need to add title here

The Mortgage Meltdown

December 14, 2008 7:22 PM

Scott Pelley reports on the mortgage crisis that's far from over, with a second wave of expected defaults on the way that could deepen the bottom of the U.S. recession.

Recent Segments
Scroll Left Scroll Right
Add a Comment See all 47 Comments
by Samalabear May 8, 2009 10:23 AM EDT
With regard to the accupuncturist, I frankly found it to be appalling. I don't feel sorry for her. I do, however, feel sorry for her tenants. I can only imagine what hell their lives have been in this. There is no help for the renters, the innocent dupes of all this greed. Real estate as a side thing? Not with six properties to manage it isn't. Too busy looking at properties to think or look at documents, or shop for mortgage brokers? I don't get that, I'm sorry.
Reply to this comment
by jimmyfite March 27, 2009 8:17 AM EDT
Unless you have years of experience negotiating with banks...you have to engage an expert to get your loan modified properly. By properly, I mean a thirty year fixed rate at five percent or better with a loan-to-value not exceeding 95%. Do not settle for anything less - regardless of your credit, or how many months you're behind; however, you have to have the income to support the new payment at approximately a 35% DTI! It's time to take the gloves off and fight. Banks have been sticking it to the general population for years and I'm sick of their arrogance. From credit card fees and rates, to NSF charges, to pitiful returns on our investments. Mymortgagemodify.com provides a wealth of free information to help homeowners. I wonder what Mr. Gianni, the founder of Bank of America, have to say?
Reply to this comment
by cinand123 March 26, 2009 10:29 PM EDT
Loan Modification wll help ease the meltdown. My clients that I do loan modificaitons for are mostly fallout from lender direct loan modificaitons. Borrowers need someone on their side. Knowing the format and the rules, a professional Home Retention Advocate for the homeowner can tell when they are getting a lazy rep who does not know what they are doing. Unfortunately its the majority on the front lines of the Loss mit. departments. Consumers need advocates. MSNBC, CNN and even the Lenders all claim Loan Mod counselors are not necessary. IT could not be further from the truth. Borrowers should not go it alone, and they should not call internet loan mod companies. They should seek help in their community. Call a local lender see if they know of anyone, or a local credit counseling agency.
Reply to this comment
by Short-Sale-Cash March 26, 2009 10:45 AM EDT
Interesting,

Just when you think the real estate and banking scam is over, we hear this news that the worst is yet to come. Like we all know, where there is a disaster in one industry, an opportunity exists in another. Looks like the business to be in is any one that services the foreclosure mess, and having been in the construction, real estate and mortgage industry, the short-sale-cash.com sellers assistance industry is where those in conventional business of real estate have to look at. With millions of foreclosures, and banks dumping all the default properties they can at any price, new opportunities arise.

Success to all,
Reply to this comment
by jimmyfite March 26, 2009 10:03 AM EDT
Livonia, MI - March, 26, 2009 - A good percentage of Americans are stressed out, tired and afraid of losing their single biggest investment?their home. It is - or was not too long ago - a great investment! Now most Americans are finding they owe more than their home is worth. Their retirement nest egg of equity is gone. No more refinancing to the hilt to help pay for your child?s college. This debacle is doing more than destroying credit scores, it?s damaging spousal relationships. When will the market value return - two years, five years, ten years?

This mortgage meltdown has created opportunity but we have to say??Buyer Beware.? Mortgage professionals and real estate professionals are jumping on the bandwagon and now providing Loan Modification services. We have researched a myriad of ?Loan Modification? companies over the last three months and there is one thing in common. They all are charging a substantial up-front fee to take on struggling homeowners cases. These up-front fees are starting at $1,500 dollars and exceeding $3,000 dollars. Our opinion is that these new ?Loan Modification? companies are charging these fees because "they can." Homeowners are desperate, they?ve missed some payments and should have a bit of a ?cash reserve,? to pay the fees. The phone jockey - loan mod expert - gets a feel of what the homeowner can pay through a free initial analysis and quotes a fee accordingly. His commission is tied directly to the size of the up-front fee.

