Exotic Mortgage Brokers: The new boiler rooms

A recent cover story in Business Week on Nightmare Mortgages generated a lot of controversy, but never much clarity:

"For cash-strapped homeowners, it was a pitch they couldn’t refuse: Refinance your mortgage at a bargain rate and cut your payments in half. New home buyers, stretching to afford something in a super-heated market, didn’t even need to produce documentation, much less a downpayment.

Those who took the bait are in for a nasty surprise. While many Americans have started to worry about falling home prices, borrowers who jumped into so-called option ARM loans have another, more urgent problem: payments that are about to skyrocket."

That sounds ominous, but it really doesn’t do any justice to the apparent fools who bought these products:

"There was plenty more going on behind the scenes they didn’t know about, either: that their broker was paid more to sell option ARMs than other mortgages; that their lender is allowed to claim the full monthly payment as revenue on its books even when borrowers choose to pay much less; that the loan’s interest rates and up-front fees might not have been set by their bank but rather by a hedge fund; and that they’ll soon be confronted with the choice of coughing up higher payments or coughing up their home. The option ARM is "like the neutron bomb," says George McCarthy, a housing economist at New York’s Ford Foundation. "It’s going to kill all the people but leave the houses standing."

How did we go from a nation of fixed-rate loving mortgage holders to this sudden spike in toxic mortgage products? It turns out that hard pitching telemarketers, in the best boiler room fashion, have been jamming these products down the throat of unwary consumers. Consider the following discussion from our media shy denizen of Maine:

I am currently receiving about 3 of these calls per month. You? Okay. I am being offered various rates, all with a 1% handle.  Most require you to go thru a voice menu if interested after hearing a recorded mini-pitch, so they’re no fun. But the ones that have piqued my interest are the ones where a hairball of a mortgage broker comes on the phone, live, calling you by your first name and immediately congratulating you on your stellar mortgage-payment record which, wouldn’t you know, has now qualified you to participate in his “program”.   

A couple of weeks ago, I played along out of curiosity  But when we got to discussing the rate, 1.2%, I believe, I asked him how or why he would want to lend money at that rate when FED funds were officially targeted at 5.25%. His response, “I don’t wanna’ talk about FED funds.  This program is about interest rates.”, caused a loud guffaw and simultaneous hang-up from me. Sound familiar? I’ll bet.

But the best ever was the weasel that phoned me last week. The pitch started out the usual way, except he called me “Dawn”. Whatever.  Right off the bat, he offered me an “opportunity to cut my monthly payments at least by half”. How? By signing up for the deal of a lifetime, a “1.7% FIXED mortgage”.   

Me: “Fixed? What’s the term?
Him: “30 years.”
Me: “Okay.  So this means that my payment is the same every month for 30 years?”
Him:  “No. It resets after 5 years at 7.25%.”
Me: “So how is that a 30-yr. fixed if it resets in 5 years?”
Him: “Listen.  This is a great program. I can cut your payments in half.”
Me: “I can’t understand how you can offer this with FED funds at 5.25%. Is a feature of this program something called negative amortization?”
Him:  (Big pause because I think I caught him off guard with the mention of n.a.) “Yes.”
Me: “So this means that every month, my outstanding balance is growing, right? Why would I want to sign up for something that puts me further into the hole every 30 days?”
Him: “Don’t worry about that.  Your real estate will continue to appreciate and take care of it.”   
Me: “Let me ask you something.  Since you can currently lend money to the US government and get nearly 5%,  why on earth would you wanna’ lend me money for 1.7%?”
Him: “The banks don’t pay me to lend money to the US government.”

Nothing in the sales pitch except a promise to cut their payment in half with a fixed rate. Where is the disclosure of risk and fees? If this was any product regulated by the SEC, someone would be going to jail.

Hello? Anyone at home in the Treasury Department on this? Office of Banking Supervision? The Fed? These fraudulent sales pitches are a cancer eating away at an increasingly vulnerable part of the economy. 

The sooner someone stops these weasels  from doing their damage, the better off we will all be.


