"There are very few defenses to a foreclosure action, but fraud is a silver bullet."

Kevin,

I would agree with you, but I don't think that anything you described above is fraudulent on the lender's part.  I saw many similar deals at the closing table.  In some cases, the borrower volunteered an explanation for their high reset rate.  "We're going to use the intial rate period to improve our credit rating and then refi again with a conventional mortgage". 

The problem with this is that the borrowers often did not do anything during that time to improve their credit score.  Many were back a year later with a new loan deal that was just as bad as the last.  Credit cards being paid off again, cash out to pay bills or buy new stuff.  Spending the equity as the home value increased.

Even if their lender went under, the borrowers, having improved their credit, should have been able to get into a stable fixed interest rate loan at some point. 

to post a reply: login - or - register