Equity, What Equity? NYT Asks Mr. Kratzer

Here is an interesting article on home equity from the New York Times called You Thought You Had an Equity Line. If you click over to the article - remember that this is supposed to be an article not and advertisement. The article focuses around a Mr. Kratzer. It is not like his advice and information is provided to generate more business - oh wait a second it is. But no one else or other opinions are even offered up.

It was the nation’s lending institutions and mortgage originators that got us into this credit mess, but it is consumers, taxpayers and those companies’ shareholders who will end up shouldering most of the costs.

This was probably said by Mr. Kratzer - just not credited with him. And I guess the homebuyers and home debtors combined with government figures pushing ARMs had nothing to do with this. This line sounds more like a blogger or an opinion commentary than a business article. Consumers were grabbing these exotic and toxic loans as fast as lenders could offer them. There were things to entice everyone. And probably pushed by Mr. Kratzer a few years ago as part of the 25,000 real estate deals he has been involved with. Now on the the Mr. Kratzer/Fee Disclosure quotes -

In the last 30 days, lenders have sent several hundred thousand letters advising borrowers that their home equity lines of credit are frozen, estimated Michael A. Kratzer, president of FeeDisclosure.com, a Web site intended to help consumers reduce fees on home loans.

... But these actions are being taken even in areas where property prices are rising, Mr. Kratzer said. What’s worse, the letters provide no explanation for how the lenders determined that the property values underlying the equity lines had fallen.

... These fees can be significant, Mr. Kratzer said: on a $50,000 line, for example, fees of $1,500 are common. If the line is being frozen at, say, $25,000, why shouldn’t the borrower be entitled to receive a refund of $750?

... Mr. Kratzer, who has recently fielded calls and e-mail messages from more than 500 borrowers in straits similar to the Martins’, said lenders who were reining in credit should provide an explanation of how they determined that property values associated with the lines had declined sharply.

“How are lenders arriving at the new loan-to-value ratios?” Mr. Kratzer asked. “When you secure a loan or home equity line, a full appraisal is generally required. But these processes aren’t being used when the lender calculates a new value to reduce an existing credit line.”

Mr. Kratzer said he had heard from frozen-out borrowers in 11 metropolitan areas where the median home price actually increased in the last quarter of 2007, the most recent figures available from the National Association of Realtors. They include Yakima, Wash.; Appleton, Wis.; Raleigh-Cary, N.C.; and Champaign-Urbana, Ill. Borrowers in areas where prices remained flat have also contacted him.

“Are they applying blanket values to ZIP codes, neighborhoods or entire regions?” Mr. Kratzer said. “We’re all left to wonder about the process.”

Luckily for the Martins, they are not in need of additional credit on their IndyMac line. But other borrowers who have contacted Mr. Kratzer say they are in the middle of home improvement projects that they can no longer finance, or have college tuition bills that they were going to pay using the credit lines. Now they can’t.

...And small-business owners who use home equity lines to bridge cash-flow gaps throughout the year are also being stricken by these curbs, Mr. Kratzer said. He has also heard from people who paid down some of their home equity lines, expecting to be able to draw on them again. Now they are out of luck.

“In a perfect world, lenders would fully disclose the process and criteria used to make these valuations and decisions,” Mr. Kratzer said. “These borrowers have a solid payment history, good credit scores and plenty of equity to satisfy most of the lenders’ loan-to-value formulas. Instead, the banks are just shutting them off.”

Almost all of the data and information supplied in the article is from Michael Kratzer, president of Fee Disclosure. It reads as his press release rather than a new article. Where is the news?

Even from the wording of the one real-world example in the article, it is hard to tell if they are Fee Disclosure clients with the wiggle words "but other borrowers who have contacted Mr. Kratzer." One would almost think those small "paid advertisement" words should appear above the article. I wonder if the author is getting a cut in the business she is directing toward the site.

From the Fee Disclosure website -

Michael Kratzer is a founder of Fee Disclosure, LLC. He is a well established real estate and financial service industries professional. For over 15 years, Michael has held numerous securities, real estate and insurance licenses. He founded, built, and sold a very successful financial service private practice in 2000. He has successfully brokered commercial and private real estate holdings for a wide cross section of corporate entities and individuals, playing a participatory role in over 25,000 real estate transactions.

As for the company - it appears to be one of these new start-ups set up to take advantage of the failing market conditions. A few years ago the principals were probably hawking liar and suicide loans, now that those careers are going they questioning and disclosing the lender's practices. They figure they can make a decent profit giving people information they probably already have access to. For some people it is worth it to pay for this legwork, but for most it is just throwing more money away.

More info from Fee Disclosure's website -

Information Control: Fee Disclosure, LLC, also known as Fee Disclosure (all referred to as “Fee Disclosure”) does not manage, control or update the information provided by its Members. Please practice common sense and caution when using the Fee Disclosure system, including but not limited to the Fee Analyzer, Quick Quote, Fee Disclosure Reports, Name Your Fees, Partnership Programs and any management transaction tools, which will hereby be referred to as the “System”. Some information may be inaccurate, deceptive, offensive, or even harmful. By using this System, you agree to accept such risks and not hold Fee Disclosure responsible for the acts or omissions of any members and users on this System. After reviewing and accepting the Terms of Use, Fee Disclosure members may hereby be referred to as “Members” or “Member”. Members also agree to accept communication about Fee Disclosure business and policy notices by email. Fee Disclosure reserves the right to modify, change, alter or delete any portion or all of the Fee Disclosure.com system or content at any time without prior notice or approval at its sole discretion.

Quote Disclosure: All transaction quotes and information generated on this System are not guaranteed. Actual fees and services may vary due to state regulations, local customs, unique transaction details and other factors. Recurring costs such as interest, taxes and insurance are not included. Real estate sales commission and mortgage origination points may also not be included.

So the information provided to the New York Times "may be inaccurate, deceptive, offensive, or even harmful." Wow - that sounds like the entire article. Or is it more inaccurate, deceptive and offensive that editors at the New York Times allowed this article to be published as is in the first place?