View Full Version : One homeowner's tale of lending woe

02-22-08, 01:59 PM
One homeowner's tale of lending woe
Windsor man bought million-dollar Healdsburg house he couldn't afford (http://www1.pressdemocrat.com/article/20080210/NEWS/385281042/1033/NEWS01)

How could a Windsor man who supervises trash truck drivers afford a million-dollar Healdsburg home?

In this case, by tripling his income on the loan application.

Roberto Gomez said he gambled, with assistance from his mortgage broker, that the 3,400-square-foot, five-bedroom, four-bath house would continue gaining value so he could refinance into a less-risky loan. It was spring of 2005 and Sonoma County’s housing market was booming.

“I was really happy because it’s a big house. They kept telling me the values would go up. I figured I could refinance and fix my payments,” Gomez said.

But home prices began falling in Sonoma County a year later as the housing downturn took hold. Gomez’s dream home became a nightmare of debt. He owed more than the home was worth and his mortgage payment more than tripled to $6,200.

“It was ridiculous,” Gomez said.

Selling was the only alternative to losing the home to foreclosure. The house is now in escrow after the lender agreed to accept a purchase price for less than what Gomez owed on the mortgage.

Gomez said discussions with the broker at Investors Trust Mortgage identified a dollar amount that he needed to put down for his annual income so that he could qualify for an adjustable-rate mortgage. Gomez would not have qualified for the loan had he put down his actual earnings, $6,000 a month, rather than the $19,500 income he stated.

“She never told me it could happen where one day you don’t have enough money for the payments,” he said. “She was positive.”

An Investors Trust official said the company’s mortgage brokers rely on borrower honesty when completing stated income loans and that they fully inform clients of the loan terms.

“If (the income) looks like it’s out of line with what they do, you have to go with what they say,” said John Brown, manager for Investors Trust’s 20 offices. “We do not make the decision of whether it’s a go or it’s not. You’re taking the information from the borrower and then you’re presenting it to the lender.”

Brown also disputed that borrowers don’t understand a loan’s costs, saying terms and payments — both at the beginning and in the future — are disclosed several times.

Gomez has sought help from Marty McCormick, owner of McCormick and Co., a Santa Rosa mortgage broker. McCormick said that no one is blameless in the deal.

“The borrower signed it, but the borrower doesn’t know how to calculate the income needed,” he said. “They wanted to live in a nicer home, no doubt about it. If we were doing our job as an industry, we should never have let the man buy this house. And we’re hearing this story again and again.”

Brown said that stated income loans were expanded to more borrowers as lending became driven increasingly by credit scores. These loans also became popular because they required no documentation of earnings.

“A lot of borrowers went to that because it was easier,” Brown said.

For Gomez, his wife and teenage daughter, using a stated income loan to purchase a house beyond their financial means was all too easy.

The family is back living in the Windsor home they had refinanced, using money from the equity to help purchase the Healdsburg house. Gomez rented out the Windsor home during the two years the family lived in Healdsburg.

Gomez faced losing the Windsor home because the loan payments on the adjustable-rate loan were set to more than double to $3,900. Gomez, with assistance from McCormick, convinced the lender to lower the interest rate and payments for the next four years to hopefully give Gomez time to save money and perhaps regain some equity.

“Right now I will try to save this house,” Gomez said. “I’m starting over.”

02-22-08, 02:40 PM
One homeowner's tale of lending woe
Windsor man bought million-dollar Healdsburg house he couldn't afford (http://www1.pressdemocrat.com/article/20080210/NEWS/385281042/1033/NEWS01)

I read this and I just can't feel bad for the guy:

Roberto Gomez said he gambled, ... that the ... house would continue gaining value.

I sometimes gamble, too. I like poker. I understand that when I gamble I might lose. I don't gamble in games where the stakes are higher than I can afford to lose. I also don't gamble in games where I don't understand the rules.

Gomez would not have qualified for the loan had he put down his actual earnings, $6,000 a month, rather than the $19,500 income he stated.

He overstated his income by over 300%? There are words for this. Lying and fraud come to mind.

“She never told me it could happen where one day you don’t have enough money for the payments,” he said. “She was positive.”

He commited fraud because "she was positive"? What a friggin' idiot. This guy needs to be investing in bridge property in Brooklyn.

“The borrower signed it, but the borrower doesn’t know how to calculate the income needed,” he said.

This isn't calculus. All this requires is a basic understanding of mathematics and access to a mortgage calculator, which is easy on the internet. I've taught high school and middle school math. I tell all my students that they need to know basic math to get by in the world. Some of them pay attention and learn as much as they can. Others don't and then get talked into mortgages three times higher than they can afford as adults.

