I dunno. I'm still left with the idea that anybody who didn't understand something so basic about the rather large loan they were about to take out was either stupid or wilfully ignorant. That doesn't excuse a broker for giving a piss-poor evasive answer, but really, why would you ever take the word of somebody who is trying to sell you something?
Apparently I have to comment to see the comments- Thanks Haloscan! Let's see, there are five showing,... is it worth it? Sure.
Good morning Tanta! I haven't eaten breakfast yet, so I still have time to believe six impossible things (per Red Queen.) Reading the posts, I'm up to four. The comments should round it out!
It is disgusting. These loans paid very well up front, so there was a high incentive to sell them.
I have always believed that most of the older people who wound up with these loans were duped and did not understand what they were doing.
I insist that incentives like these have a lot to do with announcements by bank presidents that borrowers have suddenly changed their behavior and are now willfully defaulting on mortgages which they can pay.
I've got a WAMU powerpoint on the POA. One of the interesting quotes from the presentation is "This is the financial tool of the future". Sadly, it did not have a picture of Angello Mozillo or Kerry Killinger under that quote
When I decided to refi my variable rate loan that had bottomed out years ago, I could not believe how much push there was from lenders to take cash out, interest only or neg Am loans with a HELOC built in. But getting details, like what the index was and its history, or the margin, was extraordinarily difficult; that information seemed to require completing the full application.
There seemed to be every effort possible made to obscure the possible full cost of the loan.
What you have just done is make un unfair leap to pin all of the current problems on the brokers yet again. This video was put out by a lender to steer brokers to sell their product. The assumptions that all brokers used these decpetive practices is plain wrong. A customer basically had to beg me to put them in one of these loans (I think we did 3-4 total over the years). The ones we did close were fully educated and warned of the possible dangers of neg am. The lenders want you to blame the brokers that way their competition will be eliminated. (anyone noticed that Bank of AMerica is now charging a $25 fee to get the payoff on their mortgage by using a 900 number? Good luck if the lenders take over. Be careful what you wish for.
and also:
it doesn't speak well for brokers in general that the loans originated by brokers are faring worse than in-house loans by lenders themselves.
Ok, so we ASSUME that a borrower really thinks the interest rate is 1.5% and there are no consequences. Come on, most of these people GAMBLED. Speculation can have a price to pay!!!!
My mortgage statement, having gone thru three servicers now, always shows the monthly balance.
Are there any rules on what has to be disclosed on a mortgage statement? Do the servicers not show the balance on Option ARMs, so people don't know the balance is increasing each month?
Average Joe, my last financing experience was like yours - graying executive loan officer sternly asking if we couldn't come up with more than our 10% down payment, looking shocked at the 1 blemish on our credit, an OVERDUE LIBRARY FINE from 5 years before.
She made us pay it back - literally, we had to Fedex the payment to the library before we were considered OK.
Mortgage brokers are on par with used car salesmen... oh wait, maybe worse. I'd be willing to bet most mortgage brokers didn't even understand how an Option ARM worked, and no one at the bank bothered to explain it either.
FatalException writes:
OMG. The payment may be optional, but I expect the class action lawsuit will be mandatory.
Great! I wonder if there will be enough for a new reality show: Sue That Lender! We'll follow these families (and their heart-wrenching stories) as they team up to go after their sleazy lenders. Shnaps can be the emcee.
Then in a few years: Sue That Lawyer! We'll follow these families (and their heart-wrenching stories) as they team up to go after their sleazy lawyers who took all the settlement money. Maybe Gary or LawyerLiz will want the emcee gig.
There seemed to be every effort possible made to obscure the possible full cost of the loan.
Thats the key. Right there. Anyone who applies for a mortgage loan (of any type) should get a clear, concise (36-pt type if necessary) printout that describes the loan, the payments due, and the possible range of payment (depending on interest adjustments). To do less, would be making a whole lot of money off of people who didn't have it.
"Unfortunately, I don't think very many borrowers probably asked that minimum-payment question."
