Saturday, January 9, 2010, AM | Leave Comment
Before I say anything further, I want to mention that an overwhelming majority of the mortgage refinancing companies – in any shape or form – have legitimate businesses and that includes your neighborhood bank as well. They will help you refinance your home without any questionable action on their part and within the law, fair and simple. Don’t you worry about that!
However, once in a while you hear about some good folks that are scammed to the point that they are left penniless or debt-ridden for a long time to come. The frequency of hearing these kinds of stories have been, unfortunately, on the rise lately. I just don’t understand how anybody can make money off of these good and decent hard-working folks and be happy with themselves.
The last name and the town where it happened have been withheld from this post even though it’s public knowledge.
The story goes that Willie, at the age of 57, bought a small home for about $108,000 back in 2000. He never went to school. That means, to this day, he cannot read or write. As the housing bubble inflated further, a handful of the refinancing cave-men, who are just pure and simple scums roaming the surface of our beautiful earth and were waiting for preying on folks like Willie, sprung into action.
Nothing but the scums and the schmucks, like lions hiding in bushes waiting on their prey. For the lions, it comes natural. It’s in their genes. For the scums, well! it seems to come natural. It’s in their genes.
By May 2005, after refinancing, he owed $137,000 on the property. By October 2006, after four more refinancing offered by the scum, Willie’s loan balance shot up in the stratosphere to the tune of $238,500. That’s more than double his original loan. $51,000 of the difference came from points, fees, prepayment penalties [how can that happen? Willie is not able to make prepayments] and negative amortization.
Willie sued the broker-turned-scum
The story goes that Willie had had it with the scum and he sued. He said that the refinancing began with phone calls from a mortgage broker-turned-scum promising him a lower monthly payment. As Willie could not read, he took the scum’s words on what he was getting.
While Willie’s case ended in settlement, and he remains in his home today – thank God for that, mortgage brokers in most states have no responsibility whatsoever to act in the best interest of their clients – what’s known as fiduciary duty.
The problems then can be three-fold:
- One problem with the system is that the scum had no obligation to act in Willie’s best interest – how else would the scum make money from the good folks like Willie? The system – whatever and wherever that is – allows these kinds of scams.
- Second problem is the scum got paid up front – 2% to 3% of the home’s purchase price every time when refinancing.
- There is no way I can blame Willie for not doing his research because he is unable to read or write. But if you are not an exception like him and I am sure you are not, please do research on your own and find a good company for refinancing.
What can you do now to protect yourself?
While the U.S. Congress and the Federal Reserve are putting their heads together to come up with a solution, your best move is to hire a real-estate attorney – you ought to be able to afford one when you compare the fee with Willie’s loss.
In a Nutshell
To find a reputable mortgage refinancing company and to make no mistakes like Willie, ask friends and family for recommendations. When you find a couple of them, ask for references. If the lender seems unwilling, find another one. Once you have the loan approved and before you accept it, get the documents reviewed by your attorney. Believe me that would be money well spent.
What do you think?Facebook.com/doable.finance