A Friend Gets Shafted in a Refi Deal

[Hypertiger]

The fed will do everything to make debt desireable...

 

Ultimately the consumer must borrow more than he previously borrowed to sustain debt inflation...

 

The FED doesn't create debt inflation they regulate it...consumers create debt inflation... The FED can only inflate the fractional reserve base of the money/debt supply.

 

It is upto the commercial banks to inflate the debt supply further at the request of consumers... Consumers need to borrow the money/debt for it to be created...

 

Can consumers borrow (consume debt created out of thin air at the current pace) forever? can interest rates drop forever?

[Captain's Log]

Speaking of mortgages, I had a telemarker call me friday who though she was onto a winner.

 

Telemarketer: "Hello Mr. CaptainLog. I represent a not for profit company. If I could say to you that you could own your house with no payments down, you'd jump at the offer wouldn't you."

 

CL: "No". (with big pause). "I think the housing market is about to crash big time and I am actively out of the market".

 

Telemarketer (in shocked voice): "Oh my goodness. Nobody has ever said that to me before. Don't think I can pursuade you then. I wish you a pleasant evening".

 

I enjoyed that.

[Pee Brain]

Speaking of mortgages, I had a telemarker call me friday who though she was onto a winner.

 

Telemarketer: "Hello Mr. CaptainLog. I represent a not for profit company. If I could say to you that you could own your house with no payments down, you'd jump at the offer wouldn't you."

 

CL: "No". (with big pause). "I think the housing market is about to crash big time and I am actively out of the market".

 

Telemarketer (in shocked voice): "Oh my goodness. Nobody has ever said that to me before. Don't think I can pursuade you then. I wish you a pleasant evening".

 

I enjoyed that.

 

if you want to stump the telemarkerter - tell them you are realy interested, but need to dash - then ask for their home phone # so you can call them at home later and discuss it in greater detail.... talk about pregnant pauses - eventually you tell them that they called you at home w/o permission, why cant you call them with permission?

 

mortgage borking is about to get dirtier. the good deals are done. the sub-sub-prime crap is about to get pushed through the bowels of the lending system - gonna need alot of "roughage". many years ago i stopped working for mortgage brokers - you can guess why - i suspect doc did the same. i only work for banks, pension funds or insurance companies, and there are many banks that arent worth working for - guess why? i was a "loan agent" outta college and i might be a sinner, but not like that - i only sin when it feels good and i can shower after and feel clean. doc is dead-on, that is a dirty business and i could tell you stories that you just wouldnt believe.

 

ive heard of one mortgage-backed REIT underwriting apt loans at 4.75% (before the recent jump).... needless to say, many loans written THIS year are already seeing the bubbles passing by as they sink like whalesh*t. potentially you have a perfect storm: rising rates and higher debt-service on ARMS, cratering property values, declining effective demand, weakening economy, and rising unemployment-lower wages-and less average hours worked. oh yeah, rising taxes and potential repeal of Prop-13 and whatever else gets flushed thru from Sacramento.

 

the smart lenders are already increasing credit standards and debt-service-coverage-ratios, but this move has been so high, so fast that the outcome could be "hyper-tiger-like."

[Pigeon Drop]

but if we're still operating on the premise that the money has to be paid back, people will still stop borrowing eventually.

What if we start figuring out that a lot of the debt will default and never be paid back? I am on the HOA board here and have been dealing with a bankruptcy case for 3 years. Woman owes $17,000 in delinquent HOA fees, owes $360K on a 1st mortgage at 11.6% and $45K on a 2nd mortgage at 16%. All this on a house worth maybe $400K today. So she is upside down, hasn't made a payment in 2 years, and at the moment of a foreclosure sale a year ago filed BK to stop the foreclosure. A year has passed, with tales to the judge of promises to pay, and finally a conversion from Chap 13 to Chap 7 liquidation. She has lived rent free for almost 3 years total. BK7 discharge granted, BK case closed, still waiting for bank to take the house. They are SOOO SLOW to do this. She lives there rent free still.

 

Foreclosure sale now scheduled for 8/5/03, but is postponed every month while the bank decides what they want to do. 2nd mortgage is SOL, won't get a dime. Neither will HOA.

 

Now comes the good part. Woman has never cared for her yard, yet her son has been seen out sprucing it up. Well what is happening is the house will be foreclosed and she will have a relative buy it for cash. Remember she just went BK and has no money, or so she has represented to the court. But some relatives have all kinds of cash around, and perfect credit. So the relative will buy it for the amount of the 1st debt only. 2nd debt and HOA debt wiped out. And she can just keep living there. And now start defaults again to the HOA, in the name of the new owner/relative.

