The American Nightmare
By Ms. Gumby
Anonymous bank worker...
What the hell is the American dream anyway? Getting married, having children, buying the house, the car? Well if part of the American dream is owning a house, then lots of folks are going to have to just kiss that dream goodbye.
Many people are losing their homes. Well, not really "their" homes, but the homes that the banks own that they are trying to pay off and eventually own. The biggest problem Americans face today is the notorious ARM, or adjustable rate mortgage. The sub-prime mortgage. You see, many people that never should have qualified for a home loan, did at the hands of greedy predatory lenders that pushed as many people as they could through the process offering what the industry refers to as the "teaser rate". It's an interest rate that is fairly low and attractive.
Now for those of you that are not familiar with how a mortgage works, the interest rate determines what your monthly payment is going to be. So... if you start with a low rate, your payment is also fairly low. Attractive, huh? Yes, well that is what the borrowers sees as well. Now, after about a year or two (it's written into the loan documents otherwise known as the "note"), the interest rate changes.
For example, Mr. Jones may have started with a payment of $560.00 a month, but his two years is up and now his new payment is 900.00 a month. Mr. Jones used a predatory lender to get his mortgage, so his income was falsely represented (inflated), making him qualify for much more than he could even afford. This predatory lender assured Mr. Jones that if he just "hung in there" and made the payments for a while, he could refinance it before the interest rate change came up, and he would be just fine. Mr. Jones was pretty excited to get into his first home, so he signed away.
Meanwhile, as the months passed Mr. Jones faithfully paid his mortgage, month after painful month, oftentimes even letting his other bills go just a little further past due, all the while dreaming of the day he could refinance into an even lower payment. He hoped everything would be OK, and that he could pull through this. Eventually, he could stretch no further, and something had to give. With a shut off notice on his utilities, and a garnishment on his wages, he had to skip a mortgage payment.
Finally, the pre-determined date that the interest rate was set to change came. As written in the agreement,, The LIBOR and index rate published in the Wall Street Journal were used by the mortgage company to determine the new interest rate. the economy was bad, so the interest rate ended up increasing significantly. Poor Mr. Jones had done all he could, but now he couldn't pay anything.
To make things even worse, Mr. Jones had set up his Mortgage to be escrowed, a process where the customer requests the mortgage company to charge an extra payment amount each month and save it in an account to pay the taxes and insurance for the property each year. Well, Mr. Jones lives in Florida, and the taxes went up there due to the hurricanes. The insurance went up to. This increase, of course, HAD to be passed on the Mr. Jones in his payment. How else would the mortgage company be able to pay the taxes and insurance?
Mr. Jones shot himself. Just kidding he didn't really shoot himself. He called me, and I told him to sell his property because he couldn't afford it. He begged and pleaded with me to lower the payments to whatever they were originally. I reasoned with him that it was a possibility, but wouldn't really help since the taxes and insurance had gone up. I went over his income and found out that his expenses were more than his income. Mr. Jones said that he would work 2 jobs, sell his car, and cut his expenses but it was plain to see that he never should have been approved for this home in the first place. Mr. Jones needed to just sell the property if he even could, before foreclosure happened.
Predatory lenders have caused America to rethink the lending process. It is no longer as easy to get a home loan. Many of those who were able to get a predatory lender to get them qualified and that were able to somehow make good on the payments can't even qualify for a refinance now.
I often talk to Customers in Florida, and in many other states who say they can't sell their property now because every house on their block is for sale. There's too much competition. Besides, you can now buy a brand new freshly built house for less than an old one because the property values have decreased so much.
There have been a reported total of 925,986 foreclosure filings — default notices, auction sale notices and bank repossessions — on 573,397 properties nationwide during the first six months of the year. That's one foreclosure filing for every 134 U.S. households for the first half of the year.. The Foreclosure rate jumped 55% in the first half of 2007 alone.
I will let your imagination take you from there. Consider the effects on everything else. Consider the delicate balance of our ecosystem and also consider how everything is connected, etc... and consider what is going to happen here. Enough to make you sick. Well that's my job. To save all of them I can, or more importantly to decide if foreclosure is indeed the only option.
That's all folks. hope I didn't shock you too much. But get ready for shit to hit the fan, cuz it aint over yet by a long shot.