Cancel My Mortgage!

Mike,  Sounds like we need to make sure we are covering our a**es.  I have always assumed my disclosures provided the neccessary information as they were written by attorneys.  I just hope I don't get dragged into something I thought was disclosed properly.

Yeah Mike! My favorite sentence is your last one!! 

Our system of law, right or wrong, presumes that the consumer deserves protection.  That's the reason for all the required boilerplate legal disclaimers and disclosures.

No matter what you say to some people they just won't get it.  Anyone out there have teenagers?  Ever try to warn them that driving badly can cause them to die?  Think they believe you?  Their logical minds tell them that it's true.  Yet, when they assess the risk, most don't know anyone that's happened to, so they think there's a pretty small chance, and it won't happen to them.

I know some people were not educated.  I also know many were, and they made risky decisions.  Today, when they say "I didn't understand that" it is really more like "I didn't believe that".

I have had several clients along the way that I warned off.  Most never listened and I lost business because of it.  I blame the consumers, if you are taking out a loan for the largest purchase of your life then you owe it to yourself to become educated. 

Drugs are available, but we don't all use them...life is about making choices. 

Many times I would try to get a buyer client to investigate their loan and or use a more reputable lender, but they were glassy eyed with the prospect of their dream house being attainable RIGHT NOW. 

The entitled attitude of the "give it to me now" generation is exhausting and as a REALTOR I find it difficult to take responsibility for some buyer's impulsive, rash and often uneducated decision making. 

A very respected real estate attorney whom I know put it best.

The public perception of the world is that they are lambs and licensees (both in real estate and mortgages) are wolves.

License law is set up to address this.  We license agents, require CE and have a review process to protect the lambs from the wolves.

You could put this another way.  Change "lambs" and "wolves" to consumers and salespeople.

If you don't want to be perceived as a wolf, you may be in the wrong business.  The essence of consumer protection is this:  consumers are presumed to be innocent and in need of protection.  Salespeople are perceived to be interested in sales, not in the best interests of consumers. 

Eric,  I agree with you totally, but if you as the realtor has made every attempt to share your education with a buyer and they decide to go ahead against your advice, what are you to do? 

I can't be the only person who has come up against this...

"...From the borrower, the loan officer, the underwriter, the lender and even the real estate agent."

...and the investors that over incented the product to begin with. Was 3-4 points of YSP really necessary?

Lesley, I'd keep a paper trail with dates and times and notes on discussions you've had with that buyer.

If it goes to Court, the burden of proof may be on you.  That seems unfair, but if a consumer says they were misled, you'll want to be able to recite conversations and dates on which they occurred, in order to demonstrate that you made every effort to educate the buyer. 

Eric, it is more than one and lasted the course of years.  I have paper trails and journal notes on every deal.  I have been in business since 1988 and have worked in every environment.  This isn't an issue about what decisions "I" made, it is my opinion on the decisions of these buyers.  The loans were there for them, they seemed like an easy solution and they took the risk. 

I don't want to enter a pissing contest on who is legally responsible for poor decisions.  I want to express my opinion which doesn't agree with all (and I prefer it that way).

Jimmy - Just do your job the way you are supposed to and you should be fine.  That includes following all RESPA, all Fair Credit, and so on.
Susie - Thanks!
Eric - I think these people bought the loan based on the min payment.  They were sold the loan based on the min payment.  This loan has always been one of my least favorites loans - Primarily because of the way it is sold.
Vicky - good thoughts.
Eric - I don't want to be a wolf.  If anything I want to be an Angel.
Lesley - Oh no, I've seen it time and time again.   You aren't the only one.  The new loan that's being sold to the wrong people is the Mortgage Acceleration Loans (look at the featured video today)
Michael - You bet!

I wanted to bring in the same conversation from over on Seesmic.  Feel free to join in the conversation there.

I would say that in almost every lawsuit in America, the responsibility cannot lie with just one person, but that doesn't stop some people from getting sue-happy and trying to get cash where they can. I once met a man who would visit local businesses, check how compliant they were with the Americans with Disabilities Act, and if he could make a lawsuit out of their negligence, he would. That's what I call a gross abuse of the system!

Great points, and couldn't agree more with your last statement. There are more than a few parties to blame, and singling out any of them lets the others off the hook. At the end of the day, greed took over and everyone helped enable it. Now we're going through the hangover from the excesses, with no Advil in sight...

I think that it goes back to some people trying to over buy! People trying to buy more than they can afford! We must due our best to inform the buyer and give them the best available loan for each individual.

I think Options ARMs were and still are a good product - for the RIGHT consumer. I won't sell it to just anyone. Case in point: I once had a young couple who wanted one because they said it will help them in the initial years because of the low start rate, and their father told them to get one. I sat them down and showed them how the loan would work against them (Note: I already knew their overall financial situation). They went away convinced it wasn't the right loan for them. And it wasn't! They went with the fixed rate FHA loan instead which was better suited for their needs. It's just a case in point to show that we, as Loan Officers, are ultimately responsible for ensuring the consumer not only understands the options that are available - both pros and cons - but to help them determine what truly is the best product for their needs, not what's best for our pockets.

OK. First of all, I just want to say "YES!" I hope this lawsuit revolutionizes the way loans are done in the future. I'm all for, whatever will prevent us from EVER being in this type of market again!

Second of all, Wachovia plans to do away with all disclosures? Is that what you're saying? Is that even legal?

To a large extent, this is Ameriquest on a larger scale, and a twist that they did it in front people with poor explanations of how it really worked!

