Times Reports on Mortgages, Regulation of the Toy Industry, Junk Mail, and More

Another weekend, another collection of articles on consumer law issues from the Times.  Today's issue contains the "About New York" column by Jim Dwyer, headlined "Fighting an Outbreak of Mortgages Too Good to Be True," about the Foreclosure Prevention Project at South Brooklyn Legal Services.  The column reports on an offer one client, Tilton Jack, received for a one percent mortgage.  An excerpt:

In fact, the rate was 1 percent — but for one day. On the second day, it increased to 8.13 percent. Now, it is 8.77 percent. But those jumps are not what is sending his mortgage into a financial death spiral.

Under the terms, Mr. Jack’s monthly payment is set as if the mortgage cost just 1 percent, even though it is much more. So the seemingly low rate is a trap: every month, the unpaid interest is being piled onto his principal. When it reaches 110 percent of the original loan, the payments will be adjusted to the full 8.77 percent — on the principal that has been swollen by the unpaid interest.

“The principal has been increasing ever since he got the loan, and his payments will go from $1,100 a month to over $3,000,” said Navid Vazire, a lawyer with the Foreclosure Prevention Project who is representing Mr. Jack.

If only lenders used their imaginations for something more constructive than end-runs around the TILA disclosure rules.

Yesterday's issue contained an article titled "Toy Makers Seek Standards for U.S. Safety" about calls by toy manufacturers for federal regulation.  The stated goal is to reassure consumers about safety.  This contrasts with an editorial in Thursday's paper titled "Consumers Left in the Cold" which criticized Mattel for thinking "that the nation’s threadbare consumer protections are still too stringent and should best be ignored."  The editorial noted that Mattel has been fined by the Consumer Product Safety Commission for failing to report hazards timely.  The editorial also castigated the Bush administration's treatment of the CPSC. 

Thursday's paper contained several interesting articles on consumer issues, including one titled, ""Democrats Prepare Bills to Tighten Loan Rules."  Among the proposals:  barring mortgage brokers from steering borrowers who could qualify for prime loans to more expensive subprime loan and bans on hidden brokerage fees (a.k.a. yield-spread premiums) and prepayment penalties.  Another article, headlined, "Panel Questions Financial Advisers for the Elderly,"  reported on a congressional hearing.  Finally, "For-Profit Crusade Against Junk Mail" describes organizations trying to cut down on junk mail, including efforts to create a "do not mail" list similar to the "do not call" list. 

Comments

[Carolyn]

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[John]

Besides missing the first mortgage payment that leads to the foreclosure process, the most important event during foreclosure is the sheriff sale of the property. This is the event that will effectively transfer ownership of the house from the current owners to whomever wins the auction (usually the foreclosing bank). Many homeowners are able to postpone a sheriff sale if they are working on an option to save the home, but stopping the auction numerous times may be more difficult. The homeowners, though, should take every opportunity to gain more time, even if they have realistic chance to prevent the foreclosure from taking their homes.
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[ray nwam]

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[Lee Matthews - Financial Concepts West]

"If only lenders used their imaginations for something more constructive than end-runs around the TILA disclosure rules."

Many lenders are using their imaginations and are offering their clients a way to accelerate the equity in their home once they've provided them a mortgage:

Today’s Real Estate market means that folks can no longer count on appreciation to build home equity. Those who realize that they need to pay down their current mortgage debt are looking for alternate ways to aggressively (yet safely) build equity.

And they've discovered a perfect online system to do that; they can focus on their wealth accumulation goals while accelerating their equity simply by using a Home Equity Line of Credit (HELOC) to ‘power’ this ‘financial solutions’ program.

A typical 30 year loan (of whatever type) can be paid down in 1/3 to 1/2 the time — it's a great way to save *huge* amounts of income by eliminating a mortgage amortization front-end interest load. (On a million-plus dollar home, I've personally seen where this particular program will save the homeowner $750,000 in interest charges!)

And the best thing – homeowners don’t have to refinance their existing mortgage or make (little or no) adjustments to their lifestyle.

I’d be happy to provide further details…

[Donald]

It is better to prevent foreclosures as they are resulting in frauds,loss of properties and the people are facing much frustration.