Hillary And The Mortgage Market

[The Rabbi]

So Hillary unveiled a plan to solve the mortgage crisis. Of course it will do no such thing. Calling for further disclosure is senseless. It is already one of the most opaque businesses in the country. I don't know of too many business where the seller has to disclose to the buyer exactly how much money he makes in the transaction.

[high horse] I worked in that business, specifically sub-prime, specifically manufactured housing, for 9 years. I sold hundreds of adjustable rate sub prime mortgages, many with pre-payment penalties (something Hillary wants to outlaw). In every case I counselled the buyers. I was dealing largely with people who had rough or limited credit. That's why I was there. If not for me they wouldn't have gotten a house at all.

I told them: pay your mortgage on time for 24 months. Do not take out any more debt. Pay your bills and save money. At the end of that you will have 2 years of strong credit history with money in the bank. You will be able to refinance into a prime-credit loan and save money.

Sadly most of them didn't listen. They continued doing what they had always done and ended up in foreclosure or bankruptcy or both.

I remember one loan, on Joseph Street. The lady's husband was in a Chapter 13 bankruptcy. She was swimming in debt. We consolidated her loans and got her cash to pay out her husband's bankruptcy. Her total monthly payments were lower by about $500. I counselled her to pay this and not take any more loans.

A year later she called. She had quit her full time job to sell Mary Kay. She hadn't paid off her husband's bankruptcy because "he was afraid they'd ask where the money came from." We pulled her credit. In the previous 12 months she had applied for and received credit every month, at least once a month. Accounts we had paid off she had charged up again. She had opened new accounts and run them up. I was totally disgusted. She needs to be a on a cash basis for the rest of her life.

The whole mess needs to be left alone. The market will take care of the greedy and reward the prudent. This is what needs to happen. [/high horse]

[Guest Steelharp]

most opaque

I think you mean least?

Opaque:

1. a. Impenetrable by light; neither transparent nor translucent.

b. Not reflecting light; having no luster: an opaque finish.

2. Impenetrable by a form of radiant energy other than visible light: a chemical solution opaque to x-rays.

[The Rabbi]

Yeah. transparant. Whatever.

[dariks]

I have very little sympathy for the mortgage companies and the borrowers. The mortgage company took the risk of loaning the money to people of dubious credit and it ended up biting them in the butt. No one forced them to make bad loans in the first place.

My feeling for the borrowers boil down to two words...Self Responsibility. They shouldn't have bought more house than they could reasonably afford.

If you buy a house with an ARM and you can just barely afford the payments. What do you think is gonna happen when the rates go up? It isn't rocket science for goodness sake.

[Im Neero]

I don't think disclosure is the issue. Whether the liberals want to admit it or not, pretty much everyone knows better, they just choose to borrow money that they cannot pay back anyways. I'm with Rabbi, the market will take care of this problem naturally if left alone. I had an economics teacher that showed us many examples of what happens when the government tries to solve an economic problem by going against the market. None of them turned out well (rent controlled apartments, anyone?)

[Guest canynracer]

I have very little sympathy for the mortgage companies and the borrowers. The mortgage company took the risk of loaning the money to people of dubious credit and it ended up biting them in the butt. No one forced them to make bad loans in the first place.

My feeling for the borrowers boil down to two words...Self Responsibility. They shouldn't have bought more house than they could reasonably afford.

If you buy a house with an ARM and you can just barely afford the payments. What do you think is gonna happen when the rates go up? It isn't rocket science for goodness sake.

I bought my first house 2 yrs ago, with an ARM. and I could easliy afford the payment, the payment just flexed and sent my mortgage up 650 bucks a month...

I am in the process of trying to get refinanced now, the loan companies are refusing pretty much everything below a 700 credit score.

I am a 650. I just made my third payment at the new rate and it IS killing me, but at least I can pay it (course im broke after that..LOL) but its paid non-the-less.

I have alot of "self responsibility" so in my case, that isnt the issue. I absolutley wasnt expecting a $650 a month increase, I knew it would go up, but daaaaammmmn!!

I have never been late, and I have never taken any other loans. When I bought the house my credit scores was 615

but yes, there are some folks that bought more house than they could afford to begin with, so if they are experiencing the same rate increase as me...they are now screwed.

[shaftbass]

I have very little sympathy for the mortgage companies and the borrowers. The mortgage company took the risk of loaning the money to people of dubious credit and it ended up biting them in the butt. No one forced them to make bad loans in the first place.

