New Haven Independent

Posted by: on whalley | March 5, 2008 9:34 AM

So Wiiloughby was set to close on a property then somebody told her that the property she wanted was suddenly unavailable but hey, here's this other one and she went ahead and closed on it without even seeing it or inspecting it?

WTF???

Is this exemplary of the homeowners currently in crisis? They just sign over a bunch of money to buy something they've never seen?

Suddenly I feel like the smartest man alive if people are out there doing this.

"I know you had your heart set on this Cadillac that you can't afford but we already sold it so just sign here and we'll give you something else."

Now what moron is going to sign? You could drop all that Cadillac money and drive home with an 86 Hyundai with a warped head gasket and a bent frame.

But I guess if you can't afford it in the first place and some bank stupidly hands you a loan for more than you'll make in a lifetime and you don't bother to understand the terms then you won't mind making a stupid gamble with what you consider to be the houses money.

Such ridiculous behavior must have a ridiculous root cause. I blame fluoridation.

Posted by: Gary Doyens | March 5, 2008 9:59 AM

"We're a smart little community," DeStefano said. "We should have fun for a year and over-regulate these bastards."

In one sentence, DeStefano sums up who he is, what he stands for and where he's taken this once proud city in the 14 years he's been at the helm.

First, he thinks he's the smartest guy in the room which he's not. If he was brilliant and visionary, we'd have new schools we could afford and a city government that works for the people and doesn't drive out the middle class, manufacturing jobs and other employment. He's spent money like he's on steroids and the city's debt level and debt payments are larger by far than what we can reasonably sustain even as he borrows even more money from some of those same "bastards" in order to plug a budget hole this year that he, not the state created.

Secondly, he exhibits what a bully he is, and how he will use the sacred power of his office to make somebody's life hell because of a perceived slight or action, calling it "fun." How quaint and classy. For other examples, just remember YNHH, YCC, New Alliance, Tweed Airport Authority etc. These types of comments and threats cheapens the authority of the office and it makes him look like a thug, talking dirty and playing like he's the savior of the little guy. In reality, he's standing on the little guy's head to make himself taller.

Thirdly, he denigrates an entire industry that plays a vital role in commerce and home ownership, not to mention that many of those "bastards" are the ones responsible for the FREE concerts on the green, underwriting many of the non-profits helping New Haven and others live better, read better and plug holes in social services. Don't forget the Shubert, New Haven Symphony and Arts and Ideas.

And finally, as he does with every crisis and every single issue - he blames others for woes that at best, are mutually shared, and at worse, are completely our own doing. In this mortgage crisis, there was greed and dishonesty on all sides - brokers, banks, homeowners, bond insurers and Wall Street. There is crow pie for all to eat.

Perhaps DeStefano should take off his rose colored glasses and take a good long look in the mirror in his new $3500 coat rack. The hypocrisy is palpable as DeStefano supports the home foreclosure actions by the WPCA over $800 sewer bills; supports foreclosing on homes for property taxes; advocates towing cars for property taxes, installing parking meters where there are none to generate more tickets and ticketing cars in poor neighborhoods for street sweeping days even when the streets aren't swept. Now, it's the little guy who's got his ire and we're the "bastards" who should pay. In DeStefano's world, some "bastard" is always paying.

Posted by: PowertothePeople | March 5, 2008 10:08 AM

People get taken in cons all the time so I was not at all surprised when I heard the story (I was at the lunch.) It is sad.

The house-buying process can be very intimidating. When an unscrupulous mortgage broker has spent several weeks building your trust in them, you are confused (and often lied to) by the volumes of paperwork, you are waiting with nervous anticipation at the prospect of owning your own home - the American Dream, you have already given up your old residence and have nowhere else to go... I can understand. That's how cons work.

We can sit here Monday morning and say she was a fool for signing the papers (she would say that now herself) but we weren't in the room with her nor were we in her feet when it happened.

The con-ee is duplicitous but the con-er is criminal! I hope L & M Mortgage or whatever their name is goes to prison - AFTER they pay back all the money!!!

Posted by: cedarhillresident | March 5, 2008 10:20 AM

Looking for data!!

Ok maybe I missed it out of the "up 80%" do we have any data on how many of the foreclosures are from loans of subprime in the city?? I think that makes a difference. That I do not believe that it is due to the subprime in New Haven...maybe parts of the country but not in New Haven.