May be true but the video shows the MINDSET of the mortgage salespeople. And that mindset is to provide false assurances - to coax and comfort the buyer that the purchase is OK. This is actually an effective technique when people are being emotional, which is often the case when buying a home. Thus it points to the exploitation of the "American dream".
This is not to say the person signing the loan is not to blame - however when you combine this with the no-doc stories about encouraging wage fraud, etc. it does show a pattern and practice by the mortgage industry to get people into loans they cannot afford, and this type of evidence will be particularly useful to the investors in the MBSs who are going after the originators for fraud.
All this illustrates is the reason behind the 20% downpayment idea. Remember that old, out-dated rule-o-thumb. By the time you've amassed that kind of cash wealth, your probably a little more mature/wiser and ready to understand the concept of "something for nothing" and how that only fools jump on that train. So, is it really that big of a surpise that World and most other banks and brokers were milking this housing bubble for every dollar they could. Of course not! Is it any surprise that people who can't afford even 5% down on a house probably should be renting instead. Let's face it. In the past ten years, the application to rent an apartment has been more rigorous than mortgage app's. The foolish buyers... well as Forest Gump says, "stupid is as stupid does". Boy was he right.
To those of you that continue to paint all brokers with the same brush, buckle up! Most of the dishonest brokers are no longer brokers. Unfortunately, there is only one industry that will hire failed brokers, guess who? The direct retail lenders, thats who!!! Brokers became a huge part of origination volume (around 80% by most estimates), because they offered competition, knowledge, and many options to the consumer. When the lenders realized the potential profits, they expanded their program lists (Stated, Option Arms, etc.) to capture as much of the profit as possible. Guess what that brought to the table...Dishonest brokers looking for a quick buck that they could earn due to lax lenders only concerned with profit, not true underwriting standards. Now the lenders, who created these programs are poised and ready to pounce on you, the consumer. Do you really think that a bank that will charge you a $3.00 ATM fee to get your own money out is looking out for your interests? Disclosure: prior to my 12 yeear career as a broker, I worked for a very large bank as a vice president in consumer lending. I sleep better now. Btw, I am approached almost weekly form large financial institutions to come and run lending divisions for them. I would rather "sell cars".
I was referring to the original article which states "It's optional, the broker in the video replied". In fact, if you read the article, you will quickly realize a couple of things. 1. It is an instructional video produced by the lender with a broker portrayal, not an actual broker. Also, when the "broker" describes the loan as a negative amortization (the correct terminology) the lender steers the "broker" to more "user friendly words". This means that the training video anticipates that brokers will use the correct terms, but to increase sales, the lender uses a steering technique to coach the broker. To show the impact of a poorly written piece on the general public, look at BG's post which states " that doesnt excuse a broker from giving a piss poor evasive answer" This clearly shows the power of the misleading article. BG read the article, and assumed there was an actual broker in the video. Further comments about brokers not understanding how neg am arms work further show that sheep can, in fact, be easily led to slaughter. The brokers that I know, myself included, can sit down with you and amortize a neg am with a pencil and piece of paper, let alone merely understand them. The preponderance of poorly written, sensationalized, articles painting brokers as criminals is leading to a governmental push to overregulate the independant broker and subsidize the large retail lender (who makes much bigger political donations by the way). I have read far too many inaccurate portrayals of one subsection of this industry (brokers). People need to be educated in what they do with their finances, and need not be "sold" on who is at fault when things go bust. I can tell you that there are as many dishonest borrowers and lenders as brokers. You need all 3 to make the mess we are now in. I wonder if the "victimized" would be willing to go under the same scrutiny as the "perpetrators". Nobody complained when values were increasing.. isnt that odd? I would be happy to see all of the fraudulent players incarcerated... Brokers, Borrowers, and Lenders alike. Are you prepared to see some of your friends, and neighbors face the music?
Tanta, I don't see the problem with this video. It's clear that the Option-Arms, in this case, were all 100% misunderstood by the consumers that bought into them, as it is clearly and definitively explained by the mortgage brokers about how they worked.
