The Flip Side of the Sub-Prime Story

[photopress:P1000150.JPG,thumb,alignright]Who will suffer most from all of this? Will the people who honored their commitments, and who valued and appreciated the chance the lender took on them, get hurt by all of the “reform”?

No one was more surprised than I, when I got the mortgage and closed on my home. In the end, the lender wanted me to write my profile of “Who I Am” right before the loan funded. I was starting over again in a new city. No proven history of what I might be able to make long term, as an agent in a new place. Coming out of a 20 year marriage, too old to wait until I stablilized my income, arriving with only what could fit in the trunk of my car. Sleeping on the floor at my sister’s in Green Lake while I worked hard to re-establish myself after a debilitating and nasty divorce. Needing a home for my three daughters and grand daughter to come to, hoping I could woo them away from L.A. where they were not doing well, and couldn’t afford to live on their own and be safe.

I worked day and night, seven days a week, and made the payments gladly. The one day a year when all my daughters came together at Thanksgiving, the couple of weeks when my grand daughter came up and we visited the ducks up at the Marina in Downtown Kirkland. Helping them through their hard times with their car insurance and car payments and making my mortage payments. Gladly working 24/7 for the opportunity to prove to them that a woman could make it after divorce, and not just “get by” but have a nice home.

I wouldn’t trade these last two years for anything. The memories in this house with my dearest and most cherished treasures, my girls and my grand daughter. Each of them proud of me and realizing that all things are possible, and life doesn’t get you down unless you let it.

Yes, for the first time in my life I was “sub-prime”, I was “stated income”, I was 49 and starting over. I am the person sub-prime and stated income was made for, and I’ve worked hard to be the person they believed in when that loan funded. And when the news got scarier, I took a second job as Broker of BRIO to make sure I could keep going, even if I couldn’t refi, and honor my commitments.

The day they asked me to write that profile so they could take one last look at who I was to decide if they should take a chance on me, I remembered my Uncle Johnny Rosati. How no one would give him a loan for a truck for his business “idea”. How finally, one bank said yes and he started his business and busted his butt day and night to prove himself worthy of the chance they took on him. How he refused to ever use another bank his whole life, no matter how many people told him he could get more interest elsewhere. He was loyal to that bank until the day he died, because they were the only ones who believed in him when they had no reason to, and no one else would.

Every day I live in my house, every month when I pay my mortgage payments to Washington Mutual, I thank them for believing in me and for giving me my “sub-prime” mortgage. I wake up working. I go to sleep working. I work every single day. I work to be the person they believed I could be, and I worry when I read all the bad news. I worried so much I took a “second job”.

Will I never be able to convert my 2 year arm because of the reform? I don’t know. But I do know that I will pay my mortgage payment as the rate adjusts higher. I’ll work two and three jobs if I have to. I know that they took a huge chance on me, and I know it was the boldest move of my entire life when I took this on.

Every day my girls get a year older, and every day I need to have this house less and less. Every day I thank those who believed in me and took a chance on me, and work hard to honor my commitment to them. Will all this reform close the door on me? No matter. I’ve already made it to the light at the end of my tunnel.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000

109 thoughts on “The Flip Side of the Sub-Prime Story

  1. Ardell, you are in the majority regarding how subprime loans are performing, BTW. It’s a minority that are not and will head to foreclosure.

    Your point is excellent on if you’ll be able to refi out of the ARM. That’s what I wrote about back in February of this year:

    I began to panic for home owners much like you: who have done what they’re suppose to do and now may not have a way out of their ARM. This is also why everyone should pull out their Note to review their CAPs. I’m currently reviewing each one of my clients ARMs (prime to subprime) and sending them letters to remind them of the adjustments…even if its 5-7 years away from now.

  2. Ardell,

    Where will your income come from when the RE thing dries up? If your income goes down and payments go up, won’t that be an issue?

    Maybe now is a good time to put your home up for sale so you can still get out in time.

    My view is that anyone who bought 2005-2007 is royally screwed, “subprime” or not. 2002-2004 buyers aren’t in much better shape.

  3. Ardell,
    Thanks for sharing your story. You needed the product AND you were repsonsible with it. This is the side of the story that we don’t hear.

    Ardell will do very well in any market. She might even do better in a down market. Down markets are professional’s markets, and Ardell is a professional. I don’t know about the rest of the RCG readers, but I don’t think I’ll stay up at night worrying about Ardell.

  4. Synthetik,

    Anyone’s income can “go down” whether they were salaried or commission based earners. People can lose their jobs any day…any time…and there will be consequences.

    What do I do? Every time I spend a dime, except on helping my daughters to get by, I try to spend it on improving my career or putting it into the house in a way that will expand the collateral for the lender.

    I did what I tell other’s to do. Don’t buy a house you can’t improve on! I don’t depend on appreciation alone. I make improvements to the home that secures their investment, so that if prices do go down, the home’s value will still be up.

    I took a second job, helping to teach agents the basics. Many who started in a better market and never saw a bad one, and as a result, may not have been trained properly to help people in slower markets. I continue to work hard for my clients, and added a component where my success is dependent on my ability to help other agents succeed, and acquire the skills and knowledge to serve the consumer better, and in turn make it through no matter what.

    I’ll tell you one thing I DON’T DO…I don’t turn around and bite the hand that fed me. I don’t blame the lender for taking a chance on me. I thank them every day, and work hard to pay the mortgage and also make improvements on THEIR collateral.

  5. I found this post over on the Seattle Bubble and had to see it for myself. Yes, I have no money, no credit, and commissioned income but have bought my home for my family. I work, my wife works, and who knows if the economy will do well or not. I don’t care.
    We can not be put in debtors prison. We have rights. We are allowed a lot of latitude in what we do, or how we make money. I have clients who live eight to a household, work three jobs, and pay off a house. The idea that things are going to hell in a hand basket and hoping some one fails in a basic goal of owning a home is wrong.
    What is amazing to me are the people who compare home ownership to investment schemes. The idea that the stock market bubble and housing are some how related escapes me. What I think is that there are a lot of people who were sold on sub prime loans who are on a fixed income by being employed. These people don’t have the latitude to go out and make more money.
    I keep a carpet cleaning van in my driveway, just in case I need to do more to make more. If I really need money I can scratch around to find a deal. It’s a choice I made in how I make a living and like you Ardell made the choice to buy with a loan that got me into a house. There again it’s my business and in my case my choice was informed.
    What I think many people are reacting to is that they made choices by being told only the up side of things. Many, many times the people telling the up side of the story were new to the business, or under trained in the business. I agree it looks bad from an outside perspective that we, in the Real Estate business, are saying everything is fine, we’ve seen it before, and it will pass when we have a kind of insider view of things.
    But seriously, to all of you that are hoping Ardell fails or that she and her kids end up on on the street, it’s not going to happen. I’ve seen it before, it will pass, and everything is fine.

  6. Ardell –

    Thanks for the good illustration on using a “sub-prime” mortgage for the right reasons. You knew what you could personally afford, and went into it well-informed of what your payments could do, and what you could do to make them. You also had more confidence in your earning ability than could be proven by traditional means, but you also knew that you could overcome market downturns and come out a survivor, or better.

    Great post!

  7. I certainly hope only the best for you, Ardell, and I’m guessing if anyone can keep current on their mortgage you can, but did you really get a 2/28 ARM, in a house you planned on living in indefinitely, at a time when mortgage rates were at historic lows?!? And you say you haven’t refi’d yet? Geez.

    I have an ARM, and their are certainly places where they are useful and proper, but on first blush your situation doesn’t seem to be one of them.

