this is the prototype for the american way of thinking.
i cant pay my mortgage/bills/obligations? it must be someone else’s fault!!!
you know what is absolutely laughable? the level of personal financial education in this world. does the onus fall in the lap of the lender to educate the consumer? no, absolutely not. the onus is on the lender to ensure that the consumer would be able to afford payments throughout the life of the loan (assuming a constant income at the time of the borrowing). this was not done. now, banks are writing off huge blocks ofr mortgage backed receivables. that is the ONLY consequence lenders should face, having to endure these losses.
the notion that they are somehow liable for punitive damages or some kind of compensation to defaulted borrowers is ridiculous. just because people banked on being able to refinance, doesn’t mean that now that they can’t, the entire population should pay for their mistake.
bottom line is, place the burden of educating yourself when making important life decisions on YOU. not on external parties involved, on YOU. if you are buying a car, do the research on it. if you are buying a house, do the research on the area, schools, value, structure, aaaaaannnnddddd financial products used for financing.
I guess the other thing that really pisses me off about this is a house is not some impulse purchase like putting a big HDTV on your credit card. This is the biggest purchase most people will make in their entire lives, and even then people have clearly choosen not to think the purchase through to see what they can afford. :picard:
people strive for certain living standards. if the area they live in doesn’t allow them to live at that standard because real estate is through the roof, instead of leaving for somewhere more reasonable, they crush themselves with debt. :bloated:
The flip side of the coin is that not everyone with an ARM or IO loan is getting screwed. This has more to do with people than the type of loans, those type of loans just help morons dig bigger tholes for themselves. There isn’t anything inherently wrong with an ARM or IO loan in the right situation, just like it makes sense to lease a car… in the right situation.
I think a lot of people also bank on the future and get boned. “Well I should be making $20k more per year soon so things will just be a little tight until then…”
you’re missing the point… it wasn’t just about buying more house then they can afford… that’s the dummies version.
what happened was people were banking on being able to finance at a super low rate then lock in at a decent rate and save a LOT. When they couldn’t refinance and house prices had dropped way below what these people paid their payment went a LOT higher because the ARMs sucked once adjusted and they now had homes that they couldn’t sell for anything close to what they paid. you have to remember that the economy was looking good and this didn’t appear to be a risk at the time.
while the better headline will always be people got what they couldn’t afford, it’s a little more complex then that in reality.
the solution really doesn’t have much to do with giving them money to solve their problem… it’s more about renegotiating the terms so that everybody can win. obviously nobody except the next buyer wins if the homes go to auction.
There is nothing wrong with the loan structure. Loans are merely a tool, same as a hammer. Its all about how you use it. <-You’d be amazed how often that’ll close a deal, :uhh:
The problem is/was with the underwriting.
I can’t tell you how many loans I sent through that I knew would fail in X amount of time. But it was within the standards…
At the same time, the projections were profitable and looked good on the sheets. It was great, until the property values fell out.
Okay, story time. One of my last big paydays before I left the bank, and I remember the tool quite vividly:
I had one specific person, who’d refi’d FOUR times between 2000 & 2005 because of the 9/11/01 interest rate drops… Took out more & more cash each time, because, in her words: “the property is making me money” (the values were up).
What was initially a ~$550k 20 yr purchase mtg had become a $900k IO (variable) 10/20… in Florida. Go see what difference 3.5ish % makes on $350k in cash - let alone the whole balance.
No wait, I hate that word, because it doesn’t REALLY express who’s paying.
And the TAXPAYER should bail this guy out right blue?
what happened was people were banking on being able to finance at a super low rate then lock in at a decent rate and save a LOT.
I’m not missing the point at all. You just fail to admit you can just as easily replace the word “banking” in your statement with “gambling”, because that’s what they were doing.
How many of these foreclosures were investment properties that people bought thinking for sure the value would only go up. Should the government… fuck… Should the taxpayer start bailing people out to make bad stock investments when they buy low thinking the stock is only going to go up and then they’ll sell making lots of money?
Even if you didn’t. Even if you snowballed her into the loan it’s still her fault. Businesses try to sell you more than what you need or can afford every day. If we expect people to be smart enough to do their homework when buying a washing machine, car, TV or cell phone plan we sure as hell better require them to be responsible for taking out a mortgage.
Yes, it’s complicated, which is why there are so many resources out there to help you. I refuse to accept people’s excuse of, “well the bank didn’t explain it well enough to me”. The bank is SELLING YOU A MORTGAGE. Do you go into a car dealership and ask the salesman how much car you should buy, and how best to finance it? Of course not because you’d go in with a budget for a used Cobalt financed 3 years and leave with a new Escalade leased for 6 years, with a huge down payment, 8k/year mileage, and a buyout of pretty much the original cost of the car.
I heard a story on the news the other day about a couple with kids making $70,000 a year combined and they bought a $300,000 house. The news portrayed them as victims of the bank’s lending practices. In reality they are victims of genetics because they were just fucking stupid.
I honestly tried to counsel some kind of responsibility to the people that were in questionable situations
But the people that wanted a 150k heloc so they could buy a boat… simply because they didn’t want to spend liquid assets, pfft, “sign here”. Of course, they had a far better idea of what they were doing then the people that are “victims” now. Meh. - The writing was on the wall, so I took out my 5.603 30yr and jumped ship a few months before this all fell out.
The foreclosure freeze is ridiculous IMO, but I hope that the industry can sort this out amongst themselves with these sorts of “gentlmens agreements” before the gov. has to get involved. :roll2:
Depends, do you want to move? A close friend just bought a “newish” build in Lancaster and still paid big bucks for it. Real estate in WNY never really got overvalued so it’s pretty immune to the big drops being seen elsewhere.
