mortgage loan mess

[Randy Ziemiensk]

What is the name of your state (only U.S. law)? Virginia

A friend of mine was approved for a home loan in 2006 that seemed, in my opinion, to be illegal. Here are some details: Two days before the closing of her condo, the buyer backed out. The real estate agent talked her into going forward with the new home purchase. She told her to take out an equity loan and that she could rent the condo so she could still buy the new home. At the time her take home pay was $3,000.00. The total payments for the two homes with real estate taxes and condo fees was $6,000.00!
The mortgage company gave her the loan even though she did not have a renter at the time. Even is she did, the rent would only be $2,000.00. As you can imagine, she is really struggling fincially and is considering foreclosure. My question is: How can a mortgage company give a loan to someone whose take home income is $3,000.00 and total loan payments is $6,000.00? Was this illegal?

[seniorjudge]

Q: Was this illegal?

A: It certainly sounds like there was predatory borrowing here but I doubt that your friend did anything illegal. Stupid maybe but not illegal.

[Randy Ziemiensk]

Thank you for your reply on my question, but I was really asking if the mortgage company made an illegal loan, not my friend. Could you repond to that? Are loan companies so unregulated that they can make these kinds of loans knowing that the borrower does not have the ability to pay?