    If you had it to do over, would you have financed your house differently? Would you have bought less house?

    Also, WAMU didn’t put faith and trust in you. Assuming you had a pulse, they were giving most anyone a loan in 2005. They then sold the loan and likely made a tidy profit, for which they currently hold no risk of you defaulting. And are continuing to make money off of you servicing the loan. Again with no risk. They didn’t need faith or trust in you, and your gratitude is unfounded. Your uncle’s gratitude wasn’t, but that was a different time. One I hope we return to.

  8. I don’t want her to fail or be out on the street, but it’s obvious she posted this to show there are some who have a subprime loan who aren’t going BK.

    My point is, why stress over all this just to be a debt slave to your house? That is rediculous.

    Eight to a house? Working 3 jobs? As Bush says, how very ‘American’ of you!

    I like the idea of working less and living within your means. This style of living will soon be the norm anyway.

  9. You see you don’t get it. The idea of paying off the house is to be debt free. In a lot of countries you have to have a lot of connections to own property. We’re spoiled. We can go out and buy a house or car or food any time we want. We don’t go to the market to see what’s available that day, we decide what we want for dinner.
    You are so right kid, this here is America. If I want to make a million dollars or two I can go out and do it, so can you. It’s your choice.
    Many of the people I work with thank God every day that they are alive and living here. If they get the chance they are proud to be Americans.
    Stock market, hedge funds, oil futures, 401Ks and playing with paper money are the sport of the very rich. A lot of people talking about bubbles proclaim faith in that stuff. I prefer to live in my house that I can touch every day. I prefer to have my stuff around me and tell people to pound sand when I want.

  10. What you’re missing is that most people will not be able to pay off their house if they were 10 or 20% down and purchased between 2003-2007.

    Just like a dollar or a stock, your house is only worth anything if there is confidence in that asset. I submit that it should only be the sport of the very ignorant to speculate in the purchase of a depreciating asset (housing) and expecting it to pave the way to financial security.

    Debt is not wealth.

    Owning your house will not save you from inflation and taxes. Just ask the former inhabitants on the East slope of Capitol Hill. Rents however, are only market driven and not subject to wild speculation and irrational exhuberance. If rent goes up in my area, I simply move to another area.

    Happy to be debt free and highly liquid. Did you notice the graph from the previous post? Point of maximum financial gain? That’s coming soon. If you were one of the people that purchased during the “point of most financial risk” (2003-2007), you are going to be toast.

  11. Thoughts that come to mind here….

    People (men OR women) who needed to put a roof over the heads of their kids never needed subprime to begin with. Since 1934, Americans could apply for an FHA loan, where credit scores have never been used (yet) to separate the deserving from the “let’s make them beg for the loan” crowd.

    Sure, with FHA loan limits, a homebuyer might have to purchase someplace other than the swanky eastside, but homeownership has always been about choices.

    In regards to WaMu, I will bet anyone a million bucks (and I’m not too much of a risk-taker) that the underwriter approving Ardell’s subprime loan made the decision in a way that resembles this:

    “Hmm. Here we have a fantabulously kewl home in a desirable eastside city, Ardell is putting X% down (I have no idea how much Ardell put down), home price appreciation rates are exploding upwards, Ardell is Realtor, so if she needs to sell, she can cut 3% off the cost of selling, and…..Ardell is a Realtor, which means she is good for referral of business to the retail side for about 6 months or so (the loyalty factor of most Realtors in their referrals to lenders is very short lived), I trust this appraiser, so let’s ask for a motivation letter and call this loan good.”

    During the last run up, many lending decisions (with both positive and negative consequences) were done based mostly on the collateral only, which in itself is a violation of the federal Truth-in-Lending Act, but who from the FTC is watching over that law on a daily basis? Answer: nobody.

    Ardell, now that you’ve opened up and shared your story with us, we will all be wanting updates because many of us care a great deal about you and your family.

  12. David Losh:

    “Stock market, hedge funds, oil futures, 401Ks and playing with paper money are the sport of the very rich.”

    The stock market and 401Ks are the sport of the very rich?

    Never knew I was “very rich” before…

  13. Ardell,
    Having been house poor once in the great real estate bust in Colorado Springs (at the time, vying for Route 34 in Texas as the foreclosure capital of the world) my heart goes out to you. I was fresh out of the Army and ready to live the American dream and, encouraged by our realtor, we purchased a house that was bigger and more expensive than was appropriate. I hope that this turns out well for.

    From your post, It seems that you are the type of positive person whom we all would enjoy having in our lives. Good luck to you!


    I’ve seen the fine print on those Jumbo Loans [dinasaurs now anyway?], you get a few years of artificially low payments, then you pay the piper. I know, refinance the mess to “fixed rate”. You can do that, but first, you have to pay back the fine print interest you owe the bank on the old loan. I know, use all that delicious equity growth you’ve been making buying in the Seattle area, the bank will use that for collateral and you can get the fixed loan with no cash.

    I could ask you “what equity growth since 2006?”, but everyones in denial on that contentious issue, except the realitors I talk to after a martini or two, and that make me and the tighter banks/mortgage companies wrong and them right?

    The bottom line….if you were the banker or mortgage company and it was your money, would you give out fixed loans 5-10% a year more than the property was purchased for, especially the last year or two?

    No way!

    The answer, simply hand the keys to the mortgage company after the principle payments quadruple or even triple. Or work those extra jobs, if they even exist.

  15. You are very rich.
    Me, I need a place for my kids. Before that I never carried debt. I owned my home free and clear. It’s really not that hard to do. You don’t want to do it fine. You want to collect a corporate welfare check, fine.
    The thing is my kids need stuff. You can say they don’t, and know plenty of people who say they don’t but for me I just need to make more money.
    Sorry, was that a personal attack?

  16. David – paper money, 401ks, and the stock market are for the very rich? Corporate welfare check? Could you please explain this further? I cant quite follow the reasoning behind this. Having savings is not for the very rich – just the prudent if they don’t run into major life problems. Based on the number of people who have 401ks and invest in the stock market, there must be a lot of very rich people in America, right?

    Everybody’s kids need stuff. There’s no disputing that. Just that the kids would be fine under a rented roof too.

  17. There was a time between the subprime meltdown early this spring and the rise in rates on the jumbos. Why anyone in the RE indistry didn’t see the writing on the wall and re-fi while the money was still available I don’t know. In retrospect, the whole subprime to jumbo tightening shift happened alot slower than the subprime implosion itself, so it’s hard to believe anyone paying attention could have got caught unable to refinance, assuming they had the credit and income to take available of the lower rates. It’s easy to fall back on the “well, I was just living my life” excuse for not taking action, but that sounds like a cop out.

  18. synthetik is absolutely correct. What I wonder is why Ardell felt that she just had to buy instead of renting for a while and getting established? Could have saved up for a downpayment and then bought. Yes it can take a few years to save up for a downpayment (lots of folks will now start to get used to doing this “oldfashioned” practice), but who says you need immediate gratification? Is there extra pressure put on real estate agents to buy to make sure they look good to other agents?

  19. Really read what she says — How did she state her income? She just moved across the country, she had no established business where she was at. This is derived from her own words talk about how she just moved there, her only belongings in a trunk of a car. She admits it. She was new to the area and new to her job. She couldn’t have “stated” her true income situation and get approved.

    To use this article to illustrate a successful subprime loan is wrong, wrong, wrong seeings it is quite apparent the loan was built on untruths.

