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Neg Am Loans/Refi or Sale

By Connie Grove

Mortgage and Lending with Jamestown Lending

March 25, 2007 07:39 AM

I have a large amount of clients that purchased homes with the Negative Amortization loan in the past 2 years. In most cases, the client did not fully understand the type of loan or the payments involved. With the refinance boom where I am located, this has created a monster and headache for most of us. The clients don't understand that they owe more than what was borrowed, they didn't realize that they were put on a teaser rate in the beginning, which now they can't afford to live in the home they are in. There only way to save their investment, which is what buying a home is all about, is to refinance and/or sell their property. Since most of the homes went on the 80/20 program, there is little equity left in the home. So what would an honest person suggest to their client? I dread seeing homeowners loose their home because a loan was never explained fully in the beginning before signing the dotted line. Any comments are welcome. It is a difficult subject for many people in this industry.

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Bob Sloop, Consultant, Indianapolis, IN

RS Mortgage Consulting - Indianapolis, IN

Connie, You must have read my blog a week or so ago. I had this happen to me recently. The clients were 83 yrs. of age, and knew nothing about the neg am loan they were in. Thank you for your post as I think this needs to be as publicized as possible.

Mar 25, 2007 07:52 AM

Connie Grove

Jamestown Lending - San Bernardino, CA

Oops, didn't know you were watching. It has become an extremely poor situation with a lot of people out here. You know the old saying. "Keep it simple", but don't give them the full explanation.

Mar 25, 2007 07:57 AM

Jacob Morales - Arizona Mortgage Planner

US Bank - Scottsdale, AZ

I never allow my borrowers to get into a neg am loan when it is their primary residence. Ever. Any loan officer who does usually is just focused on the commission and how much money they can make on the back for adding a 2 year prepay. It's a scam.

At the same time borrowers really should spend more time researching what they are getting in to and not just signing at the bottom of the line. It amazes me how many people don't read their disclosures or closing paperwork and just "hope for the best".

Mar 25, 2007 08:02 AM

Anonymous

I have been very fortunate because I am not in your situation.

Jacob - I agree that it is amazing how many people just sign their lives away.

Mar 25, 2007 09:08 AM

You are absolutely correct Jacob. The borrower needs to do their due-diligence and not rely so much on the loan officer to make it work. Either they qualify or don't, they need to find out if they qualify on a fixed or an adjustable loan.

Mar 25, 2007 09:19 AM

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Connie Grove

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