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Do You Have a Stated Income Loan?
By plrprousers | August 30, 2009
Several factors propped up the real estate bubble that just recently helped expose the weak links in our economy leaving many desperately seeking foreclosure help. Two of the biggest factors include ridiculously low interest rates and the constant spreading of the risk mortgage companies assumed when making loans. There were a lot of ways this was done, but the primary mechanism was “bundled mortgages.”
“Bundled mortgages” were made when lenders pooled the promissory notes of many mortgages into one bond to sell in the bond markets. These bonds had a theoretical value based on the money all the mortgage borrowers were supposed to pay back over time. These financial instruments were then sold to other banks, investment brokers, Fannie Mae, and Freddie Mac.
Everyone in the mortgage lending business made a lot of money during the boom. The refinance segment of the business also boomed, with historically low interest rates driving this market.
The ability to “share the risk,” that is, sell a mortgage that would normally be considered high risk, to other banks and to the public at large, drove underwriting standards into oblivion. The mere existence of “ninja” loans, i.e. loans made with No-Income-No-Job-no-Asset verification should have been a HUGE red flag to everyone. The rationalization at the height of the market was that anyone could “flip” any house in a short time frame and make an easy profit. In fact, market conditions briefly supported the self-deceiving idea that anyone could sell any house at any time.
Banks got more and more “creative” with payment options and types of loans to qualify more and more people… Some of the common names of loans they invented include the aforementioned NINJA, as well as interest-only mortgages.
There never seemed to be any actual “risk” to mortgage lending. As it turns out, banks and mortgage brokers actually broke lending laws as they squeezed more and more money out of everyone during this frenzy.
They offered loans with ridiculous penalties and terms. They offered 3 year adjustable rate mortgages to people who could afford the first payments under the initial interest rate, but clearly could not afford the mortgage after the rate invariably went up. They lent to people with too much credit card debt. They wrote “negative amortization” loans that ensured the loan balance would be greater than the price of the house in three years. They levied penalties at the last minute.
These practices gave rise to the term “predatory lending.” These unscrupulous practices are and always have been illegal. Predatory loans bring about sudden financial crises for homeowners through penalties and increased payments, often causing families to lose their houses, or be forced into the expensive bankruptcy process.
If you got a “predatory loan,” you may actually have a strong case in United States Federal Court to get
* Your mortgage modified by the Court to have lower interest rates,
* Penalty payments refunded,
* Legal fees for the lawsuit paid by the bank that violated the law,
* Any negative entries made against your credit rating by the mortgage lender removed, and
* Possible punitive damages reparations.
Again, this is only if you fell victim to “predatory lending practices,” which requires that laws were actually broken that applied to you at the time you closed on your loan. How can you tell if you got a predatory loan, and what can you do about it?
First, statutes of limitation limit your options if you closed on your mortgage or refinanced before January 2005. If you closed on your loan since Jan. 2005 and you have supporting evidence like copies of emails and letters to and from your mortgage broker and bank, you may have a strong case with a high probability of winning. You can find thorough pre-qualifying questionnaires around the web, and a good one at the page linked earlier in this article, to help you determine your status. If you appear to have a predatory loan like a balloon mortgage, or you didn’t get translated copies of all the paperwork, there’s a good chance you do have a predatory lender.
You can contact an attorney who knows about this kind of case, or you can contact a company to do forensic audit that would be used as evidence in your lawsuit against a predatory lender.
Ensure that any forensic audit company is very clear about the cost of their services. The first review of your paperwork should be free, and they should give you an objective assessment of the quality of your case. They should be very clear about their rates.
Any attorney you contact should already know about this kind of case, as it would be very expensive for him or her to do the research on a new kind of case on your dime. When you speak to an attorney about suing a predatory lender, that attorney should become yours, representing only you, not a real estate company, and be very clear about payments of retainers and fees. If they have been properly prepared for this kind of case, they should take your case on a contingency basis, only requiring an initial retainer to cover the costs of the initial court filings. Most, if not all, settlements have required the predatory lender to pay all of the borrower’s legal fees.
An attorney well-versed with mortgage laws would know that he should file an injunction against the lender as one of the first items of business. This freezes your loan until the matter is settled or goes to court. So, even if your situation looks hopeless because you can no longer afford your predatory mortgage payments, you could quickly get relief.
Good luck with your case!
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