Shady Mortgage Lenders

More than 28% of current mortgages are underwater with prices still falling.

Subprime Mortgages: From Boom To Bust

Owning your own home used to be considered the “American Dream”. But for many people today, the American Dream has turned into the American Nightmare. The cause of much of the recent financial and housing market meltdown was the practice of offering subprime loans- expensive loans geared towards people with questionable credit histories or virtually no credit history at all. Almost everyone who applied for a loan was able to qualify, many times for homes which were well beyond their financial means.

Adjustable mortgage rates lured people with the promise of keeping monthly mortgage payments low for the first 3-5 years of the loan. But when the fixed rate period ended, many homeowners found themselves saddled with a much higher monthly payment and inadequate income to cover the difference.

Thus began the enormous surge in foreclosures. It is estimated that nearly 20% of subprime mortgages will end in foreclosure. Aside from the obvious anguish that homeowners face when losing their home, foreclosures also hurt the housing industry in general by pulling down the market value of existing homes and new-housing construction.

During the housing boom, most Wall Street financial companies were more than willing to invest billions of dollars into the subprime lending market. This was due to the fact that most of these loans were quickly sold, sometimes in bulk, to other lenders and the profits were enormous. Federal regulators were slow to react and did nothing to control a market that was quickly spinning out of control.

Now, with the bailout of Wall Street, including most of the top U.S. banks, lending practices have become stricter. Gone are the days of “no-doc” applications. Consumers applying for mortgages must show adequate proof of income and must have verifiable credit histories. As a result, fewer people are now able to qualify for a home mortgage

The Most Common Mortgage Lending Practices and Abuses

If you are seriously considering buying a home or refinancing your present one, there are some common mortgage company practices which you should be aware of and avoid.
Many companies misapply monthly payments. They may wrongfully reject a payment made by check or even post it to another account. This results in penalties and late fees for the unsuspecting customer. It can also affect the mortgage holder’s credit rating if these late payments are reported to the credit bureaus. Consumers need to carefully scrutinize their monthly mortgage statements and be alert to any false information that is listed. Misapplied payments can earn mortgage lenders millions in fees annually.

If you are working with your mortgage lender to either modify or refinance your loan, beware of so-called “help” or advice that they offer. Many companies practice what is known in the industry as “dual tracking”. This is when they are supposedly working with the customer on a modification or re-finance, but are also actively pursuing foreclosure at the same time.

If you are specifically looking to refinance your mortgage, you should know that many loan servicers don’t want to lose your mortgage income and will stall or even refuse any attempts to provide information to another company.

Many loan modifications contain “waivers” which, if signed and agreed to, prevent the customer from ever taking any legal action against the mortgage company.

Unlawful foreclosures have been in the news lately and the conventional wisdom says that there are many more cases of this than have been discovered. Mortgage companies have blatantly ignored the rules and regulations by which they are meant to abide in a rush to push people out of their homes. Homeowners who are current with their mortgage payments have even been foreclosed on.