Sure, the mortgage broker who sold him this loan is criminal. (I wonder, do they have a fiduciary responsibility to clients?) But this guy is also culpable, on many different levels.

02-22-08, 04:38 PM
Another couple of items along the same line

"I'm Going To Strip This Mother!" (http://cheryl-lynne.blogspot.com/2008/02/im-going-to-strip-this-mother.html)

Most women are content to spend time with family, friends, contributing to society, prudently managing the family finances, maintaining their health and appearance, baking, decorating their houses, sewing, gardening, shopping(!)...Then there are women who are debt-ridden, greedy real estate flippers "stripping and ripping" their way across the country:

In home foreclosure, if it's not nailed down ... (http://www.sptimes.com/2008/02/19/Business/In_home_foreclosure__.shtml)
Twenty percent of owners strip houses before banks take them back.
By James Thorner, Times Staff Writer
Published February 19, 2008

Mike Burgur returned from work last month to interrupt a break-in at his rented Clearwater Beach condominium. The intruders were stripping fans off the ceiling and the knobs off the doors. They had carted out the refrigerator and yanked up a toilet. They'd even pulled the plates off electrical outlets and unscrewed the faucet handles.

As he stepped around the broken eggs and jelly jars on the kitchen floor, Burgur had no trouble recognizing the culprit: It was his own landlady.

"I'm going to strip this mother," the 70-ish property owner raved to Burgur, as she ripped apart the 950-square-foot unit on Island Way.

http://bp0.blogger.com/_dtY0VOFMWMM/R7uPCzU4eeI/AAAAAAAAArQ/ncnWrSDbj3g/s400/tb_HomeStrip_450.jpg (http://bp0.blogger.com/_dtY0VOFMWMM/R7uPCzU4eeI/AAAAAAAAArQ/ncnWrSDbj3g/s1600-h/tb_HomeStrip_450.jpg)

http://bp1.blogger.com/_dtY0VOFMWMM/R7uSXDU4egI/AAAAAAAAArg/J72oJ6LeHWA/s400/ransackedhouse.jpg (http://bp1.blogger.com/_dtY0VOFMWMM/R7uSXDU4egI/AAAAAAAAArg/J72oJ6LeHWA/s1600-h/ransackedhouse.jpg)

Welcome to a dark corner of the foreclosure business: People who lose their homes to foreclosure and in a pique of revenge strip the homes before the bank takes them back."In May 1945 There Were No Nazis In Germany" (http://cheryl-lynne.blogspot.com/2008/02/in-may-1945-there-were-no-nazis-in.html)

"And in February 2008 there are no dishonest people in mortgage lending. 'It was that guy over there. And that guy over there,' said the former lending industry veteran, pointing at several people around her. 'It wasn’t me. I was just doing my job.'" NYCityBoy

It looks like more of the liars and fraudsters in the mortgage industry are getting their due - as predicted - no one wants to hire them! This time fingerpointing by thieves isn't going to work; with unemployment rising, there are too many people with integrity (and real skills) looking for jobs to risk hiring mortgage criminals.

http://bp1.blogger.com/_dtY0VOFMWMM/R6-ICDU4eRI/AAAAAAAAApo/MFbxvCICYb4/s400/fraud5.jpg (http://bp1.blogger.com/_dtY0VOFMWMM/R6-ICDU4eRI/AAAAAAAAApo/MFbxvCICYb4/s1600-h/fraud5.jpg)

Sunday, February 10, 2008
Life amid the ruins
With the end of the economic good times, local people adjust to diminished expectations. (http://www.ocregister.com/news/business-job-work-1977171-mortgage-last)
The Orange County Register

...A couple of years ago, the local economy looked pretty good. Today, it's a different story. The number of Orange County residents reporting themselves unemployed rose by nearly 19,000, or 37 percent, in the 12 months through December, according to the state's Employment Development Department.


When Tracy Railsback submits her resume for a job, the first thing managers notice is that she worked in the mortgage industry. It doesn't get her a warm reception.

"Reputable companies, they don't want to look at you because they think everybody in that industry was bad and that's not true. Not everybody made tons of money and not everybody was dishonest," she said. [She was in on it by virtue of having kept her mouth shut for 10 years while she cashed her checks.]

During 10 years in the home loan business, Railsback, 38, worked her way up to a position as senior funder, responsible for approving or denying loans. [Anyone decent got out of the industry well BEFORE the blowup.] In her last job, she earned about $30 an hour, plus occasional bonuses. [Good pay for someone who now has to apply for minimum wage jobs. As I've written before, the skills of the typical uneducated mortgage 'professional' - lying, cheating, defrauding - aren't usually required outside of get rich quick scams.]Bold Comments by Cheryl-Lynne