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Eric Hartley: Foreclosure tale: a $530K house on $13 an hour

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posted on Mar, 20 2009 @ 09:28 AM
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Here's a perfect example of the mortgage mess that was created by unscrupulous brokers/bankers and unwary/uncaring buyers:

www.hometownannapolis.com...


Foreclosure tale: a $530K house on $13 an hour

Someone ought to be in jail.

If you consider the case of Raul Hernandez for very long, it's hard to avoid the conclusion that the people responsible for it and the other insane mortgages that helped bring down our economy should be behind bars.

Here is a construction worker who was making about $13 an hour in the fall of 2006, but was able to obtain two loans to buy a $530,000, five-bedroom house in Annapolis with no money down.

Hernandez, who now works as a cake decorator at a bakery, has defaulted on the loan and been sued for foreclosure. He made his last payment April 1, 2008, and a public auction of the house is set for Wednesday.
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The house at 15 Landings Court is nice enough, well-kept but hardly opulent, in a cul-de-sac near

Forest Drive. It sold for $178,000 in 1999, $359,900 in 2003 and then to Hernandez for $530,000.

Let's do some simple math. At $13 and 40 hours a week, Hernandez makes about $27,000 a year, or $2,250 a month. An affordable mortgage payment for him, the Web site Bankrate.com tells me, is $630 a month.

Hernandez's payments were more than $4,600 a month - more than twice his wages. How could this happen?
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He got a $424,000 loan for 80 percent of the purchase price and a separate $106,000 loan for the other 20 percent. That's how people were put in homes they couldn't afford with no down payment. Put it on the card and worry about the future later: the American way.




But wait - all's well that ends well, right? Instant karma gonna get you...

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And here's the perfect capper to this American tale. Scott and Trista Neff, the couple who sold Hernandez the house in 2006, bought themselves a brand new mini-McMansion in Edgewater - more than 3,500 square feet for $727,000.

Why not? Money was cheap, and they'd just made a healthy profit on the place in Annapolis. Like Hernandez, they got two adjustable-rate loans, the main one an interest-only loan. In other words, they couldn't afford their house, either.

You see where this is going. The Neffs made their last payment in December 2007. In September, they were sued for foreclosure. Just what went wrong I don't know; they've long since moved out and I couldn't reach them.

The Bank of New York bought 106 Mulberry Court at auction in November for $447,950. For now, the stone house with blue shutters sits empty, a thick lock on the doorknob and a yellow "no trespassing" sign posted in the window. It hasn't been put up for resale yet, but people are interested.


Read the rest of the article for the blame game aspect.

[edit on 20-3-2009 by jsobecky]




posted on Mar, 20 2009 @ 10:06 AM
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reply to post by jsobecky
 


Talk about really dumb. If these folks didn't have the money for it, then they probably shouldn't have bought it.

A $500,000+ home on $13 an hour?? And then the folks that sold it made a profit and splurged it? This is like double dumb.

It's impossibly dumb. These folks are so dumb, that I'm starting to think that it's like alien mind control or something...



posted on Mar, 20 2009 @ 10:43 AM
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There are plenty of these kinds of stories out there. But it is really important to keep in mind that these 'liar-loan' based purchases are a tiny percentage of the whole problem. That doesn't excuse companies like Countrywide that aggressivley pushed mortgage lending based on either no documentation or what they knew to be entirely made-up (because their brokers were actively involved in manipulating appraisals and fabricating income data). Still, the notion that it was this kind of scenario that caused the meltdown (as so many people are wont to believe) is unsupportable by the facts.

The major lenders (responsible for the largest part of all mortgage lending) were not engaged in this kind of practice. However, the derivative industry that sprung-up around mortgage lending makes what Hernandez did pale by comparison. The difference is, Hernandez lost his home, his ability to borrow money and is decorating cakes. Those behind the derivative debacle got hundreds of billions in 'bailout' money, huge bonuses and are walking away without consequence. Go figure.



posted on Mar, 20 2009 @ 10:46 AM
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So Raul Hernandez, and Scott and Trista Neff, could not do simple math? And now the government is taking more money out of my paycheck and food out of my familys mouth because Raul Hernandez, and Scott and Trista Neff, were stupid? WTF?!?