    I challange this author to explain how she stated her income and if it reflected the true situation at the time.

  20. Jim Jones,
    One cannot does not “state” future income. One “states” the income they receive at the time of the loan application. There is no “estimate” about it — you “state” what you make when the loan is originated.

    Once again, I challange this author to explain how she stated her income and if it reflected the true situation at the time.

  21. It seems like she is talking herself into believing she did the right thing. “A fool and their money are soon to depart” you are going to be spending less and less time with your children and grandchild and more and more time working those 3 jobs to simply pay the mortgage, just to say you have a house. is it really worth it? sounds
    like you are enslaved to your depreciating assest. Think about it when you are giving so much thanks to the company that took a chance on you.

  22. why didnt you just rent Ardell? seems to be the most logical thing. Homedebtorship is not a requirement to raise kids.

    why have all that extra pressure?

  23. Jillayne, The loan was probably done based on credit score alone (which it would only take a mid 600 for zero down) and making sure the salary that was stated jived with and didn’t exceed a 50% DTI. The home just needs to appraise for the purchase price or better. The lender doesn’t care that it’s on the east side…as long as it’s a SFD, they’re happy. The lender also doesn’t care that Ardell is a Realtor and they did not factor receiving future business into the u/w decision. It’s all how much $$ they’re going to make off the interest and prepay (if there is one and if it’s paid off early). The higher the risk (stated and/or low down factoring in credit score), the more money they make. It’s all risk based pricing.

  24. LOL…where did all the crazies come from? I didn’t buy a house the day I landed in town guys. All of these whackos whom I don’t know who want to throw rocks at me, get lost.

    I just think the flip side deserved a story too. Seems you all only want to talk about the people who didn’t make their payments, and not the people who did. Not happy that someone didn’t default? There are stories all over the paper about foreclosures, and you LOVE that. One measly story about someone who didn’t default, and you get angry and nasty?

    Bubbleheads…never happy unless the sky is falling in. I sent my bank statements. They asked for a profile of my historical success. Not sure why they took the gamble that I could pay it, but they were right. I did. Now if I can’t refi it because they took the option away in the name of “reform”, that’s the answer you all are cheering for…so be careful what you wish for out there.

    In the meantime my girls are now all over 18 and doing much, much better thank you, as am I. So far so good. I know…you wanted gloom and doom. Don’t you have enough stories like that in the media? No room for ONE positive story. What nasty, mean people you are.

  25. Ardell,

    I would love to hear more from you as to what your plans are for this loan. Your thought processes, your decisions, and the steps you take can help other homeowners whose situations are similar to yours.

    For example, Rhonda advocates folks with ARMs get a mortgage checkup to research options.

    I’m not sure how much you want to share with the world, but I am being honest when I say that your story, as it unfolds, could help others.

  26. You guys!!!
    It’s simple, I work with a whole bunch of people who come here from other countries. Many of those people made less than six hundred dollars a month, and maybe less where they came from. You’re very rich.
    My goverment gives billions of dollars in subsidies to American corporation to prop them up. We need to keep guys in jobs so you can pay bills and rent, then the left overs you put into savings.
    Some times I go months without hearing english, even here in the great old US of A. I tell people all the time anything is possible and see that it’s true every day. These same people have more sense of family than most Americans. I’m always amazed at how everybody takes care of the kids.
    Honor, dignity, work, and play all kind of blend together. I started down this path in 1980 by advocating for people with AIDS. You all need to go to Africa to see what that disease is really about. Don’t worry your government has not squandered your tax dollars there, they are better at starting military actions. After all military actions are profitable.
    All in all you renter guys talking about a financial melt down really need to get in touch with what is real and tangible in the world. Owning and controling your own home should be a basic.

  27. Jillayne, I missed the part about the letter. Explanation letters don’t really cover a lot of weight. With Ardell providing her bank statements, if it was 6 or 12 months worth, then the loan wasn’t a “true stated income”. Lenders will use a portion of the income via the bank account.

    I’ve been receiving quite a few emails from people across the country who need help and are stuck because of the LTVs or because they did not refi in time. Ardell, your honesty could really help people. I know some of the one’s I’ve been emailing back and forth, even though I can’t help them with a mortgage since they’re not in WA State, they appreciate not feeling alone during difficult times.

    I do encourage people with ARMs (even “prime” ARMs) do meet with their mortgage professional to get a review. In fact, it doesn’t hurt to do this ever so often with a fixed mortgage, too (last week one of my clients came in to make sure his 30 year at 5.5 was okay…I said yep and see ya later!).

  28. “Owning and controling your own home should be a basic.”

    There’s nothing about home ownership being a constitutional right or an entitlement. You have to earn your way to it.

  29. Jillayne,

    One of the reasons I wrote this was because the posts scared me to death. I got my “new payment” at time of adjustment and it went up $200 a month. No biggee. The way everyone was freaking out I thought the world was coming to an end.

    I think rates are going to come down in the next six months, at least by a half a point. So I’d rather live with the slight increase now, than lock in high rates that I think are going to come down.

    Plus, when Andrea got mis-diagnosed with cervical cancer I wasn’t sure what my near term outlook was going to be. So I decided it wasn’t a good time to do any longer range planning. Thank God everything turned out alright, but for awhile there I thought I might have to sell the house and take care of her round the clock.

    You never know what life will bring. So far I’ve made it to age 53 just doing the best I can and following my instincts. I’m bound to make a few mistakes in my life somewhere along the way…but so far, so good 🙂

    I disagree that now is the best time to “research options”. I think this is the worst time to research options, with everyone running around like chickens without their heads. Three to four months from now the options may get better than they are today, and rates lower as well.

  30. Ardell, your ARM has not adjusted as drastically as others. $200 is a cake walk compared to some of the figures I’m seeing and hearing about. Many will have their principal and interest increase 30-50% (not just subprime).

    Researching options does not have to mean refinancing. I’ve been advising a majority of clients to wait.

    Not researching and not knowing how much your mortgage payment may adjust is dangerous.

  31. Ardell, it’s not certain that it will or how much. Traders will react like a bunch of wild turkeys once the announcement is made tomorrow.

    The prime rate will only directly impact home equity lines of credit.

    If someone has an ARM, many are based on LIBOR and consumers will need to refresh themselves with what their margins and caps are and then reamortize their payment over the remaining term of the mortgage. What ever the Fed does tomorrow will not directly impact how much the ARMs will reset over the next couple of years.

  32. “Why is everyone in a hurry to get a long term fixed rate?”

    For some it’s a matter of risk tolerence. Having an ARM is driving them crazy…the media has got to them.

    For others, they cannot swing the 30-50% increase to their mortgage payment.

  33. “Isn’t the Fed Funds rate supposed to go down tomorrow?”

    Maybe. But maybe they won’t. Actually, they shouldn’t so as to defend the dollar.

    “Why is everyone in a hurry to get a long term fixed rate?”

    It’s possible to imagine a scenario where the Fed lowers but mortgage rates actually end up higher. The LIBOR could in fact rise if the Fed lowers. Lowering rates here will trash the US dollar (which is already very low) and could very well lead to capital flight out the US – that’s where foreign countries/investors decide that it’s just not worth it to keep their money in the US so they move it elsewhere for higher yields (and to places that can actually pay off their debts).

  34. I think it is VERY WISE to reaffirm what your mortgage terms are and see what options are available, depending upon one’s circumstances.

