It seems to me that the mortgage business is just the same. We sell people whatever they will agree to, not what is good for them. Experts agree that the low payment negative amortization mortgages are not good for people. Yet people keep buying them, and in record numbers. Some are headed for disaster, others just for a severe headache, sort of the mortgage equivalent of a dangerous build-up of arterial plaque.
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A new study released yesterday challenges common notions about payday lending and military personnel. According to the report by the Consumer Credit Research Foundation, fewer than 13% of military personnel have used a payday loan in the last year.
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Last call for consolidation! Consolidate your student loans before midnight on Friday to lock in low rates. On July 1, interest rates for federally guaranteed student loans will increase about 2% across the board. This means that your student loan rates could increase to 7-8%, costing your thousands more in interest on your debts.
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Next, the closing agent, escrow officer or attorney, whomever, should also know this and make sure it’s proper. I think one of their jobs is to take responsibility for insuring accuracy. Finally, the real estate agent certainly should know this. He should review a copy of the estimated closing statement. The charges on that statement should be compared with the rate sheet to assure nothing is improper.
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I just read an article about this new system where car dealers are now allowing people with bad credit to finance cars if they get this ignition blocker thing. When you make your weekly payment you get a code to put in this keypad near your ignition. If you miss your payment, you don’t get the code and the car won’t start. People love them. It lets them buy a car when normally they couldn’t. If you need your car for an emergency they’ll give you a code, even if you haven’t paid.
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Emily Davidson and Valary Miller recently joined PLIWatch.com in a podcast on the payday loan industry. You can click here to listen to the complete interview either online or on your iPod. During this conversation, we discussed the pros and cons of payday loans, current usury laws and our hopes for future industry regulation.
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It gets worse. The escrow fee used to handle just about everything, but we have seen the introduction of new extraneous charges, not unlike the myriad of “garbage fees” charged by lenders. Notary charges used to be included but now there is an extra fee, perhaps $75. Almost invariably the buyer wants a loan, so he now gets charged a “loan tie-in fee.” That fee started out at $100 or so, maybe $200, but in the two cases I referred to, the Loan Tie-In Fee was $600. Frankly, that is outrageous and when we found out about it, I was able to get it reduced.
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In spite of how much the politicians and bureaucrats in Washingtontalk about the “market forces” solving all shopping problems, this is a glaring exception. In 25 years I have never seen a buyer or a seller choose an escrow company. The buyers and sellers haven’t the foggiest idea about such things, and the NEVER shop for one. The settlement agent and title company are invariably chosen by one of the real estate agents.
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Student loan interest rates are adjusted on July 1 each year. Over the past few years, these rates have been adjusted down to historical lows. But the honeymoon is about to end, student loan interest rates are expected to rise a whopping 2% on June 30. Current student loan rates range from 4-6%, depending on the type of loan.
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Salon.com (subscription or ad-viewing required) has a great article online today about the growing person-to-person lending industry. Sites like Prosper.com work as a virtual eBay of lending, connecting borrowers and investors to finance three year loans. Promising reasonable rates and good returns for investors, person-to-person lending is becoming a viable alternative to traditional loans.
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