3 Responses to “NC Banking Commission Still At Large”

1. borninSouthPark Says:
   December 22nd, 2009 at 12:03 pm

   ” that “foreclosure…became a problem that could affect everybody.” Uh, no. ”

   How is NOT everyone’s problem? I am not talking about a “social” problem, I am speaking of the issue of collateral damage. Any and every foreclosure in your VERY zip code affects comparables — be it for your appraisal, when you are trying to sell your home and set an asking price, or simply calling up the bank to apply for a HELOC.

   Plus banks, the job market and economic Darwinism have already fleshed out 95% of those people who had mortgages they should not have. What is happening now is a compounding of the issue furthered by individuals who are losing their job, or who are long-time jobless and have exhauseted their savings, and can no longer make their mortgage payments. That is what is troublesome at this point — for all of us.

   I had a friend who worked for a subprime mortgage lender in Charlotte. I met him for lunch one day and told him I was thinking of selling my condo and buying a new one — because he was my friend, I’d use him for my new mortgage. I had a credit score of 786 FICO and was putting down in excess of 100k in down payment. He laughed at me, and said the best he could do for me was give me a 13% fixed, 30-year mtge. I thought he was joking — he wasn’t. That was their rate floor for mortgages. I asked him, quite bluntly, “if you did not know me, and I called you, and presented to you with the financial stats that I have (exceptional credit, large cash down-payment, zero credit card debt, etc.) that would be the best you could put me in? And would you do it?” To which he replied yes, on both accounts. He said it happened regularly, and since HIS pay was 100% commission, he said he wouldn’t turn down the opportunity to make “several thousand dollars in commission” on just one mortgage.

   Here is a perfect example: I ended up getting a 4.0% 30-year fixed for my new home. I got this through my credit union, mind you (not some national bank that needed a bailout). My *financed* amount is $250k because I put down over 100k. My monthly payment is $1,193., which represents less than 5% of my gross monthly income (normally, dependent upon the state, banks will not allow your mortgage to be more than 30%-40% of your gross monthly income). If I had gone with him, at 13% interest my payment would have been $2,765. What a difference! Were I to lose my job because the company went under, my max unemployment benefit would be more than ample to pay my current mortgage. But what if I had the 13% mortgage interest rate ?? No way. Not even close.

   This is what has been happening to a lot of less-than-financially savvy people. And if you think for one minute that there aren’t that many people out there that fall into this trap, think again. I had a woman who worked for me, a single mother who was completing her MBA in night school of all freakin’ things, who made about 45k a year. She regularly utilized payday-advance loans to pay her bills, of which I knew because they’d call me to verify her employment status whenever she took out a new one (which was 2-3 times per month). She used them because her friend told her about them. One day I had a frank conversation with her: it turned out her credit was terrible due to her divorce. Yet, it was NOT terrible — she did not even KNOW that certain items fall off your credit report after three years, others finally resolve at seven. She had no idea! The few items that had 30- and 60-day past due marks on her credit, were due to her ex-husband not paying for accounts they shared jointly. We immediately went on-line and purchased her Equifax report, which showed a fairly outstanding record, and she applied for a very low interest Chase card in 30 seconds! Now she could utilize that in a jam, instead of 395% APR payday advance loans. And through some more inquisitiveness, we determined her “jams” came really from some simple mistakes she was making, and once those were rectified she was almost immediately not in need of bridge financing to close the gap. If someone like this could commit these egregious errors, how about the folks who bought all of those starter homes for $110k in southwest Charlotte, where low-end builders ram-rodded people into using their “preferred lender” who ultimately shafted them with the same type of crappy mortgages, regardless of their income/credit/debt status? When individuals like my friend, who goes to church SEVEN days a week, volunteers in the community heavily, tithes a very subtantial portion of his income — could work for as unscrupulous a company as he did, and still pigeonhole many creditworthy individuals into subprime loans, what does that say?

   Furthermore, the oft-overlooked fact is that the differences between a bank/thrift/credit union/mortgage lender/mortgage broker are oftentimes blurred or overlooked — but are TREMENDOUS. These differences greatly affect how state and/or federal regulators oversee your work, and the loans made. Many, many of the private mortgage lenders (such as my friend’s company, which was a small shop in Charlotte with 100 employees) were not even regulated by the mortgage lending laws in place!

   Here’s a good read on this; this article also sheds light on the percentage of subprime loan originations:
   http://www.mcclatchydc.com/251/story/53802.html

   Foreclosure affects EVERYONE around them — if you drive into my subdivision and the very first house on the entryway is foreclosed, has 3-foot high grass and weeds, all of the windows are curtainless, and vandals have stripped the house of copper wire (and there are shingles broken off outside, broken glass windows, etc), how does that help ANYONE who lives nearby? Or high school aged children, who easily break in to these vacant homes and smoke dope and drink beer after school? Or the homeless, who become squatters in some of these homes? How about the subdivision in Inland Empire, California, where federal DEA agents discovered that over one hundred foreclosed homes were being utilized as “grow houses” for marijuana! There goes the neighborhood!

   http://www.woodstockinst.org/for-the-press/woodstock-in-the-news/neighborhoods-suffer-as-crime-follows-foreclosure-(the-associated-press-state-&-local-wire-)/

2. Jeff A. Taylor Says:
   December 22nd, 2009 at 12:38 pm

   Yowsa, born. Let’s see where I went wrong.

   I just fundamentally object to the universal victimhood vibe Pearce gave off, for a couple of reasons. One, the banks KNEW these loans would blow up and didn’t care. For that reason alone I am not terribly interested in helping them “avoid” foreclosure when foreclosure is the first, necessary step in bringing reality to the picture. Two, as you document, a string of very bad decisions usually is at the root of a foreclosure, further shrinking the universal risk of foreclosure.

   And I understand that foreclosures can whack at property values. We had one in here in Providence Plantation a couple months ago in which the bank let a property a block away go for less than tax value. Yeah, that is blow to comps but such is life in a highly leveraged real estate market. The years of over-leveraging without foreclosure have still pumped up values more that the current correction has brought them down.

   The root of the issue with distressed properties is the lack of incentive for anyone to do anything about them until they get really bad. For example, a fire in a starter-home off of McKee Rd. some months ago left the structure boarded up with a tarp on the roof. Obviously there is some issue between the lender, the insurance company, and the former occupant. Why neighbors have let it drag on this long escapes me — it obviously should be repaired or condemned and bulldozed. Yet it still sits.

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   December 22nd, 2009 at 5:05 pm

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