    This is circulating out there: A Fed Funds drop (if they do drop) in rates will have little to no effect on ARM’s tied to the LIBOR (London Interbank Index) index. To clarify, a Fed Funds Drop would not make the LIBOR INDEX drop. In fact, there is a good probability the LIBOR Index will move up. The good majority of mortgage ARM’s ARE TIED TO THE LIBOR INDEX.

    The current rate for the 1 yr. LIBOR (many borrowers have 1 mos. or 6 mos LIBOR Indexed ARMS) is 5.23% as of today. When you add your margin, for example 2.75%, then your rate, if it adjusted today, would be about 8%. A fully amortizing loan at $300,000, with this rate would increase a mortgage payment substantially over the interest only start rate of 5%, for example. The increase would be as Rhonda mentions, about a 30-50% increase. Not many people can weather that kind of hit.

    Time to read your notes & Index.

    “why in a hurry to get a fixed rate?” Because fixed rates are still incredibly low and if you read Rhonda’s Friday Rate re-cap, ARM’s in many cases are higher to start with, unless you go with I/O, which many have to get if they are to buy.

  35. Thanks Lynlee and Tim…couldn’t of said it better myself. 😉

    Again, reviewing your mortgage (digging out your note and getting help reading it) does not mean that you have to refinance. Depending on how much time you have left on your fixed, what your margin and caps are, how long you plan on retaining your property, if you can afford the new payment AND what your risk tolerance is should dictate what you do with your mortgage.


  36. I am certainly NOT one to criticize Ardell’s decision to get a sub-prime mortgage. In fact, I think she has made a brilliant financial decision to manage her risk. If the Seattle area market does actually tank she can just turn the keys over to the bank and walk away if the value of her house becomes worth less than the mortgage. Why should anyone make a large down-payment on a house and have their hands tied if there is a lender willing to shoulder all that risk for them?

    If you can get close to 100% financing, go for it! If the price of your house rises, you get all that appreciation for “free”. If the housing prices crash, just let the lender take the bath.

    Of course, Ardell would need to carefully consult the terms of her loan and get some legal advice (to ensure the lender can’t pursue any other assets if she defaults), but she stands a good chance of being able to wash her hands of the house IF the local market crashes. Sure, her credit rating will get trashed, but that’s a small price to pay rather than being manacled to the lead weight of an under-water home in a downturn.

    Anyway, I whole-heartedly congratulate Ardell on her financial risk-management skills. Way to go girl!

  37. Oh, and one other thing that get’s misunderstood by many borrowers:

    If a borrower has an ARM, look at how the cap rate is handled. Many are surprised to learn that the cap rate ONLY is in effect AFTER the initial adjustment has arrived. In other words, if you have a maximum ceiling cap of 11.75%, your ARM can adjust ALL THE WAY TO THAT LEVEL at the 1st adjustment. After that, then the adjustment caps are limited to 2% or whatever the terms dictate. Other ARM’s do limit the 1st adjustment cap to 2% or 3% over the start rate to prevent payment shock.

    I personally have had numerous experiences meeting with borrowers who talked about how they misunderstood the adjustment dynamic of their prior loan.

  38. In fact, I think she has made a brilliant financial decision to manage her risk. If the Seattle area market does actually tank she can just turn the keys over to the bank and walk away if the value of her house becomes worth less than the mortgage.

    Scum vermin. When you people crash and burn, I hope you rent until you save (a novel concept!) up enough to buy your next house in cash. You do not deserve access to credit of any kind. You should not buy things you cannot afford. Deferred gratification is the first step toward any kind of progress in the world.

    Ardell, your predicament is NOT the fault of any kind of “reform”; you alone deserve the blame for this. Stated income is obvious fraud. Why would I ever take my real savings out into a market with you idiots bidding up houses with 100% ARMs and escalator clauses? I decided to sit this one out, thank you.

    When houses became speculative investment vehicles capable of buying shiny BMWs and refilling the endless credit card wells, I lost any and all sympathy for your collective fates as “homeowners”. Congratulations! You going REO now means nothing more to me than Intel losing 15 cents in an off day. I truly could not care less.

    I sleep well at night renting a humble bungalow in Crown Hill, with spotless credit, no debt, one kid learning her colors, and another on the way. I’ve got the BMW, but guess what, she’s 17 years old, affordable, long since paid for. I’ve even driven Casey Serin around in it, true story! Such is the exciting lives we lowly renters lead.

    Enjoy not controlling your future! The housing bubble is a moral crusade, and we renters shall inherit the fallen REO world.

    I finally understand just how exercised and upset silly liberals get about President Bush, that deep-seated internal ferocious loathing that just consumes them beyond reach or reason. I understand it because that’s how I feel when I read comments like this, about sending your keys back because the deal went sour.

    You are such shabby citizens.

  39. Brava, Brava Ardell! I am glad that you are showing another perspective on what is happening with your story.

    Many people are as strong as you and are willing to assess their risk and work hard to achieve their goals. That is the American Way that allows people to work hard and achieve their dreams. What is wrong with that? I don’t understand why so many want to tear people and things down? Jealously? Fear?

    What do some people want, an Economic Dark Age? It seems that there are a small, vocal group of “financial survivalists” who want nothing more than a financial armaggedon so that they can reign and gloat over others’ hardships. Sure, sometimes things will go wrong or very bad, but then you (we) work hard to turn it around and the situation and the economy improves and life goes on….

    Some people build and some people tear down…I’m in with the builders, I want a better place for everyone! You are a builder and are making a better place for others…many, many others!

    Brava Ardell! 🙂

  40. Hi Deborah and Ardell,

    Interesting perspectives on the bubble comments. I don’t quite see this group as cheering for financial armaggedon. Instead, I read them as hoping for a different kind of economic system when compared with what we currently are living through. Maybe it’s because I’m in graduate school right now and my economics professor happens to agree with the stance the bubble bloggers take toward the Greenspan method of economic growth.

    I see their comments as being just as American as yours.

    Look deeper, beyond the surface; the bubble guys want the same things we want for America and for our families.

  41. Wow- this diatribe proved to me what I had long suspected – the real estate industry is overwhelming inundated with moronic, delusional, flunkies.

    Two years ago, when I had the unfortunate opportunity to interact with these people as I shopped for my first home, I started forming the basis for these opinions. Every single person I met in the industry from buying agents, selling agents, mortgage brokers, escrow workers, etc. was similarly brainwashed. As I tried to determine which house and mortgage was right for me, each of these flunkies relayed to me the following common phrase, “In a few years as your house appreciates 10% a year or so….”
    Many of these people haven’t seen anything but vertical appreciation.

    The euphoria was amazing. Naturally, I doubted such nonsense. I looked at this upcoming house purchase as a place to live, not an investment. Residential real estate has historically been a underperforming, break-even inflation-adjusted investment. However, I wanted a certain size home in a a particular neighborhood, and renting wasn’t practical.

    Here’s a summary of my experiences with this savvy group of insiders:
    My agents kept insisting I submit asking price or above asking price offers. And My mortgage broker kept offering me tips on how to “massage” my application to basically get any type of loan for whatever amount I wanted. Is it any surprise this country is in the mess that it’s in?

    Ultimately, I wound up with a 30yr fixed mortgage with a sizable down payment. Was I worried about buying a couple years ago given the recent appreciation? Of course I was. However, for my circumstance renting wasn’t really feasible or cheaper. Or else I certainly would have.

    But I was in a position financially where I could afford to make these payments without overextending myself or losing sleep. Furthermore, the equity my down payment provides, gives me a cushion in case the market drops significantly and I have to sell.