"It's optional." I snorted my 9 hour old coffee on that one. Hilarious.
"BG read the article, and assumed there was an actual broker in the video."
Minor nit, sir. I assumed that the broker in the training video was fake, as is generally the case in training videos. I also assumed, however, that any broker being exposed to said training by their employer would take it seriously, at least to some extent. If your boss is coaching you to give evasive answers, it's only natural to think you'll be more likely to give them, no?
Not a biggee, though. I basically agree with the thrust of your comment.
I might piss of a lot of people, but after reading the actual article I feel disgusting to those who actually signed up for those loans, not for those who produced it.
The first thing in the article which looks like a red flag to me is "when his family's home of 14 years needed repairs". Maybe I just didn't live in US long enough, but I could hardly imagine how a 14-year home might need so much in repairs that they had to refinance. Note that it was his family's home, they didn't just buy a 50yo trashed fixed-upper. So it somehow looks like the "repairs" might be in fact something like granite countertops and hardwood floors.
The Pick-a-Payment loan, with a minimum payment option that Bryant thought would lower his mortgage and leave him money to pay for repairs.
That is actually funny. So he THOUGHT he's gonna get a loan with cash-out (i.e. increase his mortgage), and lower his payments at the same time??? It might happen in some weird cases (like he bought a home financing it by credit cards), but it wouldn't be typical. But anyway, looks like he didn't even ask anything about it. Did he ever look on Truth In Lending form, where the government put all the necessary information, duplicating it several times to make sure even a complete uneducated person would understand it? Well, it looks like the Nature compensated this by producing even less educated people
Of course now they blame lenders who "put" them into those loans. Poor uneducated people who would probably spend a week on the Internet choosing the best deal on a $500 camcorder, but now claim they didn't spend any time when they signed up for a $2,000/month loan. THIS is disgusting.
Somehow the country became full of people who cannot bear, and do not want, any responsibility - and trying to blame everyone else for their own mistakes. But they still demand the same rights as everyone else. Especially in boomer generation - I never expected to see it there, but now I see it more and more. This is bad.
World Savings pioneered this monster. Option ARM's are great when used responsibly, but every went nuts and they were used to leverage homes that could not be afforded in the first place. Should they be outlawed, no, but they should have heavy restrictions on eligibility- i.e net worth, LTV etc.
They also should require a govmt. training certification to be able to sell these. I spent 4 yrs in the Vegas mortgage market and experienced brokers didnt understand how these work. The best explanation- and I have been using this for yrs is at: How Does An Option ARM Work?
i can...not....resist............f...i...r...s...t.....
I am not surprised, We are living in Orwellian society,
I'm fresh out of shock.
Or if you prefer...I am deferring my shock.
That's pretty damn sleazy.
<a href="http://gawker.com/392370/americas-most-villainous-ceo-finds-the-little-people-disgusting>Disgusting.
talk about paradigm shift.
I recall being scared to death with stories of what can happen if you don't pay your house payment.
It was like the spanish inquisition and there was absolutely zero effort to reassure me that I could actually afford it.
It's as if the broker was saying "O.K., against all my better judgement, you're approved...now I'm gonna keep my eye on you!"
Huh, imagine that. Banks being deceitful, unscrupulous, and reckless all to turn a quick buck. Who would've thunk it?
I think Tennessee Ernie Ford sang about negative amortization in his song, "Sixteen Tons."
Wachovia CEO contemplates name change
Wachovia to Wachovme
I dunno. I'm still left with the idea that anybody who didn't understand something so basic about the rather large loan they were about to take out was either stupid or wilfully ignorant. That doesn't excuse a broker for giving a piss-poor evasive answer, but really, why would you ever take the word of somebody who is trying to sell you something?
Apparently I have to comment to see the comments- Thanks Haloscan! Let's see, there are five showing,... is it worth it? Sure.
Good morning Tanta! I haven't eaten breakfast yet, so I still have time to believe six impossible things (per Red Queen.) Reading the posts, I'm up to four. The comments should round it out!
