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Current DateTime: 02:32:24 04 Jul 2009
LinksList Documentid: 30871294
Expiration DateTime: 7/4/2009 2:33:34 AM

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Current DateTime: 02:32:24 04 Jul 2009
LinksList Documentid: 30871303
Realty Check
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Nov.03
2:13 PM ET
Monday, 3 Nov 2008
Homeowners "Lying" Their Way To A Better Mortgage?

CNBC.com

In reading around the real estate blogs, I’m finding a troubling trend. A lot of American homeowners are liars. Yep, not surprising—especially given all the folks who lied about their ability to pay loans—by taking advantage of Alt-A mortgage products (those are the ones that require no proof of income or ability to pay).

Anyway, it’s all going hand in hand with the increased number of mortgage rescue plans, be it the Bank of America[BAC  Loading...      ()   ]/Countrywide settlement or JP Morgan’s [JPM  Loading...      ()   ]announcement last week that it would rework about a hundred billion dollars worth of loans or even government modifications through the FHA.

The rumblings in the blogosphere have gone from anger at the borrowers who are getting bailed out without any punishment to a “if you can’t beat ‘em, join ‘em!” mentality. More and more people are suggesting that even if you can afford your loan, you should just stop paying on it, so as to take advantage of a better interest rate that might be offered through a bailout.

Now you’d think that the bailout plans would have safety catches for this sort of thing, like the banks would look at your income and expenses and figure out that you are actually capable of living up to your responsibilities. But as the volume of troubled loans grows, the bailout plans are getting “streamlined.” That’s the word I keep hearing and reading. Industry and government officials are trying to “streamline” the process because they simply don’t have the manpower to go loan by loan. So if you fit a certain formula of negative equity on your home and a variable loan product, you can probably streamline your way into a better deal, even if you don’t really need one.

I’m not calling all American borrowers a bunch of liars, but most folks are always looking for the better deal. And remember, an awful lot of Americans took advantage of loans that they knew they couldn’t afford, because it was a good deal at the time. I’m just throwing out a word of caution, for the record.

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