I'll bet he got one of those adjustable rate mortgages with little going to principle. Lot of house with smaller monthly. The rates adjusted up, payment balloons and your house isn't worth what you paid too much for. Toss in the kiss of death second and you're screwed.
Advice to all...f### 2nd mortgages. Don't do it.
I would agree with you here, the timing is right for them to have had an adjustable, they refinanced when it adjusted and acquired a second at that time. He doesn't specify what the second was for, but at that time, many lenders were doing 80/20. The 80% was the primary mortgage and because it was 80 or less, no taxes or insurance were required to be escrow-ed. The 20% was the second and it allowed for the lack of escrow.
Depending on where the guy lives.....there was probably enough increase in home value to support the loans or they wouldn't have been done.
Yes, but I'm talking about a few years ago. Don't those low principle loans go up significantly when principle payments start.
You start out with low payments and no principle. Put very little to nothing down, so you have no equity. You hope the market keeps going up so you refinance to a conventional loan. Market goes down, principle payments kick in...you're screwed.
Of course it could be I don't know what the hell I'm talking about. 
ARM's usually have a max amount of how much the interest can "balloon" to. Most are 8-10% above the existing rate on the mortgage.
It's enough to "gently persuade" a homeowner to refinance......which puts more up front money into the lender's coffers. The lender gets around it by saying, "we'll just tack those closing costs into the loan and it won't cost you anything at this time."
Well why didn't they save some of huge income for a rainy day? When my husband was laid off we had insurance that made the payments but his new job pays less than the one he had before. We went to our lender, explained the situation and they adjusted our payments so they were more in line with our income. We didn't have to use any special program or anything. Just a pleasant conversation with the loan officer. Why not try something like that?
Cindie
Some lenders have been much more receptive to helping people who have been laid off, or lost their jobs, etc. than others.
From what I have been able to determine....there's absolutely no logic to who gets helped and who doesn't.
Count yourself among the lucky ones.
I love how the actual foreclosure was completely skipped over. From late payment sent directly to new owner showing up out of the blue.
As I'm one of those people who show up at the door ..... you would be surprised how many people think they are being helped by the mortgage company...only to find out they have been foreclosed on.
In the last year....I personally did two evictions that both homeowners were working with the bank to avoid the foreclosure. Both had sent the bank several thousand dollars...thinking they were getting loan modification....only to find out that the bank kept their money and still foreclosed. I have done others in the last 3-4 years in the same situation. They have been VA, FHA and conventional loans. With VA and FHA being the worst.
One of the problems to this situation is that Loan Modification and REO (asset recovery) are two totally different departments....most often in different states.....often in different COUNTRIES - India being the primary country handling asset recovery.
The homeowner is working with the Loan Modification department trying to get all the paperwork submitted, reviewed, more paperwork submitted, etc.....not realizing that the Loan Modification department is NOT talking with the REO department who is proceeding with the eviction.
The homeowner send money to the Loan Modification department to get the process completed....again...not realizing...that the money being sent to LM
does not get applied to the loan itself....therefore the REO department sees it still as a deadbeat loan.
All that stimulus money that went to the banks to help homeowners.....didn't. Only a small fraction of homeowners who have applied for LM have actually been helped. Again ....Obama and his merry band of idiots are lying when they stand at a press conference or town hall meeting and say the American homeowner is being helped.
Out of about 7 or 8 homeowners that I know, who have asked for loan modification, only 1 has received it. The husband had lost his job. They did the 3 payments on time, then the loan switched over to the modification. In their specific case, though their house value had dropped about 20% from what it was 2 years ago, they only had a 60% loan to new valuation. I'm sure that had a great influence with their lender to work with them.
This is happening all over the country....which combined with house values dropping in most places - some as much as 50-60%.....is causing homeowners to just walk away from their homes and not even try to keep their homes. I read an article yesterday was all about how homeowners are just leaving and going to a rental because it's cheaper than their house payment.
(
http://articles.moneycentral.msn.com/Banking/HomeFinancing/HomeownersWhoJustWalkAway.aspx )
In many cases....the homeowner has to walk away prior to them being foreclosed, so that they are able to rent someplace before the foreclosure hits their credit report.
As long as foreclosures, or "walk-aways" continue to happen...particularly at the current rate....home values are going to decrease.
When I do the reports I do....I pull 6 comparables on each one. 3 current lists, and 3 solds from within no more than 180 days (some banks want as low as 60 days). If the comps are more than a half mile away from the subject property, I have to explain why.
If out of those 6 comps....if any are foreclosures....they are usually at 30-50% value of what they would be as a traditional resale. 30-50%!!!! Now make at least 1 list and 1 sold out of those 6 a foreclosure. 6 comp houses....all have 1000 SF. 2 of the lists are $100k each and are traditional owner occupant resales....the 3rd is an REO property listed at $55k. 2 of the solds were listed at $100k---one sold for $95K, the other for $93K, the last an REO sells for $48k. All things being equal - lot size, condition, age, SF.....the bank is going to look at the valuation of the subject property, based on an average 90-120 day sale, around $82k.....with maybe pricing the subject house at $55-65k on a "30 day quick sale" if that high depending on how many comparable properties there are on the market within a .5 to 1mile radius of the subject property. These numbers are all based on the subject being in average or better condition. No damage to the property. If there is damage, that brings the subject pricing down....sometimes minimal like a missing light fixture or two.....sometimes major like walls/floors missing, windows broken out, HVAC/plumbing missing, frame house that hasn't seen a paint brush in 20 years.
Put several of these distressed properties - which is what they are, even when in perfect condition - into a subdivision or neighborhood and watch the surrounding house values go in a downward spiral.
While we may not
want the government helping people out with their mortgages.....we
need them to help in order to keep our own houses from devaluing....
So much of this country's economy is based on the housing industry....just as it is on the auto industry.
We....America....is in a vicious Catch-22 and I, for one, have no idea how we are going to get out of it.
It isn't very comforting to know that those idiots in Washington don't have any idea either....
