Many people would agree that they didn’t understand the loan — I’ve had a number of them openly admit this to me. Many of them were upset because they trusted their broker/lender to explain everything to them and not put them into a loan they couldn’t afford. The originators were assuring them they could afford it, and too many people are financially inept, and rely too much on “experts” to tell them what to do.
Many of them had a verbal agreement, then signed the docs without even reading the details because they trusted the loan officer/broker. Yes, many of them were dealing with predatory originators.
What I learned by reading our purchase loan docs (this was different from the refi that we were being rushed through, BTW):
-I had signed one set of documents that had the agreed-upon rate and terms. A week or so later, the broker said something had changed, and we needed to sign a new set of docs (don’t remember exactly what had changed, but maybe regarding the DTI ratio or something???). The new package was sent by courier, and the terms and rate were absolutely 100% different from the first package and the terms verbally agreed to. When I called them up and asked them why, he told me to just sign the docs and they’d change it back later. Needless to say, we didn’t go through with it, and ended up just selling and renting, instead.
I’ve had numerous people tell me the same story regarding their loans. This is why these regulations are needed, and quite frankly, why anyone who does this to borrowers needs to be sent to jail and have all their personal asset seized, IMHO.
For every foolish borrower, there was likely a predatory lender. Like you have said about your own business, a good lender/broker will not put somebody into a loan they cannot afford. They were only allowed to do so because they didn’t retain the loans and there were no negative consequences for their actions. This needs to change.
