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Buyers Always Beware

Friday, November 10th, 2006

For those of you who missed the article by Ruth Simon and Michael Hudson Bad Loans Draw Bad Blood it is confirmation of the message that I have been sharing with you the past few weeks, “mortgage brokers, mortgage lenders, home loan lenders, bankers and anyone else that is part of loaning you money for your California Home Loan has their best interest at stake - not yours!” It is imperative that you be your own best counsel when getting a home loan or mortgage!

Simon and Hudson wrote, “Although the $9.1 trillion mortgage market has been relatively calm as the housing market has slowed, players on Wall Street and beyond are starting to grapple over bad loans, especially in the market for borrowers with scuffed credit — so-called subprime customers.” Subprime customers are those that are borowing money above LIBOR. Subprime customers, what a great term, it is almost everyone buying a house or a piece of real estate that who actually needs to borrow the money to buy the house. You know, the guy or gal who has enough money to pay cash for their real estate never has to worry about paying above LIBOR.

Simon and Huson also wrote, “Of the $3.1 trillion in mortgages originated last year, 68 percent were packaged into securities, Bear Stearns said. In the past, most mortgages rolled into securities were standard loans packaged by government-chartered loan clearinghouses Fannie Mae and Freddie Mac. Investment banks increasingly have gotten in on the action, and they have helped fuel the growth of atypical mortgages, including risky ones that don’t require down payments or income documentation.” This paragraph put chills down my spine because with that much money being bought and sold it means that those of you getting a mortgage are mere pawns in a global banking game of gazillionairres.