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NutmegCT
01-27-2008, 07:43 PM
OK gang - I'm reading and seeing reports like this:

young couple is frantic and in foreclosure. can't pay their new monthly payment. bought their six bedroom 3 car garage house for $400K with no down payment. were told their monthly payment would be $2200.

now 6 months later, the "intro" interest rate has ended, their payment is over $4000/mo. Discover the value of the house is closer to $250,000.

did they get an attorney when they bought the house? no
did they read the mortgage agreement? no
did they know the low interest rate was only temporary? no

and to top it off, they had been living in a two bedroom apartment, earning $35,000/year. found an internet ad for "affordable new houses in desirable area".

drove out to take a look, mortgage broker said they could afford it (never even asked their income). they chose the house, a mcmansion on a tiny lot in a treeless tract of similar overpriced, oversized firetraps.

this is happening to thousands and thousands of people. what the heck happened to "due diligence"? did we make it so easy for people to have fun and "get it now", that getting into trouble became something you just giggle at and cry later?

yeesh.

Tom

Brooklands
01-27-2008, 08:03 PM
Tom,
I am afraid some of this is the result of never being told they were wrong in grade school, getting awards for showing up, lack of personal finance course in education, and watching too many Vacation Home shows on TV. My son's senior year at USAFA he had to take a course in personal finance and make a budget for living on 1st Lt. salary before graduation. It is something that all students should have to do sometime in their education.

AngliaGT
01-27-2008, 08:21 PM
Our oldest had to take a course like that at the
Naval Academy.Great idea.

- Doug

NutmegCT
01-27-2008, 08:30 PM
Tom,
I am afraid some of this is the result of never being told they were wrong in grade school, getting awards for showing up, lack of personal finance course in education, and watching too many Vacation Home shows on TV.

Dave - something tells me you're describing a *large* proportion of today's 20 and 30 year olds. Doesn't bode well for the future, I'm afraid.

Tom

Brooklands
01-27-2008, 08:51 PM
Tom,
I think most of them grew up and avoided this problem, or maybe their families helped them with reality...but there are <u>some</u> who think Hollywood is reality.

But I remember when how worried my Dad's generation was about the Baby Boomers, and a few of us made it through okay.

hilsideser
01-27-2008, 08:52 PM
I think we're seeing the chickens come home to roost right now.

01-27-2008, 09:22 PM
How did they get a 400k mortgage on a 35k salary?

Actually forget it - at a rate of over 10% there's no need to ask.

The sad thing is that they'll probably get bailed out somehow using my tax money. I should be a little more feckless...

&lt;edit&gt; If you think this sounds bitter, you're right. I just did my taxes - and got screwed by the twin spectres of AMT and the marriage tax yet again.

AngliaGT
01-27-2008, 09:37 PM
I heard of an $8.00/hour worker being approved for a
loan on a $300,000 home.
These irresponsible companies will probably get bailed
out for their stupidity & greed.

- Doug

AweMan
01-27-2008, 10:26 PM
Even though it`s not right, I wouldn`t mind it so much if it was JUST the home owners getting bailed out! Having said that, It`s a shame that the preditory lenders will also somehow get bailed out. It is my opinion that preditory lenders should be left holding the bag on these A.R.M. loans! Further more anyone that even considers an A.R.M. loan needs to FULLY understand just EXACTLY what it is He/She is signing.
Preditory lenders will tell prespective buyers well ..... you can sign now and in four or five years you can refinance to a fixed rate. Thats all fine and dandy, but what normally happens is is in the course of the five years the borrowers credit is in such a mess that refinancing is impossible.
Our current admistration says that bailouts won`t bo on the tax payers nickle, so far so good! But what about the next administration?
B.T.W. Alana never fear, there is a bunch of us in your boat!
My wife and I have NO deductions and are over 100k in income
I can hardly wait!
Note to the I.R.S.: You could at least give me a kiss this time!

Basil
01-27-2008, 10:45 PM
So far this thread is ok, and I'm letting it continue, but please do NOT get into politics...thanks.

Basil

01-27-2008, 10:56 PM
My wife and I have NO deductions and are over 100k in income
I can hardly wait!
Note to the I.R.S.: You could at least give me a kiss this time!

I just had 43k in deductions disallowed thanks to the wonders of AMT. Nearly all the mortgage interest and property tax we pay, so it's not like it's anything exotic.

You can imagine how happy that made me.

Getting married costs me 12k a year in additional taxes over us both filing seperately. Worse decision I ever made. No penalty my a$$. I HATE tax season...

