A Friend Gets Shafted in a Refi Deal

[longOnUranus]

A friend and his wife. Living the good life, but on the edge. Multiple refi's, credit score probably below 700. Local Refi Guy is a new-come friend of our local circle; he has pool parties, drinks heavily, etc. But: he gave me a great rate and terms on my refi.

 

Anyway, these folks locked in a 4.5% fixed loan, no cash back, 44 days ago. Today, last closing day for the 4.5 rate, he and his wife were desperately calling to get a closing time. He didn't return his calls; at 430 PM they got hold of an office attendant (everyone else had left) who flatly stated they couldn't close - EVER - because of a bad credit score. This, after the guy's company had had the report for at least 30 days, and had made no objection to it.

 

During MY refi with this guy, I found it curious that the ultimate rate I received was 1/4% LESS than what I had "locked"...not that this was bad, just that I had never received an interest rate break (rates had gone down dramatically between lock and close dates) with any previous residence/investment property. Additionally, I paid this "friend" no money down, until closing. I got a really great deal; so good that the whole neighborhood wanted to refi with this guy.

 

I think what happened is that the Refi guy didn't lock the rate, got burned on the bump in rates and decided he wouldn't do the loan. This makes the most sense to me. But my question: does the Refi agent pay a fee to the underwriter when these applications are locked? It seems that this fee would be relatively small, and not worth the very bad PR for this guy that is coming out of all this.

 

More ominously, I think it is possible that the underwriters are finding any excuse they can (this was a Jumbo, not FRE/FNM deal) to shitcan loans at rates that have turned against them. If you applied to refi 45 days ago at 4.5, and the underwriter was looking at 5+ on the loan...makes sense to me.

 

Has anyone else heard of/had experiences like this. Any of you mortgage guys? This has really stressed these people out. TIA.

[Jorma]

I'm trying to close on a house here in the rust belt, ie less than $90K, and so Fri. was suppsed to be the day but Wed. nite my agent called and said the underwriter had refused the appraisal. Nobody had ever heard of this.

 

Then yesterday the story changed and the underwriter supposedly never got the appraisal. I don't know what the story is but maybe you are on to something with the low rate locked up a moth ago and they trying to dump the deal.

[Pee Brain]

i cannot comment on this specific situation, but i had a mortgage broker buddy who would tell people they were locked in and then wait for rates to drop to close 'em. he'd collect the extra discount (premium) points and pocket them.

 

say he told them 8% and 2 pts and market is at 8%.

 

then market rates drop to 7.75%, so when he closes them at 8.00%, he pockets the premium on the rate differential.

 

BTW, i heard the owner of this mortgage company was actually prosecuted or sanctioned in some way, but i dont think he went to jail...

[flockofsheeples]

same here...my buddy is in the "selling $$" business he was ready to slit his wrists over the past week w/ the bond market in flames. Unless your friend has anything in writing, he's SOL. He can always tell the shady MF'er who shafted him he's going to call the state, that may change his tune.

[DrStool]

I was in the morgage business in 1987. This is exactly what went on in May of 1987 when the bond market went to hell. One of the guys I worked with later went to jail. GMAC knew all along what these guys were doing and they encouraged it because they split the fee gains with the agents. A lot of the guys would play the market that way. Biggest gang of criminals I ever worked with. Mortgage brokers make stock brokers look like choir boys.

 

The stock market crash followed five months later. Commercial real estate went into a depression that saw properties fall in value often to 10 or 15 cents on the dollar by 1992. Many newly built office buildings and shopping centers were built and filled with tenants on leases with 6 to 12 months free rent in 1987-89. Most of the leases defaulted. Many were bogus in the first place. Occupancies dropped form 90% to 25 or 30%, even zero in many cases. Large, incompetent, crooked banking institutions were wiped out, and/or rescued with public money. It took five or six years for values to come down form 1987 to 1993, then another five or six to get back to 1987 levels even with the help of massive monetary stimulus, and a capital spending bubble in the latter years of the recovery. Many properties never recovered because their value was bogus to begin with.

 

What's going on today is ten, twenty, thirty times bigger, because it involves not just commercial real estate but stocks, bonds, mortgages, asset backed securities, and most importantly, the 7000 pound gorilla, residential real estate.

 

The game's over folks. Countdown to meltdown. This one is too big to paper over by bankrupt state and federal governments, with a Resolution Trust Corporation type bailout. All those bad loans backed by nothing are about to come home to roost.

 

For crying out loud, they let the crooked mortgage broker financial engineers run things. How the hell did they expect it to turn out.

[Hypertiger]

Fractional reserve banking is the culprit... everything else is a convenient excuse to hide behind...

 

Untill FRB is targeted this will just keep happening over and over again forever...

 

For every patsy that goes down 2 are being manufactured by FRB...

 

FRB can only ultimately corrupt anything and everything that comes in contact with it.

[Darkdoc]

A huge amount of corruption documented on CapitalStool today...mortgage and commercial banking; the FED; national, state and local governments and commisions; school boards; companies and corporations...the inevitable effect of so much liquidity sloshing around is not only inflation and asset bubbles, but also corruption and graft and crime to equal the level of leveraged debt creation.

