Fresno Bee: Equity loans may have hurt owners (DUH!)

[El Pinko]

http://www.fresnobee.com/business/story/411548.html


Equity loans may have hurt owners
Compounded borrowing may have hastened foreclosures, a Fresno Realtor group study finds.
By Sanford Nax / The Fresno Bee
02/20/08 23:29:18


More than half of Fresno County homeowners who lost their houses to foreclosure late last year had taken out equity loans, possibly accelerating their downward spiral, a new study estimates.

The Fresno Association of Realtors sampled 350 of the more than 600 cases in which lenders obtained houses through foreclosure in the fourth quarter of 2007. In 51% of those cases, homeowners had refinanced their loans -- sometimes multiple times -- or borrowed up to $250,000 against their equity, or both.

The findings are significant because they show that many families used their house as an ATM, said Don Scordino, association president. The average family refinanced or took cash out twice before losing the house, the study found.

"A new kind of currency was created" during the boom years, Scordino said. "People spent a lot of money they didn't earn." Only 3% of the families refinanced their original loan with one offering better terms or rates. The remaining 46% got saddled with the wrong type of loan or didn't have enough income to support the original purchase, Scordino said.

[enid602]

1. scary

"Only 3% of the families refinanced their original loan with one offering better terms or rates." That's a bit scary.

[Horse with no Name]

2. Wow

They are really on the ball....:crazy:

[Captain Angry]

3. Not exactly something you can teach in high-school.

If 70%+ of the nation never goes to college, and 80%+ of those that did go to college never go near a business class, who is going to explain the minefield that the banking industry became?

Most of the people selling the loans didn't know what the terms were. How would the people buying them?

I feel bad for all of the people that got into that situation. They should have known better than to outspend their income. Anybody who asked for home-buying advice could not have been prepared for what the banking industry became over the last 10 years. There was no precedent for the way those loans were structured.

[Le Taz Hot]

19. Many people refinanced at higher

rates due to dire financial circumstances -- we did because it was either that or lose everything. What we DIDN'T do was pull ALL the equity out -- only enough to pay off all the bills -- cc & medical mostly. Though it left us with a higher interest rate and a higher monthly payment, we refinanced from a 30-year to a 20-year mortgage. It was actually a good move for us. Once our credit is repaired, we'll be able to re-finance with a better rate.

Just offering a point of view that not everyone who refinanced at a higher rate is "really on the ball."

[taught_me_patience]

4. No bailouts for these people!

Tapping home equity to live beyond your means is unacceptable.

[Skittles]

5. it sounds like pure greed

still....I wonder if stuff like medical bills came into play here

[taught_me_patience]

6. you should see the amount of new Mercedes

and BMWs in suburban driveways here in Los Angeles and O.C. Some may be medical bills but the overwhelming majority, I suspect, is for "toys".

[Skittles]

7. that's bad

I've never understood how people can be comfortable with debt - I detest it so much I saved up cash to buy a new car :D

[Adsos Letter]

9. I grew up in a family that was poor due to the debt incurred through alcoholism...

it left an impression on me that has made me scared of being in debt to this day (I'm 52).

We owe a few more years on a mortgage and have only refinanced to get a better fixed rate; we never took a dime out of equity.

And now I sure am thankful; if the sky does cave-in, it won't be because I personally did something stupid...in this instance, anyway...

[Skittles]

10. such a terrible way to grow up but you did learn

me, I got my wisdom from being raised by the double-whammy of a depression-era father and a WWII survivor mum - yes INDEED

[Adsos Letter]

11. OT...but let me just say...

that your threatened ass-kickings are some of the highlights of my reading here at DU...yes INDEED they are... :D

[Skittles]

12. LOL

aw thanks! :D

[Adsos Letter]

13. Just the truth, ma'am...

here...have a flower... :D

[Skittles]

14. pretty

what kind of flower is that?

[Adsos Letter]

15. some kind of purple clover...

it was growing next to a stream in the middle of this desert:




:D

[Skittles]

16. here's what we get here

bluebonnets and livestock :D

[Adsos Letter]

17. Beautiful!...and the flowers are nice, too...

:D ...a very good female friend of mine in college was from Houston...she used to send me beautiful cards with bluebonnets on the front...gorgeous flowers. I bet the bees like 'em.

She is down in Bolivia teaching English, at the moment.

[Captain Angry]

8. Nothing like seeing a $35,000 truck with a boot on it.

In front of a $500,000 house with a for sale sign.

Very sad.

Some folks were convinced that they were going to stay ahead of the game. I wonder where they got that idea...

Our government spends and spends, and keep saying that it's ok. Because as a percentage of GDP, the deficit will stay small as long as the economy grows.

Talk about voodoo.

[El Pinko]

18. kick

nt