VitalAccurateThinking

Foreclosures Story Template

I guess the whole journalist world works on a template. I commented on a similar news story here. The Houston Chronicle copies the template of the witless dupe who was conned into taking a mortgage he clearly could not afford. But here is the bottom line on this story:

But even if Addison's taxes hadn't gone up, he may never have been able to afford the house. A review of the mortgage application that he provided the Chronicle shows he made $3,316.25 a month, a third of that coming from overtime. However, his monthly debt, including the underestimated mortgage payment, totaled $2,118 — putting his debt-to-income ratio at 64 percent.

The ratio tells lenders how much of an applicant's income will go to pay debts.

While lenders use different ratios for different kinds of loans, the Federal National Mortgage Association, which buys loans from lenders, uses a benchmark ratio of 36 percent. It considers loans with ratios of 45 percent or higher to be at a significantly higher risk of default.

He had no chance. The lesson: you must learn how to do your own math and think for yourself. Loan disclosures will not save you from yourself. What is it that the commercials say "A good decision in a sea of really bad ones."? For this guy, this was a disaster from the beginning.

posted by Jim VAT @ 6:38 PM