 

When the moral hazard in banking and finance disappears, all other morality flushes with it. The people lose thier moral direction, all institutions then suffer.

 

We sin, because we are sinners.

[depends]

hyper . . . "Fractional reserve banking is the culprit... everything else is a convenient excuse to hide behind..."

 

While watching the Davis recall today I recalled the

witch hunt in the book "Extraordinary Popular Delusions and the Madness of Crowds".

 

Maybe goveners are next on the list to be targeted as scapegoats for the FRB interference in free markets.

[flockofsheeples]

You would expect these mortgage people you are dealing with to have licenses, correct? (they do). How do they get these licenses? Pass a few tests given by the state? Nope.

No exam, test, quiz, true/false of any kind. Just send the state your $$ and you too can become a licensed LO.

When there is a mortgage broker on virtually every major street corner do you think the top is in?

[DrStool]

We sin, because we are sinners.

Please excuse my interruption of this thread.

 

First, I am well aware that my views are grossly offensive to both Christians, Jews, and everybody else who believes there is something more to life than what you see is what you get.

 

That being said, the idea quoted above is something that I would prefer to see on Theostoology, not here. I am uncomfortable about posting statements of our personal religious beliefs on this part of the message board. However, I would like to answer the quoted statement, recognizing, of course that it is a concept agreed upon by a billion or more people today. I give due respect to the fact that so many folks believe this, and I regret that what I am about to write will be offensive to some of you. I trust you will forgive me.

 

I disagree with the "we are sinners" idea.

 

The idea that humans are innately sinners is unique to one of the world's religions. To the best of my knowledge, just about all other faiths would disagree with it.

 

The religion I was born into holds that God imbued humans wth free will. Under that concept, sin would be a choice, not an innate human quality. I'm not an expert on other theologies, or even that of the religious group to which I was born, but I am reasonably certain that none espouses that humans are born sinners. When we sin, it's because we decide to. Technically it is probabaly correct to say that humans are sinners, since just about everyone sins on occasion, in terms of some set of behaviors defined as sinful by some religious philosophy. But I think it's wrong to say that we are innately sinners or sinful. Sinfulness relates to rare, occasional, or frequent human action, depending on the human in question, and depending on the widely varying definitions of what is sinful, not to the essence of humanness, in my view.

 

Religion is about myth, legend, and faith. Ideas which cannot be proven or disproven. While I find the ideals espoused by the world's religions to be of value, I find the stories and myths behind them to be ridiculous and unbelievable. That goes for the religion I was born into, and all others. Absolute nonsense. Fairy tales and nursery rhyme stuff. The bible has some fine stories in it with some great lessons for life. These stories are common to the primitive polytheistic religions which preceded monotheism, and common in some variation among all modern religions. But most of it is ritualistic superstition and gibberish. Humans will always look for structured explanations for both the circuituous chain of cause and effect in life, as well as its abundance of random nonsense.

 

So let's keep statements of our religious upbringing off this part of the message boards, and I will be glad to stay out of it. Feel free to discuss yur beliefs on Theostoology, if you so choose.

 

Peace Love Baby. V

 

Doc

 

Now let's return to the discussion of what's going on in the mortgage biz, and the implications.

[ShitEatingGrinner]

I'll tell you what's up in Dallas...the Mortgage Bubble is DONE. Busted. Houses are losing value. New monster homes are sitting empty. And they're building more with money already in the pipeline--look for that to further depress prices. Ass the butthole surfers once said: "They shot the pope. They shot his ass. It's all over, now."

[threadbare]

Most people just follow the tide. We are all swimmers.

[Hypertiger]

Nothing creates more economic activity (Debt inflation) than real estate...

[Pigeon Drop]

Headed down, albeit slowly, in Silicon Valley. 8.5% unemployment rate. No RE crash, just a slow bleeding. Next door neighbor paid $462K for a 3br townhouse May 2002. We now have one identical listed for $419K. $462K guy is from LA, husband and wife each with new BMWs, lives the good life. He is sure this is temporary, it will come right back. Meanwhile another guy just moved out of his, upgraded to a single family house. But kept the townhouse as a rental because he doesn't want to sell when prices are down. He is sure that if he holds a couple of years he can get top dollar for his townhouse, plus see appreciation in his new home. Who knows? FED will do everything it can to keep the bubble inflated, even if it creates system wide inflation. The worst thing for them would be lots of repos and liquidation of bad debt.

[threadbare]

Pigeon, It doesn't matter what the Fed does, when the same people who are waiting for the economy to turn around realize the good jobs are now extinct, when we are paying more for utilities, taxes and insurance, in an atmosphere of declining or stagnant wages, it doesn't matter. You can only have the fed make a difference if wages and jobs are increasing along with the supply of money.

 

It's poised for a huge correction, regardless of monetary policy. Hey, they can PAY YOU several thousand bucks up front to encourage you to borrow money, but if we're still operating on the premise that the money has to be paid back, people will still stop borrowing eventually.