AweMan
01-27-2008, 11:03 PM
Sorry Basil, I didn`t intend to take it in a political direction. But I guess I sorta did.
my Apoligies!

AngliaGT
01-27-2008, 11:09 PM
....and I thought that AMT made model cars.

- Doug

DrEntropy
01-27-2008, 11:11 PM
1/24th s(c)ale.

2wrench
01-27-2008, 11:17 PM
A sad state of affairs. Leaves us in further
economic disrepair. These loans have assisted
in fueling the economy to a falsehood and now it is
time to pay the fiddler.

I say brace yourselves for the worst....

Buy another British car now...before it's too late!

Oh, and refer back to the thread on lifts and buy
one of those too. Somebody's gotta fuel the
economy!

Sherlock
01-27-2008, 11:22 PM
My concern (from here in Canada) is the spill over effect into our economy... I remember when this story broke last year and even then I had a funny feeling about it...

At least here in Canada our banks and mortgage brokers are a lot more careful in approvals of mortgages.

bugimike
01-28-2008, 12:18 AM
While everyone seems to blame the hapless, naive couple who were blissfully trying to live the American Dream for getting in over their heads, not much has been said of the culpability of the unethical bankers/lenders and mortgage brokers who happily led these unqualified borrowers down the garden path to their demise knowing full-well that default on the mortgage would be inevitable! Therein lies the crime and there lie the culprits who should have to foot the bill! Unfortunately the whole system seems to be so corrupted by greed that to make them pay would be devastating to the entire industry and ripple through the whole national economy and hence, we, the taxpayers will have to start bailing to keep the whole boat afloat! Funny how we can spend billions and billions overseas yet balk at helping our own!!

01-28-2008, 05:21 AM
1/24th s(c)ale.

That was too slick, Ertl.

DrEntropy
01-28-2008, 06:56 AM
"Just like the real thing, only smaller."

/bcforum/images/%%GRAEMLIN_URL%%/jester.gif

Shinsen774
01-28-2008, 07:22 AM
I saw that show on TV that the original poster described.

I also saw an article on the local TV news here. A local couple with two small children, only he works, terrible credit history, two new SUVs in the driveway, nice furniture, salary about 1/3 of mine.....gets a variable rate mortgage for 100% of the house price and closing costs, for a house about the size and value of mine. Rate goes up, they can't make the payment, and claim it isn't their fault and the taxpayer should bail them out. My advice was get cheaper more fuel efficient cars, get a nice smaller house you can actually afford, get the wife a job, and stop spending money you don't have.

Tinster
01-28-2008, 07:46 AM
Same mess here in Puerto Rico.

We live in an up-scale, gated community of 320 single
family homes. Close to 50 homes are for sale now.
Mostly "for sale by owner" in an attempt to squeak out a
few more $$.

I know of one guy who bought a home here and he had no
income to support it long term. It's fallen in value at
least $100K since his purchase, he's about to lose his job
and his low, introduction interest rate just got launched
upward. He's in a panic.

I call it the "greed factor" all around. I really have
little pity for ANY of the players in this mess.

just my 2 cents.

d

Brooklands
01-28-2008, 07:48 AM
The living beyond one's means syndrome is not a new development. There have always been people doing it. My brother-in-law from my previous marriage was a bank president, and he was always worried about the people he knew who were living well with unbelievable debt ratios, mostly from multiple credit cards...

NutmegCT
01-28-2008, 07:56 AM
Well, from my 1830s background ... I'll sure admit that folks have lived beyond their means for a *long* time.

But the way this disaster is unfolding, it's showing that we haven't progressed very far. In the 1830s if you lost your house, you lost your house. You moved in with relatives. There was no such thing as a mortgage, or "collateralized mortgage-backed securities", or multiple SUVs and motorboats in the driveway. You couldn't borrow money at all, unless you were a business. And even then, the maximum loan length was 30 days. Yep - 30 days.

Nowadays, the ill-informed (or ill-educated) family which "owns" the $400K house, two SUVs, motorboat and motorhome on a $35K salary can bring down a whole economy.

It's not really a "mortgage" issue. It's a complete lack of responsibility, "oh honey that's cute let's get one" issue.

Onward through the fog!
Tom

bugimike
01-28-2008, 09:43 AM
OK, admittedly, these people are living way beyond their means, but why are the lenders taking the risk on them? Do they like losing money or is there a hidden silver lining in it for them to do so?

01-28-2008, 10:32 AM
The person doing the lending gets a commission.
The corporation doing the lending takes the loss.
The person is not affected (unless the corporation goes out of business of course).

