else in the country.

It's like teen pregnancy, or drug a way. Sure, the pregnant teen and the drug addict are to blame, but isn't it in our best interests to help them if we can?

At 9:06 AM, May 27, 2008, Blogger Theresa in Mèrida said...

jj, I don't think the people who signed on the dotted line should be bailed out, lets face it, if it sounds too good to be true, it probably is. I am just saying that the hustlers/car salesmen should be prosecuted for fraud and that they probably gave the huge mess the push it needed to topple over.
I am amazed at what people think that they need these days, it's unheard of for kids to share a room, and everyone has cell phones. Maybe you want to be able to reach your child, and payphones are almost extinct, so you get a pre-paid phone,not a camera/video/internet phone for your jr high darling! I think I would be so depressed if I owed 70grand in debt!

At 6:44 AM, May 28, 2008, Blogger JJ said...

Heather - I kind of see your point, but my stubborn side still says let this be a lesson on personal responsibility and ultimately good shall prevail. That being said, there is just a huge number of people in our society who live just to get what they can without following the rules. That whole "one bad apple" thing. But how do you fix it? Okay, how about offer forebearance plans that place delinquencies at the end of the loan term, restructure the current loan for a two year period that will then allow them to pay currently and after that two years allow them to refinance the loan into something that makes more sense, school them on how to make the right choices in financial situations. Those that are still unwilling to work it out won't get any help and will lose their homes, trash their credit and raise children who don't care either. This kind of thing could open up employment opportunities with the mortgage servicers, and you really could hit all those homeowners in that situation. And the government wouldn't have to bail out anyone.

And Theresa, I am with you on the frivolities. I get giving your kid a cell phone to keep tabs on them but I DON'T get giving them a tool to be completely anti-social, rude and inconsiderate. And I am currently carrying a cc balance (no where NEAR even $10K) right now and am sick about it, I couldn't even imagine what it's like for someone with so much more debt.


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