Financial Advice from a Softball Dad

[Sam]

Predatory lending is not a myth- there were several small mtg shops that set-up mortgages with ridiculous terms with the idea of securing property- I have seen it personally. These loans did not go near freddie or fannie

Small percentage, but Sam I assure you it is and was no myth

So, Jonriv, I'm not doubting what you are saying, but to what end would a small mortgage company wish to secure additional inventory in a declining market? There aren't many direct lenders who keep their own paper....at least not in California.

I'm not sure who the victim really is in the scenario you describe. Many minorities claim that they are victims of predatory lending, but when you look at the situation, the people claiming to be wronged end up benefitting.

The bubble was created because of lenders, at the direct behest of Fannie Mae and FHA, virtually creating buyers for entry level homes they could not afford...which allowed the people selling those homes to upgrade and so on and so on. The increased demand throughout the entire market drove prices through the roof until the defaults started happening and the lenders were overwhelmed with REO inventory. This situation could have been mitigated had the loan servicers been willing to short-sell the homes at the beginning of the collapse. They were too stupid to do that, resulting in billions of taxpayer bailouts to Fannie Mae.

[Pale Rider]

Local scumbags here were caught buying up really bad houses in bad neighborhoods...then they got a unscrupulous company to 'reappraise these dumps...Of course for WAY WAY WAY more than they worth and what they paid for them...they would then find people unqualified for a standard loan but qualify for some govt guaranteed loan...who had no intention of living in that house, and didn't give a rats ass about the debt...the seller, the appraisers and buyer would split the money and default and disappear...
They got 2 whole years when they were caught...served 11 mos
But had fraudulently taken over $5 million over a period of 3 yrs...
I'll do a few months in a cozy Federal prison for $5 million....

[AlwaysImprove]

I am not commenting on predatory lending or not.

Boatman's bank in St. Louis, used to make big bank on low income houses in downturn markets. They have a very long history of issuing loans they were pretty certain would go bad in downturn. They felt if they could get properties at 30 cents on the dollar, they could sit on them forever and still make a ton.

They own large swaths of properties in poor communities. If they get enough of them in a block together bordering on better community, they will rehab. Otherwise they pool the properties into investment companies and let slum lords rent them out.

If they are not able to make money with rehab or slumlord they consider bankrupting the investment company. Since a lot of this housing is in poor communities, they can almost always get some government to pay them.

They do this by proposing that they have to go bankrupt, or tear all the homes down. Tearing the homes down would put the rest of the homes in those areas on huge downslide. If houses go on a big downslide, chances for a mass rehab go way up, so bank still wins. Since most of these governments are run by community organizer types that panic at the thought of loss in affordable housing and seem unable to run a spreadsheet, they often panic and give the bank the money, in exchange they get nothing.

I believe that most large urban areas in older cities have companies/banks participate in this game. Not the newer cities on the west coast, but back east.

[jonriv]

[quoteSo, Jonriv, I'm not doubting what you are saying, but to what end would a small mortgage company wish to secure additional inventory in a declining market? There aren't many direct lenders who keep their own paper....at least not in California.

][/quote]

Because when the were aquiring them 2000 - 2007 it was not a declining market

[Sam]

Jonriv,

I'm still having trouble finding a victim in your scenario. People got into these homes with zero to very little money down, got to stay in them for free for at least six months, and then had to go back to renting.....which is what they were doing in the first place. Their realtors could easily alert them to issues with their loans, as well as the escrow/title/attorney (depending on which state you are closing). I'm aware of situations where the buyers are in on the scam.

I have seen many hispanic realtors and lenders take advantage of their own people who don't speak english. The non english speaking people think they can trust another hispanic person as their realtor and/or lender only to find that these people, many times, are the ones most willing to take advantage of them.

[exD1dad]

There was a Beverly HIlls Broker who bought run down houses with a straw buyer in very nice areas back in '05 & 06 then had his lackey appraiser & notary (who got pennies in comparison to this scammer) lie & commit fraud when he refinanced the homes taking Millions out on dozens of houses. the banks then foreclosed, the straw buyers got their credit ruined (mortgages were never paid as they refied right after purchase) Notary & appraiser lost their licenses forever & the RE Broker only lost his license for 5 years & is already back in business with his established Irainian clientele Opps I forgot I have to be PC.. his Persian clients hahaha

This guy had done 100 mil several years in a row, but it all comes down to 1 word...GREED

[PDad]

There was a similar scheme in OC where the scammers bought houses and then flipped them to straw buyers. Two of them got prison terms of 8 and 10 years.

- http://www2.ocregister.com/investigatio ... houses.php

- http://latimesblogs.latimes.com/lanow/2 ... -case.html

[jonriv]

[quoteI'm still having trouble finding a victim in your scenario][/quote]

There are a few victims-

1) It has always been a popular scam among immigrant groups-usually from one of their own(for many decades) In many cases these people are financially ruined and their credit destroyed- as well as their dream of home ownswership crushed. There were also many cases of current homeowners who refinanced into predatory products that then found themselves with outlandish baloon rates etc..... These "financiers" tended to pray on the naive and ill-informed.

2) We are all victims- these practices help to falsly inflate prices and then make the crash even deeper and longer. As mentioned before- it only takes a small percentage of these to make a mess of things. Banking and credit works like a pendulum- when something goes wrong one way, the adjustment to the other way is strong ans swift. Banks are now much tighter with their credit criteria and it takes longer and is more difficult for even qualified borrowers(although it is still easier to get a mortgage now than 30 years ago) It will take a few more years until things settle down

[jonriv]

Now back to the subject!!!!

For those of you that have not started a college savings program. Please start now!!!! Do not wait!! Time really is money. Start with as little as $25 a pay period, make it automatic-every bit can help! A sensible investment plan with dollar cost averaging can really make a difference

As I mentioned before- birthday money, christening money, middle school graduation money etc..... all should be put in.