Nightmare Mortgages
Mara Der Hovanesian
Businessweek, SEPTEMBER 11, 2006

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What's been said:

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  1. James Bednar commented on Sep 12


    You just stop the anti-American rhetoric right now.

    These products are all about affordability and giving the average Joe access to the American Dream.

    What kind of good American would be against others achieving the American Dream?

    Without these products, these good Americans would not be able to afford homes, never able to ascend past the granite ceiling.

    The wealthy have had access to the luxury of real estate appreciation and equity withdrawl for years. Now that everyone can afford real estate, the wealthy want to take it all back.

    You just stop your fear mongering right now.

    (sarcasm off)

    Have you read some of the comments made to the Office of the Comptroller of the Currency regarding the curbing of risky lending practices? You’d be amazed at how many of them read like the above. Let me try to dig up the link, it’s worth the time spent.


  2. bill the barber commented on Sep 12

    wasn’t our former fed chairman pushing ARM products some time ago?

  3. blaze commented on Sep 12

    There is nothing wrong with ARM products. Fact is, if you went 10 year fixed and I went ARM, both of us for the last 10 years…

    who do you think would have paid less in interest?

    I’d like to see a study that checks that out on 30 year windows, historically, and I bet the ARM guy always comes out ahead.

    The problem isnt’ ARM loans, the problem is people borrowing more money they should.

  4. Bob_in_MA commented on Sep 12

    Per usual in this country, we forget tat markets need regulation even between crises. You can be sure there will be congressional hearings in a couple years where congressmen will be shocked! shocked! to learn what I’ve been reading about in newspapers for the past 2-3 years.

    Luckily, our federal finances are so sound we can easily afford another bailout–not of the poor schmoes who lost their home, but the banks which enabled them, of course!

  5. doh! commented on Sep 12

    Yes this will be “shocking” to our “law breakers, uh I mean makers, law makers” in a few years LOL . But I have seen print ads that talk about “fixed” mortgages that clearly are NOT, with ridiculous teaser rates to lure the unwary. This is worse than car dealers ads that bait and switch. It is false and misleading. Nuff sed, by me anyway.

  6. tjofpa commented on Sep 12

    In the book I read about the S&L crises, none other than the House Speaker was credited with keeping the door open for his Texas buddys for 4 or 5 years after everyone knew it was going to end badly.
    Did he resign over an extra-affair or the 50 $Bil he cost taxpayers?

  7. Larry Nusbaum commented on Sep 12

    wasn’t our former fed chairman pushing ARM products some time ago?
    Posted by: bill the barber | Sep 12, 2006 8:00:41 AM


  8. Royce commented on Sep 12

    All it would take is an hour or less of a lawyer’s time to go through the paperwork before people refinanced and tell them what a terrible deal these mortgages are. Unfortunately, people fret over paying a lawyer $150-200 when they’re setting up a three or four hundred thousand loan (if not bigger).

    My PSA for lawyers is now over.

  9. jkw commented on Sep 12

    Who is going to lose money from all of this? Will the borrowers be forced to pay back the loans for the rest of their lives? Will the banks be forced to take the loss? Will MBS holders actually lose money?

    I wonder if people are going to try to bring a class action lawsuit against these people. If I was offered a 1.7% fixed rate 30 year mortgage, I would try to make the bank stick to those terms. There are states where recordings of phone calls are admissable in court even if only one side knew it was being recorded. If they offer you one thing on the phone and then send you paperwork for something else, it could count as fraud.

    We need mortgage regulations that require payment schedules to be prominently displayed in the paperwork. There should be one for what the payments will be each year if interest rates stay where they are and one for what happens if interest rates hit the mortgage’s rate caps all the time. Expecting people to understand the difference between different interest rate benchmarks is too much. Expecting them to understand a payment schedule will leave only the truly stupid stuck with loans they have no chance of managing (some people just can’t be helped).

