Friday, April 01, 2005

Mortgage-Buyer Beware

One of the financial radio shows I regularly listen to is broadcast on Sunday mornings, from 11am to 1pm CST, on local station KTOK. It's called "The Whinery Mortgage Show." The host, Chris Whinery, is a mortgage broker whose candidness and no-holds-barred view of his industry is awfully refreshing. Personal experience (and those of acquaintances) has led me to hold a not-so-shiny view of mortgage brokers in general. But this guy Whinery I like. (KTOK does broadcast online, so if you have a bit of time and happen to remember, I'd encourage folks to take a listen. His bluntness can be very entertaining. And the show which follows — it's dubbed "The Financial Diva" — can be worthwhile, too, from time to time.)

Anyhow, one of Mr. Whinery's favorite whipping-boys is the mortgage firm Ameriquest. Generally he has stopped about a centimeter short of calling them criminals; it's because of his repeated scorn for shaky mortgage practices that I paid attention to this article regarding oft-accused Ameriquest:

LA Times:   "Doubt is cast on loan papers"

Huh ... three different people have the exact same 401k account balance on their loan papers. Now why would anyone possibly be suspicious of that? Idiots, I say. Idiots.

Also related to the mortgage world:
USA Today:   "More home buyers go with ARMs"

You have to wonder how the home markets and foreclosure arenas will look in 6 to 8 years, when all these 5-year ARMs have had a chance to show their teeth. Adjustable-rate mortgages were built to transfer the risk of higher rates from the creditor to the lender, and that's exactly what they do. They're fine if you're going to move soon. And if the property value doesn't stagnate or (heaven forbid) depreciate. All too often, though, they're used as a way to get borrowers into homes and loans for which they could not otherwise qualify.

The words "recipe for disaster" come to mind.


— Posted by Michael @ 1:05 AM


Even scarier than the ARMs are the interest only, negative amortization, and 40-year loans people in hot housing markets are being tempted into. If this real estate boom turns out to be a real estate bubble, a lot of people are in deep trouble. Hey...that rhymes!


You aren't kidding. Some of the products that have made their way into the mortgage arena lately (which lenders have created in order to keep business at or near record levels as rates notch up) are downright unnerving.


Lowest rates in 40+ years...nowhere to go but up...ARM sounds good to me!

Anonymous Anonymous
, at 8:25 AM, April 13, 2005  
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