Posted by: Vince Gaetano
“‘Orphaned’ homeowners face foreclosure – Lenders ask federal government to back special billion-dollar fund” by Greg McArthur and Jacquie McNish on GlobeInvestor.com
This article fails to point out the obvious – these clients have fallen prey to a predatory lender and poor advice from a mortgage broker.
With poor credit and zero downpayment, these clients fell victim to 7%
lender fees, a 9.15% interest rate and an extended amortization that has
left them paying close to $40,000 over three years to a lender and still
owing $1,000 more then they netted to purchase the home to begin with. This
is on a $127,000 purchase.
These clients should have been given a plan to clean their credit rating and
improve their beacon scores, save some money over the next 18-24 months and
consider purchasing at a later date. This could have put them in a mortgage
with possibly half the interest rate they were charged, a 2.75% insurance
premium and a healthy financial situation.
Unfortunately, we have a lender that has earned about an 11% yield, a
mortgage broker that was paid handsomely and a homeowner that will need to
sell their home.
Who’s to blame? It sure isn’t the government. Maybe the lender should kick
in some of the yield they earned or the mortgage broker clean up the mess.
Education is key to purchasing a home. Sometimes the best decision is the
one you don’t make….here is the perfect example.