 

Total BK fraud, the money probably came from her and was transferred to the relative's name before the BK process.

 

Point is, if you play the system you can live like a king and never have to pay anything back. You just need friends/relatives to transfer the money to and play a shell game with the stupid lenders. And ultimately the money never gets paid back, some gets written off and the rest surfaces as new debt.

 

You don't care what the interest rate is, if you never really intend to pay back the loan anyway. Words to think about.

[Pigeon Drop]

Pee Brain and others, maybe you can help me. I have been considering selling my Silicon Valley place for what I can get, and moving to Las Vegas. So I have been there for a look-see trip, and have been researching property values online in many ways. I am very confused about something.

 

There are articles like this:

http://www.reviewjournal.com/lvrj_home/200...s/21811544.html

which tell you that things are so hot you can't keep a house on the market for a day before it sells.

 

Then I drove through sub divisions of brand new homes, just constructed, and see signs all over inside the new development that say "for lease", "for sale/price reduced". Flyers on resale homes indicating price reductions. This tells me prices are going down, not up?

 

Then I read online bulletin boards of hopefuls all moving from all parts of the world to that pot of gold at the end of the rainbow, Las Vegas. All hoping for a better life. Here is the site:

http://www.movetolasvegas.com/phorum/index.php

It is the "Move to Las Vegas" board.

It indicates people are buying pre-constructed houses in huge numbers, and watching as their prices escalate before they are even built. Hot hot market, and these folks are all congratulating themselves on the money they've already made on their yet-to-be-built houses.

 

Then I go to the LV Review-Journal classifieds, which are all online:

http://www.lasvegasnewspapers.com/db/ads.d...alestate&class=

And there I see ads in every price range, indicating "asking $30K below appraisal", "seller desperate", "must sell this weekend", "$20K below market". This tells me the market is weak and people are having trouble selling houses.

 

So which is it? Are prices going down or up? Surely not both at once!

 

Now I know that LV has a net inflow of new residents approximately 5,000 per month. And that keeps up demand. And there are over 300 new subdivisions being built all over town. But how can prices be skyrocketing at the same time as people are selling under appraisal.

 

I am SOO CONFUSED!

 

And to end my story let me relate to you a radio show I heard on the way out of town. It was early morning and I drove back from LV to CA. The radio show was about real estate. They had a mortgage guy, a few realtor types, all taking about real estate, mostly investment RE. So the guy says, I have a client who wants to do some investing in real estate, but doesn't have the cash. And there are so many ways to get involved in RE and make money. For example, I know of a 4plex appraised at $260K, but I know the owner wants out and will take $220K. So here is how someone could make some money. He would put down $20K, and borrow the $200K to buy the property at $220K. He loses his use of the $20K for a few months. During that time, the rent stream will pay his payments on the $200K loan. In about 3 months we will refi the property for its $260K value, and he will pull out his $20K that he sunk into it, so he gets ALL HIS MONEY BACK IN 3 MONTHS. Plus he now has an additional $40K of fresh capital to invest with in the real estate market.

 

Now that is the story as best I can remember it. Can some of you LA people tell me how this works and no one goes to jail? I mean is the place worth $220K or $260K? Which is it? And if it is worth $260K, then why am I able to buy it for $220K at first? But if this works, and these are all non-recourse loans (please tell me if that is true), then should I care? In fact, is this guy telling me that by playing this shell game I can suck $40K out of the investment and not care what happens to it after that because I have no risk?

 

These guys were all very serious, they said all this with a straight face like it goes on every day. Does it? If there is so much free money around why does anyone need a job?

 

--Confused Pigeon

[Darkdoc]

Doc Stool,

 

My comment was meant as a comment on the generalized lack of moral direction in the markets of all kinds. My apology to you because it apparently seemed otherwise.

 

It was not intended to be a declaration of the doctrine of depravity or of original sin.

 

I understand your desire to leave those topics out of stool discussion, even though a strong argument can be made that all ethics is religious.

 

But that said, I have no intention of engaging anyone in theological dogma, and my comments were not directed to any person on this site. The characters I mentioned in my post DO seem to be incapable of doing the right things, and their actions seem to feed upon one another. Any free will they exercise seems to be inevitably self-serving and harmful to others.

 

I shall try harder to avoid this in the future.

[flockofsheeples]

Pee Brain and others, maybe you can help me. I have been considering selling my Silicon Valley place for what I can get, and moving to Las Vegas. So I have been there for a look-see trip, and have been researching property values online in many ways. I am very confused about something.

