I disagree that we have dodged the fallout from subprime lending tactics by
lenders. The city has been going through a massive increase in foreclosures,
much of it resulting from predatory lending. The mortgage market is no longer
local and mortgages have become commodities traded on Wall Street.
-----Original Message-----
From: [EMAIL PROTECTED]
To: [EMAIL PROTECTED]; UnivCity@list.purple.com
Sent: Wed, 9 May 2007 1:40 PM
Subject: [UC] Explaining Sub prime lending : Kudos to my colleagues,
competition, local Lenders and PENN
Lately, I have heard lots of general questions about the "market" and the
cause of sub prime mortgage foreclosures and the effects on individuals
and the economy. The link is to an article which defines the big
picture, in simple terms, and gives snapshots of the devastation of two
families who signed onto sub prime loans.
http://www.reuters.com/article/wtMostRead/idUSN0329892220070508
Philadelphia, and especially UC, seems to be dodging the collateral
damage of sub prime disasters.
For this we owe a debt to:
Our city, conservative in banking matters
A sufficiency of local Lenders, mostly reputable Banks and Credit
Unions
The preponderance of Agents who have acted responsibly and not
chased kickbacks.
PENN, who has encouraged Home Ownership, with good programs.
In a theme I consider related, I have had many folks question my aversion
to Knox (I much prefer to discuss my faith in Michael Nutter and my hope
that Philadelphia keeps Chaka in Federal and Dwight in State government).
Sometimes the questions come with some base implication that I am voting
the wrong "color" (implications I find easy to dismiss!) but sometimes
people have bought Knox's campaign spins of 'Business, better than usual'
and 'opportunity as charity'.
Knox might want to sell an image that he was one of very few who would
lend to those poor enough to "need" payday loans or ownership
"opportunity". But true Charity does not come with interest totalling as
much as 400% per Annum.
One sad local example:
I was called to a listing appointment.
The prospective Seller was an elderly man, who had hoped to stay in his
home "forever".
But, he was confronted with a notice of Sheriff Sale and wanted to know
if by hiring an agent he could sell, pay off all of his debts and retain
enough money to be independent.
Sadly, this man had refinanced twice in 10 years.
The first time was a straightforward refinance, through his own reputable
bank, during a period of 8.5% rates, and for the purpose of helping a
grandchild through college.
He want from owning his home free and clear to having a mortgage of under
$400.00.
It was admirable and survivable, barely, on his fixed pension income.
He understood the choices and risks.
But the second time, he was vulnerable and fell under the spell of a
usurious Mortgage Lender.
He had just heard that his wife had been pronounced terminally ill.
The couple determine to take the amazing vacation that they had postponed
through the raising of kids and grand kids.
They knew they had equity and wanted to know if they could lower their
rate to the then 5.5%, keep the payment where it stood, and take out some
equity for the vacation.
The person who promised to make "their dream come true" talked them into
a total refinance (versus a simple equity loan) and an A.R.M. that
started just under 5% (but capped at 12%). They took out $10,000 in
equity and paid almost $13,000 in fees and charges (on a now $50,000
loan) to do so. Money seemed to flow in only one direction, and even
now, after the damage is done, this potential Seller can not understand a
reconstruction of how the loan went from a debt ratio of $23K-on-$60K to
one of $50K on $60K. The potential Seller didn't understand why the
percentage charge on their loan had jumped 3% / year each year, or why
payments had jumped from under $400 to well over $600. He only knew that
he was facing Sheriff Sale with a humiliating amount of debt. To
compound matters, the loan also had a huge prepayment feature, and so
there was no way to clear enough to live independently. Now this elderly
widower will end up living with Adult children or in subsidized housing.
The cost to his pride and life style are enormous, a Lender got richer
($13,000 in fees for $10,000 in cash out! + 12% interest for most of the
term!) and we taxpayers may end up subsidizing the housing of this
mortgage victim. BTW, the vacation was never made. The wife did not
survive until the planned day of departure. The $10,000 disappeared in
payments on the new debt. I could not promise him any proceeds from a
sale. And so, I referred him to agencies that pay people to advise on
home saving and legal aid. He had my sympathy, but I support my family,
with commissions. He was better served, by staying in his home, as long
as possible, even if he had to declare bankruptcy. I left the
appointment shaken, by the evidence of a greed, that was so thoughtless
of the consequences to this man, our neighborhood, and the national
economy.
I believe that those who can't find 'opportunity' in other than sub prime
lending, are better off waiting (and working) for the 12 months needed to
create conventional / better opportunities. Blown 'opportunity' can damn
credit records for 7-10 years. While waiting may permit time to make a
more thoughtful purchase.
I believe that most who can make sub prime work can probably, with good
and ethical advice, find better opportunities in FHA or "First Time" Home
Buyer grants and loan programs.
I typed this, to create a clear answer for the many who have asked, and
then decided it might be useful to a larger number of members of this
list. Feel free to read, save, share or even delete.
Home ownership is a terrific goal.
Voting is a privilege that should not be wasted.
(In Belgium, qualified voters are fined about $300.00 if the neglect
their duty.)
I hope to see you next Tuesday.
All the best!
Liz
Elizabeth Campion Cell Phone: 215-880-2930
215-546-0550 Main, -546-9871 fax, Desk + VM: 215-790-5653
PRUDENTIAL, FOX & ROACH REALTORS, LLC
Please read Consumer Notice & enjoy "HOME PILOT" tools at
www.PruFoxRoach.com
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