Blame the Homeowner for this loan mess? NO!

[puppetmaker]

Now the homeowners who have the sub-prime mortgages are being blamed for taking on more debt than they could pay. They should have known better. They are bad people for not being able to pay for their houses.

I don't blame a majority of them. (I can't say all because I am sure there were a few that did this to cheat others out of money.) Consider what we saw on TV before the mortgage crash. The commercials aired that told people that they too could be a homeowner and part of the American Dream. They could be real estate moguls and retire early. I constantly hear these both on TV and on the radio. People who thought that they would never own their own home were given a chance to do so. People were talking out second mortgages to pay for their kids to go to college and other things because it was so easy to do. We also have programs like "flip this house" where we are shown that you can take a home and add some money and sweat equity to it and then sell it at an absurd profit. You could make money was the cry.

Home ownership is important to people in America. Owning a piece of land, I was told from an early age, shows that you have made it. Owning a home meant that you had a freedom that renters didn't have and you had something valuable down the road you could use as an asset. And it is a siren song that is played over and over again.

I think we are going to find out a lot more about how banks worked the system to their advantage to make huge profits for their stockholders. I also think there are going to be some serious revisions as to how people applying for credit are assessed. This is going to be bad for many people who were about at the point that they could buy a home or a new car or some other large purchase. But I think in the long term this might be exactly what needs to happen to make sure we don't stay in recession longer than we have to.

I also think we need to look at the people who pushed these loans that are now causing the problems with the banking system. We also need to take a serious look at the people behind them who convinced the brokers that this was the way to go. The brokers got their cut and screw the customer. It was no longer their problem. There was a nudge nudge wink wink about these sub-prime loans. We are finding more and more that paper work was incorrectly filled out or changed slightly because it would help the customer secure the loan. And of course these customers were told don't worry because everyone is doing it.

Then there are the renters who are caught in this mess without doing anything but pay the rent to the landlord. They entered into a contract for their living space only to find that the landlord has been put into foreclosure by the bank and they have less than a week to find somewhere else to live. I feel sorriest for these people. The ones who did everything by the book only to find themselves on the street.

The banks and lending institutions needs to stop this campaign of that it was upon the customer to make sure they could afford the loan. The problem is within the loan system itself when some idiot found a loophole in the federal regulations that allowed them to create this system that has now collapsed. They did it to themselves and rather than the government bailing out the banks, they should be bailing out the taxpayers who entered into these Faustian deals in good faith.

I am grateful that we have a fixed rate on our mortgage.

Comments

[xo-kizzy-xo.livejournal.com]

My dad was in real estate, so I grew up with the "fixed rate or forget it" anthem. Even if this mess hadn't happened, there'd be no way I'd do an ARM. There are just too many variables.

People can't resist a bargain, especially people who are desperate to have an actual house. That is/was the danger of subprime. People went blindly into them not realizing what the effects would be. Conversely, they were never told about them either.

I thank heaven that my house is already paid off. Oh, I'll bitch and whine about the property tax, but it sure beats having to pay the same amount every month.

[puppetmaker40.livejournal.com]

Good for your dad! With a fixed rate you know what you are getting into rather than gambling with your future.

Yep. Property taxes are a pain but they are part of home ownership. *grin*

[theresamather.livejournal.com]

My grandfather instilled this too. He reminded me about the 20% plus mortgage rates during the So Cal housing bubble of the 80's. I was pretty floored that so many people took adjustables in the last few years, though in the So Cal market it was the only way many of them could get the huge loans needed to pay the speculation driven prices...which is one reason I just up and left. I'm glad I had the option to move to an area that hadn't inflated yet.

[amarafox.livejournal.com]

I agree. To a point. I do think that people shouldn't be completely star struck by advertising t live beyond their means, but the advertising was pretty brutal, I caught some of it when I was in thr US. BUT I also believe this because *I* fell int the 'It's better to own than rent' trap, and the story for that lies below.

I actually have someone on my friends list who got caught as a renter renting a house that went into foreclosure and had to move - fast. It really sucked.