  10. Eric commented on Sep 12

    Barry maybe you are dead on for the practises in the East but in the Mid West your wrong. However I doubt they needed to scam anyone back East either. I have done many loans over the last 5 years. I even did one option package like you mentioned. The option package you mentioned the guy could have afforded to go fixed but he “insisted” that he go the other way against my advice. He was better off than most financially. The sales pitch (if you could call it that) was do you need help with your payments. From there you had a kling on attached to your leg that called you a couple times a day. No selling needed.

    I’ll tell you about the last loan I did. The man was 60 plus. Held 3 jobs one being the Town Treasurer another being a salesman with a company for over 20 years. His wife worked in health care. All respectable positions. His problem was (which seems to be everyones problem) he was overloaded in debt. Above that what shocked me was really how financial iliterate the guy and his wife were. They were no different than everyone else I dealt with it was just that he was the Town Treasurer as well. All I saw was people so overwhelmed with debt that all you tried to do was educate them and try to put them on a path out. To give them hope so to speak. It truly is sad how how I feel these people are being ripped off blind. But it is not from some boiler room Barry.

  11. bostonian commented on Sep 12

    blaze: And guns don’t kill people, people kill people, right?

  12. PW commented on Sep 12


    Most insidiously these boiler rooms are targeting their cancerous pitches at minorities, particularly African-Americans and Hispanics. Toxic debt taking away the American dream from a whole group of minorities, sounds like a hate crime to me.

  13. albiegf13 commented on Sep 12

    I’ve been watching this for a long time. All that I can say is that if I were the Dictator, I would have them all shot on the spot. Everyone that’s involved in this racket, especialy those at the top, that should know better.

    That poor salesman that was quoted in this story is probably carrying one of these neutron bombs himself. He’s probaly living in a mini McMansion that was built on a toxic dump site and probably drives a late model, mid-rnage SUV. He’s got a bitchy, cheating wife with fake tits who’s trying to upgrade from Coach to LV and just went into hock buying a Hermes belt. He’s probably got a kid that he loves as much as you and I love ours and he may really be a nice guy that’s stuck in a bad place and he just doesn’t know any better and can’t get out.

    However, as stated above, there are those that do know better, and they should all be beaten severely and then shot.

  14. S commented on Sep 12

    Caveat Emptor?

  15. Lama commented on Sep 12

    Hi All,
    Suppose the banks are successful in selling the new “Fixed” mortgage with negative amortization or some other such product. Suppose they can continue to obtain inflated appraisals to substantiate the loans. Does this seem plausible? Does the party continue? For how long??
    No politician wants to put his name on any bill stopping the party, so the market itself has to implode (IMO). The longer that takes, the worse the scenario (Japan for expample).
    Thanks for any information.

  16. David commented on Sep 12

    blaze, are you talking about the ten years to the present, 1996-2006, when you talk about the “last ten years”? Including the final seven years of a major bear market in long-term rates?

  17. KirkH commented on Sep 12

    It’d be nice if the consumer would read a little before making the biggest financial decision of their life. The more the government “helps” consumers the less they’ll have to learn. Underinformed consumers are not good IMO.

    The “fools” who bought these products will learn their lesson. I still think we should teach financial literacy in High School. Don’t let ’em graduate if they get scammed by the teacher. Though I’m sure the 13th century boats are helpful somehow.

  18. calgarycanada commented on Sep 12

    I’m a Canadian watching the whole mess unwind from HERE!
    I went through the same thing in 1980 here in Calgary when the market dropped 25% in 6 mths. I had 3 mortgages on my 1st house and I was 21.

    You can survive it.

    Warning! We didn’t have the internet then so this could go very quickly and very far.

    Like my silver yesterday???

  19. MaxedOutMama commented on Sep 12

    I agree that products such as these should not be sold to the average borrower.

    But you’re leaving something very important out – there is a required disclosure that must be given to the borrower at the time of application (or mailed if it’s a remote app), and definitely before any fee is paid, and no one’s going to close without it in their files.

    This is a sample of one of these disclosures. By law, it must disclose if there is negative amortization, and it must disclose the possible maximum payment and maximum interest rate.