Lisa - although there will be different reasons for it in the future, you do realize that everything is cyclical and WE WILL BE IN THIS TYPE OF MARKET AGAIN, right?  While it is true that we are experiencing a record number of foreclosures, we also simply have a record number homes compared to downturns in other markets.  While it is true that in the early 90s short sales were mostly people working things out with their lenders AND PAYING THE DIFFERENCE, USUALLY AT THE TABLE, and later generations think they should be let off scot-free... that has to do with the fact that we are now several generations away from people who taught us about reasponsibility.  WE are the generation of parents with the highest divorce rate ever - THAT didn't teach us too much about commitment or responsibility.  WE think someone else should bail us out all the time, and it is certainly the other guy's fault.  But, WE are learning the hard way, and our children will learn from us, as will their children.  But, 4 generations from now, when I am long dead... every lesson we learn now will be largely forgotten.

One day I was in history class, not paying attention and passing a note.  My teacher slammed his hand down on my desk to get my attention and said "Young lady, learn about this lesson now, or suffer through learning the lesson first hand later.  Of one thing you can be certain, history repeats itself."  I must have been the only one in that class - or everyone else was still passing notes.

I think the most interesting and possibly scary part of this is the idea that perhaps the buyer can say "I'm not paying." Where will THAT leave the market? Unfortunately, I think there's going to need to be more government involvement because we're doing a pretty bad job of policing ourselves! The blame lies with all parties, including the lender, the buyer, the real estate attorney, and, yes, even the real estate agent. It's scary sometimes how fast real estate closings take place! The borrower just sits and signs and signs and signs and doesn't read a thing!

January - I have some Excedrin...
Frank - It's more than just that.  But the point of the story is that if this Judge decides in favor of the borrower, does that set a precedent for all borrowers to just cancel their mortgage?  CHAOS!
Lewis - You are correct!  Right loan for the right person. 

Lisa - That would be a very very bad thing.  How would you like 25% of the homes in your area to stop making payments?  And if I'm thinking correctly these homes would not be able to be sold easily.  Wasteland.  And NO Wachovia isn't doing away with disclosures, they did away with the entire Neg Am Loan.  SEE:Wachovia eliminates all Neg Am Loans
Ronald  - They did..
Vicky - Wonderful stuff!  Keep it coming.
Liz - Yup!  That's exactly what I am thinking...

Hey, I love the conversation!  Thank you all so much.  Have a great and safe 4th of July!

Mike,

I liked your last sentence the most too... I agree that everyone involved in originating those types of mortgages from the buyer to the underwriter and everyone in between is responsible for the mess that has ensued. However, I also believe that there are many people who could afford their payments when the loans were originated who cannot afford their payments now because of the current state of our economy. The neg am loans were definitely originated irresponsibly but across the board people are finding themselves in a position in where they need to decide to either make a mortgage payment or feed their children and in that kind of a situation the choice is obvious. If someone loses their home to foreclosure that hurts but they can always rent... People cannot starve their children!

Mike,

Option ARMs, like interest only have a place in the market. Some lenders, like WaMu, sold them to people that shouldn't have had them and didn't understand them. However again, we get the spray can when we should use the finishing brush for the paint job.

I have to say that I'm with Leslie here--I don't feel that as an agent who informed clients repeatedly that 100% loans are NOT a smart move, that agents shouldn't be included in the blame game!  Frankly, I feel that the responsibility lies on the shoulders of the Buyers who, as ADULTS, made lousy choices!

Just my two cents worth!!

Chrstopher  - Thanks.  Incidentally I had a Neg Am Factory operating next door in my office building.  They finally went out of biz.  Came in the middel of the night and hollowed out the office.  Employees showed up on Monday and nothing was there.  They were gone.

Fred - Yup!

Debe - I think Agents should very much be on the list.  Maybe not you.  But agents in general.I also argue that buyers should not shoulder all the blame.  They come to professionals and rely on those professionals for guidence.  Presumably that would be us.  If your Doctor gave you misinformation "Just take the Blue Pills 3 times a day" and taking themm caused serious harm - would you say, "That's ok, it was all my fault?"  Probably not.  I argue that the same rules apply.

If you are a Buyers Agent giving advice to a client they should understand what they are getting into or you are not doing your job.  However they only hear what they want to hear sometimes and no matter how many times you ask "Do you understand"  they just nod without always paying attention

Jeff - and all - please understand 2 things from an agents perspective (1) Every client who hires ME does not follow every piece of advice I give, no matter how clearly - and they SHOULD make up their own minds if they disagree with me - it's their life; (2) Some clients come to an agent looking for a property after having already secured financing.  As long as it is secure financing and on the surface makes sense, that's their business.  None of this is to say that agents who intentionally took the ostrich approach and stuck their heads in the sand shouldn't shoulder some of the blame, but I just want everyone to know that a realtor can not be responsible for the actions of her clients, any more than a child can be responsible for the actions of a parent or an employee can be responsible for the actions of a boss.  Let's keep things in perspective. 

I think that in some ways this proves the arrogance of our industry.  We think that we explain it, we think that we disclose it - but in reality the words we say are going in one ear and out the other.  Like all products, these had a niche.  Like the ambulance chase, there are plenty of out of work attorneys who will find their niche in this real estate market. Case in point!!

Mike,

It is definitelty everyone's fault that was involved with these loans, if they were not for the right customer.

It's a real shame because when it was World Savings alone that did these products, and did them right, we had the lowest default rate in the country.

Great product, bad timing, and double my money overnight borrowers.

I wonder how many job applications McDonalds got this year from mortgage brokers who never should have gotten involved.