Thursday, July 2, 2009
Predatory lending....it's back!
Predatory lending is back, this time the predator is the government though. Our brilliant leaders have now decided that Obama's foreclosure prevention legislation did not offer enough help with it's 105% LTV refi limit. The brainiacs in Washington have increased the loan to value limit all the way to 125%. Bravo, it only took them 2 years to forget that programs like this is why we are in this mess. Not that 125% LTV will help many Calfornians. We will need 200% LTV before it helps.
Another government program designed to turn homeowners into debt slaves. Most homeowners are not that financially savy. That's part of the reason they are in the mess they are in. They didn't take the time to find out that they could never hope to afford a home that was 10x their yearly income. A broker or agent told them, "I can make your payments $xxxxx" and that was all they needed to hear. The same thing will happen with this loan program. A banker or broker will tell them "I can get you into a fixed rate loan for $xxxx/mo" and they will take it. They will then be trapped in a home, unable to sell for a decade or two. And the worst part is they will probably have traded a non recourse purchase loan, that they could have simply walked away from, for a recourse loan. A loan the bank can garnish their wages, take their car, their stocks and their beloved singing fish in order to satisfy when they default. And the banks are not going to tell them about that because they get fees from the refi and a nice big fat check from the government for every refi they do under this program.
Aint it grand, you and me get screwed twice by the same program. It will slow down the correction, AND our tax dollars to towards the payment the bank recieves from the government.