Refinance pitches: Lessons Not Yet Learned


Disturbing news this week from the pages of the Los Angeles Times–it appears as if no lessons have been learned from the mortgage/credit crisis the U.S. (the world??) finds itself in.

According to the paper, there is a virtual “blizzard” of advertising aimed at homeowners to induce them to refinance. And, while these ads are not targeting the sub-prime crowd, they apparently take pretty much the same tone and make the same potentially dangerous promises that got us into this mess in the first place.

The paper quotes a flier from a mortgage brokerage sent to a homeowner: “You have been selected to substantially reduce your mortgage payment…” But, as the Times points out, what you need a magnifying glass to read is the fine print that discloses that paying the lower amount offered the homeowner would actually increase the loan balance! Nice move…for the brokerage company.

Or, how about this flier from Countrywide – “No need to show bank statement or verify other assets…no paycheck stubs or proof of income required…no new appraisal needed (in most cases.)

Sound familiar? It should. Offering mortgages to would-be homeowners who lacked the income to make the monthly payments is partly what ignited the housing crisis as more and more homeowners realized that the math just didn’t add up and they could not afford the payments.

Says the Times, “In the current refinancing push, lenders are promoting some of the same exotic products that gained notoriety during the housing boom.”

What’s going on?

Simple really. The figures show fewer and fewer homes being sold–so, to make money, the mortgage firms are now trying to make some bucks convincing homeowners to refinance.

Isn’t there a folk song with the tag line, “when will we ever learn,when will we ever learn?” Guess the answer is, never!

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. The only way to get a refi without showing a paystub is if you do an FHA refi. Countrywide is using the one program they have that doesnt need income verification as a way to obtain a larger lead database. If you do not have an fha loan refinanced prior to 2009, this will not hold true for you and they will try to sell you into one of their other programs. There for, the mortgage industry is not going back to the no doc loan. Never fear. The only way that will ever happen is the subprime market opens back up. the subprime market refers to banks that lend private money.

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