Tuesday, November 27, 2007

Swindlers, Negative Amortization and Eugene's Healthy Real Estate Market

The New York Times ran an article this week about the so-called "mortgage swindlers," of which I'm sure there are many, but it does paint with sort of a broad brush.

Anyway, this article reminded me of a current client we're refinancing. She's a retired lady, who has owned her home for six years. A year and a half ago, someone refinanced her into a NegAm ARM. In English that means an adjustable rate, that requires a minimum payment every month that is LESS THAN the monthly interest charge (to say nothing of NOT making a dent in the principle).

I've said this before, but let me say it again, this type of loan is a cash-flow mechanism for the financially savvy. It is not for people to buy more home than they can afford and certainly not for a single woman living on social security with no other assets. She was definitely sold a bad idea. Now we're putting her into a fixed rate loan, but she owes $20,000 more than she borrowed a year and a half ago. It's terrible. Be careful -- if your loan payment sounds too good to be true, it probably is!

In good news, Eugene is not feeling the alleged housing crash that we're always reading about. Some speculate that Oregon's wonderful land-use laws coupled with a low percentage of sub-prime lending has contributed to Eugene holding its own. At least for now.

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