Saturday, March 8, 2008

Mortgage Mortuaries in the Making

Mortgage companies in the UK are throwing caution to the winds by earnestly liberalizing its lending policies, salivating at the huge profit potential of first time buyers to raise demand for business growth. The methods and packages offered to young couples and singles carelessly ignore the painful result of this approach that caused the collapse of the US sub-prime mortgage market; a big contributor to the current US recession. Prudence, it seems, has been cast aside, even when evidence of homes turning into virtual mortuaries that housed the deceased dreams, aspirations, and relationships of former US homeowners, have yet to be buried or cremated.

Young couples with kids and groups of singles are being offered 3% to 5% deposit from the traditional 10% criteria. On top of this, they are prepared to offer loans of 5 times the buyer's annual salary with come-ons of absorbing surveyors fees, solicitors, and the initial cost of home furnishings. Options of lower rates, cash back and loan consolidation are also thrown in. But no mention is made if the absorbed fees will be due if payments are delinquent; if lower rates are only for the first few years; how much will be deducted from the cash back option; nor what terms there will be for the loan consolidation. These would be part of the contract when the buyer's hopes have been raised, is made ready to sign, despite "minor changes in contract term rates". These alone are means of inducing borrowers to purchase a unit for which they may not have the capacity to pay.

By pointing out that rental rates are equal to the monthly mortgage rates with the added disadvantage of being uprooted if the owner decides to retake the property, young people are enticed to buy since owning a home is built into their psyche'. And here's the salt on the wound: the mortgage companies also have programs that would make the parents' homes the collateral in lieu of a deposit. Today, the number of adult children borrowing from parents' retirement funds to pay for debts and mortgages are rising at an alarming rate. If this trend continues,these "dependent adults" will render their parents homeless and penniless after sacrificing many years and all their resources to support their children's extravagant lifestyles.

Couples may be broken, friendships can be ruined, and families can disintegrate, all because of an objective to spur business growth that feeds on human desires and weaknesses. This approach is predatory and harmful. Potential buyers seeking to make a home where they could build their dreams, may wake up to a nightmare of seeing the carcass of their hopes inside a virtual mortuary, which they have brought themselves to.



Anonymous said...

Only suckers would fall for this scheme. If you feel you can't afford it, why force the issue eh?

And those adult dependents, If I were the parent, I'd have taken contraceptives.

durano lawayan a.k.a. brad spit said...

Hi Anonymous,

Some people cling to the idea that maybe they can make it possible to own the home and make it work.

But times are full of uncertainty, and failure to make payments is one of the most stressing things you can have.Going home to the house you love and be reminded of losing it can cause many sleepless nights. It also ruins relationships.

The dependent adults are also a result of bad parenting, among others. :-) --Durano, done!