One thing that makes me a little upset, though, is the pushing of homeownership as the be all and end all of bring grown up. I did, at one point, own a house in a depressed real estate market. When i went back to college, the appraised value of my home tanked. I bought it in a neighbourood that was kind of not great, but the city just ignored so it got worse. At its lowest, my house was worth about 20k. I tried to rent it when I was at college, and it was vacant for most of he time. I was paying rent AND mortgage AND utilities. I only didn't let the mortgage collapse and ruin my credit rating because my dad was a cosigner.

I bought it for 56k - and lost almost 20k when I sold it - and it was on the market for 6 months. For those 6 months I was paying rent and mortgage and utilities here in BC (It sold for 39k, and then I had legal fees). Had I sold it for what I paid for it, I would have had 30k to drop on the deposit for a house here in BC And I still would not qualify for a mortgage

I had someone say 'You can get a 40 year mortgage!' And I responded with "I can't qualify for that here, and I'm not paying for a house whose property value will probably decrease until long after I'm retired"

While I want to own property, once bitten, twice shy. Right now the only way I could afford a house is to buy in a small mountain artist community(It is tempting) and telecommute.

[puppetmaker40.livejournal.com]

I'm sorry that homeownership didn't work out for you.

I hope that you have better luck next time.

It just goes to remind us how much the government is mixed up in the real estate market.

[amarafox.livejournal.com]

Thankfully here in Canada the mortgage industry is VERY tightly regulated so less than 5% of people were using sub prime mortgage lenders. Our real estate market hasn't felt much - except the pre-sale condo market. There have been 5 or 6 developments grind to a halt in BC because of investor problems.

presale condos are another beef of mine. i think it is anhuge conflict of interest for real estate agents to buy presale condos and flip them. One building on the beach went from 200k for a 1 bedroom to over 500k, and I bet part of it is due to this practice.

I think my next homeownership experience will be better, if I can ever afford a home.

[spydielives.livejournal.com]

Blues and I have an ARM, but we got it in 1995. Through this whole credit thing, our payments have never gone above the amount we initially set as our personal cap - the bank can only raise our rates so much every 6 mos (March and Sept). The last statement: 5.25%. It has been as low as 5.00%. I do not remember it ever being higher than 7.25%.

I do not blame those who took out the loans, with one small exception - it is always, always important to read the fine print of any loan. So many people will sign documents without reading the whole thing. Still, I agree... far too many people are going to be screwed, and it won't be the banks.

ETA: I should point out we still own this property in KY; our kids are living in it while they go to school there. We took out a 30 year mortgage, and of course are more than half paid off. We hope to sell it, and get roughly what we put into it out, mostly because of the kind of property it is. We bought it to have the security of control - the mortgage was cheaper than rent, even with insurance, and we could afford it on grad student salaries.

[puppetmaker40.livejournal.com]

You got a sensible ARM which has very strict rules governing it. And you knew what you were getting into.

Some of the newer ones can change month to month depending on the market. It was like the snake oil salesmen took over the loans departments and told people not to worry about things that they really should have been worrying about.

[spydielives.livejournal.com]

Yeah, I have looked at what some of those ARMs offered now and wondered who in their right minds would accept them - and what kind of greedy SOB would even offer them.

But then again, credit card companies, banking on interest rates going up, are doing the same thing.

Fees that are now at $35 and $40 for anything - I was charged $10 for a courtesy check to transfer a balance and will pay 6.9%, because it was UNDER $2000, which would have been a 3% fee at 3.9% apr for the first year... It was the "fine print" * on a different part of the courtesy check.

*shakes head*

[jenny_evergreen]

People who are educated, for the most part, both academically and practically, are unlikely to fall for this, but the vast majority of people aren't and that's exactly what the banks were counting on. They can't come back now and say they should have known, you know? They KNEW they didn't know and they did everything they could within the limits of the law (and sometimes outside them) to KEEP them from knowing.

Greed is NOT good. :\

[puppetmaker40.livejournal.com]

Greed is NOT good. :\

Yep. You are so right.

[reddheart.livejournal.com]

As someone who wants the next step to be 'buy a house', especially since we are restricted to the Bay Area because of the miniD, this depresses me a lot. I actually worry that we'll never -get- a house, because the restrictions are going to be so impossible.