If you are having problems paying your mortgage, you can tackle your loan modification yourself or hire an expert; however, you need to do something in a timely manner to save your home, and you need to beware of unscrupulous companies.
Reply to this comment
by fungirl_10 March 12, 2009 3:15 PM EDT
That was interesting, but really what do Americans think when they give a 2.9 million dollar mortgage to someone with out a job in hopes that in 5 years time when it is time to pay the first payment that these people will have a job all of a sudden that will be able to cover the payment? If people are really that stupid to buy 6 properties and NOT read any of their mtg documentation or even question the bank about the mtg, than really it isnt the bank that is stupid, it is the person.

I am thankful that I live in a country where people have encouraged me to think for myself, and question people. I am thankful that I live in a country that have more strict rules about what is allowed and is not allowed in regards to Banking as we are only country where our banks are NOT owned by the government.
Reply to this comment
by wabby99 December 17, 2008 5:44 PM EST
I think some of our Democratic Congress should be dismissed and prosecuted. They denied any problems with Fannie and Freddie back in 2004 and 2006 when it was brought to their attention. Just go look at the hearings that were held. Listen to the words of Ms. Waters. Chatising the auditor and she and others stated Mr. Rains is doing an excellent job at managing Fannie Mae. That video alone should be enough to prosecute them for trying to protect Mr. Rains and continue to loan money to people they knew could not pay the loans back. They did not care how it impacted our economy they had one goal in mind and that was to give more handouts to their constituency to get votes. Also, Americans MUST be accountability for signing on to loans they knew they could not afford and were too greedy to read the contract they signed. No one can make you sign a mortgage contract, car payment contract or credit card contract. Americans need to be more accountable and patient. They want things that others have to work hard to get and the young people think they should have what took their parents years to get through hard work not passing around a credit card. The American people themselves are mostly to blame for irresponsible behavior and I don''t think those of us who practice self control should pay for their irresponsibility. You can spin it anyway you want but our Congress and the American people themselves are solely to blame for this miss.
Reply to this comment
by realtard December 17, 2008 2:50 PM EST
The business model of Real estate is what encourages fraud. The Multiple Listing services are a brash attempt to control the market. By limiting new listings (our right) during a bubble or time of high inventory we restrict the choices and this forces house prices up. There is no law that says we have to represent anyone other than the seller, or even use common sense. If we can talk up a property and pretend to "NO NOTHING", we have done our job. SOme of us use shills---to drive up house prices. Some of us Block bust--in a legal sort of way. We never use ethnic words, but will use secret buzz words like "spotty" or "changing" to let a buyer know that a house in the wrong area will not be a good invetsment. We use the word investment all the time, without ever having be responsible, or even understanding what the word means.