My feeling for the borrowers boil down to two words...Self Responsibility. They shouldn't have bought more house than they could reasonably afford.

If you buy a house with an ARM and you can just barely afford the payments. What do you think is gonna happen when the rates go up? It isn't rocket science for goodness sake.

That is how I feel. Responsibility isn't just whether or not you can afford the payment, but also doing the research to see what would happen when rates go up. I think denial is in the head of some of the borrowers. "Well the rates wont go up!" That possibility is put aside because they want to hurry up and get in a house.

I learned early on that adjustable rate loans are NEVER a good idea, thanks to doing tons of research before I bought a house.

If the government comes in and bails people out of their too-expensive mortgages, well, that's just a terrible use of government resources and I'd equate it to welfare.

[Guest dotsun]

Wow CR, that sux. I bought a house a couple of years ago and my mortgage is substantially less than your 'adjustment.' Good luck on the refi bud, that's one insane damn jump, in fact it's a pistol a month adjustment. Oh sorry, guess I'm not helping much.

[The Rabbi]

I learned early on that adjustable rate loans are NEVER a good idea, thanks to doing tons of research before I bought a house.

My experience is the opposite: ARMs are always a good idea. You just have to know what the idea is.

[Im Neero]

ARMs are also great for a property that you don't plan to stay in for long as well. There's a great place for them, but it's not long term.

[analog_kidd]

I teach the Dave Ramsey program at our church, and I am always amazed by the lack of knowledge folks have about smart finances. We churn out graduates from public school, that know all about how to apply a condom, or about really useful things like how a single cell amoeba reproduces, but they don't even have a clue about how simple compound interest works, or about the benefit of early investing in a 401k or IRA.

We teach to save up a 10% down payment, then make sure the mortgage is no more than 25% of your take-home pay. With that formula, most people can afford a house.

It really boils down to common sense and self discipline. Many of todays young marrieds want to start off with what took their parents 25 years to get. It's dumb for them to bite off more than they can chew, and it's dumb for the mortgage company to approve it. I think both parties share some the responsibility for the problem, but ultimately the homeowner is the one who has to pay up. Unfortunately, it's become almost the norm to just file for bankruptcy these days.

[Mike.357]

I'd be slitting my wrists if my mortgage went up $650. When we bought I was very specific to the banker that there was NO WAY I was going the route of an ARM. My rate could be better I suppose but I can afford the payments.

The way they are building houses around here I think I could already double my money just on the lands value. Had one real estate guy tell me he could more than double what I paid and he had no desire to see our house. I imagine they would knock my house down and just divide up my land to put a dozen houses in. Hopefully when I am ready to sell some years down the road the story will be the same.

The gov't has no business bailing out people who are stupid and get in over their heads.

[Guest canynracer]

Wow CR, that sux. I bought a house a couple of years ago and my mortgage is substantially less than your 'adjustment.' Good luck on the refi bud, that's one insane damn jump, in fact it's a pistol a month adjustment. Oh sorry, guess I'm not helping much.

LOL...yeah, thanks though...I will get through it. then I will be SHOPPING!!!!

I thought I did everything right, and still think I do...we went with the ARM because it was our first house, and we werent sure we were gonna stay..we love the neighborhood and the house, and we decided we are gonna stay...but well, this happened..

like I said, I didnt buy outside my means, I can still make the payments, and I am on time every time..just tightened up..like A LOT!!!

every time the first rolls around I kinda pucker up a bit...LOL

[Guest canynracer]

I'd be slitting my wrists if my mortgage went up $650. When we bought I was very specific to the banker that there was NO WAY I was going the route of an ARM. My rate could be better I suppose but I can afford the payments.

The way they are building houses around here I think I could already double my money just on the lands value. Had one real estate guy tell me he could more than double what I paid and he had no desire to see our house. I imagine they would knock my house down and just divide up my land to put a dozen houses in. Hopefully when I am ready to sell some years down the road the story will be the same.

The gov't has no business bailing out people who are stupid and get in over their heads.

that is half of the reason I am having trouble..since the market drop, my appraisal was low...but I will survive..

hey I think that is a song...

[Guest canynracer]

We teach to save up a 10% down payment, then make sure the mortgage is no more than 25% of your take-home pay. With that formula, most people can afford a house.

this is what we did, and why I am not foreclosing