    You explain to me how lenders have signed copies of these in their files for these loans. I don’t doubt that limited-English and illiterates are being scammed, but I have major questions about how an engineer or a police officer can manage to unknowingly close on such a loan. I don’t believe half the examples given in these articles. I think they were just desperate and went ahead with it anyway.

    If they didn’t get these disclosures, they have a legal claim and can force the bank to settle with them. If they did, and now they are conveniently forgetting it, then they’re showing the same amount of irresponsibility that got them into a financial hole in the first place.

    Don’t get me wrong. I think a huge number of brokers and quite a few loan officers should be out of business. But I’d really like to know how these people get into these loans without knowing that their interest rates can increase as they say they did. I am a skeptic.

    And btw, I lost a customer (I do work for banks) by refusing to go ahead with a bad loan program for a bank. This isn’t the type of thing I would ever agree to make money by participating in. These loans truly are toxic. The law is TILA. See
    Reg Z 226.19
    . I agree with Eric above (and Royce).

  20. critical thought commented on Sep 12

    my only question, how do I survive or thrive in a another bailout situation and recession?

    LT Bonds?

  21. eli commented on Sep 12


    Who will pay for all of this? My guess is taxpayers. People will default on loans, and the government will pay off the banks with tax money and china money. Though, I can always dream that these lenders will be left in the proverbial lurch..

  22. eli commented on Sep 12


    I’m also interested in how the rapid flow of information will influence any of these potential panics (housing, stocks). Though, I’m not sure how much different the flow of information now is from back in 2000.

    I guess we’ll have to wait and see.

  23. fred hooper commented on Sep 12

    How about shooting the fraudulent borrowers too. You know, the little-white-lie crowd: overstated incomes on no-docs, bogus employment verifications, speculators with owner-occupant loans. And while we’re shooting people, lets get the appraisers, real estate agents, developers, city planners and inspectors. Who have I left out?

  24. calgarycanada commented on Sep 12

    Re: What to do.
    I survived because I worked for a smaller Co. that provided a service to the management Co.s for large commercial R.E owners.
    When times get tough they can’t loose tenents and so they keep them happy.
    Think leaky roofs or any building maintenace type work.
    when you are stable and the house market hits bottom…….then buy with little or nothing down. Keep working! Buy the best ones that can carry themselves.
    Your tenants will be the people walking away or loosing there homes and trading down in their monthly payments. Remember, all these people still need to live somewhere!
    Now wait it out because it will be years before the appriciation returns but when it does DON”T SELL LIKE I DID. Keep them and you will retire earlier.


  25. calgarycanada commented on Sep 12

    RE: Speed of information.
    MY own experience in 1981 here, I was young , working like a dog , making and spending tons of money and rarely read business news.
    And I wouldn’t have understood inverted bond yield anyway. Just like all the constuction workers you,ve hired in the last few years.
    I may have heard housing sector slows or something but “Who cares, I’m doing fine.”
    So I’m not going to a special store and by newspapers for a bunch of major cities to compare prices. No reason. Then iT just happened. there were no buyers and more and more signs went up and it was too late.
    Now “I think” with access to broader infomation more availabe to a larger population the bad news has the potential to travel faster so a seller may react faster buy lowering deeper and faster in order to appear as the best deal to any buyers that might be left in the market.

  26. Mr. Beach commented on Sep 12

    Whats up with the homebuilders today?

    Why the rise?

  27. S commented on Sep 12

    Mr Beach:

    CNBC attributed the rise in the homebuilders to comments made at the CSFB homebuilders conference. Two or three of the builders presenting apparently mentioned possible consolidation within the industry. I heard similar comments on the HOV and TOL earnings conference calls so I’m not sure why the market is reacting to that “news” so positively today.

  28. L’Emmerdeur commented on Sep 12

    Funny how Americans demand that their people be smart enough to know what they are getting into when they deal with ARMs and teaser rates, and then provide them with a public education that can’t even teach them how to locate their own home state on a map.

    Do you know what happens when smartypants sharks are permitted to rip off the dull witted over and over again? Ask the Romanovs and the Bourbons.

