|Mortgages: Messy Business Practices
4/9/2014 4:34:30 PM
By Beverly Gadson-Birch
Will someone please help me to understand mortgage lending practices? It's been over seven years now since this country's finances spiraled out of control. Banks cried wolf and claimed they were broke.
That was the tallest tale I have ever heard of. The government bailed them out and within six months most of the major banks had repaid their loans. Where did the sudden windfall come from to repay the loans? By the way Mr. Banker, it was taxpayers money that bailed you out. So, why not offer a little helping hand to your customers or find innovative ways to help keep them in their homes.
Instead of helping customers, banks immediately began closing down business credit lines putting many small businesses out of business and foreclosing on homes forcing homeowners into apartments or shelters. What banks thought was their biggest money maker, foreclosures, turned out to be an albatross around their necks. Homes sat vacant for years while mold and mildew crept in creating health hazards.
And, many homes were vandalized leaving banks with expensive repairs, replacement of air conditioning units, appliances, windows and copper wiring. Banks lost money on many of the homes all because they did not want to work with long established customers who were not delinquent on their payments until the financial disaster hit this country.
Banks had consumers jumping through hoops when they had no intentions of approving new loans or refinancing their homes. It was an awfully demeaning process for customers to say the least. They were asked to submit tons of paperwork only to be told they did not receive them.
The sad part about the mortgage debacle is the banks created the situation by over extending credit with high interest rates to those who could not afford the loans then turned around and sock it to their long time good standing customers who just needed a little bail out themselves.
Several things prompted me to write this article this week. It's about the "record low", the "dip in refinancing" and the "shortage of homes". I say "hogwash". If the banks just let up a little, we can solve this problem overnight. After reading an article on real estate entitled "Listed, it pointed out that mortgages were at a record 14 year low so I wanted to know the root cause. The article went on to say "a dip in refinancing may be to blame and it also pointed to a shortage of homes for sales. While there may be a shortage of homes in some areas, there are many homes that are still vacant and bank owned and they are giving borrowers a tough time obtaining loans to purchase homes.
Banks took a risk on first time home buyers or borrowers with low credit scores who could not afford their mortgage but got approval anyway; yet, they were not willing to work with customers currently residing in their homes with as high as twenty plus years of paying back their mortgage on time. Where is the rationale here? Listed stated that if your credit score is not above 650 banks won't even call you back. Most sales are on the high end side of real estate because the buyers have higher scores and banks don't consider them risks. So, don't be surprised if you are trying to obtain a loan in one of those upscale neighborhoods and you were denied, that is just another way of keeping you out.
Let me share a story with you. I know of a lady who went through the entire process to obtain financing for a second home, was approved, had a letter of approval with the amount in hand, all records submitted and validated and was denied the loan the day before the closing. She lost her first home to foreclosure after making payments for 23 years. She was coming around the mountain. She was beginning to see light at the end of the tunnel and then boom, bank swoop down and snatched up her home. She had invested quite a bit into the property over the years. A catastrophic illness caused her to fall behind in her payments. Her husband's check dried up.
They squandered their savings on doctor bills and even borrowed out of their retirement to stay afloat. Then the recession dragged on far too long. They could no longer afford the monthly mortgage. They sought relief through their mortgage company. Their request was simple, reduce the payments or extend the loan payments. The response was a flat out "NO".
They didn't want to even discuss it. You would think with such a valued customer, the mortgage company would find a way to offset foreclosure. The home was previously appraised for almost a million dollars. Guess what they got on the chopping block, two hundred fifty thousand? So, who is the loser here?
With this latest information from "Listed", it looks like the poor will continue to suffer the brunt of homelessness unless someone with some sense with regulatory authority steps in and stop these outlandish bank practices.
And even if you are fortunate enough to get approved for a mortgage, don't even mention the interests. You will never finish paying for your home. Be sure to pay attention to the interest before signing on the dotted line. It's designed to keep poor folks poor.
It is time that banks and mortgage companies be held accountable for their backroom practices. When we cross out "Freddie the Freeloader" folks pay their bills when they have a job and are healthy. I realize banks are in business to make money but don't make it "Robin Hood" style.
If you have applied for a mortgage loan recently and have been turned down, don't just walk away. Find out why!