By George Boelcke, FCI
American Chronicle, February 17, 2008
There is a great line from Homer Simpson that often comes to mind, as more and more of the mortgage crisis continues to develop, and to seemingly get worse: "for once in my life I'm confused." And here are some of the reasons:
Why hasn't there been legislation passed to mandate income verifications, simple plain-English disclosure and banning mortgages where the payments don't even cover the interest, and the balance actually goes up? It would have prevented many kinky brokers getting millions of people confused between "you're approved" and "you qualify for this loan and these payments."
There is a huge amount of blame to be shared in this fiasco. But I haven't heard any company take any responsibility for anything. Nobody has stepped forward and acknowledged their role in millions of families now living a financial nightmare. Hearings aren't the same as solutions, and "ought to help families" has no connection with tangible actions. What a relief and blessing that the FBI has stepped in to do some serious digging and an extensive criminal investigation. I just hope it goes far enough to investigate individuals and not just the 14 firms currently being looked at.
Everybody got rich beyond belief while throwing millions of families under the bus and killing their financial hopes, dreams and credit. I don't know who should do what, if anything, but I do know that any decisions, or help, need to have a whole lot more urgency. Every month that goes by, it'll be too late for more and more families who will have their life altered for years to come.
But here's what I do know:
Experts say pre-pay your loan when you can. I disagree: Once it starts raining, don't fix the roof – get an umbrella! Get some emergency savings in place, instead. If you do run into a problem, need the money to refinance, or to avoid going into arrears and dropping your credit score where there'll be no way out, you'll have some savings. Once money is pre-paid on your mortgage loan it's spent and can't be accessed anymore. If and when you're out of the woods, you can always apply the savings to your balance at that time.
There are currently huge inconsistencies in what lenders will work with, won't consider, refinance, do on a forbearance, or consider for workouts. Remember that lenders will lose over $70,000 on an average foreclosure, and they're just as scared as you are. Half the people who start getting into trouble don't even call their lender and just give up. THAT is never a solution.
On the other hand, what your lender wouldn't do last week can change this week. Don't give up, keep asking, and make sure you get to the right people with your lender. You do have to fight harder for this than they will! It's your life and your home. In these volatile times your lender doesn't know any more than you do. Just make sure that a solution is really a solution you can live with for some time. Ask a lot of "what if" questions of your lender AND of yourself, something you likely didn't do before you signed the loan you're in now.
Isn't it funny, in a sick way, that almost every lender is now advertising fixed rate loans? These are many of the same lenders who are waist-deep in the nightmare they were instrumental in creating. Now a bunch of them are the "good guys" that want to help you?
For most people, the most important criteria of who gets their business should be the credibility of a lender. Just because someone pays money to be on TV or the radio does NOT make them credible. It only makes them advertisers. Credibility is measured by what a company does – not what they say, and there is now ample evidence of what the cost has been to ignore that difference.
Yet there is a huge company, Primerica Financial Services, a division of Citigroup, that has made vast numbers of refinance mortgage loans through a product they call SMART. NONE of these are adjustable rate mortgages. Read that again: Primerica has never originated any ARMs with their refinance products (done through Citicorp Trust Bank). Their clients are watching the mortgage crisis from the sidelines and the safety of a fixed-rate term and consolidation, thinking: "that could have been me in a foreclosure…"
Because they refuse to do false, misleading, or gimmick advertising, they need to work harder to make themselves known, in spite of doing the right thing, in the right way, all the time. How sad that credibility can so often be bought by simple advertising. But if you're looking for a second opinion, some options, or perhaps a way out, it might be worth your time to get in touch with them.