Is The Mortgage Crisis Also Responsible For Global Warming?
George Boelcke FCI
March 23, 2008
Linda is 18 years old, lives in Las Vegas and was now on TV. The show was one of these buy this house, flip this house, renovate this house type of shows, which was obviously recorded some time ago.
After a more than patient realtor had shown Linda house after house, she actually made an offer on a property for $300,000. It was based on no down payment, but that wasn´t going to discourage her. In fact, Linda was shown celebrating on the Vegas Strip that night, sure she was now a homeowner or home flipper. No, not old enough to have a drink and years away from actually being able to get into a casino…
The following morning, the voice-over announced that Linda had just received a call that her application was turned down because of the "mortgage crisis."
Excuse me? Hands up if you would lend an 18-year old with an obviously non-existent credit rating and no money down, a loan with YOUR money for $300,000, which would have monthly payments around double her income each month? Right, I didn´t think so. Yet somehow lenders should even consider this application? Or for some reason lenders should now be the bad guys for refusing this type of insane loan, guaranteed to default?
Sorry Linda, there is no mortgage crisis for new loans. There is a new reality, or more accurately, a return to the old reality of needing some type of down payment, decent credit and proof that someone can actually make the payments for a debt they´re taking on.
The second story was a news report featuring a family with an adjustable rate mortgage (ARM) due to renew this summer. The focus of the feature was to highlight a real family and the current mortgage crisis. Fair enough to put a human face on the foreclosure statistics, and perhaps run a feature that may help many others in a similar situation. Yet the story was somewhere between dead wrong, ill-informed or inflammatory.
When the reporter walked the couple through their loan, he reported that they couldn´t afford the payments because of their ARM and the drop in the value of their home. But read that section again: Their ARM wasn´t renewing until this summer, yet they were currently two months past due. This couple couldn´t afford the current payments when they took out the loan! It has nothing to do with the rate adjustment this summer, nor with the current value of their home!
Whether their house is currently worth a million dollars or a buck has no relationship to the payments they are currently making and right now they are still in a low ARM period for another few months. This national report was simply misleading and missed a great opportunity to take another two minutes to help, versus inflame, to talk about some budgeting tips, debt and payment priorities and tools on how this family, and many others, could find some help and ways out of their situation. And that´s just sad that the media doesn´t seem to care much about the "help" side of the story.
Without minimizing some real problems for jumbo loan holders and vast numbers of ARMs, these types of stories do nothing to help legitimate families in need, who were ripped off, trapped, lied to, defrauded, misinformed and simply taken advantage of. Linda couldn´t afford a $50,000 condo and the family in arrears needs concrete financial help without being used and misled that no part of their current situation is their responsibility.
After a more than patient realtor had shown Linda house after house, she actually made an offer on a property for $300,000. It was based on no down payment, but that wasn´t going to discourage her. In fact, Linda was shown celebrating on the Vegas Strip that night, sure she was now a homeowner or home flipper. No, not old enough to have a drink and years away from actually being able to get into a casino…
The following morning, the voice-over announced that Linda had just received a call that her application was turned down because of the "mortgage crisis."
Excuse me? Hands up if you would lend an 18-year old with an obviously non-existent credit rating and no money down, a loan with YOUR money for $300,000, which would have monthly payments around double her income each month? Right, I didn´t think so. Yet somehow lenders should even consider this application? Or for some reason lenders should now be the bad guys for refusing this type of insane loan, guaranteed to default?
Sorry Linda, there is no mortgage crisis for new loans. There is a new reality, or more accurately, a return to the old reality of needing some type of down payment, decent credit and proof that someone can actually make the payments for a debt they´re taking on.
The second story was a news report featuring a family with an adjustable rate mortgage (ARM) due to renew this summer. The focus of the feature was to highlight a real family and the current mortgage crisis. Fair enough to put a human face on the foreclosure statistics, and perhaps run a feature that may help many others in a similar situation. Yet the story was somewhere between dead wrong, ill-informed or inflammatory.
When the reporter walked the couple through their loan, he reported that they couldn´t afford the payments because of their ARM and the drop in the value of their home. But read that section again: Their ARM wasn´t renewing until this summer, yet they were currently two months past due. This couple couldn´t afford the current payments when they took out the loan! It has nothing to do with the rate adjustment this summer, nor with the current value of their home!
Whether their house is currently worth a million dollars or a buck has no relationship to the payments they are currently making and right now they are still in a low ARM period for another few months. This national report was simply misleading and missed a great opportunity to take another two minutes to help, versus inflame, to talk about some budgeting tips, debt and payment priorities and tools on how this family, and many others, could find some help and ways out of their situation. And that´s just sad that the media doesn´t seem to care much about the "help" side of the story.
Without minimizing some real problems for jumbo loan holders and vast numbers of ARMs, these types of stories do nothing to help legitimate families in need, who were ripped off, trapped, lied to, defrauded, misinformed and simply taken advantage of. Linda couldn´t afford a $50,000 condo and the family in arrears needs concrete financial help without being used and misled that no part of their current situation is their responsibility.
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