Hopefully we can get what we want without having to contortion ourselves. :( We think in a couple of years we'll be ready and more than able to do something really cool, or even just something nice where we can paint our own walls and have enoug space to take costuming projects outside and -leave- them there to eat or something (that isn't a back alley).

[puppetmaker40.livejournal.com]

I will think good thoughts for your future housing situation.

My gut feeling is that you are going to find something that will suit y'all well.

[wherdafux-d-cat.livejournal.com]

I would get so angry when I would see TV ads for 'pay only the interest' mortgages. Such an obviously bad idea but people were going for it right and left because hey, if it's being offered, it can't be bad, right?

[puppetmaker40.livejournal.com]

Have you noticed that these ads are gone?

I also hate those ads where they gave you more than your house was worth in the current market because prices always go up. So you end up paying more for your house than it was worth.

[wherdafux-d-cat.livejournal.com]

Yes indeed and I was quite relieved to see them go. I just couldn't believe there wasn't anything illegal about such an extremely hair-brained scheme. I could never think of an upside to a mortgage like that -- well, for anyone other than the one collecting the fees and interest payments!

Ohhh those are other ads I love to hate. I wish people would look beyond the 'money right now!' facet and look at the whole picture. It's not like the dot-com bubble was forty years ago so that no one remembers how something so excessively hot can go cold so very fast. None so blind, I guess.

[neadods.livejournal.com]

I also think we need to look at the people who pushed these loans that are now causing the problems with the banking system

The Post had an article about someone who lost her home in this nonsense. She did some very stupid things, such as buy without looking and without independent verification of the price, but the article also detailed exactly who was pushing this... a friend in the community who said that they could co-sign on the loan and would help out. They buy the house together, it rises in value, the owner refinances and buys out the co-signer. Looks good on paper, but what really happened, of course, is the owner went under, and the co-signer threatened that she had to turn the house over to them, immediately and without recompense, for the "trouble" she was putting them through. It was, in short, a cheap and easy way to get someone else to pay for a house, lose it, and have to deed it over for next to no money on the pusher's part.

[readinggeek451]

As you know, I really, really, really wanted to buy a house a few years ago when the interest rates were so low, but I just couldn't swing it. Partly because there was no way in h*ll I was going to take out an adjustable rate mortgage.

(There were a few houses I looked at that I could have afforded--just--but I didn't like the minuscule house/nonexistant yard/flood zone.)

I'd still like to own a house, but I'm getting increasingly glad that I didn't overextend myself to buy one. Even if I am paying an insane amount of rent every month.

[trinalin.livejournal.com]

I know this isn't exactly related to what you posted about, but I found it interesting when he told me about it earlier this afternoon:

Dad just recently looked at what he paid for his house ($15,000) in '68 to see what that money is worth today due to inflation ($92,000). Then he summed up all of the home improvements he's done on it and the total came to what his house is actually worth on the market today ($120,000 on a good day). So what he's discovered is something that real estate agents never tell you - your house being worth more over the years is due mostly to inflation.

Hmmmm, so do I really want to fix up my basement?

[baxaphobia.livejournal.com]

I am so thankful that our house is paid for. I can't imagine what some people are going through.

[popfiend.livejournal.com]

Amen.

And yes, I am grateful for my fixed rate mtg. too.

[cynamin.livejournal.com]

Oh yeah. The housing market has been ridiculous, and it will be interesting I think to see what comes of all of this in the long run.

I'm very glad my boyfriend and I have not ended up in the situation of some renters with foreclosed homes. Intead, our landlords want to sell us the place, so we're very careful evaluating our ability to do so. Sure, a year or two ago we could have gotten some ridiculous loan and gotten a place. Those ads and offers were everywhere. You went to open houses and realtors would be telling you the wonderful deals that were out there for mortgages.

One of our friends who was unfortunatly poor with money and would take anything that would sound like a deal bought a house during that mess. We cringed when we found out that he had gotten an interest only mortgage (though, fortunatly not an ARM) and had put his down payment on his credit cards. We are no longer in touch with him, but we occasional wonder if and how he's managed to hold onto his house.

We'll probably be first-time homeowners in a couple of months. Sure, it's harder than it was a year ago. But I'm honestly glad for that.