    (and I work for a hedge fund, so don’t even THINK of accusing me of being some sort of liberal pansy)

  29. JJ commented on Sep 12

    funny how the French are so full of themselves monsieur
    how’s Villepin treating you ?

  30. Lama commented on Sep 12

    Tres amusant…I get quite a laugh when someone from Europe attempts to take the most diverse population in human history and homogenizes them with one sweeping sociological analysis.
    Mais, pour la plus part, j’aime beaucoups les francais.

  31. OldVet commented on Sep 12

    Boilerroom? That recording sounds like my mother in law – the one taking the customer to the cleaners. She used to sell crappy little houses with a fresh coat of paint.

  32. fatbear commented on Sep 12

    Now could someone explain to me how those sales calls BR cites differ from the average customers’ man talking to one of his accounts?

    Or how they differ from an insurance sales call? Or a CNBC “analyst”? Or Jim Cramer?

    The only difference I see is that it’s fashionable to trash the mortgage guy but not the others; but it will be if (when?) those other markets make their own BW covers.

  33. david foster commented on Sep 12

    “I still think we should teach financial literacy in High School”…possibly so, but you can’t learn to be *financially* literate until you’re *plain old* literate–ie, can read documents of some complexity and understand them. You also have to understand basic arithmetic and have some feel for numbers.

    There’s no point in trying to bring students to stage #17 (or whatever) when the earlier stages are so often missing.

  34. Lyon commented on Sep 12

    As I said before, now we have 50year amortizations….next 75’s.

    But look at what I just received from a lender…..

    lender shall remain nameless.

    Super Stated

    100% LTV/CLTV
    1 account for 24 months and 2 accounts for 12 months (do not need to be open or active)

    Self–employed or 1099 borrowers OK
    Disregard charge offs, collections, and judgments not affecting title

    620 minimum score required
    Max 50.49% DTI

    2 years proof of self–employment with 620 score and 1 year with 640 score
    Acceptable sources of income: checking, savings, 401(k)s, IRAs, Keoghs, SEP IRAs, publicly traded stocks and bonds, mutual funds, money market accounts and CDs

    Requires reserves equal to 3 months stated income. Source and seasoning 90 days
    Full Doc LTV’s and loan amounts up to $1.5M

    50–yr amortization now available

  35. brion commented on Sep 12

    “….How about shooting the fraudulent borrowers too. You know, the little-white-lie crowd: overstated incomes on no-docs, bogus employment verifications, speculators with owner-occupant loans. And while we’re shooting people, lets get the appraisers, real estate agents, developers, city planners and inspectors. Who have I left out?…”

    Well Fred i think you shot just about everybody there….

    Home prices have gone up so much and the financing of home “ownership” has become so exotic that one has to ask, “what do you expect”?
    How can you NOT expect “little-white lies” in a housing market that’s built on big black ones? For a lot of folks the ONLY way into a house has been through one back door or another…..

    My only question has been…Will this bubble truly pop (and when/how) or will a “new paradigm” be set up where home “borrowship” becomes the new norm allowing these currently “inflated” prices to remain so?….
    Japan has 90 year mortgages after all….

  36. brion commented on Sep 12

    btw (i don’t believe the housing market will crash…i think it will shatter)

  37. David Sternfeld commented on Sep 12

    “1. Who is going to lose money from all of this? 2. Will the borrowers be forced to pay back the loans for the rest of their lives? 3. Will the banks be forced to take the loss? 4. Will MBS holders actually lose money?”

    Answers: Everyone, no, no, probably. 1. The defaulted loans will be paid off by all holders of dollars and dollar denominated debt. “Conservatives” love socialism when it comes to socializing debt and devaluing fiat currencies. 2. Unless we reinstitute debtors’ prisons that earn their keep, defaulters will be ruined, but unable to repay. 3. Banks forced to take losses? Since when have irresponsible lenders been held to task? Stupid loans to craven developing countries? Nope. S&L thievery? See Bush, Neil or Jeb. 4. MBS holders? Public pressure on Congress will probably help out the silver-spoon crowd. Again, socializing the fallout from the debt bombs.

