First and foremost, although I am sure it will be met with great opposition, I feel adjustable rate mortgages should be illegal. They are sold to unwitting consumers under the false guise of a plan that will accommodate their future increased earnings to allow them to purchase the home of their dreams. Since there has never been any guarantee that someone’s pay will increase many years in the future to keep up with the rate increases, it never should be marketed this way.
This type of loan was recommended very strongly to me even more so than the fixed rate loan which I requested and chose. The adjustable rate loan that was recommended would have been a disaster had I selected it, and I probably would have faced foreclosure myself if I had gone that route. Although grateful to have been able to obtain the mortgage, I actually felt somewhat discriminated against because the loan officer pushed the adjustable rate loan so strongly, even though I felt it was not in my best interest.
These mortgages allow many people to gain home ownership, which is definitely the American dream, but does not truly make them understand the hardship when balloon payments are due or when rate increases occur. Mortgages should be qualified on the basis on what you can afford at your current rate of pay at the moment, just in case you don’t get the anticipated raises in the future. Many people are taken in with the lure of adjustable rate mortgages as they feel it is a good deal, when only the lender knows it is truly only a good deal for them and a bad one for the potential buyers.
Recently, I have been watching some of the shows on television helping people find their first homes and often see them getting mortgages in 2 parts. They start out from the beginning with first mortgages on 80% of the home and 2nd mortgages on 20% of the home. Is it just me, or does anyone else see a disaster waiting to happen? This again tells me they are getting in way over their head they should only be allowed to take out only a first mortgage. If there needs to be a second mortgage to obtain the home, they should reassess what they can afford and start out with a lesser valued home. You have first time home buyers purchasing $300,000 to $500,000 homes and such and trying to creatively finance it. I feel it will only be a matter of time before they will be info foreclosure. This is another practice that should be outlawed.
Another provision that would help not only the home purchaser as well as the lender is allowing an almost automatic refinance at a current available fair rate and not holding someone accountable to an inflated rate that will surely cause them to default and go into foreclosure. The rate would be fair and allow them to save their homes, as well as keeping a viable loan intact for the lender to collect its funds. This option should be...