Sub Prime Casulties

[BradleyT]

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I am still getting people with low 500 FICO's approved where I work.

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Hope you don't lose money when they default.

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From the post:

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Low LTV refinances


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They will do alright on a default.

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See that's what happens when you don't read an entire thread and reply to someone without knowing what an abbreviation means lol.


Anyway, say joe has paid $35,000 of his $250,000 mortgage and then defaults his way into foreclosure. Does Joe get the amount of principal he paid or does the lender get the entire house without having to pay Joe anything?

[jaydub]

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I am still getting people with low 500 FICO's approved where I work.

[/ QUOTE ]

Hope you don't lose money when they default.

[/ QUOTE ]

From the post:

[ QUOTE ]

Low LTV refinances


[/ QUOTE ]

They will do alright on a default.

[/ QUOTE ]

See that's what happens when you don't read an entire thread and reply to someone without knowing what an abbreviation means lol.


Anyway, say joe has paid $35,000 of his $250,000 mortgage and then defaults his way into foreclosure. Does Joe get the amount of principal he paid or does the lender get the entire house without having to pay Joe anything?

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This is not a low LTV loan.

J

[BradleyT]

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I am still getting people with low 500 FICO's approved where I work.

[/ QUOTE ]

Hope you don't lose money when they default.

[/ QUOTE ]

From the post:

[ QUOTE ]

Low LTV refinances


[/ QUOTE ]

They will do alright on a default.

[/ QUOTE ]

See that's what happens when you don't read an entire thread and reply to someone without knowing what an abbreviation means lol.


Anyway, say joe has paid $35,000 of his $250,000 mortgage and then defaults his way into foreclosure. Does Joe get the amount of principal he paid or does the lender get the entire house without having to pay Joe anything?

[/ QUOTE ]

This is not a low LTV loan.

J

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I don't understand whether it's LTV or not matters in answering if Joe gets any of his downpayment or principal back or if he defaults into foreclosure. Let's say the house is worth $400,000 and he paid $150,000 as a down payment and financed $250,000 and has paid $35,000 towards the mortgage.

[VeryTnA]

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I don't understand whether it's LTV or not matters in answering if Joe gets any of his downpayment or principal back or if he defaults into foreclosure. Let's say the house is worth $400,000 and he paid $150,000 as a down payment and financed $250,000 and has paid $35,000 towards the mortgage.


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A low LTV loan reduces the risk to the lender. For example a borrower puts down 250K on a 500K purchase to give you a 50% LTV loan.

Lets say the borrower defaults on this 50% LTV loan. When the lender sells this property they are allowed to recapture all their principal, interest, and fees incurred to go through judicial foreclosure. If there is any money left over the borrower would receive those funds. If there is a shortage the lender may go after the borrower and send them a Tax Form 1099 for the difference. Usually the shortage is uncollectable but will show up on your credit report.

Regardless, a foreclosure on your credit report makes buying another property difficult. Sub-prime lenders like the company I work for will lend to you after 12 to 24 months, but the rate sucks. You may also be required to put down at least 20%. The source of this down payment will be carefully checked.

[hawk59]

It's more than just the math wrt to LTV's...a home buyer who put nothing down is much more likely to just walk away from the property if the value begins to decline or they lose their job. They don't have any skin in the game. Someone that puts down a $100k downpayment on a $500k house is going to lose that $100K if they go into foreclosure and the bank takes possession, and thus they are going to be much more desperate to figure out a way to make their payments or work something out with the bank.

The no down payment mortgages that were available to people really just gave them an opportunity to buy lottery tickets for free, the bank was taking all the risk. The buyer would just lose whatever mortgage payments they had made.

[Uglyowl]

This is a great site to read about the trouble sub-prime mortgage companies. Quite fascinating.

http://ml-implode.com/