Posted by: BRHO | March 5, 2008 11:15 AM

On Whalley,

I can almost understand your indignation about Ms. Willoughby's actions. It is clearly not a good idea to buy anything sight unseen. But, it is also down-right criminal to pull the old "bait and switch" on an unsuspecting consumer at the last minute. Too often, home-buyers put far more trust in the mortgage brokers/loan originators than they ought to, believing that these people are truly trying to help them realize their "American dream". The reality is that mortgage brokers are only trying to put together deals that net themselves the highest commission. And, in the right situation, with the right client, some will exploit the trust and mis-information of a desperate person.

Consider that when a home-buyer like Willoughby is finally sitting at the closing table, she - most likely having moved out of her old apartment, often living with friends or family with kids and/or husband in tow - came only to sign and collect keys. Everyone else at that table wants her to do that, too. So, when things are not quite what she expects, she may be suspicious, but she still trusts that "her" broker, "her" realtor, and "her" closing attorney are looking out for her best interest -- and, certainly they know all about her particular situation. Switching the property at the last minute may be a new low, but the "bait and switch" happens all the time with rates, terms, and closing costs.

Clearly, this example illustrates a great need to educate first-time home-buyers, but please be aware that the bulk of our current foreclosure crisis is actually the result by un-checked (and unscrupulous) brokers and lenders. They will try to get away with whatever they can for the sake of their own bottom line and this is why groups like the event's coalition are calling for regulation and enforcement. In my humble option, criminal is far worse than ignorant.

Posted by: Outta-order | March 5, 2008 12:29 PM

Ken Willis is right. Over-reg is never the solution to anything. DeStefano will call for over-reg today but I hope he realizes that this will lead to a remarked decrease in lending in marginal neigborhoods. This in turn has an adverse impact on the stagnant homeownership rates in New Haven. Over-reg now but realize that you will again have to lead the fight for redlining in the future.

Posted by: Your Tax Dollars at Work | March 5, 2008 12:31 PM

Will we set up a city agency to regulate the banks, mortgage brokers, real estate agents & attorneys? All of those entities are already regulated by state and federal governments and there's clear law the City is preempted and does not have jurisdiction.

These are seriously tough times. Real estate prices have reached the stratosphere. Hard times will continue until prices come down to "reasonable" levels. As with past cyclical bubbles, prices will come down below "reasonable" levels before they start to rise.

This will probably take 3 to 5 more years.

In the meantime, lets sincerely work to find viable ways to help the poor folks being foreclosed, not only by the banks but also by the City and its "independent" but really subservient "authorities."

Posted by: Christine | March 5, 2008 1:43 PM

Great video Paul!

Posted by: Bill Saunders | March 5, 2008 3:45 PM

Let us not forget that NEITHER the Real Estate Agent nor the lender is beholden to the buyer. Quite the opposite, actually. The Real Estate agent works for the buyer, and the private mortgage companies work for their bottom line.

If a new homebuyer is foolish enough to enter into a large money transaction without the benefit of an attorney at the closing (or a home inspection, prior) to look out for THEIR interests, I don't have a lot of sympathy.

Maybe that should be the first stab at "regulation" -- mandate that homebuyers be represented by an attorney of their choice (not the friendly mortgage co. attorney that comes with the loan, and provides the fountain pen of unending ink).

Posted by: Heights Resident | March 5, 2008 4:18 PM

Wow I read this article in amazment, I didn't know you could buy a house site unseen. I see the problems with foreclosers in my neighborhood, three nighbors are fighting to keep there homes, and it's sad.

These money hungry mortgage brokers sold them a pipe dream and promised low end arms and the rate flew through the roof.

I'm hoping that some regulation comes down that would put a halt to these practices, this not only destroys families, but neighborhoods as well.

Best of luck to your family Ms. Willoughby.

Posted by: Ned | March 5, 2008 8:20 PM

Uh oh it's the B word - bailout

I have zero trust that any program to "save homes" (how's that for emotionally manipulative framing of the problem) will not be subject to more fraud and corruption.
Of course the people who stand to benefit from the big bailout are in favor of it - duh!

Posted by: Edward_H | March 6, 2008 10:38 AM

"There was a way we got here, which was driven by greed," DeStefano told the crowd,

I would like to know at what point in time mortgage lenders became overcome with "greed"? 1980? 1995? I guess this means mortgage lenders were less greedy at some period in time? What is the mayor using to measure greed? Has this "greed" subsided? Does "greed" only apply to monetary pursuits or can it also apply to vote pulling?

http://www.newhavenindependent.org/archives/2007/11/machine_pulls_e.php

"We're a smart little community," DeStefano said. "We should have fun for a year and over-regulate these bastards."

Thank God this man did not become Governor. He has zero insight on economics or business. Gary Doyens hit the nail right on the head.

Heights Resident

These money hungry mortgage brokers sold them a pipe dream and promised low end arms and the rate flew through the roof.

