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tazzygirl -> RE: Top Foreclosure Firm’s Homeless-Themed Halloween Party Pictures Spark Controversy (11/3/2011 8:54:35 AM)
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Hard Sell
To get the deals done, banks have turned increasingly to unregulated mortgage brokers, who now account for 80% of all mortgage originations, double what it was 10 years ago, according to the National Association of Mortgage Brokers. In 2004 banks began offering fatter sales commissions on option ARMs to encourage brokers to push them, says Gail McKenzie, assistant U.S. attorney in Atlanta, who is investigating mortgage brokers for improper practices.
The problem, of course, is that many brokers care more about commissions than customers. They use aggressive sales tactics, harping on the minimum payment on an option ARM and neglecting to mention the future implications. Some even imply verbally that temporary teaser rates of 1% to 2% are permanent, even though the fine print says otherwise. It's easy to confuse borrowers with option ARM numbers. A recent Federal Reserve study showed that one in four homeowners is mystified by basic adjustable-rate loans. Add multiple payment options into the mix, and the mortgage game can be utterly baffling.
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Jennifer and Eric Hinz of Somerset, Wis., are feeling the squeeze. They refinanced out of a 5.25% fixed-rate, 30-year loan in June, 2005, and into an option ARM with a 1% teaser rate from Indymac Bank. The $1,483 payment for their original mortgage dropped to as low as $747 with the new option ARM. They say they had no idea when they signed up, however, that the low payment adds $600 in deferred interest to their balance every month. Worse, they thought the 1% would last three years, but they're already paying 7.68%. "What reasonable human being would ever knowingly give up a 5.25% fixed-rate for what we're getting now?" says Eric, 36, who works in commercial construction. Refinancing is out because they can't afford the $15,000 or so in fees. "I'm paying more, and the interest is just going up and up and up," says Jennifer, 34, a stay-at-home mom. "I feel like we got totally screwed." They say their mortgage broker has stopped returning their phone calls. Indymac declined to comment on the loan's specifics.
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Stories like these can be found across the socioeconomic spectrum, says Allen J. Fishbein, director of Housing & Credit Policy for the Consumer Federation of America. In a May focus group, the CFA found that option ARM customers at all income levels said the loans were the only way they could afford their homes. While many recognized that their mortgages could increase, "they professed complete surprise that they could increase as much as they could," says Fishbein. That lack of diligence will cost them over time.
http://www.businessweek.com/magazine/content/06_37/b4000001.htm
This isnt every loan... but its not an isolated incident either.
A bad reputation
The fact that borrowers used ARMs as the only possible way to afford buying homes gave these loans their bad reputation during the initial part of the housing bust. Option ARMs with negative amortization offered homeowners deceptively cheap payments that were set to balloon upward a few years later. And while some banks, including Wells Fargo (NYSE: WFC - News) and US Bancorp (NYSE: USB - News), didn't originate option ARMs themselves, plenty of now-vanished lenders, including Countrywide, Wachovia, and Washington Mutual, did. So now, Countrywide-acquirer Bank of America (NYSE: BAC - News), Wachovia-buyer Wells Fargo, and WaMu asset purchaser JPMorgan Chase (NYSE: JPM - News) have ended up with plenty of option ARMs.
http://finance.yahoo.com/news/The-Last-Housing-Mistake-fool-268410976.html?x=0&.v=2&.pf=real-estate&mod=pf-real-estate
http://www.mtgprofessor.com/A%20-%20ARMs/marketing_arms_with_artful_deceptions.htm
Several years ago, my husband and I applied for a loan. We were not sure if we qualified since we only make $50,000 a year combined but the mortgage lender said we did and only had an interest rate of 1%. We thought this was suspicious but since we were able to buy the house, we have no complaints. After the third year, we noticed that our principal was actually increasing. The mortgage lender didn't mention this would happen and we may be facing foreclosure since our rate jumped to 8%. Can we take legal action for predatory lending?
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In your case, it appears that the mortgage lender failed to clearly and accurately disclose terms and conditions of the loan. The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to protect consumers in credit transactions, by requiring clear disclosure of key terms of the lending arrangement and all costs. This case would be especially egregious if you stated to the lender that you weren't sure you could afford the loan and they still said that they could lend to you.
http://www.foreclosurelawfirms.com/legal-advice/neg-am-mortgage-scam.htm
"Countrywide used egregiously unfair and deceptive lending practices to steer borrowers into loans that were destined to fail," said Illinois Attorney General Lisa Madigan.
Her suit was filed on behalf of thousands of people in the Chicago area who Madigan says are in danger of losing their homes. Some 35 percent of Countrywide's sub-prime mortgages are reportedly in default.
Brown alleges that Countrywide Financial used deceptive tactics to push homeowners into complicated, risky, and expensive loans so that the company could sell as many loans as possible to third-party investors. According to the lawsuit, the company marketed complex and difficult to understand loans with very low initial or teaser interest rates or payments.
Countrywide employees, including loan officers, underwriters, and branch managers -- who were under intense pressure to process a constantly increasing number of loans -- misrepresented or obfuscated the fact that borrowers who obtained certain types of loans would experience dramatic increases in monthly payments.
The lawsuit charges that the companys deceptive marketing practices, designed to sell costly loans while hiding or misrepresenting the terms and dangers, included:
• Encouraging borrowers to refinance or obtain financing with complicated mortgage instruments like hybrid adjustable rate mortgages or payment option adjustable mortgages
• Marketing complex loan products by emphasizing a very low teaser rate while misrepresenting the steep monthly payments, increased interest rates and risk of negative amortization
• Dramatically easing underwriting standards to qualify more people for loans
• Using low or no-documentation loans which allowed no verification of stated income
• Hiding total monthly payment obligations by selling homeowners a second mortgage in the form of a home equity line of credit
• Making borrowers sign a large stack of documents without provider time to read the paperwork
• Misrepresenting or hiding the fact that loans had prepayment penalties
http://www.consumeraffairs.com/news04/2008/06/ca_countrywide.html
Seems to me things were not "plain" enough... some were hidden... some lied about. Could they sue? Of course
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