In 2003, Dianne Brimmage refinanced the mortgage on her home in Alton, Ill., to consolidate her car and medical bills. Now, struggling with a much higher interest rate and in foreclosure, she wants to modify the terms of the loan.
Lenders have often agreed to such steps in the past because it was in everyone’s interest to avoid foreclosure costs and possibly greater losses. But that was back when local banks held the loans and the bankers knew the homeowners, as well as the value of the properties.
Ms. Brimmage got her loan through a mortgage broker, just the first link in a financial merry-go-round. The mortgage itself was pooled with others and sold to investors ”” insurance companies, mutual funds and pension funds. A different company processes her loan payments. Yet another company represents the investors as the trustee.
She has gotten nowhere with any of the parties, despite her lawyer’s belief that fraud was involved in the mortgage. Like many other Americans, Ms. Brimmage is a homeowner stuck in foreclosure limbo, at risk of losing the home she has lived in since 1998.
The greed of both the borrower (attempting to get more than they can afford) and the lender (lending money to people who cannot afford to borrow it) have caused our current financial crisis. Yesterday’s lessons spoke to this very clearly. As Christians, we need to educate ourselves and our brothers and sisters in Christ on the appropriate use of money and work to help those caught in a financial crisis out of their situations.
YBIC,
Phil Snyder
Y’know, though, the standard model of loan negotiation is that the borrower can trust the lender to help them figure out how big a loan they can afford, because the lender loses money if the borrower defaults.
The securitization of mortgages has removed the lender’s incentive to be conservative and, especially, to be honest with the borrower. Witness the bait-and-switch recounted by Ms. Brimmage, in which the fixed-rate loan she signed up for was changed at closing, over her objections, to a variable-rate loan that has helped to bankrupt her.