The creator of this explanation of the credit crisis left out one other facet - mortgage companies willing to refinance homes and appraising them for more than they were actually worth in order to loan the maximum amount of money. My husband was caught in that situation. His $65K house was appraised at $125K so they could loan him enough money to pay off his ex-wife’s credit cards (that she got in his name without telling him) and pay off his old mortgage. He was told the ARM was 9% for two years, at which time he could refinance into a lower, fixed rate. This was 2 1/2 years ago. His credit is good, but because he owes more than the house is worth, he can’t refi, and because he’s made all his payments on time, and isn’t in default, the mortgage company won’t do a loan modification (and all we want is a lower, fixed rate, we’re not asking that any of the principal be forgiven). So, because they are greedy asshats, when the ARM resets to a higher rate and raises our house payment to where we can no longer afford it, they’re going to have another house they can’t sell. So those mortgage companies, and the investors who bought those mortgages, are continuing to fuel the credit crunch, and will continue to fuel it until they figure out that pricing people out of their mortgages is a big negative in their pocketbook.
I have to agree with vesta - that is part of the problem - they are not stopping the things that have caused the problems. I know of a person who has admitted to having “really bad credit” and yet they were just approved for a $100,000 home loan. I am sure the interest rate is high and it makes me wonder if they will be caught in a trap like so many others.
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On Feb 21, 2009, vesta44 said:
The creator of this explanation of the credit crisis left out one other facet - mortgage companies willing to refinance homes and appraising them for more than they were actually worth in order to loan the maximum amount of money. My husband was caught in that situation. His $65K house was appraised at $125K so they could loan him enough money to pay off his ex-wife’s credit cards (that she got in his name without telling him) and pay off his old mortgage. He was told the ARM was 9% for two years, at which time he could refinance into a lower, fixed rate. This was 2 1/2 years ago. His credit is good, but because he owes more than the house is worth, he can’t refi, and because he’s made all his payments on time, and isn’t in default, the mortgage company won’t do a loan modification (and all we want is a lower, fixed rate, we’re not asking that any of the principal be forgiven). So, because they are greedy asshats, when the ARM resets to a higher rate and raises our house payment to where we can no longer afford it, they’re going to have another house they can’t sell. So those mortgage companies, and the investors who bought those mortgages, are continuing to fuel the credit crunch, and will continue to fuel it until they figure out that pricing people out of their mortgages is a big negative in their pocketbook.
On Feb 23, 2009, Karla said:
I have to agree with vesta - that is part of the problem - they are not stopping the things that have caused the problems. I know of a person who has admitted to having “really bad credit” and yet they were just approved for a $100,000 home loan. I am sure the interest rate is high and it makes me wonder if they will be caught in a trap like so many others.