One bad thing about the curent system, is that the listing cointarcts FORCE the buyer to pay the sellers listing agent, no matter if they are a "little thief" or a "big thief". Realtors should never receive a fee for just listing a house. The system where we are is typical. 3% to sellers broker, 3% to buyers broker. The broker can split off a 50% to an associate, or not. The broker has nothing to do but cheerlead the associates and have a small office to entertain the buyers--make it look "official".
Reply to this comment
by realtard December 17, 2008 2:37 PM EST
I am a Realtor. Starting in 1999, we noticed that a bubble was brewing. We bought up everything we could find and waited a year before selling. We wanted to get out, not knowing when the bubble would burst. We kept a few properties, and started dollar cost averaging "in" to buy and "out" to sell. Our commissions, referral fees, and profits were exploding. It got so crazy, that all we had to do was smile at a prospective buyer, no more lying was required. In about 2005, we saw some stickiness on house prices. We could no longer list and sell in a week. That means we had to be creative to find new buyers. It seems that everyone was either a flipper, investor or buyer. The N.A.R. was the number one cheerleader during all this frenzy. "You better buy NOW, or you will never be able to be a homeowner", Yopu will remain a "renter", as though renting is like being a terrorist. How did we find new buyetrs, if everyone was a buyer? We trolled for the homeless! We sent out buses and vans with card tables with literature and some uneducated sounding flippers to extoll the virtues of homeonwership. They key words were: NO MONEY DOWN, CASH BACK AT CLOSING, HOUSE PRICES ONLY GO UP, NO CREDIT CHECKS. We didn''t even require identification, no drivers license, No Social Security card, No telephone nunmber or address. Come on back down here tot he bust stoip or Salvation Army when you get your free meals this week and we will help you move in---NO CHARGE!
Reply to this comment
by eaglerising2 December 17, 2008 1:26 PM EST
Eye on the Economy and 60 Minutes have done an excellent job of informing its audience about our current economic situation. Consequently I would like to point out that absence of usury laws since 1978 is devastating our economy just as sub prime mortgages, mortgage ARMs, and stock derivatives have. The higher the interest rate (APR) credit cards and banks charge, the longer it is going to take for our economy to recover. It%u2019s difficult to stimulate the economy when approximately 50% of credit card holders are paying over 25% in interest. If that isn%u2019t bad enough, these taxpayers are bailing out various banks to the tune of $800 billion.
Reply to this comment
by florida_reo December 17, 2008 12:48 PM EST
I am a Realtor and fouund it interesting they quoted Oscar Munoz on his trash out - property preservation company, as Munoz is currently being forclosed on several propertes.

I would suggest to Scott Pelly''s producers, when ever you interview someone about the mortgage meltdown, check to make sure there are not any skeletons in their closet.
Reply to this comment
by jaykobb December 17, 2008 12:07 AM EST
Its all pure ***, the media loves to use confusing terms, like sub prime, single, double and triple digits etc, instead of presenting the simple facts in simple language... the Mortgage "melt down" has nothing to do with the prime rate, it is consisting of different kind of borrowers, mostly those who bought houses with 0% down, had no credit and low income if any, and got "teaser rates" that later on went up. there are also those "normal" borrowers who just happen to get down on their luck, and some dumb spaculators... who can not be helped in any way. To help those who are worth helping, the government must urge the banks to change terms of mortgages to ones that are reasonable, many borrowers will be reluctant to keep their mortgages with any terms, and keep a $500K loan for a house that is worth only $300K now.
Reply to this comment
by jaykobb December 17, 2008 12:05 AM EST
Its all pure ***, the media loves to use confusing terms, like sub prime, single, double and triple digits etc, instead of presenting the simple facts in simple language... the Mortgage "melt down" has nothing to do with the prime rate, it is consisting of different kind of borrowers, mostly those who bought houses with 0% down, had no credit and low income if any, and got "teaser rates" that later on went up. there are also those "normal" borrowers who just happen to get down on their luck, and some dumb spaculators... who can not be helped in any way. To help those who are worth helping the government must urge the banks to change terms of mortgages to onse that are reasonable, many borrowers will be reluctant to keep their mortgages with any terms, and keep a $500K loan for a house that is worth only $300K now.
Reply to this comment
by lholfelder December 16, 2008 9:25 PM EST
The mortgage problem was driven by sky rocketing housing prices resulting from the Fed''s monetary policy of low interest rates. Their job is supposed to be preventing boom and bust cycles by using prudent monetary policy. Even the President cited the keeping of interest rates unrealistically low as the culprit in his address to the nation.

