Dirt

Did the Canary Croak....

when the giant Mortgage Money Mine caved in?

Wanda Waitress isn't hearing any chirps. In the Spring of 2004, Wanda, a Las Vegas renter with an income of less than $30,000 a year, was told by a Loan Broker that she could buy a home. Wanda had been chatting with the Broker for a few years while she served him breakfast and felt she knew him. The Broker was kind enough to bring her Loan Application Papers into the restaraunt saying that all he needed was her signature and he'd fill in the rest. Two days later, Presto! Wanda was pre-qualified for a home loan of $230,000. She went into a Real Estate office and met a nice gal who showed her some houses. On her next home viewing trip, the agent told her that two of the homes Wanda saw and liked on Tuesday were sold by Thursday, putting her under enough pressure that she signed a contract on the first house she saw that day...a cute little 1500sf 3 bedroom, 2 bath bungalow with spa for $220,000. The closing costs added to the sales price brought it up to $230,000 in a 100% financed loan. But, Wanda's wildest dreams were coming true so she didn't ask questions, she just signed everything. It was Magic!

$10,000 in Closing Costs on $230,000...Hmmmm

A year later, Wanda's friendly Loan Broker told her that the value of her home was up to $315,000 according to sales in her area. "Rich Wanda," could re-finance her home and pull out cash. He got her a new loan with payments pretty close to the old one, all with just her signature on the loan application and other documents. Wanda got $30,000 cash after closing costs of another $10,000.

Wow! Free Money.

Now, in 2007, Wanda's dream is a nightmare. She got her Mortgage statement las week and discovered that her payment had gone up 20% which she will not be able to pay for more than a few months. Her friendly Loan Broker was sorry to tell her that he could not get her a new loan because her "Loan to Value Ratio," was too high. After pocketing up to $18,000 from two loans to Wanda, the Broker never did explain the downside of his magical loans. Wanda has no idea to this day what information he filled in on her loan application paperwork. She did not read any of the 50 or more documents she signed at the Escrow Company to close each deal.

Do we start the Blame Game?

Her Loan was an Ajustable Rate Mortgage with an initial low rate good for 2 years but then it could tgo up every 6 months with a cap at 12%. Her low "teaser," payment of $1200 a month could go as high as $2700 per month. Wanda's take home pay averages between $2200 and $2500 a month. She now owes $270,000 on a home with a current value closer to $260,000 because the Las Vegas market has lost up to 20% of its value this past year. She spent all the $30,000 she got in her re-finance.

How does Wanda get out of this mess?

Stay Tuned. There is a solution to her problem.

The canary's still breathing, but won't be singing much until the dust clears from the cave-in of the sub-prime money pit. At last count over 30 Sub-Prime Lenders, who make loans to folks with less than excellent credit, have stopped lending or gone out of business since Nov/06. The fictional tale of Wanda is distilled from several real life stories. The Writer has been a full time Realtor since 1985.


				*Dirt*



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