Amway-type mortgages?

Factual Questions
21

I’ve read stories about a lot of homes that were bought in this manner. . .stating that they would be “owner occupied”.

The oversight on that, in certain areas, seems to have been non-existant.

I was reading a story recently (probably through a link at thehousingbubbleblog) about a guy with 6 owner-occupied properites.

The “stated income” mortgage kind of goes hand-in-hand with that. I consider both to be pretty much fraudulent. But, that “stated income” thing is going to look completely indefensible when this whole thing unravels.

I bet the OPs sister and any of her cronies with houses have all done the “stated income” mortgage.

22

In the industry we call them liar’s loans.

23

Simply astounding.

It doesn’t amaze me that there are PEOPLE would take advantage of this loophole.

It does amaze me that lenders would lend money based on stated income.

24

Part of it makes sense. Lenders say they do stated income because they don’t care what the income is. The borrower’s credit is good, the lender is protected because they keep the loan-to-value ratio low enough where they will be protected in case of foreclosure (they can sell the property for enough to cover the mortage amount), and they do verify assets. In effect this is asset-based debt. Heck, Texas *requires *equity loans against homestead property to be non-recourse. http://tlo2.tlc.state.tx.us/txconst/sections/cn001600-005000.html (Section 6(C)).

OTOH, the stated programs seem to be involved in much of the mortgage fraud that I see, even if the “stated” parts aren’t relevant to the fraud.

And, asset-based lending gets riskier as property values drop. Newsday | Long Island's & NYC's News Source - Newsday

25

Thanks all, this has been extremely illuminating. I was not interested in refinancing from a hard-sell in the kitchen and becoming a pyramid-agent was out of the question. Nonetheless, I was curious enough to think something was very remiss.

So it’s not really a scam, so to speak, but they are skipping some very important details in their presentation.

The sad thing is that the company is marketing toward lower-to-middle income folks*. The type who would go to a living room presentation and be convinced to try this. It’s telling that they emphasized the boatload of cash so much, good way to pay off debts. While they may be homeowners, Hawaii houses can be rather expensive, and quite a few still live paycheck to paycheck.

I now shudder to think what will happen to their clients in 3-5 years. And who knows if my SiL will still be in this refinancing gig in 3-5 years when the clients realize what a fix they’re in.

A hijack (but I’m the OP, so why not):

Fir na tine I hate it when people I know are involved in Amway type things. They annoy the heck out of you with their invites/products… then they ask you to annoy your friends for their invites/products. Count me out.

26

And they’d make you think that renting your old house is a piece of cake.

Sure they’re paying rent but your still hit with property taxes (non-homestead) and homeowner’s insurance not to mention your the guy they’re gonna call when the furnace breaks down, A/C doesn’t work, garage door opener breaks, sink leaks, etc. etc. etc.
And then you have to deal with drawing up a lease, dealing with late rent payments, renters damaging your house, etc. etc.

But I’m sure all that runs smooth as silk with their plan while your enjoying your new McMansion.

27

Update time.

My refusal didn’t really cause the problems, but all the BS surrounding her “business” has.

She wanted us family members to help her reach 25 people so she could reach the next level. We needed someone to watch our daughter Anya (her niece) for a day a month down the road. So we proposed to be that 25th person and help out by filling out the form and loaning $100 for the processing fee (only 12 of those 25 needed to process, so we were the other 13). She would watch Anya and then pay us back the $100 in 30 days, when she made the next level.

Time passes. While she is too busy to hang out with the family (missing birthdays, family get-togethers, and retirement dinner plannings), she never bothers us about her business.

30 days pass, and we casually ask about the $100. As you can imagine, we want to sever all ties with this scheme and not give her any illusion we might refinance. She does not have the money, because she has to meet more “criteria” for the $100.

So I’m thinking, okay, chalk off that $100 as a loss/gift. No biggie, in the scheme of things. And she’s returned our application after the 25 were counted. The camel’s back hadn’t been broken despite her non-committment and late payment.

Remember she agreed a month ago to watch our daughter? We’ve given her reminders, even the day before. The day comes, we’re getting Anya ready… then Doreen calls. “Was today the day I was supposed to watch Anya? Oh, it was? I’m at the airport now, because I have a financial analysis for a client on Maui”.

This left us a tad non-plussed. After counting to 10, I calmly said, I want the $100 back now. I do not want to hear the word “refinance” again. If you ask for my help, accept the condition to watch Anya for one day a month down the road, then reneg on my daughter that day… then yes, I’m withdrawing my help. Screw with me, fine. Anya, no.

So, she did what any 40-year-old professional businessperson does during a contract dispute. She called her parents and whined how unfair my wife and I were.

She needed help from her family and we were revoking our favor. So what if she couldn’t watch Anya, family members shouldn’t attach “conditions” to favors. Besides, we should understand how busy she is with her important business. It went on like this for a couple weeks, with my poor wife taking the brunt of the attacks (my SiL only talked through my wife’s parents). Her parents, as is their culture, believed the oldest sister and took her side. My wife’s rebuttals and explanations were met with “Pasensya” (patience/forgive her/you know how your older sister is). We could never get ahold of my SiL, just got repeated salvos through her intermediaries.

She would only give me my $100 if she got an apology. Since I’m such a wuss (and wanted to relieve my wife), I caved in and came up with the appropriate apology “I’m sorry if you were offended when I asked for my money back”. She totally bought it and we got our $100 back. I’m sure there’s some resentment, but I and her parents feel it is all over.

On a somewhat related note, the banks most of her 12 applicants. Can’t fool the lenders.