 

There are articles like this:

http://www.reviewjournal.com/lvrj_home/200...s/21811544.html

which tell you that things are so hot you can't keep a house on the market for a day before it sells.

 

Then I drove through sub divisions of brand new homes, just constructed, and see signs all over inside the new development that say "for lease", "for sale/price reduced". Flyers on resale homes indicating price reductions. This tells me prices are going down, not up?

 

Then I read online bulletin boards of hopefuls all moving from all parts of the world to that pot of gold at the end of the rainbow, Las Vegas. All hoping for a better life. Here is the site:

http://www.movetolasvegas.com/phorum/index.php

It is the "Move to Las Vegas" board.

It indicates people are buying pre-constructed houses in huge numbers, and watching as their prices escalate before they are even built. Hot hot market, and these folks are all congratulating themselves on the money they've already made on their yet-to-be-built houses.

 

Then I go to the LV Review-Journal classifieds, which are all online:

http://www.lasvegasnewspapers.com/db/ads.d...alestate&class=

And there I see ads in every price range, indicating "asking $30K below appraisal", "seller desperate", "must sell this weekend", "$20K below market". This tells me the market is weak and people are having trouble selling houses.

 

So which is it? Are prices going down or up? Surely not both at once!

 

Now I know that LV has a net inflow of new residents approximately 5,000 per month. And that keeps up demand. And there are over 300 new subdivisions being built all over town. But how can prices be skyrocketing at the same time as people are selling under appraisal.

 

I am SOO CONFUSED!

 

And to end my story let me relate to you a radio show I heard on the way out of town. It was early morning and I drove back from LV to CA. The radio show was about real estate. They had a mortgage guy, a few realtor types, all taking about real estate, mostly investment RE. So the guy says, I have a client who wants to do some investing in real estate, but doesn't have the cash. And there are so many ways to get involved in RE and make money. For example, I know of a 4plex appraised at $260K, but I know the owner wants out and will take $220K. So here is how someone could make some money. He would put down $20K, and borrow the $200K to buy the property at $220K. He loses his use of the $20K for a few months. During that time, the rent stream will pay his payments on the $200K loan. In about 3 months we will refi the property for its $260K value, and he will pull out his $20K that he sunk into it, so he gets ALL HIS MONEY BACK IN 3 MONTHS. Plus he now has an additional $40K of fresh capital to invest with in the real estate market.

 

Now that is the story as best I can remember it. Can some of you LA people tell me how this works and no one goes to jail? I mean is the place worth $220K or $260K? Which is it? And if it is worth $260K, then why am I able to buy it for $220K at first? But if this works, and these are all non-recourse loans (please tell me if that is true), then should I care? In fact, is this guy telling me that by playing this shell game I can suck $40K out of the investment and not care what happens to it after that because I have no risk?

 

These guys were all very serious, they said all this with a straight face like it goes on every day. Does it? If there is so much free money around why does anyone need a job?

 

--Confused Pigeon

FWIW my cousin who lives in LV sold their house recently...one day on the market. Sounds like a sellers market to me.

[machinehead]

I mean is the place worth $220K or $260K?  Which is it?  And if it is worth $260K, then why am I able to buy it for $220K at first?  But if this works, and these are all non-recourse loans (please tell me if that is true), then should I care?

The theory is that a desperate seller may take a "below market" price. Then you refi based on a "market price" appraisal. Nothing illegal about that, but it's not as easy and risk-free as they make it sound. (Unlike the stock market where "one price" rules, the real estate market is local and full of inefficiencies.)

 

NON-RECOURSE? I don't believe it. If you sign a mortgage and a note, it's a recourse loan (due to the note). Any conforming mortgage (i.e., conforming to Fannie Mae standards) is recourse. But there's an urban legend that there are all these non-recourse mortgages out there. Nonsense.

[Barkley]

Guys, thanks for the mortgage stories. I just refinanced at 5% and the guy ended up charging me points. I was pissed, but what could I do, rates had skyrocketed. Now I know what happened, he didn't lock when he said he did hoping to make a buck then tried to make it up at my expense. To be fair, I bitched so much he agreed to pay me a personal check to cover half the new fees (which he actually sent me). Still screwed me though...

[Fukui-san]

I understand your desire to leave those topics out of stool discussion, even though a strong argument can be made that all ethics is religious.

