Reply to What I don't get: When people complain that they are drowning because their house is underwater

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[quote=Anonymous][quote=Anonymous]When we bought our house, I was shocked at how easy it was to get a mortgage.  Our real estate agent kept pushing us to spend more.  She kept saying we could easily afford a bigger house.  And when we financed, they tried to push us into one of those adjustable mortgages.  I had to finally had to ask the lady point blank why on earth woudl I ever consider doing an adjustable mortgage when I could lock into a low mortgage for 30 years.  [b]She laughed (as in, "you got me") and backed off[/b].

My point is, I can see how someone could easily get caught up into buying more than they can afford or pushing their incomes.  Then their adjustable mortgage goes up at the same time their house value goes down.  And they can't refinance because suddenly their loan amount is worth more than their home.  So they legally CANNOT get a loan for more than the value of their house.  This is why people freak out when the value of their house declines.  Because it impacts their abilty to refinance.  I actually think this law/rule needs to change.  If you have a mortgage on a house, you should be allowed to refinance for that same amount.

So, they are stuck paying a higher mortgage, which they can't get out of through re-financing and can't get out of from selling due to the crappy market.    Then - one of them loses a job or gets paid less or has a kid (I don't know about you, but the kid expense amazed me).  And suddenly, you are under water.

[/quote]

That's nothing! When I bought my first house back in 2002, interest rates were at a then-very attractive 6 percent. I told the mortgage guy I wanted a 30-year fixed. He kept pushing a 40-year amortization on me. I said, no, a 30 year fixed. He agreed.

So, I get to the settlement table and I'm reading the loan papers and ... it's a 5-1 ARM and a 40-year amortization!

I called that guy and he basically says sorry it was all I could do. I was livid. I closed but raised hell with the State Corporations Commission in Virginia. The lender tried to blow me off but I was able to produce a commitment letter that outlined the 30-year fixed. State raised holy hell on my behalf and the lender (American Home Mortgage, which we later discovered was one of the really bad guys) was forced to buy back the loan and give me the terms promised. Small victories.

Ironically, I ended up refinancing that 30-year fixed a year later when rates dropped a point. Sheesh.[/quote]

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