Once the lender stops sending statements, the loan should be frozen at that amount. By not sending statements, they hide the problem and shouldn't be allowed to benefit by later springing the problem onto someone who had no idea there was a problem.
Yes. To further the rationale: By not sending statements, they are demonstrating inability to process payments in an orderly fashion, as is their responsibility.
> They were called 80/20 loans, and that second mortgage meant a homebuyer didn't need to come up with a down payment.
> "It was the easiest thing I've ever applied for," McDonough said. "I just filled out paperwork and submitted it and I was approved."
That’s the investment risk these people took and now the fine details are coming to bite them back. Don’t make huge purchases with loans unless you fully understand all the terms.
> her mortgage company told her a second mortgage she had on the house was forgiven as part of the modification. And she said that seemed to be true — she stopped getting any statements for more than 10 years.
“Told her” how? “_Seemed_ to be true” ?! Cancellation of a huge interest-accruing loan is probably where you don’t want the word “seemed” to appear. Have to do your due diligence and make sure you have everything in writing with notarized documents.
> Don’t make huge purchases with loans unless you fully understand all the terms.
I mean, yes, but they were also under the impression the 20 was forgiven over a decade ago.
The debtor definitely should know what they're signing up for. That said, if I loan an economically distressed person some money, I myself shouldn't (wouldn't) be surprised when they fail to pay it back.
The creditors in this case were international institutions with entire risk departments, all staffed with nominally intelligent people and definitely more context than any individual debtor could ever have.
While I'm miffed at people taking out loans they cannot afford will raise the cost of any investments I'd like to make in the same market, I'm much more miffed at those 'market makers' who set policy on the interest rates (so, risk) and lending qualifications for allowing this situation to exist in the first place.
Few sentiments make my blood boil more than this. No, you are absolutely not entitled to a return on your investment, or even to recoop your investment. That's why it's called an investment, not 'arbitrage'.
If you're trying to force the working class to pay for your ill advised, failed investments, you're an economic cancer in the sense that your existence is detrimental to the health of the greater system, you contribute negative value, and the greater system would be better off if you ceased to exist. Also, like cancer, if this is permitted to happen, the ideology will spread and further reduce the health and capabilities of the greater system.
> "And there is real money at stake."
Once again, ugh. No, there wasn't. This Gordon dude was one of the guys artificially inflating the cost of housing by irresponsibly lending to otherwise unqualified people. That's why it was called the 'housing bubble', exactly because the inflated value of mortgages at the time was divorced from reality.
What an unethical snake. We'd be better off if all these degenerate gamblers on wall street were to go back to Vegas like the old days. It's all the drugs, sex work, and criminality they're familiar with, but in a setting that doesn't take down every productive member of the American economy along with them.
(Sorry to throw you under the Bus, Vegas, but at least you have experience taking a tithe from people like this)
Indeed. What an arrogant statement. A true investment shares in the risk. That's what the whole "skin in the game" talk was about soon after the subprime mortgage crisis. And besides, housing (or debt!) is not per se an investment for the banks, but a place for people to live that they can own.
Usury (which effectively includes all compound interest) is banned in Islamic banking, and condemned by the Catholic Church (still is and always will be, contrary to misconception), for a reason. And it will impoverish your society and drive it into debt slavery, and put it at the mercy of the lenders. We need banking, we need finance, but these are only legitimate when they make money from licit investments in productive enterprise, and from legitimate service fees, not compound interest.
When I hear arguments like "well, the banker has to charge interest, because why else would he loan money?" or "he has to charge interest because he might not get his money back, and because of opportunity cost", I am floored. This is shameless narcissism. No one forced the banker to loan money. Lending is not supposed to be about making money. If you are making lots of money off lending, then you are by definition stealing it, because housing is not a productive asset where the loan is concerned. You aren't funding a startup that you have good reason to believe will make a profit from its labor and resulting value.
Lots of people get pressured into these kind of things because it is so easy and they simply don't know. Not everybody is this well informed and if you do not educate people and also not protect them you get this kind of crap.
It's an interesting paradox that certain essential life skills cannot be taught in high school. Any teacher who for the day's lesson wrote on the whiteboard "How not to get ripped off by your car dealer/real estate agent/loan broker would have reason to fear consequences from some kid in the class whose parent works in just such a job.
Yup. There's a reason you can't enter into (many/most kinds of) contracts as a minor.
While the lady from the story wasn't a minor, she was a recently divorced nurse practitioner with kids trying to find housing on short notice.
That's already predatory, but when you start astroturfing paid articles saying how 'financially savy' it is to take advantage of these loans, and then minimize or outright ignore the risks of such, imo you transition from "highly unethical" to straight up "criminal conspiracy depending on the current makeup of the judicial system" behavior.
(Not a lawyer, just someone who hates freeloading leaches like this Gordon dude, and someone who wishes for a stable yet competitive and innovative economy)
> "It was the easiest thing I've ever applied for," McDonough said. "I just filled out paperwork and submitted it and I was approved."
It really is scary how easy it is to sign your life away. A lot of people aren't able to fully understand the risk they are taking on
> "Regulation Z, which is part of the Truth in Lending Act," Kelly said. "It requires that monthly statements be sent if there is interest assessed on a mortgage."
> In many cases, she says, that just never happened. The homeowners never received any kind of communication about these loans for years. And debt collectors piled on massive amounts of interest and late fees retroactively.
There should be a cap on how much interest a loan can accrue. Maybe 1.5x or 2x the amount of the loan.
Always a bummer for people to lose homes, but I do tire of painting people who go way over their heads in debt as helpless victims. Having lived through those times and warned plenty of people I knew to not borrow beyond their means, many people could care less of the risks and just wanted their stuff.
One of the problems that I see is that, sometimes, you must borrow beyond what you feel is your limit, because everyone else is doing the same and the market rises accordingly.
So you take the “everybody is doing this so if we fall, we fall together and somebody will need to act” route.
That can happen in a (imho) non-perfect, non-commoditized market like housing. I wouldn’t care for people overborrowing on, let’s say, cars.
Everything. But what is the real alternative? Renting, with the risk of rent going up and become unbearable?
I know quite a few “mindless borrowers” who did ultimately “win”: their house price increased a lot and so they are now sitting on a house which has a much higher value when compared to their mortgage. They could sell and realize a huge profit.
Certainly, there is blame and responsibility to go around. A culture of materialistic excess and consumerist superficiality opens the door to predatory snakes, and the snakes then reinforce that same culture by encouraging debt. Adults should not inhabit a fantasy world, and live beyond their means, as if they were temporarily disgraced millionaires. At the same time, the ignorance, naivete, or foolishness of others does not excuse or legitimize the exploitative greed and deceptive practices of lenders. To accept that as licit is to accept as licit a psychopathic notion of business, society, and the human person. You need there to be rational assent to an objective good, and a rational consent. Risk is okay as long as it is reasonable and understood. On the other hand, a casino owner who actively encourages people to piss away their life savings with the unrealistic promise of winning big should have more than a little trouble sleeping at night.
I didn’t realize the process was so anquidated. I’m in San Diego county which I guess is “new” by American standards as most development happened after the 50s. The property records including liens freely available online. And a very special feature - email reports if the title for a property has a lien added. But… the whole website feels 10 years old so I presumed that would be a more normal thing people have access to across the country
To my understanding this is why title insurance exists (and, indeed, is why it's required in many cases). The lien will still exist but nominally you can make a claim against your title insurer to recoup your loss.
That said, insurance isn't always the easiest to get a disbursement from, especially if you don't have the money for a good lawyer, or if ownership of your most valuable assest is the thing in question.