Well, who''s to blame for this and was it just incompetence?
Reply to this comment
by giraffeballz December 16, 2008 8:50 PM EST
i could afford it until it started to adjust a month ago, a month before i lost my job. Because of wallstreet and greed, and cooked books, i lost my job. i signed up for a bad product given by the banks. I didnt lie on any application, and they made it seem like it was going to be so easy to refinance. I admit that i was so overwhelmed with the great deal i was getting. But are you going to also blame all of america for being sucked in? The banks are getting bailouts, and not using the money or rate cuts on american home owners. Thank GOD i found the mitigation team. Everyone makes mistakes. But always remember that it is the consumer that makes it possible for wallstreet to exist.
Reply to this comment
by redfriz December 16, 2008 6:41 PM EST
With all this talk about option ARMS and Alt-A, one should realize that there are still more bad loans to follow-look at the loans to condominium associations (available at least in New York) and reverse mortgages-these are the next areas prime for abuse-
As long as the mindset continues that you can get something for nothing and it is not necessary to have any understanding of the loan you enter into, people will continue to purse easy money at no matter what cost.
Reply to this comment
by giraffeballz December 16, 2008 6:29 PM EST
I am living in NJ and had to sign mt home loan through an alt-a product due to my mediocre credit. I Purchased my home 3 years ago thinking that i would have an increase in equity in time to fix my credit, and allow me to refinance for a better rate than 8% to make my payments affordalble and secure an easier lifestyle. Apparently, that did not happen, and i worked for AIG. You can figure out the ending to my story. I was one of the first laid off and have fallen behind 2 months in my mortgage payments. I found a site online called modyourloans.com , and they quickly executed a mortgage modification to let me stay in my house. I hope that all americans can find out about mortgage modifications, and stay in their homes. I think that the only way for america to get back on track is through keeping the tax payers in the houses, creating a new economic market. I think the banks set me up for failure. So thats why i needed a mitigation team to wipe out the arrears on my loan and fight for my rights to keep my home at an affordable payment. Let the bad banks go down. They put us all in this hole with their greed.
Reply to this comment
by ichigorue December 16, 2008 6:03 PM EST
Lesson 1: Never get an adjustable ARM unless you have the power to pay it off at your discretion.

Solutions:
1)Sell some of your cars
2)Buy food monthly from a cheaper source, and buy cheaper food.
3)Radically restructure your budget and your commitments
4)Contact your lender and let them know what sort of situation you''re in. It''s more profitable for them to keep you as a paying member than for you to default and lose it all. It may mean some repossession of items or a less favorable restructuring of your mortgage(long term) but it''ll likely let you make ends meet.
5)Don''t buy Christmas presents, especially ones you can''t afford. 20% of Americans have Christmas debt from the past year.
6)Basically, all the things that you think you''re entitled to and deserve, get rid of them. No fast food, no showers every day(no long, hot, showers for sure), no heating the whole house, no cable TV, no internet, no newspaper or magazine subscription, no junk food.

If you''re not digging steps 1-6, try step 7.
7) See if you can sublet a floor of your house to someone for 700-1000 dollars a month. That''s a reasonable rent rate(in MD), and it would likely put you over the top for your ARM.

-From my good friend Rob
Reply to this comment
by December 16, 2008 5:26 PM EST
We can manage this better.

Separate the Primary Home Owners from Investor Owned Homes. Let the people living in their primary home continue to live there. Keep the interest rate at the original rate. (the Fed has already lowered the rate to far below when the ARM''s were issued.) So it should work.

This is only one part... I am working on more. People could stay put. Banks could save money and eventually make more in future.
Reply to this comment
by penvan December 16, 2008 3:20 PM EST
If its just the increase in interest rate that''s going to cause more forclosures and this economic collapse to spiral out of control, why wouldn''t the lenders or the government just freeze or lower the intersest rates? I would love if someone could explain this to me.
Reply to this comment
See all 47 Comments
  • 60 Minutes, 11.22.09 60 Minutes, 11.22.09

    43:21 November 22, 2009

  • James Cameron's Avatar James Cameron's Avatar

    12:43 November 22, 2009

  • Maziar Bahari: Witness Maziar Bahari: Witness

    11:53 November 22, 2009

  • The Cost of Dying The Cost of Dying

    14:07 November 22, 2009

  • Web Extra: At Home, At Peace Web Extra: At Home, At Peace

    1:38 November 22, 2009

  • Web Extra: Comfort and Costs Web Extra: Comfort and Costs

    1:51 November 22, 2009