    However, it’s seems obvious Ardell’s situation was the opposite. It’s clear to me by her wording that she falsified her application to secure a loan.
    “No one was more surprised than I, when I got the mortgage and closed on my home.” This statement, along with having to write a profile in the lending atmosphere at the time speaks volume. Anybody with a pulse and social security number was given a loan.

    If Ardell were in a market like Phoenix or Las Vegas, or many others, she wouldn’t have the audacity to write such an article. She wrote it simply because Seattle’s fall out hasn’t happened, YET!

    One final comment- one of the real estate agents I spoke to was a friend’s cousin. She was attractive and had a cute smile which makes you fully qualified to be an agent. I came to know her as my house search progressed. She worked as a barista in a coffee shop along side her real estate career. As luck would have it, a wealthy eastsider walks into her coffee shop. One thing leads to another and the cute agent makes almost $100k on one of her first deals.

    After that deal, she felt her Toyota Camry wasn’t sufficient to maintain her image as a flashy east side agent. She immediately found a fancy european car to lease (typical, huh?). Not much later, she left her apartment to purchase a million dollar home on the eastside. After all, this was typical of the real estate business, right? It’s where fortunes are made.

    Last I heard, she hadn’t sold a house in 8 months and the house was up for sale in just over 1 year from when she bought it.

  42. There are 1,000 stories in the naked city…this is just one of them. LOL!!! If I didn’t make what I stated, I wouldn’t have been making the mortgage payment for over two years. Strange comments. I guess they only like stories where people default on their mortgage.

  43. Biliruben,

    “If you had it to do over, would you have financed your house differently? Would you have bought less house?”

    No. I wouldn’t have done it differently. I couldn’t have done it differently for one, and the dirt under my house is worth almost as much as the price I paid for it. So “less house” wasn’t a factor. Location was the primary consideration.

    I love my house and I’ve loved all the good times I’ve had in it these last two years. My Mom, who is ultra conservative, approved at the time. Honestly, they just had faith in me, and so far that faith is not unfounded. I appreciate every day I get to come home to it and I haven’t seen a house, and I see many, that I’ve liked more since I bought it.

    One thing I don’t get is why would people want me to rent? I’m 53. Don’t people who rent have to work forever? In a couple of years I’ll have my 20 year bank pension. That may cover the taxes 🙂

    Not many people have a house they love enough to keep working for. I think I’m pretty lucky. Seeing Mom do well really helped the girls a lot. That alone was well worth it.

  44. “If I didn’t make what I stated, I wouldn’t have been making the mortgage payment for over two years.”

    Um, no. Have you been paying a fully-amortized mortgage payment, or some sort of teaser rate? You are subprime, after all. You did know that “subprime” is not a mortgage but a class of individual? Did you get a nice WaMu option-ARM? Then you’re already a goner.

    And please don’t try to sell this female empowerment-through-real estate crap on us. At some point this became a major selling angle for the REIC. How many single women bit on this to buy a condo that in the end they cannot afford? They’re going to be socially radioactive when their ARMs adjust.

    The only upside is that your children are older, so you can bear the burden of this on yourself with less impact to them. A responsible parent buys what she can truly afford, and sets this example to her children.

    Look, Ardell, if you can’t afford the house, sell it. Put it on the market today, at a price that will just cover closing costs and let you get away clean. There are still plenty of fools out there to buy it. Your mistake would be to price in your paper “appreciation” that you think you have. Go rent a nice apartment and bank the savings while you still have income at all.

  45. heck, why not work TEN jobs!? it’s so easy!!!! especially if you’re a broker for BRIO and can saddle other suckers w/ more high-interest, sub-prime crap!! don’t be alone in your suffering, what this country needs is everyone working FIVE, SIX jobs each 🙂

    you are a complete and utter joke and should be ashamed of yourself for enabling the biggest financial bubble this world has ever seen.

  46. Million,

    Why are you so hostile towards the people who simply making sound financial decisions? It’s not Ardell’s fault that there are (or were) idiot investors out there who are salivating at the prospect of buying tranches of high-yield (and junk) mortgage securities. Hey, if someone is willing to lend you a tonne of money to buy a house with no money down you’d be a fool not to take it.

    To get angry with Ardell with availing herself of the existing mortgage finance products is the same thing as shouting at students who borrow money on government programs for college. Yes, government funded student loan programs are a travesty, but they exist and you’d might as well take advantage of what’s available.

    Face it: Ardell made a smart decision to led some sap investor hold all the risk in her home. She has limited her losses if the local market should happen to go south, while positioned herself to become wealthy if prices keep appreciating. This is smart. And I would argue that most people getting sub-prime or 100% finance mortgage products are smart too.

    Heck, without these kinds of highly leveraged products many people would never have been able to gamble on real-estate price appreciation at all (i.e. they never would have been able to get a traditional mortgage). Sure, prices might decline and the bets could go sour, but that’s no big deal. If you have no equity you can just walk away. It’s the saps who have lots of equity in their homes, tying their hands, who are the big losers here.

  47. Plenty of people get divorced, get sick, lose a job etc and still manage to have good credit savings and income. Making it to the big 5-0 with only the clothes on your back and sleeping on your sisters couch would indicate there is something else going on.

  48. Ardell,
    You can call me crazy all day long, I could care less. You are the one writing this for the world as non-fiction. It is your chance to gain credibility, not mine.

    The thing is either you have a “stated” loan or you don’t. On hindsight after I posed the question, you claim to have given bank statements to the lender. A bank statement loan is not a “stated” loan. Subprime allows bank statements as a full documentation loan. Now if these bank statements did not support enough income, then perhaps you did give them to your broker and on review of them, you did a “stated” loan. Which is it Ardell? — You know the answer so answer the question. This is your field, don’t try to act naive.

    Was it a stated loan or not?

  49. I don’t understand the personal attacks on Ardell. There’s certainly points for discussion here, but the attacks are out of line. It took courage to tell her story, and I commend her for that.

    That said, I also don’t understand the repeated sneering at renting like it’s beneath you. Renting is a financial option like any other, with it’s own benefits and drawbacks. It is not a moral or social stigma to be reflected in a person’s self-identity (unless YOU make it that way), just as being subprime should not be. It simply a financial option, and sometimes a much smarter one that buying.

    But then, I’m one of those lowly Bubblehead renters who apparently wants financial argmaggedon so I can lord over others. And here I thought I just wanted a reasonable real estate market so I could buy a decent house without playing financial Russian roulette.

  50. LHR,
    My attack isn’t personal — Never said a bad word about her. I am asking about the process she tok securing the loan she wrote about for the world. Once again Ardell, Bank Statements are not “stated”

    Was it a stated loan or not?

  51. “I know better”,

    Why on earth does it matter if Ardell’s loan was stated or not? Either way, she was able to find a sucker to give her a high-risk loan. If someone with inadequate credit can find a lender dumb enough to give them the money to buy a house, then they would be idiots not to take the cash.

    It seems like you are somehow trying to take out anger at the existence of moronic lenders (issuing masses of sub-prime loans) on Ardell. Don’t blame the people who used these products, they were being very rational (and damn smart, I might add).

  52. Sniglet,
    It matters because that Ardell “stated” the income I am asking about to the “sucker” you refer to. If the “sucker” was given incorrect information by Ardell then the “sucker” wasn’t just a lender, they were a victim of fraud.

  53. A lender a victim of fraud??? thats funny. All i can say is the lenders got everything they get coming to them.i cant wait till lenders have to maintain millions of homes.But,the down side is China will end up owning a lot of America.Why not,they already own our government.Get ready to meet the new landlord.

