Good summary. A lot of this was covered in the story but you have to read through a lot of fluff before you get to the bit about the actual mechanics of the situation. Another bit to mention, though, is that a lot of those 20% second mortgages had variable interest rates, and after the 2008 crash, the rates skyrocketed for a lot of folks. People were unable to make the suddenly much higher payments, which is why they sought consolidation/forgiveness in the first place.
But yeah. Always be aware of what you’re signing up for when you take out a loan, and get all the terms in writing. If someone tells you not to worry about making payments, make sure you get that in writing, too. I was lucky enough to learn this lesson a long time ago with a much less expensive asset. My wife and I bought an appliance on one of those no-money-down 0% interest financing deals. The fine print was that if you were late on a single payment by even a day, they immediately tacked on back interest for the full purchase price at ridiculously high rate. My wife thought she had mailed the final payment but it turned out she had miscalculated by one. We got a phone call the day after the last payment was due. On a balance of something like $50, we suddenly had a penalty of over $1000. I was pretty pissed but there wasn’t really anything we could do since we’d signed the deal.
Good summary. A lot of this was covered in the story but you have to read through a lot of fluff before you get to the bit about the actual mechanics of the situation. Another bit to mention, though, is that a lot of those 20% second mortgages had variable interest rates, and after the 2008 crash, the rates skyrocketed for a lot of folks. People were unable to make the suddenly much higher payments, which is why they sought consolidation/forgiveness in the first place.
But yeah. Always be aware of what you’re signing up for when you take out a loan, and get all the terms in writing. If someone tells you not to worry about making payments, make sure you get that in writing, too. I was lucky enough to learn this lesson a long time ago with a much less expensive asset. My wife and I bought an appliance on one of those no-money-down 0% interest financing deals. The fine print was that if you were late on a single payment by even a day, they immediately tacked on back interest for the full purchase price at ridiculously high rate. My wife thought she had mailed the final payment but it turned out she had miscalculated by one. We got a phone call the day after the last payment was due. On a balance of something like $50, we suddenly had a penalty of over $1000. I was pretty pissed but there wasn’t really anything we could do since we’d signed the deal.