None of your neighbors understood what the word "Adjustable" meant? They had no idea when they signed the paperwork an ARM stands for "Adjustable Rate Mortgage" that the mortgage rate was adjustable after a period of time? More than likely your neighbors had a choice between a fixed interest rate and an ARM. Most likely they gambled on the adjustable betting that their homes would rise in value enough before the initial low interest period was over and allow them to:

1) refinance to another initial low payment ARM
2) refinance to a traditional fixed
3) sell their home and upgrade to a larger home
4) sell and collect profits on the sale

Now that they lost their gamble on rising real estate values they are feigning ignorance. No matter how "money hungry" mortgage brokers may be they cannot make money without "money hungry" real estate buyers willing to buy houses. If any home buyers does not understand their mortgage they have no right signing a contract in the first place.

Posted by: THREEFIFTHS | March 6, 2008 10:55 PM

Edward-H
Not all people are losing there homes becuase of the arm mortgage, The people on my block are losing there homes because of the lay off from winchester And Bayer in west haven that now is own
by skull and bones yale, They have told me that they can not get the pay grade that they had at these companys,This is happning Across this country to people in the work force so it is not just the arm mortgage market.

Posted by: Nestor Makhno | March 7, 2008 2:15 AM

I would think the NHI's right-wing would be happy that these people facing foreclosure on their homes were once pursuing the American Dream of life, liberty and PROPERTY. Low interest rates no doubt sparked a veritable home-buying hysteria. Predictably, these interest rates, coupled with reckless and exorbitant lending orchestrated by a combination of mortgage brokers, appraisers and other like-minded hucksters, caused real estate values to inflate to the point where those wanting to purchase a home were required to borrow more than the home was truly worth. Add less than reputable subprime lenders backed by investors, and you are left with something akin to an IMF for US citizens. From a distance, it almost seems as if the whole mortgage crisis was manufactured.

Posted by: Andy Ross | March 7, 2008 11:58 AM

I suppose it's only human nature to look for someone to blame when things don't go our way, and we have a tendency to take the credit for anything that turns out to be a great success. When housing values were experiencing double-digit percentage increases, we all congratulated ourselves on what a smart investment we had made in our homes. Right now, with the current sub-prime mortgage crisis worsening each day, all we really want to know is who's really to blame for our current economic situation?

Some people might argue that Wall Street Investors are to blame. They are the ones who provided the mortgage industry with loads of available money. This encouraged mortgage originators to create as many mortgages as they could. As the Wall Street Investors demanded a higher rate of return on their capital, the loan originators responded by accepting lower standards from their mortgage applicants in exchange for charging them higher interest rates on their mortgages.

Other people will tell you that the investment bankers are to blame. After all, they are the ones who bundled these mortgages into instruments with names like: structured investment vehicles. The investment bankers then made these vehicles available to the Wall Street investors. Loan originators and Wall Street investors might never have come together if the investment bankers had not gotten involved.

Can we blame the loan originators, even if they followed all of the legal procedures required by law? Originators prepared disclosures with signed acknowledgments from the loan applicants acknowledging that they understood the terms of their mortgage. The loan originators didn't determine the applicant's future ability to pay, personal integrity, or level of individual accountability. In most cases, the loan originator only made certain that the applicant met the qualifications for that specific mortgage.

What about the blame that should be shouldered by the attorney's who have a fiduciary responsibility to their clients? In Connecticut, as in many states, real estate closings require the services of an attorney. In most cases, the attorney only ensured that the letter of the law was followed. Shouldn't the attorney also be obligated to make certain that no client signs a contract that he or she does not fully understand?

We could place the blame on the new interest rate changes for the adjustable rate mortgages (ARM's), but the majority of them have not actually reset yet. They are due to reset within the next two years.

We might even be tempted to blame the hybrid loans themselves. These loans do not require every applicant to work in a 9 to 5 job or possess documentation verifying: employer, hours worked, and rate of pay.

I think that everyone would agree that predators could be at least partially to blame for the total problem. They disguise themselves as representatives of any industry. Predators are the unfortunate byproduct of all businesses in which there is money to be made by illegal practices.

Last, but not least, one of the most overlooked things to blame for our current economic problems is the escalation in the cost of living. The costs associated with owning a home have skyrocketed. Insurance rates have tripled, taxes have increased by 50% to 100% in some areas, and energy costs have doubled. In the past 5 years. This could very well be blamed for our plight, or at very least a major contributor.

