Greed at all costs
There is nothing more vile, obscene, unethical and disgusting than predatory lending to the elderly by loan officers with absolutely no moral compass.
There is nothing more that I can add to this post.
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6 comments:
The problem is that we don't receive loan documents until the very last minute, so it's almost impossible to turn down the business and have someone else close the deal.
While we are neutral in any transaction, we do have the ability to turn down the work. That seems to be the only neutral way to deal with the problem--just don't be a party to what we deem is contrary to ethical business practices.
Anyway, I'm really concerned. How does this type of loan work? My assumption is that he pays interest only for a fixed period at a fixed interest rate.
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I think he thinks the principle amount stays the same and he just pays the interest, which is fixed and never changes. Is that possible? Is there such a product?
I'm no mortgage product expert, but I'm pretty sure there are products out there where you could put no money down, and get a fixed-rate primary mortgage (for 80% of the purchase price) and an adjustable-rate, interest-only secondary mortgage for the remaining 20%. The ARM might be fixed for a period of five or even ten years, which would mean that until the first adjustment, the rate wouldn't change.
As far as the principle goes, the only kind of loan in which the principle becomes larger is negative-amortization loans (as far as I'm aware). Even an adjustable-rate, interest-only loan pays down all the interest every month. With regard to your friend, worst case, he could have a neg-am loan, and his principle would indeed be going up every month. I doubt that's the case, because $1,400 is about what I would expect on a $200,000 loan at around 7%. Possible case, he's got two interest-only ARMs, and his principle is staying the same while he treads water on the interest. Most likely case, he's got the 80%-fixed, 20% IO-ARM, and he's paying down some small amount of principle on the 80% while the 20% stays unchanged.
Yes, many of my friends put 0 down and did the 80% fixed and 20% ARM.
Needless to say I heard from all of them as to how surprised they were when the ARM readjusted by a few hundred dollars.
Synthetik, I believe you are thinking of a negative amoritization loan like Tim says. Basically on those you don't pay the interest due each month and whatever interest you don't pay gets tacked onto the principle.
if he was close to 12% interest he must have had POOP for a FICO score.
I don't understand how someone would sign something like that.
the highest everage FICO i've seen.
This elderly person was being taken advantage of. And this is where the slippery slope comes in for us escrow folks. Knowing that someone is being obscenely screwed (there is no other word to describe it) and you can't offer any advice. I can just tell them the facts and that's it.
Sometimes it really really sucks to watch this happen. It's almost like seeing someone getting the hell kicked out of them and just stand there watching it. The only recourse we have is to turn down the job of closing the transaction.
I don't know what else to do.
S-crow:
Fast forward: the client was sold a new loan that cost them major loan fees...
What's the trend on the rapid refinancing of one risky loan into another?
Did this peak udring the last re-fi boom or is it growing now?
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