It is disgusting. These loans paid very well up front, so there was a high incentive to sell them.
I have always believed that most of the older people who wound up with these loans were duped and did not understand what they were doing.
I insist that incentives like these have a lot to do with announcements by bank presidents that borrowers have suddenly changed their behavior and are now willfully defaulting on mortgages which they can pay.
I've got a WAMU powerpoint on the POA. One of the interesting quotes from the presentation is "This is the financial tool of the future". Sadly, it did not have a picture of Angello Mozillo or Kerry Killinger under that quote
to quote Mozillo's email "disgusting"
When I decided to refi my variable rate loan that had bottomed out years ago, I could not believe how much push there was from lenders to take cash out, interest only or neg Am loans with a HELOC built in. But getting details, like what the index was and its history, or the margin, was extraordinarily difficult; that information seemed to require completing the full application.
There seemed to be every effort possible made to obscure the possible full cost of the loan.
What you have just done is make un unfair leap to pin all of the current problems on the brokers yet again. This video was put out by a lender to steer brokers to sell their product. The assumptions that all brokers used these decpetive practices is plain wrong. A customer basically had to beg me to put them in one of these loans (I think we did 3-4 total over the years). The ones we did close were fully educated and warned of the possible dangers of neg am. The lenders want you to blame the brokers that way their competition will be eliminated. (anyone noticed that Bank of AMerica is now charging a $25 fee to get the payoff on their mortgage by using a 900 number? Good luck if the lenders take over. Be careful what you wish for.
I dunno honest:
it would appear to me that we are all aghast at everbody.
lenders, brokers, securitizers, investors, borrowers.
stick around, we'll slam the lenders again soon enough.
Good luck, Wachovia, you're going to need it.
and also:
it doesn't speak well for brokers in general that the loans originated by brokers are faring worse than in-house loans by lenders themselves.
OMG. The payment may be optional, but I expect the class action lawsuit will be mandatory.
those people who took the bait are so stupid and they can only blame themselves for their lack of personal finance education.
Ok, so we ASSUME that a borrower really thinks the interest rate is 1.5% and there are no consequences. Come on, most of these people GAMBLED. Speculation can have a price to pay!!!!
My mortgage statement, having gone thru three servicers now, always shows the monthly balance.
Are there any rules on what has to be disclosed on a mortgage statement? Do the servicers not show the balance on Option ARMs, so people don't know the balance is increasing each month?
Average Joe, my last financing experience was like yours - graying executive loan officer sternly asking if we couldn't come up with more than our 10% down payment, looking shocked at the 1 blemish on our credit, an OVERDUE LIBRARY FINE from 5 years before.
She made us pay it back - literally, we had to Fedex the payment to the library before we were considered OK.
Of course, that was a LOOOOONG time ago.
Mortgage brokers are on par with used car salesmen... oh wait, maybe worse. I'd be willing to bet most mortgage brokers didn't even understand how an Option ARM worked, and no one at the bank bothered to explain it either.
FatalException writes:
OMG. The payment may be optional, but I expect the class action lawsuit will be mandatory.
Great! I wonder if there will be enough for a new reality show: Sue That Lender! We'll follow these families (and their heart-wrenching stories) as they team up to go after their sleazy lenders. Shnaps can be the emcee.
Then in a few years: Sue That Lawyer! We'll follow these families (and their heart-wrenching stories) as they team up to go after their sleazy lawyers who took all the settlement money. Maybe Gary or LawyerLiz will want the emcee gig.
There seemed to be every effort possible made to obscure the possible full cost of the loan.
Thats the key. Right there. Anyone who applies for a mortgage loan (of any type) should get a clear, concise (36-pt type if necessary) printout that describes the loan, the payments due, and the possible range of payment (depending on interest adjustments). To do less, would be making a whole lot of money off of people who didn't have it.
This post is not approved by "Mortgage Pig"
I wonder if there will be enough for a new reality show: Sue That Lender!
I hear the fall line up will include..
