Are lenders stupid?

They loan money to a family to buy a house.

The family has bad credit, so the lender makes them get a variable rate
mortgage.

The family can barely afford the payments with this loan.

Later interest rates go up and the family can't afford the new higher
payments. The lender forecloses on the house and wonders why this is
happening to so many of their variable rate loans.

Duh!

I would think that before loaning anyone money at a variable rate, the
lender would be sure the borrower would be able to make the payments for
however high the interest rates might go up in the future.

And that if a family can barely make the payments with current interest
rates, the lender would *insist* on a fixed rate mortgage or no deal.

Is this common sense or what?

On Aug 10, 9:18 am, "Bill" wrote:
And that if a family can barely make the payments with current interest
rates, the lender would *insist* on a fixed rate mortgage or no deal.

Is this common sense or what?

The people who set up the loans don't care squat if people can pay
because once they are done with the loan they get their fees and they
sell it to someone else. As long as not too many of the loans fail
(and can be traced back to them) they rake in the $$$ with no risk.
Sweet deal for them!

Also, I was at a closing where basically the lender pulled a bait and
switch and I suspect this isn't uncommon. I felt sorry for the
buyers. The lender basically told them that "sorry, you didn't
qualify for that loan we told you you could get (you didn't get it in
writing, right? good) but we have this incredibly complicated one over
here that is just as good and it's too bad it's so complicated you'll
never be able to understand it in the 5 minutes you have to decide but
I assure you it'll be OK.". There's a lot of pressure on the buyer to
just take it and go. A couple years later they had to sell the house
when the balloon kicked in and they could no longer afford the
payments.

On Aug 10, 7:25 pm, WDS wrote:
On Aug 10, 9:18 am, "Bill" wrote:

And that if a family can barely make the payments with current interest
rates, the lender would *insist* on a fixed rate mortgage or no deal.

Is this common sense or what?

The people who set up the loans don't care squat if people can pay
because once they are done with the loan they get their fees and they
sell it to someone else. As long as not too many of the loans fail
(and can be traced back to them) they rake in the $$$ with no risk.
Sweet deal for them!

Also, I was at a closing where basically the lender pulled a bait and
switch and I suspect this isn't uncommon. I felt sorry for the
buyers. The lender basically told them that "sorry, you didn't
qualify for that loan we told you you could get (you didn't get it in
writing, right? good) but we have this incredibly complicated one over
here that is just as good and it's too bad it's so complicated you'll
never be able to understand it in the 5 minutes you have to decide but
I assure you it'll be OK.". There's a lot of pressure on the buyer to
just take it and go. A couple years later they had to sell the house
when the balloon kicked in and they could no longer afford the
payments.

Exactly, it is the fault of the companies who give out the
mortgages.........as well as the buyers in all honesty, they should
know what they can and cant afford. Then when these people get in
financial trouble, President Bush gets blamed somehow, makes no sense
to me. Then we have Hillary Clinton who thinks that our tax dollars
should pay to "bail out" these people so they dont have to go through
foreclosure.