I take the time to read up on the daily Real Estate / Mortgage buzz when I eat my lunch. Today I came across this http://money.cnn.com/2007/05/01/real_estate/bubble_buyers.moneymag/index.htm article. It really "bunched my panties" as the saying goes.
At what point do consumers who enter into ANY mortgage let alone an ARM or Option ARM get to take some of the responsibility for not knowing what type of loan they are in? To anyone who thinks they can get a 30 year fixed loan at 1% - stop it and actually read what you are signing. If you are refinancing you have 3 days to take your papers to a real estate attorney. I recommend fellow Active Rainer Chris Sevick to all my clients if they feel the least bit skeptical about their loan documents. Guess what? Not ONE client has called Chris to go over their docs. Whether I did or the closer did a good enough job explaining the loan the client was entering into, is irrelevant. That client had the tools and resources (name of a disinterested 4TH party) to help explain things further.
I am not that naive to believe that everyone who signs up for an ARM or Option Arm knows exactly what is what. Because there are many loan officers who themselves didn't know how an Option ARM works or how an ARM actually adjusts. They advertised the 1% rate because THEY COULD. Was it ethical to do so? I'll let everyone else be the judge of that. In my opinion it was completely irresponsible to advertise a 1% rate. Lenders did that because they know that would make the phone ring. The phone did in fact ring and a lot of business was written because of it. But remember back in 2004 and 2005 when a lot of ARMS and Option Arms were originated the economy appeared to be strong and nobody was complaining. Now however, Detroit can't make any money selling cars, companies are moving big parts of their operations to India and the Real Estate industry is in a "correction" stage. So the consumer is fighting back by saying it's our fault. I simply think they are wrong.
What bothers me the most is the entire Mortgage Broker / Mortgage Banker industry gets pigeon holed into the "you are an evil predatory lender" bucket when an article like the one I have linked gets read. I recently lost a purchase transaction because the sellers agent said I was "one of those brokers" and not a bank. The fact of the matter is this: It only takes 1 rotten egg to make the fridge stink. Yes there are un-ethical lenders out there that prey on people and yes I feel like they should be held accountable. But as soon as the first person claimed they were a victim of predatory lending because they agreed to enter into an ARM it became the "IN" thing to do and it just snowballed from there.
I must confess I have in fact written 1 Option Arm in my career (just over 4 years). That client has since refinanced into a fixed rate mortgage. Does that mean I am to blame for all the woes in the sub prime market today? I say again the entire sub-prime implosion is not my fault even though I originated an Option Arm.
To the consumer who is looking for a mortgage - ask questions ask A LOT of questions. If you still don't understand your potential loan ask more questions. Get with a Real Estate Attorney and ask them questions ask the Escrow Agent who is closing the loan questions. Mistakes have been made in our industry that is a fact. However, YOU are now responsible for the mortgage that you enter into because you have the tools, references and the knowledge TO ASK QUESTIONS before you sign anything.
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