You know what, those people were stupid, and the government has no right to penalize me for it. They have no right to take my money to cover stupid mistakes that I had nothing to do with.

[edit on 20-3-2009 by Dbriefed]



posted on Mar, 20 2009 @ 10:59 AM
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He got a $424,000 loan for 80 percent of the purchase price and a separate $106,000 loan for the other 20 percent.

That's a fairly common practice. Many states have laws that force you to have mortgage insurance if you have a loan for more than 80% of the mortgage. To bypass this they simply put the other 20% on a separate loan. While this is odd, it isn't unlawful or immoral. The lender should still check the buyer's income to see if they're able to pay on both loans. That's the real blame here. Mortgage brokers were just greedy to get commission on a big loan regardless if the person was able to pay the loan back.



posted on Mar, 20 2009 @ 10:59 AM
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Y'know, I am in absolute agreement than these brokers should not have put people like this into loans like this.


However...


If you think you can afford a half a million dollar home on $13 an hour, you probably also think santa will bring you your mortgage payment, and the easter bunny will spot you the cash if santa doesn't show.


Then again...


I also think we can blame society for these peoples' beliefs that they can actually afford these homes.


And for that...


We can blame the educational system, TV, fluoride, Monsanto's GM crops, et. al. Yeah, but mostly TV.



posted on Mar, 20 2009 @ 11:02 AM
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Originally posted by Unit541
We can blame the educational system

Funny that kids are required to attend classes to tell them they should shower and put on deodorant, but a class on finances is something you have to learn on your own when this really is one of the most important things you can teach young people.



posted on Mar, 20 2009 @ 11:13 AM
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One of the things that is not being pointed out is why would someone make such a silly choice.

I have a relative that lives in any area that has been hit with lots of foreclosures. He asked his Realtor how these things happen.

The answer surprised him. The Realtor said that the houses is this area rent for $2500-$3000 per month. But when all the money was flowing and you could get ridiculous teaser rates and 100% financing the initial payments on those loans were closer to $1000 per month.

So, many immigrants (legal and illegal) took those loans because they were cheaper than paying rent. So, you'd live in a nice house for a few years. The loan payments start adjusting up and you simply don't pay them or don't pay them in full. You can drag out a foreclosure for quite a while if you're smart.

Eventually, they just walk away from the house.

But, they lived there for several years at greatly reduced rent.

So who was the real victim?



posted on Mar, 20 2009 @ 11:13 AM
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reply to post by Dbriefed
 


See, that's the thing. It ISN'T the Hernandez-like situations that the government is making us (the taxpayers) pay. If it was, the bill for the bailout would be a fraction of what it is. What the government IS making you pay is the undercapitalized investments (and insurance products) that banks, investment firms and insurance companies (like AIG) made. They made huge, risky investments and never had the money to back them up if they went south (which they did). You're not buying houses. You're covering investors' gambling losses. Imagine if you only had, say, $1,000. But you placed a $35,000 bet with a bookie on the SuperBowl (because the outcome you were certain, was a sure thing and, besides, all your colleagues were doing it). And then... your team lost.

THAT, my friend, is what you are paying for.



posted on Mar, 20 2009 @ 08:46 PM
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So now, these bank notes are considered 'toxic assets'?

I want to make sure I'm politically correct.



posted on Mar, 21 2009 @ 12:15 AM
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When we were in the market to buy a house several years ago, our realtor kept showing us houses that were way out of our price range and telling us that we could put a little money down ( I forget how much) and then take a balloon mortgage out so in a few years time we'd have a huge payment due.
I told her no freaking way. Who can tell where they will be financially in 5 yrs time?