  54. “Look deeper, beyond the surface; the bubble guys want the same things we want for America and for our families.”

    Exactly. I’ve got my house. Bought it in 1990 and paid off the mortgage back in ’99. I’m completely debt free. But it was a hell of a lot easier then than now… The buying price was only 1.5X my income and I put 20% down. Now if I had to buy the same house all over again, the buying price is 3.5X my income (and I make a good bit more than the median). I’m worried about the next generation of buyers: if prices don’t fall we’re condemning them to a life of debt slavery. Incomes aren’t rising – we compete globally for wages now and that’s holding down incomes. So, either home prices need to stagnate for many years, or we need to see home prices fall a good 30% over the next 3 or 4 years in order to get back to a healthy market. I think this is something the real estate agents (the REIC – Real Estate Industrial complex) doesn’t understand: too many people are priced out now. The best thing to help those people is not NINJA loans, but prices that are more realistically in line with incomes. It’s better to sell some houses for 30% less than to sell no houses at current prices – 6% of nothing is nothing.

  55. Ardell,

    Congrats to you for taking risk! I am 49, divorced and raised two children while renting. Coming from a swanky eastside home into apartment life was hard. Emotion and business mix like oil and water. My kids have grown, I am still renting and looking for my “first” home to purchase. You went out and secured a home, with a mortgage and are paying your bills. Good for you! Thank you for your story. Some of the posts give good suggestions and advice for us all.

  56. Bofiz, No offense to you

    It is not NINJA (don’t know where the press came up with that– irresponsible reporting to the masses. It is actually NINA which stands for no income, no assets revealed in the loan application. This is for people who choose not to reveal any income or asset information in constrast to those who document their income and assets or state their income and assets (SISA). NINA loans are very credit score driven and were/are not availiable in the subprime market. NINA was also not a 100% loan.

  57. Best I can tell you is that it was stated in the way a small business loan is based somewhat on projections and probabilities, based on the present and future. Remember I am not simply an individual as to income, I am a small business. Every agent is a small business in and of themselves. At the time we were also a new business without a two year histrory. So some component of the lender’s decision was based on their belief that my business would continue to do well.

    When you use statements that don’t go back consistently for two years, it can’t be full doc, and then became an underwriter decision based on probabilities. I hadn’t lived in Seattle for two years at the time. So two year history based on the same geography was not possible. I think that’s why there were bank statements but not “full doc”.

    I have had clients with their own business subject to the same criteria. Somone who owned day care centers. Someone who owned a small computer firm or did contract work. “Stated Income” is mostly for people who are not salaried, or for people whose income cannot be fully documented for two years prior, in the same field or geographic area.

    I’m not a lending expert as to stated income as the huge majority of my clients are salaried. I do know that my profile was the tipping point.

    Biliruben asks if I would do it over now if I had the chance. I think the more relevant question is would the lender make the same decision today, given forward projections of the real estate market, as they did back then.

    If you were selling widgets, and widgets were selling like hotcakes, the lender would make a different decision than if widgets where last year’s big seller and a new product threatened to replace your widgets.

    Bottom line is at the end of the day, sometimes an underwriter is sitting on a fence and they make a decision based on many factors. Things are not as cut and dry as some would like them to be.

    When my Dad died my Mom got a loan to buy a house, and move out of a declining neighborhood. She shouldn’t have gotten it based on her on paper credentials. She got it because everyone at the Bank knew her integrity level. She paid that loan off years ago.

    People who have fairly fixed incomes are subject to different considerations than those who do not. Stated Income was never meant to be a criteria for salaried persons. Many years ago they were mostly used for people with “cash business” like liquor stores, etc…and often used for any business that had large gross receipts, but many write offs.

    Rhonda can likely answer the true and fitting purpose of stated income loans better than I. But the obvious is small business vs. salaried or hourly wage owner.

  58. Jeanne,

    Then you will understand that a large part of the motivation was the fact that I had three daughters, and the message I was sending them regarding women generally as a single Mom after a divorce. That was not an insignificant factor in my decision.

  59. Thanks for your response, Ardell.

    When you say,

    “…the dirt under my house is worth almost as much as the price I paid for it.”

    It sounds like you are saying that you think that is some bedrock price that is enduring and unchanging. In fact, the research shows just the opposite. Land prices fluctuate 3 times as much as house prices. So if you thought that your land was worth 600K and your house 200K when you bought it, and your houses value drops 50K, your land’s value could easily drop 150K or more.

    The land is not a sturdy, immovable platform, it’s more like a heavy anchor, that can sink and drag your boat down with it.

    I just didn’t want you to have a false sense of security which causes you to make poorly understood decisions with potentially catastrophic results.

  60. Ardell,

    “Stated” is not based on “projections and probabilities”. It is what it is “stated income” and the income stated is what the borrower makes at the time of the loan application. To “state” an income on “Projections and probabilities” is fraud — nothing more, nothing less. Call WaMu and tell them your “stated” income was “projections and probabilites” (even though you just did in your post) and you will find you committed fraud. Now that you made this statement you better take 20 jobs to make that payment because if you default, you will be looking at not only foreclosure but criminal charges.

    Another lie, No, stated is not for people whose income does not go back 2 years, it is for people who have 2 year history but choose not to document it for ease not omission of material facts as in what the income/self employment status and history of self employment status is at the time of application.

    Universally “stated” requires 2 year history of self employment in the same job, same location. You admit you did not have that qualification

    A “small business” cannot and does not qualify for a residential mortgage, an individual does. This is why lenders will not let title be taken in a LLC or corporation or other “business” designations so there goes that explanation you ponied up. Now you know you took title as an indiviual on a residential mortgage loan – you qualififed as an individual, not as a business enity on a commerial loan.

    You state above (and I quote) “Stated income was never meant to be a criteria for salaried position. Many years ago they were mostly used for people with “cash business” like liquor stores, etc.. and often used for any business that had gross receipts, but many write offs”. That is BS — 1.) salaried people can go stated for ease 2.) stated was never meant as a loan option for “cash business” or the gross recipts with write offs. “Stated” was created for ease. What you suggest is TAX INVASION and lenders did intentionally create a program for criminals, although people, yourself included, hint that they did. Call WAMU and ask them that to.

    Your repsonses thus far indicates you willingly and knowingly defrauded the lender.

    You can’t have a “stated” loan with “some” bank statements. The minute bank statements are given to a lender, the lender becomes knowledgeable of any incomeand/or length of employment at location. a loan can no longer go “stated” loan.

    Also, you know damn well it wasn’t a “profile”. “Profiles” have never been in WaMU guidelines or anyone else’s. It was a Letter of Explanation (LOE), what did you have to explain? That in itself is the answer here and may give a more detailed account of what happened here — I am giving you a way out here asking about this, explain the LOE, perhaps it is information in your LOE that makes what you have described yourself as an illegal act on your part as legal.

    Please do not try to claim ignorance now. After all of your blog articles in which you have portrayed yourself as the diva and know all of real estate, no one buys it and WaMu won’t either.

  61. Ardell,
    And the “I had 3 daughters” as motivation thing is garbage too as dependents require a larger net disposable income and increases risk for the lender.

    The qualifications/guidelines are just that. One must fit in them. There isn’t no, “Ardell is a nice person and promises to pay” slipped in on a post-it note. Either the loan qualifies and is in guidelines or not. Many a nice person who promises to pay with 3 kids have been turned down as their DOCUMENTED income is out of guidelines. The answer to this problem isn’t just “Go Stated and Qualify” as many do, That answer is a criminal act. The legal answer is buy less house or wait until the income is there to qualify.