Flip this REO !
and
REOs of the Rich and Famous
"Unfortunately, I don't think very many borrowers probably asked that minimum-payment question."
May be true but the video shows the MINDSET of the mortgage salespeople. And that mindset is to provide false assurances - to coax and comfort the buyer that the purchase is OK. This is actually an effective technique when people are being emotional, which is often the case when buying a home. Thus it points to the exploitation of the "American dream".
This is not to say the person signing the loan is not to blame - however when you combine this with the no-doc stories about encouraging wage fraud, etc. it does show a pattern and practice by the mortgage industry to get people into loans they cannot afford, and this type of evidence will be particularly useful to the investors in the MBSs who are going after the originators for fraud.
Some mortgage brokers lower than used cae salesmen.
All this illustrates is the reason behind the 20% downpayment idea. Remember that old, out-dated rule-o-thumb. By the time you've amassed that kind of cash wealth, your probably a little more mature/wiser and ready to understand the concept of "something for nothing" and how that only fools jump on that train. So, is it really that big of a surpise that World and most other banks and brokers were milking this housing bubble for every dollar they could. Of course not! Is it any surprise that people who can't afford even 5% down on a house probably should be renting instead. Let's face it. In the past ten years, the application to rent an apartment has been more rigorous than mortgage app's. The foolish buyers... well as Forest Gump says, "stupid is as stupid does". Boy was he right.
End of rant. Thank you.
Wachovia discovered a bug in their training script. Now that it's been fixed, the answer is now dubbed over with a "yes".
We have a new meme: "we didn't rip you off on purpose -- it was an honest mistake"
To those of you that continue to paint all brokers with the same brush, buckle up! Most of the dishonest brokers are no longer brokers. Unfortunately, there is only one industry that will hire failed brokers, guess who? The direct retail lenders, thats who!!! Brokers became a huge part of origination volume (around 80% by most estimates), because they offered competition, knowledge, and many options to the consumer. When the lenders realized the potential profits, they expanded their program lists (Stated, Option Arms, etc.) to capture as much of the profit as possible. Guess what that brought to the table...Dishonest brokers looking for a quick buck that they could earn due to lax lenders only concerned with profit, not true underwriting standards. Now the lenders, who created these programs are poised and ready to pounce on you, the consumer. Do you really think that a bank that will charge you a $3.00 ATM fee to get your own money out is looking out for your interests? Disclosure: prior to my 12 yeear career as a broker, I worked for a very large bank as a vice president in consumer lending. I sleep better now. Btw, I am approached almost weekly form large financial institutions to come and run lending divisions for them. I would rather "sell cars".
What you have just done is make un unfair leap to pin all of the current problems on the brokers yet again.
Where? Quote the sentence where Tanta's post says this.
Oh, and Anonymous: Who cares what you think?
Cramer on Wachovia
The bell tolls for Wachovia
Cramer on BloggingStocks: The bell tolls for Wachovia - BloggingStocks
... a recipe for a stock that simply can't be owned even if there is a turn unless this management vanishes from the face of the banking earth.
Cramer: Wachovia's Golden Days Over
Option Arms have been around for 25 years. Now they say "There seemed to be every effort possible made to obscure the possible full cost of the loan."
Wow that's a long time for a cover up.
Clear case of discrimination. The contracts were not translated into ebonics.
