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Friday, November 27, 2009

WaPo: A Liar Loan Example

by Calculated Risk on 11/27/2009 10:53:00 AM

From Donna St. George at the WaPo: The $698,000 mistake

[A]ll of this began in the heady days of the mortgage boom ... [Ms. White] only knew that there seemed to be possibilities, even to those with little means such as herself, which is how a woman who had never paid more than $700 a month in rent and who had relied in recent years on Section 8 housing vouchers suddenly owned a house.

A four-bedroom house.

With 3 1/2 bathrooms. And walk-in closets, black granite countertops and a fireplace.
You can already tell how this story will end.
On settlement day, reality bore down.
Papers were read and presented, most of which White did not try to decipher. ... White's papers cited income of $163,320 a year, even though she says her 2005 income-tax earnings were less than $15,000 and she relied at times on food stamps.
White signed papers while waiting for the one she cared most about: her monthly payment. ... "Please let this be something I can afford," she said to herself. She was pretty sure she could afford $2,000. She told herself that if her day-care business did well, perhaps she could afford $2,500. If it was $2,800, she would struggle. Here, now, came reality: $5,635 a month.
To get White to sign, the sellers - who were real estate agents - agreed to make the first two mortgage payments for Ms. White. According to the article, White received $40,000 in cash out at closing - and the seller made over $200,000 on the house. Naturally it went into foreclosure and Ms. White is back living in an apartment.