    I suggest you have the sense to shut up and not further implicate yourself.

  62. “It is not NINJA… loans”

    Yeah, let’s just call them crazy loans to cover all the abuses from subprime, to Alt-A, interest only, neg-Am, etc.

  63. “I know better”,

    I don’t see where fraud occurred here. If Ardell supplied the lender with all the information they asked for then what more should she have done? If the lender felt that the information provided was adequate then that’s the end of the story. Fraud would only have occured if Ardell had provided false information or similarly withheld relevant data. Incomplete, or spotty, information does not consitute fraud.

    Why blame the borrower if the lender had extremely low standards on the information they required to issue the loan?

  64. Ardell,
    Also in refernece to your post where you state,
    “If you have bank statements that don’t back consisently for 2 years” UUMM, that doesn’t make sense either as they average out bank statements over the 2 years taking all deposits and dividing them over 24 months and using that number as income. So a “bad month” can still be used.

    Only case where one can’t go bank statements to qualify is either 1) the average income is less than required for the loan 2.) Bank statements show that account was open less than 24 months and statements from prior bank are used — now that is a problem if you haven’t been in the same location for 2 years as the bank statements show this (your address) In both cases, if bank statements were shown to the lender and were shown to be inconsistent as you freely admit, the loan must be denied. Not changed to “stated” as that is an fact of fraud

    Bottom line, if you produce one bank statement, you must produce them all unless you are using the bank statements to go SIVA (Stated income, verified assets) but that would not be your case as there are/never were any SIVA subprime loan programs.

    So what do you mean when you say “consistently” You had bank statements that showed less income that required for some months and the average was less than needed to qualify? Maybe you truely don’t know, call the broker that did your loan, perhaps the broker had you commit fraud and you didn’t even know it. However your problem is you did know — you say the bank statements did not “consisently” — is this statement made in hindsight? Doesn’t look like it.

    Can you see why today your actions are a problem? Now you can’t refinance and this is one of the reasons why — you never qualified for that house when you bought it. WaMu and your broker didn’t “believe in you” because of some damn “profile, they built your loan using only the information that worked for the story they needed to sell the investor — the “stated” income. If you think those bank statements are part of that story, you are sadly mistaken — those were shredded long ago and not for your advantage but your disadvantage.If you were aware and it sure sounds like you were, you have legal, moral and ethical issues that for your sake better never come to the lenders attention or the State that issue your real estate license.

    At this point I would shut up because I don’t think any First Time Home Buyer or any other buyer for that matter is going to trust that you are will not bend the rules to a point of it being criminal for your own financial, emotional or physical gain. That’s not to mention how WaMu who lent you money, your business partners who put their names with yours on legal transactions, or the state thinks who controls your financial future thinks of your actions.

  65. Sniglet,
    She did not choose to go “stated” for convienence as the program is designed for. She admits to be willing to submit bank statements. The problem was the bank statements she had were not used as they were not “consistent”. She can’t say then say after submitting them that she choose not to and went stated for convienence because by her own admission she went stated due to what the bank statements reveled in consistence. She writes exactly that as the reason she went stated.

    “Stated is for people who have the income but choose for the convienence of things not to show it.” Not to pick and choose after the fact if the documents work. It is like being pregnant, it is documented income or it is stated income. There is no “partial” documentation.

    Lenders also require that once one document showing income is produced, the option to go stated is no longer an option. Once a document is produced that falls into higher documentation is produced, the loan is forced to go that documentation level or it has to be denied and cannot be resubmitted later as a “lower” level of documnetation loan. This is obivously to protect the lender from being a party to with holding material information that would influence the invesotrs decision to invest in the loan. Think about it, it is common sense.

    Ardell had the statements so it wasn’t an issue of ease, it was an issue of wanting to conceal them from the lender. She could not produce income documentation that showed the loan was in guidelines so went “stated” not for ease but to omit material information that would have resulted in the laon being denied.

    Ardell, did you know all stated loans have a 4506 in them that you sign at close? Yep, you signed a form that allows WAMu to request your tax returns for the years in which you “stated” your income. This is because, once again, a borrower goes “stated” for convienence reasons not “consistency reasons”. The lender retains the right to pull the 1040’s just to double check the income you “stated” is an accurate representation of the true income. Now if you stated more you reported on your 1040’s, then either you lied on the loan application or you lied to Uncle Sam — both are crimes. You sweating now that you know this? You shouldn’t be but with those bank statements having that “consistentcy” issue, my money is on you needing to wipe your brow.

    Did you know the guy who started the blog is now being charged with fraud after writing his “stated” income story on the net. He went for public interest and it seems the lender didn’t feel so sorry for him. You better stop writing and start calling your lawyer. WaMu has large eyes and what is called “buy back” clauses.

  66. “I know better”,

    I think you are crossing a line of net civility by pressing Ardell as to whether she has done something criminal or not. It’s well and good to debate the wisdom of sub-prime mortgages, and even discuss when (and when not) to use stated loans. However, scaring someone with dire warnings of prosecution goes beyond the pale.

    But then, I never understood why so many people were personally affronted by Messr Serin, even to the point of forwarding information to law enforcement. It’s not our place to judge. Further, if the lenders were so willing to approve every silly loan application that came across their desks they deserve all the pain that results.

    Let’s avoid the accusatory comments, or insinuations of wrong-doing and immorality.

  67. Sniglet,
    What about if I am a victim of the down the road consequences of such possible fraud? Do I then have a right to both question it, report it and have it investigated?

    I am not and will not be the person “judging” it. That is beyond my scope, it is the job of who I report it to, to judge it.

    It is every instance of fraud collectively that has caused the “credit crunch” we are now experiencing. This has resulted in foreclosures of some peoples’ homes, the loss of many innocent peoples’ jobs and decline of property prices. One of the main issues risk is unable to be calculated is due to the fraud that occured in the process and everyone down the road that is effected has a right to be offended by it and report it.

    Ardell opened the door. Ardell made her financial business public and invited such comments. I didn’t seek Ardell out. Ardell sought me out by writing a story she believed would reflect her as the picture perfect sub-prime borrower trying her hardest to cope with a reset of the ARM. I didn’t out Ardell, she outed herself by writing what was supposed to be a self promotion entry on her blog that back fired in her face.

    How “civil” of is it when one acts in the way as it appears Ardell may have. It is so uncivil, it potentially looks to go beyond a “civil infraction” and on to possible criminal action. There are real victims who have had real injury due to such actions.

    If one only sees the “lender” here as a victim, they aren’t looking far enough the slide. What about the investors down to the man on main street working 8AM to 5PM? That’s right, the everyday working person whose 401K has been indirectly affected by the rampant fraud in lending. The pension holders, the tax payers who see reports of a recission due to the housing market, the people who get laid of as a result of a recission, the guy who needs to sell his house but cannot — They are all possible victims and I believe that every possible victim has a right to have a report of a potential crime investigated. Every American who saves for their retirement or owns a home is effected by this BS, not just the lender who approved the loan.

    Damn right I am mad.

  68. Sniglet…

    I’m surprised that you actually advocate walking away from ones home when upside down on the loan. You seem to be speaking out of both sides of your mouth where you harp on people for “insinuating wrong doing and immorality” yet you are an advocate for “wrongdoing and immorality” by suggesting that someone just walk away from their contractual obligations.

    Correct me if I am wrong but I thought that with the new BK rules that one isn’t allowed to wipe away their mortgage debt with the exception of the “homestead allowance” or whatever it is called if their income is above a certain level. I can only assume that Ardells income puts her into the “can’t walk away from mortgage debt” bracket.