In some cases, the bank requires that a person, especially sub-prime borrowers escrow their taxas and insurance with the lending institution This assure the lender that the borrower will not be in danger of being foreclosed on by the municipality for non payment of taxes, or the property go uninsured. This is not only a smart business decision on the part of the bank, but should be required in all cases, so a borrower can more clearly see and feel their monthly obligation. It is an excellent exercise in budgeting. It is a win for the town tax collector as well. The town will always receive their money on a timely basis, regardless if the borrower is paying or not. I would go as far as encouraging states to enact into law, and if the State will not, then the local government should.

Considering all of the above, I'm afraid the simple truth is that we, the consumers of mortgages, should accept most of the blame for the situation that we find ourselves in. We are responsible for the financial decisions that we've made.

When buying merchandise in a store, we understand that it is our responsibility to make certain that we've chosen the finest value at the best possible price. We don't blame the storeowner for selling us something that isn't right for us. Nor do we blame the retailer for selling us something that costs more than a comparable item sold by a competitor. In other words, we usually get what we deserve. Mortgages are no different.

Hybrid mortgages offer opportunities that have allowed many people with, unusual circumstances, to thrive by obtaining unconventional mortgages. They thrive because the mortgage, that they've selected, fits their specific situation. "No money down," ARM loans were not created to put people into houses that they couldn't afford; they were created for people who believed that their situation would change within a specified period of time, enabling them to meet the larger payments when their mortgage rate adjusted.

The truth is that you are the only person who can determine what your needs are and what you can truly afford to pay for a home. If you have chosen to finance your home with a hybrid mortgage that doesn't fit your situation, you have chosen to use your family home as a short-term investment. You have entered the high-risk game of speculation.

Investments that are lost in the stock market are just that: investments lost. The money that is used to secure the investment has been paid up front. Using your family's home as a short-term investment is like playing the stock market on margin, your losses can easily exceed your investment. You are actually leveraging your down payment and good credit on speculation that the value of your home will increase. You could realize a short-term profit by refinancing or selling the property, or you could realize severe losses with a drop in property values, resulting in negative equity. As we have seen, this type of high risk gambling can net big returns, but you must be prepared to face the possibility of loosing your family's home. It's completely your choice.

In any case, the old saying is true; each of us is the master of our destiny. Blaming others for our own bad decisions will only result in lessons unlearned. The sooner that we acknowledge and accept responsibility for what we have done, the sooner we can move on to rebuild the housing industry on a solid foundation.

Posted by: JMac | March 7, 2008 12:03 PM

"The market corrects itself. It's called the invisible hand of the market," Willis said."

Sure, obviously, the buyers should have been more cautious about what they were getting into with ARM's.

However, few people seem to point out the breathtaking stupidity of the financial institutions involved. If you got someone with, say, $3000 monthly take home into a mortgage that started out at $1500 and then "adjusted" to $2500, how in hell did you expect they were going to pay it?

The whole thing was essentially predicated on ever increasing home values, something that is obviously never going to happen.

And we're not just talking about the original broker/salesperson trying to turn over a bunch of transactions and make quick money either.

Aren't there supposed to be people in these financial institutions who make careers out of assessing risk? People with PhD's?

And then this ridiculously risky paper was packaged into "collateralized debt obligations", or investment vehicles, with such supposedly sophisticated players as Merrill Lynch and various hedge funds involved. Did any of these geniuses stop to think what might happen if the housing market crashed?

Now we're told that these capitalist masters of the universe types don't even know how to value the paper that they're holding. Unbelievable. Farcical.

The whole thing reminds me of Reagan's deregulation of the thrifts in the early 80's that led to the massive S&L bailout a decade later. But yet people relentlessly insist that an unregulated market is a wonderful thing.

I think DeStefano is right. These morons need to be regulated to protect them from themselves, not to mention the rest of us.

We all pay for this in a million ways. Fools gamble on the fringes of the housing market, the Fed prints more money to respond, and the few people left who actually try to save money the old fashioned way get pummeled.

Posted by: Ned | March 8, 2008 10:51 AM

Hello people we're in the NUTMEG STATE. It's time to do your research; check out the Short Calendar for New Haven, to find foreclosures; pick some names and check the Vision Appraisal database to find the flippers, speculators and slumlords. Check out the public notices to find foreclosure auctions. Go to an auction; does it look like the unpaid taxes, delinquent sewer bill, multiple mortgages, section 8 rents, etc. were going into property maintenance or improvements??? It seems that half of the housing stock in the city is totally neglected. In other words speculators were buying buildings they couldn't or wouldn't maintain at grossly inflated prices and sucking out the (non-existent) equity. With zero population growth and declining quality of life in some New Haven neighborhoods, why would property values increase? Ignorance + deceit + cheap money = greatest fool! Anyone want to buy a Nutmeg?