HOME-LOAN HUCKSTERING KEEPS COMING

You might have noticed that something called the subprime mortgage industry has cratered. Millions of people are losing their houses in foreclosures, big-name lenders are eating billions of dollars in losses, and America’s whole system of home financing is teetering. But if you see the ads of home-loan hucksters, you’d think nothing has happened.
Jim Hightower's Radio Lowdown
Jim Hightower's Radio Lowdown
HOME-LOAN HUCKSTERING KEEPS COMING
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You might have noticed that something called the subprime mortgage industry has cratered. Millions of people are losing their houses in foreclosures, big-name lenders are eating billions of dollars in losses, and America’s whole system of home financing is teetering. But if you see the ads of home-loan hucksters, you’d think nothing has happened.

These companies – some of which are on the brink of broke and facing lawsuits for their scurrilous lending practices – are spending more than ever on ads to entice new borrowers into the same sort of skewed loans that caused the present crash. No money for a down payment – no problem! Bad credit rating – that’s OK! Zero interest rates – we’ve got ’em! Come on in!

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To back up the mortgage companies, the National Association of Realtors is running a national TV come-on asserting that “Home values nearly double every 10 years.” Hey, it’s a sure thing, right? Well, actually, home prices are falling in practically every part of the country, home builders are cutting back, and no independent analyst sees an uptick anytime soon, much less a doubling of home values.

In addition to loans for buying a house, lenders are also trying to lure existing homeowners into playing the very dicey game of equity loans. These let a borrower draw out the cash value of their homes, in exchange for putting the house up as collateral. A Bank of America spokesman declared that this scheme is “a smart way for consumers to finance things.” Well, he might ask all the people who’re now losing their homes about that. Many of them took the home equity cash, only to see the value of their houses plummet, leaving them with a debt that’s far bigger than what their house is worth.

As one federal regulator of ads said of these questionable pitches by desperate lenders, “it’s a good time for consumers to be especially wary.”

” No Lull in Mortgage Pitches,” The New York Times, February 18, 2008

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