  38. anonymous commented on Sep 13

    Me: “Let me ask you something. Since you can currently lend money to the US government and get nearly 5%, why on earth would you wanna’ lend me money for 1.7%?”
    Him: “The banks don’t pay me to lend money to the US government.”

    Actually, isn’t he absolutely correct here? I wouldn’t think that mortgage lenders are allowed to buy government treasuries (or papers, coupons, bonds, etc.) with that money. It seems strange to end that particular boiler-room conversation on a note where the high-pressure salesman is actually telling the truth — it undercuts the notion that he’s a sleazy liar.

    Or am I wrong and lenders are actually allowed to lend to the U.S. government?

  39. rebound commented on Sep 13

    “i don’t feel any sympathy for the morons who get suckered into these mortgage scams though”


    You should feel sympathy. In fact, if you are human you should feel empathy if you have ever made a stupid financial decision in your lifetime. Also, does grandma or the average Joe have the BS detector or wit which Barry possesses? No.

    When this much “product” is circulated and exotic mortgages become the norm, it becomes difficult for an average consumer to see through the haze to make an educated decision. What percentage of “quality” loan content is out there vs. “snake oil” type mortgages? More truth in labeling (or lending) could be of benefit here.

    In a refreshing twist, I have started to hear mortgage broker radio advertisements out West informing consumers (dare I say, educating customers) to bail on their exotic mortgages and get into traditional 30 year mortgages ASAP while rates are low. I hope this phenomenon spreads far and wide. We will all be better off for it.

    Besides, how good is the average Joe at timing the stock market? Or a better example, the options market? The answer is not well. Why would we think the average Joe would be good at timing the mortgage market or the exotic mortgage product market?

    For the masses in general, a 15 or 30 year fixed rate mortgage is a stable platform which does lead to home ownership. Not perfect, but not bad, either.

  40. ~ Nona commented on Sep 13

    Rebound (and Anon), I definitely agree that one should have sympathy for people suckered in by these products.

    For the record, I’ve known two licensed financial professionals fall for two different foolish investments — AND PUT CLIENTS INTO THEM. Both had to apologize to their clients, but both should have known better.

    And what about the clients?

    Those people trusted their financial professionals’ judgement. Alas, what was lacking in all the professionals’ credentialing and training was basic good judgement. I don’t think it’s possible to train good judgement.

  41. dsquared commented on Sep 14

    not wanting to interrupt the moral indignation here, but are any of you guys aware that these “toxic”, “neutron bomb”, “fraudulent” products are absolutely standard for the UK market, and indeed it is the USA that stands out in the English-speaking world for 30-year fixed rate mortgages.

    Good god if this is the state you get into at a simple interest-only mortgage (btw, the correct answer for the broker to have given would be “obviously you need to set aside a savings plan in order to accumulate your principal repayment but the advantage of this deal is that you can be much more flexible in doing so than if you had a fixed monthly principal payment), then what are you going to do when a hard-charging Australian bank decides to have a go at the flabby US market? What does anyone think about a mortgage with no fixed term, no scheduled payments at all and where you get a credit card that immediately puts the purchases you make onto the mortgage?

    That’s the deal I’ve got at present – it’s called the RBS One Account.

  42. Bankrupt commented on Sep 14

    DSquared …..
    sounds like you did something very smart there !!!!!!!

  43. Jay commented on Sep 17

    The Option ARM, COSI, COFI and MTA loans all have the potential for negative amortization, otherwise called deferred interest. These mortgage programs are the equivalent to purchasing stocks on margin. Many people make money buying stocks on margin during regular stock markets times and very recently some made a lot of money during the dot com boom. However, also during regular stock markets times and the not to distant dot com bust, many people that bought stocks on margin lost money and some a lot of money. Similar to the dot com boom, real estate values increased over a short time period quite rapidly. By the rule of 72, if home prices averaged 33% appreciation per year, the home’s value doubles every 2 years, 3 months. Over the last several years by utilizing these mortgage programs, many people have achieved homeownership and increased their wealth. Again similar to the dot com bust, home prices are declining in many areas. Those people who use these mortgage programs to buy at the end of the run up in real estate values in their area will lose equity on paper. However, even with the dot com bust, several dot com businesses survived and their stock prices have recovered and again been increasing. Those who survive the downturn in real estate values by not selling will eventually see the value of their real estate rise again. Only those who are forced to sell will actually lose money in reality.

