AWvsCBsteeeerike3 wrote:There's no way in hell they could afford to pay the interest alone, so even if they spread it out over 500 years, it wouldn't matter b/c the debt would only grow. But, these people didn't even bother to look into that, and that is stupid.
You could say the same thing about the lenders though, right? Why are they giving out six-figure loans to people that can't afford it? It's right there in front of them.
I haven't bought a house, I don't work for any of these institutions, but I can't say that I wouldn't have tried to go out of my reach (at least somewhat) when banks couldn't wait to give out these secured loans.
jim wrote:There are plenty of people that had no idea what they were getting into because it wasn't explained truthfully or at all. There are plenty of stories that seem reputable where people honestly thought they had a fixed rate, and only discovered they did not when the mortgage payment skyrocketed. Not all, but enough to where blanket statements about people in trouble aren't fair.
edit - my wife is the financial expert in our house, and she really is an expert so I have a big advantage in these matters. But I can't fault people who don't have that knowledge and were just flat out lied to.
But, jim, don't you think people should know a little bit about what they're doing before they do it? I mean, if you go get a loan, shouldn't you at least look into it a little bit at least? I mean, we're not talking complicated economics or math here. One simple test will tell you that people are lying/offering a loan that is too good to be true. Even at 5%, a low rate, you're still paying $833.33/month in interest alone on a 200K mortgage. I know banking and the accounting that goes along with these loans can be incredibly complex, but there are a few simple and extremely easy things that people should be able to do themselves to figure out if they are getting a fair shake.....and figuring out your payments aren't even covering the interest should be one of them.....
It's too complicated. Unless you are a lawyer you aren't going to understand the entire contract. If it were one page where it said you are getting a loan with these terms, then yes absolutely. But they bury so much crap in there and make it impossible for the average person to understand.
Bush addressed this very issue early in the week and he's spot on.
C'mon jim, you are really giving people the benefit of the doubt. When we signed our loan we knew which papers we were signing were more important than others and its pretty easy to see written in the contract that its a 30 yr FIXED rate, that and if you're unsure say you want to SEE it in writing. Most of these people knew they were in over their heads and tested it. The housing market crumbled and these people couldn't sell houses that they thought they could make a profit on before the adjustable rate went up.
I just went through this yesterday. Signing loan application paperwork with my mortgage guy who is putting me through on an FHA loan for this new house I have waiting (if my current house EVER sells). I'm making a pretty large step down in houses and locations. The paperwork didn't seem all that complicated to me. I just sat down, figured out what monthly payment I could afford comfortably (without figuring into it any child support because I don't know what I'll get for that yet), then told him to go get a rate that would make it work with what I intend to put down, of course, I'm now putting down a little more than I originally wanted, but not by much. I'm still unclear about the difference between an FHA and conventional loan. There has to be more to it than FHA is through the government and coventional is through a bank?? Any thoughts.
jim wrote:There are plenty of people that had no idea what they were getting into because it wasn't explained truthfully or at all. There are plenty of stories that seem reputable where people honestly thought they had a fixed rate, and only discovered they did not when the mortgage payment skyrocketed. Not all, but enough to where blanket statements about people in trouble aren't fair.
edit - my wife is the financial expert in our house, and she really is an expert so I have a big advantage in these matters. But I can't fault people who don't have that knowledge and were just flat out lied to.
But, jim, don't you think people should know a little bit about what they're doing before they do it? I mean, if you go get a loan, shouldn't you at least look into it a little bit at least? I mean, we're not talking complicated economics or math here. One simple test will tell you that people are lying/offering a loan that is too good to be true. Even at 5%, a low rate, you're still paying $833.33/month in interest alone on a 200K mortgage. I know banking and the accounting that goes along with these loans can be incredibly complex, but there are a few simple and extremely easy things that people should be able to do themselves to figure out if they are getting a fair shake.....and figuring out your payments aren't even covering the interest should be one of them.....
It's too complicated. Unless you are a lawyer you aren't going to understand the entire contract. If it were one page where it said you are getting a loan with these terms, then yes absolutely. But they bury so much crap in there and make it impossible for the average person to understand.
Bush addressed this very issue early in the week and he's spot on.
C'mon jim, you are really giving people the benefit of the doubt. When we signed our loan we knew which papers we were signing were more important than others and its pretty easy to see written in the contract that its a 30 yr FIXED rate, that and if you're unsure say you want to SEE it in writing. Most of these people knew they were in over their heads and tested it. The housing market crumbled and these people couldn't sell houses that they thought they could make a profit on before the adjustable rate went up.
Everybody told me to go with an adjustable rate, and for awhile it looked like they were right. But it turned around and I'm glad that we went that way. Others choose to gamble...some win some lose. But when I gamble I almost always lose.
When I was in the market for my first home, I attended a real estate informational seminar. The "expert" showed all kinds of stats, graphs, you name it which explained why it was smarter to go with adjustable rate. He had all the data to back it....when it came time for me to buy, I went with fixed, mostly because I like knowing what my rate is.....the not knowing or fear of it increasing would have worried me too much. Fortunately for me, every time I've bought a house since that seminar (that was late 1990s), I've been able to get a great/low fixed rate loan. I'm sort of vanilla like that, though.....