I was referring to the original article which states "It's optional, the broker in the video replied". In fact, if you read the article, you will quickly realize a couple of things. 1. It is an instructional video produced by the lender with a broker portrayal, not an actual broker. Also, when the "broker" describes the loan as a negative amortization (the correct terminology) the lender steers the "broker" to more "user friendly words". This means that the training video anticipates that brokers will use the correct terms, but to increase sales, the lender uses a steering technique to coach the broker. To show the impact of a poorly written piece on the general public, look at BG's post which states " that doesnt excuse a broker from giving a piss poor evasive answer" This clearly shows the power of the misleading article. BG read the article, and assumed there was an actual broker in the video. Further comments about brokers not understanding how neg am arms work further show that sheep can, in fact, be easily led to slaughter. The brokers that I know, myself included, can sit down with you and amortize a neg am with a pencil and piece of paper, let alone merely understand them. The preponderance of poorly written, sensationalized, articles painting brokers as criminals is leading to a governmental push to overregulate the independant broker and subsidize the large retail lender (who makes much bigger political donations by the way). I have read far too many inaccurate portrayals of one subsection of this industry (brokers). People need to be educated in what they do with their finances, and need not be "sold" on who is at fault when things go bust. I can tell you that there are as many dishonest borrowers and lenders as brokers. You need all 3 to make the mess we are now in. I wonder if the "victimized" would be willing to go under the same scrutiny as the "perpetrators". Nobody complained when values were increasing.. isnt that odd? I would be happy to see all of the fraudulent players incarcerated... Brokers, Borrowers, and Lenders alike. Are you prepared to see some of your friends, and neighbors face the music?
there is only one industry that will hire failed brokers, guess who?
Please tell me it's whatever industry these folks are considered to be.
Tanta, could I beg you to go on a deletion spree?
Yo honest broker,
Great work. I am a broker myself. You have written the truth well my friend. Very well.
I commend you.
Tanta, I don't see the problem with this video. It's clear that the Option-Arms, in this case, were all 100% misunderstood by the consumers that bought into them, as it is clearly and definitively explained by the mortgage brokers about how they worked.
"It's optional." I snorted my 9 hour old coffee on that one. Hilarious.
Didn't neg-am used to be called Vig?
This company is not Wachovia. It is First Union labeled as Wachovia. As for Herb and Marion they knew how to call the top....
Honestbroker,
"BG read the article, and assumed there was an actual broker in the video."
Minor nit, sir. I assumed that the broker in the training video was fake, as is generally the case in training videos. I also assumed, however, that any broker being exposed to said training by their employer would take it seriously, at least to some extent. If your boss is coaching you to give evasive answers, it's only natural to think you'll be more likely to give them, no?
Not a biggee, though. I basically agree with the thrust of your comment.
I might piss of a lot of people, but after reading the actual article I feel disgusting to those who actually signed up for those loans, not for those who produced it.
The first thing in the article which looks like a red flag to me is "when his family's home of 14 years needed repairs". Maybe I just didn't live in US long enough, but I could hardly imagine how a 14-year home might need so much in repairs that they had to refinance. Note that it was his family's home, they didn't just buy a 50yo trashed fixed-upper. So it somehow looks like the "repairs" might be in fact something like granite countertops and hardwood floors.
That is actually funny. So he THOUGHT he's gonna get a loan with cash-out (i.e. increase his mortgage), and lower his payments at the same time??? It might happen in some weird cases (like he bought a home financing it by credit cards), but it wouldn't be typical. But anyway, looks like he didn't even ask anything about it. Did he ever look on Truth In Lending form, where the government put all the necessary information, duplicating it several times to make sure even a complete uneducated person would understand it? Well, it looks like the Nature compensated this by producing even less educated people
Of course now they blame lenders who "put" them into those loans. Poor uneducated people who would probably spend a week on the Internet choosing the best deal on a $500 camcorder, but now claim they didn't spend any time when they signed up for a $2,000/month loan. THIS is disgusting.
Somehow the country became full of people who cannot bear, and do not want, any responsibility - and trying to blame everyone else for their own mistakes. But they still demand the same rights as everyone else. Especially in boomer generation - I never expected to see it there, but now I see it more and more. This is bad.
World Savings pioneered this monster. Option ARM's are great when used responsibly, but every went nuts and they were used to leverage homes that could not be afforded in the first place. Should they be outlawed, no, but they should have heavy restrictions on eligibility- i.e net worth, LTV etc.
They also should require a govmt. training certification to be able to sell these. I spent 4 yrs in the Vegas mortgage market and experienced brokers didnt understand how these work. The best explanation- and I have been using this for yrs is at:
How Does An Option ARM Work?