    The above addresses the value question. As to the deferred interest, that is a cost of homeownership. If you own a home that appreciates $30,000 in a year and it costs you $2500/month for the PITI, in one year you broke even. If you take one of these mortgage programs and choose the option to not make your full interest payment, than you cannot expect the appreciation to always cover the cost of carrying the property. Many times in the past real estate values have declined or moved sideways for an extended time and not increased more than the cost to carry the property. If you postpone making your full payment such that the appreciation doesn’t cover it, other than you owe more money you are no worse off. If you can’t pay the freight, then you can pay less, but there is no free lunch. At some point, you will have to pay the deferred interest. Just don’t expect the appreciation to always cover the deferred interest. Sad to say, you might have to work harder to earn it and actually pay it.

    As to unscrupulous mortgage brokers, yes, there are unscrupulous mortgage brokers and they shouldn’t be in the business. Many people aren’t being properly educated about the true nature of these type loans. However, anyone taking one of these loans recently has to have their head stuck in the sand to not have read or heard about the negatives. So, if people are still taking them, it is because of the same mentality that people lease cars. Why pay today, what you can put off until tomorrow. It is the same mentality that people don’t save for retirement and then whine that the Government should bail them out. It is that same mentality that people don’t buy health insurance, yet they expect medical service when they walk into a hospital. People who are ignorant and/or make bad decisions have to take responsibility for their actions too! Its not always someone else’s fault.

  44. aussie-lending commented on Sep 18

    Nona: those Australlian mortgage types you are talking about are some crazy money management tools. I don’t know if you’re state side or not, but they have hit the shores of the U.S. already. A matter of fact I’ve been certified to originate that product (though I do not currently originate any loans).

    However they are very new and not very popular or well known. All of your monthly income is deposited on top of the principal driving down the amount of daily interest accumulated and increasing any net-savings at the end of the month. If done wisely a homeowner can manage their cash flow to steepen the amortization curve and pay off their balance in a greatly shortened period of time. If done so in less than a 30 year time period any balance less than zero is turned into a money market account.

    All the while the homeowner can spend up to the line of credit amount. The line of credit starts at 80% loan-to-value and is fixed at 10 years and then the remaining 20 years it is reduced linearly to zero.

    The homeowner does not make mortgage payments, just any interest accumulated eats away at the line of credit. If they lose their job and have no source of income they do not default as long as the maximum line of credit limit has not been reached by any added interest.

    The homeowner does not need a checking or savings account in which to pay bills, they just use their line of credit to pay for daily expenses or really for whatever they want to use it on. They can visit the ATM and withdrawl a $20 even if they like. Big bank lobbyists resisted the product because of how it has an affect of purging checking and short-term savings accounts. But through much due diligence it is here in the good ole’ U.S. of A.

  45. jp commented on Sep 24

    As mentioned – the big red flag here appears to be debt. I wonder that this isn’t the engine that drives the desperation…the stupidity…the risk.
    Starting from the point that a fiscally repsonsible person lives within the perameters of whatever income they earn, and whatever that will allow – there’s the traditional model.
    Is it any wonder – when traditionally well-paying jobs disappear, replaced by McJobs that offer reduced wages – and lifestyle aspirtions that climb into a consumer-aquisitional stratosphere….it’s a deadly combination.
    I think there are way too many people out there – trying to make money out of way too many people who just don’t have it…never will. The crazy thing is that this just doesn’t seem to matter anymore.
    Why is this stupidity and reckless irresponsibility driving our economy?

  46. esl commented on Apr 19

    now the shit has hit the fan, why aren’t these people going to jail?

    wasn’t the owner of Ameriquest ( a huge subprime lender out of California that was penalized for predatory lending practices) made US ambassador to some European country?

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