NY MAG: How Four New Yorkers Got Into Subprime Messes

[El Pinko]

http://nymag.com/news/intelligencer/44763/


Not Ready for Subprime
New Yorkers behind on their mortgages try to save their homes. How’d they get in such a mess?

* By Arianne Cohen
* Published Mar 3, 2008
One in 40 New York City homes with a mortgage is in foreclosure, and there are 26,000 subprime loans in the city. “A lot of these people were okay paying 5 or 7 percent mortgages, but when their monthly payments exploded, they ran into trouble,” says State Senator Jeff Klein, who is running sessions for borrowers to meet with mortgage servicers and bank counselors. “We need to force lending institutions to sit down with loan holders and modify the terms,” he says. Invitations were sent to 20,000 New Yorkers in or near foreclosure. Arianne Cohen spoke to four of them at Klein’s first forum, in the Bronx, on February 23.

(Photo: Arianne Cohen)

George Mascia
69, charter-bus driver, East Bronx
Why are you here today? I’ve been in foreclosure less than a month.
What happened? My mortgage payment went from $2,482 to $3,500 a month. I had a two-year teaser rate. Every six months it goes up 1 percent, to a maximum of 13.2 percent.
Who’d you talk to? I spoke to Wells Fargo. I tried to get them to keep the rate at the teaser rate, 6.8 percent. They might, but my credit’s bad. I’m in a home that cost us $35,000 in the sixties. We refinanced three times, and we owe $400,000.


(Photo: Arianne Cohen)

[shain from kane]

Cost $35,000 in the sixties. Why didn't you pay it off in the eighties, and never put it

up for collateral again?
Tou must have been satisfied with the house to live in it that long. So, why would you risk it for any reason?

[Warpy]

3. I know people who did that to improve the place

because 60s kitchens, especially, were not designed with a cook in mind.

Other people did so to pay off medical bills and credit card debt. The latter was a good idea, since it dropped their interest rate considerably.

A court has ruled ARMs and interest only loans with balloon payments inherently unfair. We'll have to see how that one goes as it grinds its way though all the courts.

[Lance_Boyle]

1. "Did you know about the adjustments?"

"I was told that it increased every six months, but I didn’t realize the impact it would have."

Boo. Fucking. Hoo.

FAIL --> lose house.


"How’d you get the second loan?"

"We listened to Ernest, and didn’t read. Ernest said, 'Don’t worry, everything’s okay.' Everything’s not okay. That’s our fault, we should have read."

I applaud this person for owning the mistake.


"We refinanced three times, and we owe $400,000."

Boo. Fucking. Hoo.

Used house as piggybank, lost. Where did all the money from those refis go?

[Warpy]

2. 12 years ago, when I was locking in a mortgage rate so I could

start a house hunt in earnest, I had to pick up my papers and head for the door to get them to stop talking tommyrot about ARMs and start talking about a 30 year fixed mortgage.

They have been doing a hard sell on ARMs for a very long time. Since mortgage rates went down after I bought, I'd have been in the catbird seat in the short term. However, those things will always kill borrowers in the long term.

I don't wonder that a lot of people who aren't as stubborn as I am got stuck with them.

[hatrack]

4. READ. THE. MORTGAGE. CONTRACT.

Also, can we banish the word "home equity loan" from the English language?

It's not a "home equity loan". It's a second, or third, or (in this case) fourth mortgage.