  69. Ardell,

    Thank You. This is seriously the best post I have EVER read on I just said so I my own blog.

    Owning a home is such a key goal to building wealth for your family. The sub-prime debacle has hurt many, but helped far more.

  70. After looking back through Ardell’s writings, I have found out Ardell has no problems at all with holding and altering information from lenders material to the transaction. Ardell also seems to be just fine with doing business with those who evade taxes or makes a living committing crime. Lenders certainly do not okay stated income for criminals for many reasons not to mention the risk is quite high for default for someone who gets caught and is sentenced to serve time.

    Worse yet is Ardell uses these tactics in her quest to be seen as a leader in her industry and educate others in her profession via her blogging.

    Ardell will be reported for her actions in her own words.

    If you go to Ardell’s profile and read her articles you will find an article on page 7 written April 6, 2007 in which she writes about a scenario with a listing that had a pre-determined price that would not work with the financing package. She writes how she contacts the “lender” about increasing the price so the borrower can qualify for the 100% loan. She isn’t contacting the “lender” though, she is contacting a mortgage broker. The broker is not the “lender, he is the one submitting the information to the “lender”. To alter the lising price upward to alter the LTV disclosed to the lender that is really lending the money is illegal and an act of fraud. If Ardell thinks she has clean hands here, she doesn’t, she is the one writing the purchase argreement. Also this is easily traceable as the listing price compared to the sales price remains in MLS.

    On page 17 Oct 15, 2006 of her articles she talks about how “stated” income is “good and valid” for those who partake in tax evasion. Please see the quotation below in Ardell’s own words

    “Bottom line is that ALL of the “exotic

  71. I know better, who apparently doesn’t know better. Stacking costs on top of the sale price is not my idea and has been done for as long as I can remember. Your thinking it is “wrong” is incorrect. The listing price is readily available to the lender’s appraiser. If the appraiser appraises it with the costs stacked on top, that’s between the lender and the appraiser and has nothing to do with the other parites. The appraiser has ready access to the asking price.

    Not much different from when properties bid up. Sale price exceeds the asking price, often.

    What do you think “stated income” is for if not to remove the “proof” part of the process? It can be done for convenience, it can be done
    for many reasons. You’ll have to ask a lender when and why stated income is most used. I don’t usually get that involved in the details of how my clients document or don’t document their income for the lender.

  72. EconE,

    I can tell that IF the collateral is insufficient, that is not my fault. If the collateral is insufficient, not that I’m planning to not pay my mortgage, but if that happens, I would pay back the lender for what he lent me, whether required to or not.

    My Dad went bankrupt a couple of times when I was a kid. My Mom worked to pay off every penny even though she didn’t have to.

  73. I know better, it WAS a profile. I thought it was pretty odd too, but that’s what the underwriter asked for. Actually WA MU bought the loan at the closing table.

  74. I know better, the sale price was not higher than the listing price in my case. I’m trying to catch up on all of your spewings and misinterpretation of facts. Do you just make this crap up?

    Are you that weird stalker guy? I’m going to go check your email address, not that you couldn’t have changed it.

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  76. I thought this was a great post, Ardell. Funny how so many have a problem with someone that understands an obligation. Maybe some of these people work in the media?.. Millions of scenarios create markets.. Good and bad. Many people will be hurt by the current mortgage “mess” while others will profit.
    Keep up the good, honest work..

  77. Ardell, you’ve got big satchel for posting tumultuous events in your life for all to read. I can’t say I agree with your process but obviously wasn’t in your position so will keep quiet other than to say I respect that you are working so hard at currently making the best of a bad situation and I wish you the best.

    Losh – we need you in the white house. Our enemies would suddenly be very confused and petrified.

  78. czb,

    Clearly the need to conserve cash to build up my business, and to carry me through until the business was stronger, was part of the equation. To isolate the decision making process to simply “home purchase options” is not realistic. Our lives and overall considerations are much more complex than that. Had I used the money to produce home equity vs build my business, I would not likely have made it as far as I have.

    Just because you have 20% down in your hand, doesn’t necessarily translate into putting 20% down being your best overall option “all things considered”.

    Kind of like the old “walk a mile in my shoes” before you judge me. I’m glad I wrote this post. It’s hard to stick your neck out this way, but I do think people need to see all sides/ Those who think the most conservative methods are the ONLY methods worth respecting, don’t know many people who have accomplished great things. Rarely are the greatest accomplishments founded in conservative stances.

    Small business loans for companies in business less than a year were a lot harder to get than zero down financing on residential purposes. So zero down funded my success in other areas. Sometimes you just have to give someone credit for knowing their circumstances better.

  79. czb,

    I appreciate your good wishes. I’m still thinking that working hard and taking these risks is the only way to insure that I don’t have to be working so hard when I’m 70. I don’t think my 20 year pension from the bank and social security are going to stretch very far. I’m willing to work really hard, while I still can, to catch up.

    I came home from work the other day feeling a lot like I did in my 20s before I got married and had children. That’s not a bad thing. I feel like I’ve made it back to who I was. That was clearly worth it regardless of what happens in the future.

    I stopped seeing my-ex in every mean spirited diatribe a long time ago. Another good thing.

    “I Know Better” appears to be a woman from Australia stuck in the mid-West. Maybe something in her life caused her to need to vent. Maybe she had a really big headache 🙂

  80. Ardell, as you began this post and you are proving; subprime mortgages work for people in similar circumstances as yours. They were intended to be “band aid” loans – not long term financing.

    They work for people who have found themselves in a “circumstance”, they do not work for people who have bad habits they cannot and will not correct.

    You are a good example of how these loans could and should have performed. And a majority of these loans are performing.

  81. Rhonda,

    I think there are many legitimate uses for “stated” income. One is for hourly employees whose hourly wage increased dramatically due to a promotion. When a salaried persons’s income increases, lenders count it after the first paystub or two. When an hourly person’s wages increase by the same amount, they have to earn at that rate for two years before lenders count the higher amount.

    Doesn’t seem fair, but that’s how it is. So the hourly person would end up as stated to be on an even keel with the salaried earner. A very good use of a two year arm using stated income would be that scenario.

    There will continue to be good reasons why people use stated vs. full doc loans and lower payment start points. My plan was to pay off the second in it’s entirety before I refied the first, and to do that by the time I was eligible for my bank pension and my alimony was over in 2009. So far my plan is still on track.

    Given the changes in the mortgage industry, I may convert to a 90% first with PMI and then pay the first down to 78% to get rid of the PMI. Still weighing my options and I do think interest rates will be lower in 4 months or so. I didn’t use a low start rate loan, so a $200 increase per month is clearly doable for now. The bigger issue for me is managing 2008. I think we will all have to stay on our toes, and work extra hard and smarter, to keep our incomes steady through 2008.

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  85. As a epilogue to this article: Ardell’s house was sold in August 2009. The sales price was recorded at $550k down from the purchase price of $850k.

    Feel free to delete this comment if you feel it is in bad taste. I would love to read a followup article about Ardell’s experience.

  86. Hi Alan,

    I tried to email you about the one word change, but the email was returned. It is an interesting story, as the short sale went on from September of 2008 (at a much higher price) to the actual closing almost a year later at the lower price. Since the story involves not only me, but the buyer, I am not sure how much detail I can reveal without violating the buyers’ right to privacy. I will think about that.

    In the meantime people can continue to comment, and I will only interject if there are errors or it impacts the buyer in some way.

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