Wednesday, October 3, 2007

Mortgage-lending task force will need to find common ground.

Although many in Oregon's mortgage industry were thrilled when Bill 965 died upon the close of the 2007 Legislative session in June, we also knew that the debate was far from being over. This article in The Statesman Journal includes views from both sides of the issue and the readers' comments are engaging. I, of course, have my 2 cents to throw into the pot and I encourage your comments as well.
I feel bad for the Bringham's and all the other home buyers who are in the same boat but the obvious question remains to be asked, Why did you sign? Did you read what you were signing? I know there are deceptive loan officers and lenders out there that pull stunts between the original good faith estimate and the closing, I have zero tolerance for these "professionals", however all terms are disclosed in the note. If you are faced with this type of "surprise" at closing you do not have to sign. For a purchase it's okay if you put on the brakes until further review of the loan documents. If you get pressure or the hard sell from either your loan officer or your realtor they simply don't care about your best interests. The deal will probably fall though but you have to decide what is more important your financial forecast or the "house of your dreams"? It is not the later, the emotional attachment one may feel is easily forgettable. I personally have walked away from a purchase, it sucked at the time but looking back I am sure glad I did. If the transaction is a refinance you also have the 3 day right of rescission to exercise. Sure, there are times when issues arise during underwriting and a loan program needs tweaking or other terms might change, a good loan officer will discuss the options with you at the time these issues arise and not sneak it in at closing. It is okay to trust your gut and it is okay to say no. I strongly advocate consumer education.
Trying to use legislature to cure shady tactics is altogether impossible, furthermore it will limit choices to consumers and drive up rates. The Bringham's themselves wanted to facilitate the interest only option to keep their payments down, is it up to the legislature to say "Sorry, but we don't think that is good for you."? The industry can only help rid itself of the lice by establishing equal licensing and disclosure requirements in addition to mandating a brick and mortar location within the state.
Many of the equity concerns are not solely due to the slow of housing market or ARMs, neg-am or not, but because buyers typically do not bring any of their own money to the closing table financing 100% or even more. I find many borrowers who do not make any improvements to the home and property to help increase its value. To compound the lack of gain they rely on grace periods and pay late which means even less money goes to the principal.
Touching on the sub-prime and risky loans made, consumers' credit issues are not dealt with, they continue with slow pays, escalating debt, and simply put, poor budgeting. How many people do you know buy a home and then have a new car in the driveway in the first six months? I counsel my clients at great lengths but some people only hear what they want to. I know "life happens" (read some of my other posts) but I can't stress the importance of taking care of your assets and your credit.
If you are one of the 2 million borrowers whose ARM will reset this year or next, you have some options. Call me I will be happy to review them with you or stay tuned as this post has opened up a whole new can of worms.
Regardless of who you choose to blame the reality is not an easy pill to swallow. I know this topic will be revisited ad nauseum as I plan to follow the happenings of the task force closely.
Or you could just ignore this advice and try to qualify for this home... too bad I'm not currently licensed in Cali : )