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Subject:  Re: GA Deal I'm working... Date:  2/22/2006  10:09 AM
Author:  GusSmed Number:  7641 of 14302

Predatory lending does not end with the Ameriquest settlement, it is widespread, boiler room tactics.

100% LTV isn't predatory lending, it's risky lending. Banks used to insist on an 80% LTV so that if they were forced to foreclose, they'd be less likely to lose money selling the house at auction. The party likely to get hurt the most if real estate prices go south is the lender, not the borrower.

The practice is untested in a RE downturn, and could result in millions of borrowers like yours losing their houses.

100% LTV loans won't cause anyone to lose their homes. Nor does a RE downturn force anyone to sell, or increase anyone's mortgage payments.

The risk to the borrower lies in ARM's. If the rate on an ARM goes above what the borrower can pay, then they may lose their home. Which the lender sincerely hopes won't happen if the house has lost value.

The article you link to is about the risk to lenders, and to the housing market as a whole. The point he's making is that with no equity, borrowers have little incentive not to walk away from a house if they can't make payments.

- Gus
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