Replies

1. 
   DanH | Oct 14, 2007 05:53am | #1

   "Recast" every 120 days sounds to me like a variable-rate mortgage -- one of the factors in the current mortgage meltdown.

   If your view never changes you're following the wrong leader
1. 
   peteshlagor | Oct 14, 2007 05:55am | #2

   To me also.  But note it specifically states it is a fixed rate.

   But a variable recast doesn't produce a kickback.

   The blue smoke is getting thick...

    

    

   Edited 10/13/2007 10:56 pm ET by peteshlagor

1. 
   DanH | Oct 14, 2007 05:58am | #3

   Fixed for 120 days, I suspect. There maybe some swizzle there that allows them to call it a fixed-rate loan (by giving "rebates" vs reducing interest rates when the rate goes down, eg), but I'd be highly suspicious.
   If your view never changes you're following the wrong leader

1. 
   peteshlagor | Oct 14, 2007 06:46am | #4

   Specifically, it says "fixed for 30 years."  The schedules show 360 fixed payments.

   I agree with the "swizzle," but a reset does not throw out a refund, kickback, whatever. 

   I thought for a minute that the broker was "loaning" the note to different firms for 90 or 120 days, but what is in it for the loanee?  He may get swindled once for a "loan" fee, but not 100 times, nor can I imagine 100 different banks going thru this process, either.

   But I've also see and heard ads about these recent mortgage programs getting paid off in as little as 5 to 7 years.  What is the mechanism to allow so without doubling up payments (going to biweekly instead of monthly, but that's still double payments).

   With the focus on the subprime issues, I can't see how this can occur in this environment.

    

1. 
   DanH | Oct 14, 2007 06:51am | #5

   There's been focus on subprime, but no new regulations. Crooks are gonna try to befog the paperwork to make unattractive loans look more attractive, however they can do it.(Not saying that's necessarily the case here, but I'd just be very, very, very wary.)
   If your view never changes you're following the wrong leader

2. 
   DanH | Oct 14, 2007 06:52am | #6

   Oh, and the talk of "wealth accumumlation" is probably a red flag. Making it sound like you're gonna get rich by taking out a mortgage.
   If your view never changes you're following the wrong leader

2. 
   DanH | Oct 14, 2007 07:11am | #7

   Reading it again, they MAY mean that the payments are refigured every 120 days, based on how much you've paid down the principle. Thus if you made an extra principle payment in the first 120 days that amounted to half the outstanding principle, the size of payments would be cut in half (but the term of the loan would remain unchanged). But they could also mean (in addition) that you have a never-ending mortgage, since they could be implying that the clock is restarted every 120 days.

   Note that this feature (if I'm reading it correctly) is really covering their behinds more than yours. By slowly reducing the size of your payments they're making it less likely that you'll refinance down the road, when you have the principle paid down quite a bit. They're also preventing you from paying off early, maximizing their interest collection potential.

   And the "rebate/credit" thing sounds like a gimmick to get you to buy a larger loan -- probably for folks who are well below the $417K cutoff. You get money back (but presumably get the full tax deduction), kind of like getting cash out of a refi, only every 4 months, and you can either pay down the loan with that or spend the money. Guess which they really want you to do?

   My bogosity sensor is still flashing red.

   If your view never changes you're following the wrong leader
1. 
   BillHartmann | Oct 14, 2007 08:32am | #9

   The 417k appears to be the "name" of the program."417k VIP loan example"This is the range of loans." loan
   > > sizes from 250k-10MM,".
   .
   A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.

3. 
   BillHartmann | Oct 14, 2007 07:56am | #8

   Who (what kind of person) was this directed to, if you know?

   I tried google on several combinations of key words and really did not find anything that related.

   This is the closes that I found.

   http://www.raincityguide.com/2007/04/26/two-offers-to-refi-in-one-dayjust-how-lucky-can-a-gal-be/

   " “Your Mortgage Master loan in the amount of $375,000 can be restructured to a (you better sit down for this one) a 10 year payment at only $79. This is not a typographacial error. Your payment rate is only 1/4% and is fixed for 10 years….

   Call us today and have no house payments until June 2008“.

   Of course I had to call them! The gentleman was very friendly (much nicer than the chaps I dealt with trying to help Jillayne uncover the Vacation Mortgage). First you must meet their guidelines. “Slick” tells me that one of their biggest “catches” to get around is loan to value…lucky for me, we meet the 70% or less LTV requirement. You also must have credit scores of 680 or better and not plan on moving for 3 years or you’ll have the opportunity to pay a prepayment penalty.

   Me: What is the rate based on?

   Slick: 0.25% interest only

   Me: I mean, what is the base rate? How much is the deferred interest?

   Slick: Wow, you seem to know a lot! 6.750%

   Me: At what point does the mortgage recast?

   Slick: 150% (yep…that’s what he said….150%). I can’t believe it either!

   This means that every month you make the 0.25% interest only payment of $79; the difference between that and the fully amortized payment is tacked on to the back of your loan. This difference is $2,322.17.

   This would be allowed to continue until my original mortgage balance of $375,000 reaches $562,500! I estimate this would take 80 months (or just shy of 7 years). Although the rate is fixed for 10 years, the loan will recast into a fully amortized mortgage when it reaches the 150% cap.

   If we assume that my house is worth $550,000 today and has a mortgage balance of $375,000. In 7 years, we know that if I did this refinance with Slick, my mortgage balance would be $562,500. We really have no guarantees on what my $550,000 home will be worth in 7 years. Not to mention what would happen to my credit scores having a mortgage balance that was increasing over the original loan balance.

   Last but not least…we’ve finally uncovered the “vacation mortgage” mystery! With this program, they also offer to give you 12 months off of your mortgage payment as a “credit”. It’s very easy for this type of lender to do. At $79 a month, 12 months of mortgage payments would be $948. It’s simply priced into the loan by rebate, margins or the prepayment penalty.

   Pretty slick….huh? "

   Nothing to do with your details, but somehow I feel that they are related.

   .
   .
   A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.