AWvsCBsteeeerike3 wrote:There's no way in hell they could afford to pay the interest alone, so even if they spread it out over 500 years, it wouldn't matter b/c the debt would only grow. But, these people didn't even bother to look into that, and that is stupid.
You could say the same thing about the lenders though, right? Why are they giving out six-figure loans to people that can't afford it? It's right there in front of them.
I haven't bought a house, I don't work for any of these institutions, but I can't say that I wouldn't have tried to go out of my reach (at least somewhat) when banks couldn't wait to give out these secured loans.
Yeah, most definitely, the banks are just as much, if not more, to blame than the borrowers. But, the borrowers don't get a free pass either.
Personal responsibility or not, this mess could not have been prevented by a few more cynical home buyers. It is well documented that there was a huge increase in world capital in need of somewhere to invest and T bonds were at 1% so this market was created, not by unwise homebuyers, but by mortgage co's and Wall St. And no one important enough to do so had the balls, while fortunes were being made, to put a stop to it.
AWvsCBsteeeerike3 wrote:There's no way in hell they could afford to pay the interest alone, so even if they spread it out over 500 years, it wouldn't matter b/c the debt would only grow. But, these people didn't even bother to look into that, and that is stupid.
You could say the same thing about the lenders though, right? Why are they giving out six-figure loans to people that can't afford it?
The lenders sold the risk, usually by throwing these loans into the now-infamous mortgage securitizations, so they had little (short-term) incentive to care. It's possible the lender and borrower aren't so much opponents as co-conspirators. "You know you probably can't afford this house. I know you probably can't afford it. But those fancy-pants on Wall Street are giving away money, so why not?"
jim wrote:There are plenty of people that had no idea what they were getting into because it wasn't explained truthfully or at all. There are plenty of stories that seem reputable where people honestly thought they had a fixed rate, and only discovered they did not when the mortgage payment skyrocketed. Not all, but enough to where blanket statements about people in trouble aren't fair.
edit - my wife is the financial expert in our house, and she really is an expert so I have a big advantage in these matters. But I can't fault people who don't have that knowledge and were just flat out lied to.
But, jim, don't you think people should know a little bit about what they're doing before they do it? I mean, if you go get a loan, shouldn't you at least look into it a little bit at least? I mean, we're not talking complicated economics or math here. One simple test will tell you that people are lying/offering a loan that is too good to be true. Even at 5%, a low rate, you're still paying $833.33/month in interest alone on a 200K mortgage. I know banking and the accounting that goes along with these loans can be incredibly complex, but there are a few simple and extremely easy things that people should be able to do themselves to figure out if they are getting a fair shake.....and figuring out your payments aren't even covering the interest should be one of them.....
It's too complicated. Unless you are a lawyer you aren't going to understand the entire contract. If it were one page where it said you are getting a loan with these terms, then yes absolutely. But they bury so much crap in there and make it impossible for the average person to understand.
Bush addressed this very issue early in the week and he's spot on.
C'mon jim, you are really giving people the benefit of the doubt. When we signed our loan we knew which papers we were signing were more important than others and its pretty easy to see written in the contract that its a 30 yr FIXED rate, that and if you're unsure say you want to SEE it in writing. Most of these people knew they were in over their heads and tested it. The housing market crumbled and these people couldn't sell houses that they thought they could make a profit on before the adjustable rate went up.
You are sounding like you don't think there were people tricked into a loan. If that is true, then you are wrong.
It's not. You'll also note which administrations are responsible for the current debt situation. It's the "fiscally responsible" party that cuts taxes while borrowing to buy weapons. It couldn't be more clear.
Still, you were calling for depression as an alternative to a moderate increase in debt. I think that's crazy.
Popeye_Card wrote:As for it's scrutiny in congress and it getting paid back, I'll believe it when I see it.
The whole justification for charging higher interest rates on sub-prime loans, was that the lender must be compensated for the increased risk of default. If lenders didn't want to accept that risk, the loans shouldn't have been offered or purchased.
As to decision making about mortgages, people certainly ought to be more prudent, but a huge number of buyers don't really understand how their loans works, and most haven't even calculated the total cost. People just look at whether they can afford the current monthly payment. They also thought that they were going to be able to sell at a big profit. Now that house prices are falling, that has evaporated.
I think the government policy of encouraging everyone to be a home owner has to take some responsibility for this. There's nothing wrong with renting.
greenback44 wrote:The lenders sold the risk, usually by throwing these loans into the now-infamous mortgage securitizations, so they had little (short-term) incentive to care. It's possible the lender and borrower aren't so much opponents as co-conspirators. "You know you probably can't afford this house. I know you probably can't afford it. But those fancy-pants on Wall Street are giving away money, so why not?"
Looking this up on google, but I'm not familiar. Anyone want to give me a cliffs notes version?
The rest of it makes sense.
NM - I've got it now.
Last edited by haltz on September 24 08, 11:29 am, edited 1 time in total.
