Friday, August 26, 2005
Housing sales slowing down - house-poor Californians - mortgage fraud rampant
Recently I got a junk fax advertising 1% payment mortgages. I called and talked to Mike Clark with “The Mortgage Standard” - apparently an unlicensed outfit running the loans through infamous junk faxer Bridge Capital.
This fax violates just about EVERY California and federal mortgage advertising regulation.
When I asked for more information about the loan program, Mike sent me several pages about this “MTA” mortgage. Unfortunately, it contained no rate, no margin, no adjustment periods, no historical values for the index and not even the CURRENT index.
I called again on Wednesday and I asked Mike Clark numerous times what the current rate for the advertised mortgage is.
Repeatedly he told me that the rate is 1% for three years.
I asked whether there isn’t a margin and negative amortization. I used to be a mortgage broker, I know how loans work. He finally told me that there are TWO rates.
How can a lender charge 2 rates on the same loan at the same time?
It’s simply not possible. Mike Clark was doing his best to hide that the REAL interest rate is much higher than 1%. He finally told me to go to the WaMu website to find the terms for this loan!
He did NOT disclose that the loan comes with a 3 year prepayment penalty until I specifically asked about a prepay.
Thursday I called again and I requested to speak with the broker. I got to talk with Dan, who claimed to be an underwriter. He went through that same spiel “1% for 3 years” and he wanted my personal info (so they could run my credit and lower my credit scores and effectively trap me) before providing me with the loan terms.
I told him about creditsuit.org and that I was researching the loan that was advertised on their fax. I mentioned the many desperate homeowners who write to me about their foreclosures and that obviously many of the people who make these 1% *PAYMENTS* will be unable to sell or refi in 3 years when the loan goes to the fully amortized payment. Apparently there is NO payment increase cap.
Dan ran some numbers for me. According to Dan, and based on the current index (which will most likely go up), a $400K loan will end up with $10K in negative amortization per year. Assuming that’s fairly accurate, the borrowers who make only the minimum payment will owe probably about 10% MORE in 3 years because the index is likely to go up.
This loan program will put many borrowers in foreclosure:
1) 3 year prepayment penalty
2) Balance increased by 10% and maybe even more
3) Monthly payments will increase substantially in 3 years
4) Housing prices may well be LOWER, making it impossible to sell or refi
Inability to refi or sell = foreclosure
Dan was NOT happy about my assessment and especially my complaints about the fax advertisement. This program is actually NOT for people with bad credit, bk, foreclosure, etc. as advertised. When I asked whether the California Department of Real Estate approved the ad and whether they are licensed he became quite angry and eventually hung up on me. I called back a couple of times to get his last name, unsuccessfully. Their # is 888-469-7826 - maybe you can do better.
Dan told me how popular this loan is and I believe it. Even I couldn’t get the terms after numerous requests, many people probably think that the rate is 1% and even if they actually read the disclosures or closing papers, it’s often too late to cancel.
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