More bad loans...

I was reading MSNBC this morning and ran across this article about the pay option loans...


These “pay option” adjustable-rate mortgages gave borrowers a choice of payments each month. They also carried a feature that came as a nasty surprise to some borrowers, called "negative amortization." If the homeowner opted to pay less than the full monthly amount, the difference was tacked onto the principal. When the loan automatically “recasted” in five or 10 years, the owner would be locked into a new, much higher, set monthly payment.

They estimated in 2010 55K of these mortgages were coming due....

It stated the lady that worked for Wachovia at that time 2006, was to sign 45% of her customers to that type of loan. She refused to do it and found another job...and we all know what happened to Wachovia...

When I was selling Real Estate in 95-2000 the housing market was good and pretty stable in AZ. We had cleaned up the mess from Charles Keating in 86 and compared to now it was pretty easy to sell your home for a set price.

In all of the houses I sold, which was not a lot but I remember I did sell million dollars worth of property my 1st year, and a little more each year after that...I only made one deal with creative financing...

I had a client that was a brand new Doctor working in an office where I knew the office manager very well. This lady Doctor was looking for a nice home...I looked for a few days and visited several dozen homes then I took her and her husband out to view these selected homes.

We found one for 350K that was a bargin. I'm sure it had 70 to 80 K in the wood work alone...there was oak wood everywhere and set on the water of a prestigious development. They loved the house. So driving back to my home in my Caddy I asked them what they were planning on putting down and I remember exactly what the man said..."Well, we will be getting about 1,500 back on our income tax in a few days...."The rest I do not remember as plainly because I was so ill after hearing this he muttered something about having a gun or two he could sell.... We needed about 40K to close this house and they basically did not have a penny!

I went to a special lender who I had done a few loans through and spoke to him about this client...He finagled around and got them a 90% 1st loan at a good rate then, I believe was about 7% and a second 10% loan for about 15% that she could refi in 6 months... we got the seller to pay closing costs by putting in a full price offer... By the end of the year this Doctor was raking in over a million dollars and they did refi that home within the 1st year.

As of last year they were still in that house because I ran into the husband at my local Walgreens Pharmacy where he was now a pharmacists...He worked for the VA when I sold him his home...he made 25K a year as I remember... It was his second marriage and he had kids older than his wife...He retired from VA and went to work for Walgreens. I was pretty sick and was picking up a prescription at the drive through and he recognized my name and came to talk to me. He thanked me again for getting them that house.

I remember the day we closed on that house I walked inside behind him and his wife and he said, "I never thought I would own a home like this."

I did meet some interesting people while I was in Real Estate....but then I always seemed to meet interesting people everywhere I worked...