 

A strong case can be made that ethics and belief in the supernatural (religion) are two different things:

 

The Analects of Confucius (551-479 BC) are one of the foundations of Chinese, Korean, and Japanese society. The Analects concern themselves with the organization of society and the ethical behaviour of individuals in that society. They are not based on any religious beliefs.

 

In the pre-Christian West, philosophers such as the Atomists and Stoics concerned themselves with the ethical and moral behaviour of a man in his society irrespective of the supernatural. Lucretius ("On the Nature of Things") and Aurelius ("Meditations") are two such examples.

 

Btw, religions such as Buddhism concern themselves with enlightenment rather than salvation.

 

Although, I must admit, as a marketing tool, the concept of "original sin" is hard to beat.

[Darkdoc]

F-san

 

I wasn't trying to make the argument in this setting. I was trying to cool the isssue, not inflame it. We can take it to Theostoology if you wish to persue this further. I enjoy peaceful, reasoned debate.

 

Doc wants it elsewhere. OK by me.

 

In ending, though, I see no requirement that religion include the supernatural. Many religions have no supernatural tenets or claims. A broader definition of religion would make my statement accurate in both our views. Every debate needs to start with a definition of the terms to be used - I think we have a problem in that so far we have not been discussing the same things, even though we are using the same words.

 

Thanks for your comments. Peace to you.

[anotherone]

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.

Let's put it another way.

 

"All living things must eat or be eaten.

We only ask that we not be eaten today!"

 

The concept of sin really derives from the awareness that we have to kill other living beings to eat and survive. That is a major root of most religions, the blessings on food/meals, etc.

[Sasquatch]

Tonight should prove very interesting for the swap and spread traders, when the Far East markets open.. One cannot minimize the utter danger to many hedge funds, if the spreads continue to widen.. There exists the possibility where, at some given point everybody heads to the exits at once, which could be catastophic to those margined to the hilt!

 

US SWAPS-Ugly response to ongoing yield upsurge

 

[martialcomp]

These mortage lending stories are GREAT!

 

I always suspected shenanigans going on. Now I know the truth.

 

So, mortgage brokers are just like car dealership finance managers. They are there to find a way to sell you a higher rate and pocket the difference.

 

Of course they are NOT locking in the deal...they are hoping that they can find a better deal later on and pocket the difference.

 

And, from what is typed here, if they can't get the mortgage rate they originally promised, they either back out saying that your credit isn't "perfect" or they charge you points or origination fees or some other pain and suffering charge.

 

Whoever said that Greenspan left the mortgage brokers in charge by lowering rates like he did was absolutely correct. For Greenspan to do what he did with little or no government regulation of the mortgage brokering business was foolish.

 

That is another good part of this thread...learning that there is little or no regulation or even a test to be come a loan officer.

 

No wonder everyone wants to be a loan officer. Who wouldn't? For a few years, all you had to do was get a client to "lock in" a rate verbally and then wait to see if you could get a cheaper rate than the client locked in. If not, then tell them there 30 day past due car payment that occurred one time 6 years ago dis-qualified them from the loan.

 

Or, charge points, or origination fees or paperwork fees or....Or how about just telling them the rate has gone up? Why not, it was only verbal, no paperwork was every generated saying that a particular rate was guaranteed.

 

Imagine an entire economy living off of the liquidity generated by mortgage activity with the loan officers involved raping the general public to the tune of billions cummulatively per year using every nasty tactic in the book.

 

I would like more stories like this. Seems this is one missing link to the entire mortgage refinancing debacle.

 

"Lets see...Mr. Olson, did I go over the fees with you yet?" Piece of paper with fees listed handed to poor, over indebted Mr. Olson:

 

Fees:

1. Loan origination fee $1000

2. Loan discount fee $1000

3. Appraisal fee $40

4. Credit report fee $75 (costs them about $10 or less).

5. Document preparation fee $450

6. Processing fee $695

7. Inspection fee $750

8. Underwriting fee $475

9. Endorsement fee $500

10. Other various fees $200

 

Fee total: $5185

 

"But Dale, you didn't tell me about these fees when I locked in?"

 

I would love this thread to continue with more stories like this. Seems as though people are paying thousands just to get out of credit card debt, jet ski debt, furniture debt, Hummer debt, etc. One wonders, except for the interest being tax deductible, if they were better off just paying off these things over time instead of borrowing more on their homes and being stuck against a wall having to pay a mortgage broker these outlandish fees.

[EasyAl]

Here is a link that machinehead posted earlier. In case you missed it, the article from San Francisco Chronicle describes a Massive Mortgage Fraud Case Shakes California Up Web of conspirators accused of complex multimillion-dollar scam