Easy Money, Hard Times
Posted on May 28, 2006
Filed Under Mortgage Updates
Florida real estate fluxates sometimes annually and unfortunately many new home buyers middle class and higher get stuck with bad mortgages that have higher interest rates because they are new to the game.
Studies indicate that more than 2,000 families are in danger of foreclosure after mortgages they signed have them paying more now than they were at the beginning.
As the state’s red-hot real estate market grew hotter, thousands of new brokers and brokerages obtained licenses to operate in Florida. That coincided with the availability of new types of loans, which gave far too many middle-income buyers who couldn’t afford it a shot at living in a half million-dollar home.
Far from the rock-bottom interest rates of recent years, many local loans started off with hefty double-digit rates, which are now creeping upward.
One couple in Greenacres did not realize until they were before a judge that they might have gotten a better deal. They were able to work out an agreement with the lender while they caught up on back payments.
“When we went to the foreclosure hearing, the lawyer asked us if this was our first house,” recalled the 30-something homeowner, who asked not to be identified because she is embarrassed.
“We said yes, and he just said, ‘You should never have been put into that mortgage.’ ” The couple had taken out a $212,000 adjustable-rate mortgage that starts at 7.8 percent, and goes up from there. They had taken a second mortgage, known as a “piggyback loan” because it is on top of another loan, to make the down payment.
There’s evidence thousands of wide-eyed borrowers fell prey to the lure of easy money:
• A St. Andrews Country Club home fell into foreclosure only 60 days after its owner took out a $1.9 million loan.
• A Boynton Beach man was in his $248,000 villa just four months before the $1,845.74 monthly payment proved too much for him.
• A Lake Worth couple slipped into default one month after refinancing at an 11.99 percent interest rate.
Thousands of new brokers have made thousands of new home loans.
“In 2000, there were about 28,000 licensed brokers,” said Schneider, noting that the number had more than doubled in five years, and now, “an average of 4,000 people a month were taking the exam.”
More than $106 million in home loans collapsed in Palm Beach, Martin and St. Lucie counties in the first quarter of this year alone, according to a Palm Beach Post analysis of data collected by RealeSTAT.com, a local commercial firm that gathers foreclosure and default records. A little more than $68 million in mortgages defaulted in the first quarter of 2005.
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