UncleNasty
Posts: 1108
Joined: 3/20/2004
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quote:
ORIGINAL: SilverMark
As a man who has purchased a few homes, the realtors always say "You can afford this much on a house $............
My normal response is....yes, if I don't want to do any more than own a home.
Personal Responsibility!!!!! Credit can be dangerous.....Buying a house should scare the hell out of anyone....look at the bottom figures....the payback....the interest....the fees....
Is it a realtor's fault....NO....the Mortgage Lender....NO.....the Consumer.....YES!..
The blame could be spread around but, at closing an Attorney sits there with you and explains and goes over every single paper...every question you have can be answered....The consumer signs the documents....agrees to the terms....no one holds a gun to their heads....I am amazed at those who will blame anyone but themselves....Damn....maybe I have been reading too many Merc posts!
I don't know if you're married or not Mark, but let's pretend. Let's pretend your wife buys a car from a used car lot. She didn't do her due diligence on the make, model and year and paid 30-40% above NADA. OK. Bummer. That research is easy enough to do, and she didn't do it. Clearly her fault.
Two weeks after purchase the engine freezes up. Turns out the lot had put sawdust in the crank to cover the flaws and defects. The vehicle is now useless, and worthless. Clearly his fault.
Would you be more inclined to:
1) go beat up the salesman
2) contact your local prosecutor have him charged and convicted
3) Hire a private attorney (or act pro se) and seek relief for damages
4) tell your wife "Sorry honey, I know he lied, and I know you got screwed, but it is your own fault."
Caveat emptor does not really apply here. Defined in Random house as:
the principle that the seller cannot be held responsible for the quality of his product unless guaranteed in a warranty
There is much more to this transaction, and many other transactions, than this. The seller has an obligation to represent the product truthfully. Misrepresentation is against the law.
By rolling back the odometer and putting sawdust in the crank the seller misrepresented his product. He can be, and should be, prosecuted. He should also be required to make his "victim" whole, and perhaps pay punitive damages as well.
To expect buyers of products and services to be knowledgeable about every product they purchase is not reasonable. Society has decided this and accordingly has enacted laws that put burdens on sellers. The laws covering real estate transactions/mortgages are voluminous precisely because society has determined the average borrower is not knowledgeable and needs the protection.
I mentioned several regulatory codes previously - TILA, HOEPA, RESPA, FHA, FDCPA. They have been enacted precisely because lenders have consistently demonstrated their willingness to "put sawdust in the crankcase."
In the case of the Truth In Lending Statement, which the lender is required by law to provide to the borrower/consumer, the borrower should be able to rely on the accuracy of the numbers supplied by the lender, and thus should be able to make a reasonable evaluation of the loan (or product) they are considering for purchase. In the old days, when most mortgages were fixed rate loans, it was still fairly easy for the consumer, even an unsophisticated consumer, to check the numbers. That has become more difficult as some of the "loan products" have become more complex. Lenders still have a duty to report honestly, and many consumers have erroneously relied on that to protect them.
Let me throw some of the regulations and some numbers in this to help draw a more complete picture.
A Truth In Lending Statement (TIL) is required to report accurately:
1) APR, or Annual percentage rate, over the life of the loan. In the case of an adjustable rate note the numbers used to calculate this are mandated to be "worst case" numbers. Controlling laws can be found at http://www4.law.cornell.edu/uscode/15/usc_sec_15_00001639----000-.html
The text of section (a)(2)(B) is particularly significant:
"in the case of any other credit transaction, the annual percentage rate of the loan, the amount of the regular monthly payment, a statement that the interest rate and monthly payment may increase, and the amount of the maximum monthly payment, based on the maximum interest rate allowed pursuant to section 3806 of title 12." (emphasis mine)
2) Finance charge, or the amount of interest paid over the life of the loan.
3) Amount financed, or amount borrowed. Tolerances for this number are narrow, only + or - $100. Considering the amount of a typical mortgage this is a pretty narrow window.
4) Total of payments. This totals items 2 and 3.
There are controlling regulations for all the items I've listed, and for items required to be on a TIL I have not listed, but for the sake of brevity I'll refrain from listing them as well.
Now let me plug in some numbers.
APR Finance Charge Amount Financed Total of Payments
a) 7% 209,000 150,000 359,000
b) 8% 246,000 150,000 396,000
c) 11% 364,000 150,000 514,000
The difference between example a and c comes to $155,000.00 over 30 years. The annual difference is $5166.00.
In the past year I have reviewed approximately 75 TIL Statements. The vast majority of these have not complied with the law. Lenders routinely, as a standard operating procedure, misrepresent the annual percentage rate. The impact this has on the amounts can be extreme. I have seen misrepresentations of the APR ranging from 2.5% to 5%.
The average borrower is neither aware of the laws governing real estate transactions nor capable of making some of the more complex calculations required to accurately ascertain bottom line figures. They are (even a collective "we" as the number of consumers that have fallen to these ploys seems to be quite large) easily fooled and misled by unscrupulous and predatory lenders.
Section (h) of the same code states:
"A creditor shall not engage in a pattern or practice of extending credit to consumers under mortgages referred to in section 1602 (aa) of this title based on the consumers’ collateral without regard to the consumers’ repayment ability, including the consumers’ current and expected income, current obligations, and employment."
This section is designed to eliminate what are referred by industry insiders as "liars loans," "stated income loans," "no doc loans," and my favorite "neutron loans." The last example beacuase they kill the people but leave the buildings standing. Another way to think of this type of loan is that they have been made solely on the foreclosable value and that foreclosure was the lenders intention at the outset. Clearly that is against the law.
Many of the homes being foreclosed on in the past several years, being foreclosed on currently, and for at least several more years into the future, have involved these and other illegal practices on the part of lenders. That makes the foreclosures illegal. Illegal foreclosure = theft. At current rates it is massive theft.
Equity maxims hold that "He who seeks equity must do equity." If you haven't been honest, fair and lawful you aren't entitled to equity, or to seek relief in the courts, whose responsibility it is to mete out equity and justice and to make sure all the parties follow the rules.
Mark, you also asked questions. Is it the realtors fault? Is the lenders fault? Your answer is/was "NO!" You, as many others, are completely willing to place the entirety of blame on the consumer (I should point out that consumers typically are involved in only one transaction of this nature - lenders are involved in quite literally millions of these transactions annually). Given that laws and regulations are being broken by lenders in origination of the mortgages, the material misrepresentations are SOP, I don't see your opinion as being legitimate or valid.
To state it in simplest terms consumer fraud and/or fraud in origination end up with the mortgage (or contract) being null and void. There isn't really anywhere else for the law to go on this.
Uncle Nasty (really wishing he'd had 2 hands completely functional to type this)
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RE: Bank of Canada warns of possible debt, mortgage def... - 
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