I told her to start showing us houses we could afford with a regular loan. We bought a house in our price range and we are doing fine with the payments.



posted on Mar, 21 2009 @ 12:26 AM
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Don't be calling the folks dumb, they just don't know what they are doing.
Its the people who lent them the money, that are criminals.
And then of course, sold security's based upon those unrealistic mortgages.
To foreign banks.
Yet still, the people who authorized this ridiculous credit, go un punished.



posted on Mar, 21 2009 @ 12:31 AM
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We bought in 2003 with no money down but we had a price limit ans stuck to it. It is barely affordable with one earner but doable and not too bad with two earners. If I didn't live in a rural area with a certain abundance about it I would sell. Everyone that thought $13 an hour could afford a half million dollar house were ignorant.



posted on Mar, 21 2009 @ 12:36 AM
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Regardless of whether or not the bank gives you a loan.....

YOU MAKE $13 AN HOUR

if you make $13 an hour and decide a 530k house is in your price range.....


blame the banks and investors all you want... of course people that should have realized that they can't afford it....

as far as I'm concerned it sucks for him but he deserves to be homeless.



posted on Mar, 21 2009 @ 12:22 PM
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This is why i'm opposed to bailing out the homeowners. They were just greedy idiots and i say let them suffer. I have never bought a home or used credit in my life.



posted on Mar, 21 2009 @ 12:23 PM
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Originally posted by CaptainCaveMan
Don't be calling the folks dumb, they just don't know what they are doing.


Well, that's being dumb!!!



posted on Mar, 21 2009 @ 04:56 PM
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Many people... on both sides of the street were gaming-the-system...

the brokers/lenders/sales agents/ appriasers/banks making MBS paper
(that's the Wall-Street side)

the immigrants/blue collars/slave wagers/middle class/Drs & Lawyers/
the 'Flip-this-house' bettors (that's the Main Street side)


each for their own reasons and rationality thought that the 'time-was-ripe'

Being that the Paulson originated 'bailout' model & pattern of relief for the bankers is an abortion of a plan...
and still, Geithner and Bernanke are using that rip-off template a whole 6 months into the collapse of the global financial-&-credit systems....

I have to wonder if the lowly (i.e. financially-challenged) people that were trying to 'game' the system weren't right after all.



posted on Mar, 21 2009 @ 07:41 PM
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Clueless people all a round who took part in sheer acts of stupidly that got us all into this mess . People like Raul Hernandez were willing to take out loans that even someone as mathematically challenged me can work out that he was never going to be able to pay it . The banks in there equal stupidly in giving loans to people who didn't have a chance in paying them back . You cant teach people common sense which has so sadly been lacking .



posted on Mar, 21 2009 @ 09:39 PM
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Originally posted by dbates

Originally posted by Unit541
We can blame the educational system

Funny that kids are required to attend classes to tell them they should shower and put on deodorant, but a class on finances is something you have to learn on your own when this really is one of the most important things you can teach young people.


is it funny or the result of something politically moral-less

we all know that one dollar of GDP now takes more than 5 dollars of debt

imagine what the "growth" in the economy would be should the masses be educated early on in life about debt and interest rates...and the like....and the preying nature of the financial industry....(substitute any for profit major players in any industry).....GEE see why this is not in any govt's interest or financial lobbyist's interest to educate people about debt....

appears to me not to be much of a puzzle

regarding people taking out loans that they couldn't afford they got greedy and this effected their rationale thoughts and the Future happiness they fantasized about getting rich allowed them to be willing to believe that houses would go up for ever (like some experts touted)....some people did make a killing..........they may have flipped multiple times and then got out..........but once you get that check or taste of flipping.......it maybe difficult to stop before the market stops you.........unless of course you understood the real estate market in the context of a speculative boom


[edit on 21-3-2009 by cpdaman]



posted on Mar, 22 2009 @ 12:17 AM
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IMHO they guys were gambling with the prices and loans...

They "buy" a house with this magic loan and will try sell the house again with a premium value and make some cash. I am sure many people have done that before and it worked... but this time the bubble collapsed.

[edit on 22/3/09 by blackcube]




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