“Affordability” Loans — Not FHA Mortgages By Any Standard

by Peter G. Miller
October 25th, 2007
Related FHA Stories
Story Tools

It’s always great to dress up stuff by creating new and innovative names.

Instead of firing people, we “downsize” companies. There, doesn’t that sound better?

One of our commentators, says that many borrowers have been helped by affordability products.

Let’s see. Could there be other names for loans which are leading so many people to foreclosure and financial distress?

Oh, here’s one. HUD Secretary Alphonso Jackson calls them “suicide loans.”

The 2007 head of the National Association of Realtors, Pat Combs, says we need to do something about “exploding ARMs.”

Here are a few other tasteful names for “affordability products.”

How about unfair and unconscionable?

How about legalized fraud on a mammoth scale?

Here’s a question: If affordability products are so great how come lenders and investors are losing billions of dollars? Why — as RealtyTrac.com has reported — were foreclosure rates in August 2007 twice as high as August 2006?

Let’s “rightsize” our language and stop the nonsense. Toxic loans hurt people, lenders and investors. The usual causes of foreclosure — illness, accidents, death and divorce — are always in place, but the reason we have so many foreclosures today is that:

*Loan officers got bigger commissions by selling high-cost subprime loans to borrowers who qualified for lower-cost FHA mortgages.

*Underwriters didn’t verify income claims.

*In too many instances, physical appraisals by licensed appraisers were not used to verify home values.

*Wall Street brokers did not fully disclose risks to investors.

*Stated-income loan applications generated increased fees for less work.

*Prepayment penalties for subprime borrowers that continue after initial re-sets are nothing less than instruments of predatory lenders.

*Federal regulators napped for five years.

One thing you can say about affordability products — they’re not FHA mortgages. And that’s a costly difference for a lot of borrowers.

  •  | 
  •  | 
  •  | 

 

This entry was posted on Thursday, October 25th, 2007 at 2:20 pm and is filed under , . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Are you a Mortgage Lender specializing in FHA Loans? Join our mortgage directory today! Homeowners click here to appy for FHA Loans