If the person who approved the loan had to repay their commission if it went belly up, you'd see standards tighten in a heartbeat...

Sherlock
01-28-2008, 10:50 AM
The only problem I see (really) is that the combination of the two factors 1) people who are greedy for what they can't really afford & 2) irresponsible lenders who hand out these mortgages... have the effect of dragging down the economy for everyone else who is responsible with their money (who I suspect are the majority of people)

And with the size of the American economy all of this ripples across economies worldwide having a negative impact.

lawguy
01-28-2008, 10:55 AM
This whole issue has me royally PO'd, but may end up personally benefitting me.

Call me stupid. You see, I still live in the first house I bought about 9 years ago. I paid under $100,000 as a brand new associate attorney with student loans, a child and one on the way. Not accounting for unrealistic optimism- if I wanted to sell it today, and I mean today- I could sell it for $130,000- if I wanted to wait a few weeks, another $10,000. It is a modest starter home, but with a bit more room and a few neat details- there will always be a decent market for a house like that.

My income is literally 200+% of what it was when I bought the house and I have been looking for a new place (buy or build) for 2 years- so far nothing has met my desires, which I am willing to wait for (4+ acres, 5 bedrooms, out in the country).

Most houses that meet my criteria cost more than I want to pay...not that I couldn't get approved for it...but I will not let someone else decide what my budget is. After all, their goal is to take as much of my money as they can. However- the prices are coming down, oh so slowly, but they are. My house, due to its price point in our area will not devalue, but the houses I want will. Good for me.

As for "predatory" lenders- I would hate to see public money, my money, used to bail them out....or the "victims" who let envy drive their buying decisions, but provided the proper disclosures were made and the law was complied with- I have no sympathy for a person who refuses to be relaistic about they can afford or is so short-sighted that they believe that historic low interest rates will never rise.

I am not jealous of their over-sized, overpriced and over-mortgaged home, but I suspect they may be jealous of my low house payment, absence of car loans and complete unfamiliarity with consumer debt. I am willing to wait until I can afford more without a strain. I guess I don't fit in today's world.

Again, stupid me- I locked in a fixed rate at the historic lows. I guess no one will bail me out...but then again, I don't need it.

PATR8
01-28-2008, 11:14 AM
I have be watching this thread, interesting reading. It says allot about the country's mentality. Even with Katrine they were interviewing a lady who had lost her house. Of course it was the governments fault for the flood so they owed her a new home. It was an interesting interview listening to her point of view right up to the point where she admitted she did not actually own the home, she was on section 8 housing paying $28 a month (that is right $28 a month with the tax payers paying the rest of her rent) and now she deserved a new home of her own.
I am like most one here so far, very little sympathy for the home buyers who should have known they were way over their heads and NO sympathy for the lenders.

We have a very nice gated community near us where my neighbor works as a realitor. She says the turn over rate on the homes there is nearly 30% a year from young couples wanting to live the gated community's dream on a trailer court income. She says there are homes there with rented furniture and leased cars, people she knows can not afford the homes but always seems to get the loans. She tries to warn them to include the speech about the huge turn over but to no avail. She likes it cause she has sold the same house 3 times in the past 28 months

tony barnhill
01-28-2008, 11:46 AM
hmmmmm....we're looking to buy a "warm weather" place - New Orleans, Alabama/Florida panhandle Gulf Coast - maybe this situation will work to my benefit!

Puerto Rico...hmmmmmmm...never thought about that location....

jlaird
01-28-2008, 12:37 PM
Bah Tony, just put another wing on the garage.

tomshobby
01-28-2008, 12:50 PM
I remember going to college nights for two years taking 72 credits while holding a full time job and fully paying my own way while taking care of my family. 3.96 GPA. I also remember walking the halls at school in my shop clothes and being snubbed by other students, many of them also going to school on my money (and yours).

Now after working hard the last 4 years developing a new home construction tool, then building prototypes and proving the design, and finally manufacturing it only to see it start like wildfire and then hit the skids with this mortgage mess. Yes, I was heavily invested in it and will loose big time, but I will be the one loosing, not the taxpayer. I would not have it any other way. Though it would be nice if the government were a little less of a hog at the trough when I do well.

NutmegCT
01-28-2008, 01:55 PM
Believe me, it's great to read there are still folks who limit (or shun) debt. Thanks for posting your experiences- renews my "faith in mankind".

Someone asked why lenders approve borrowers who pretty obviously can't afford the debt they're taking on.

One thing that comes to mind immediately: private (or lender) mortgage insurance. The buyer pays a small amount extra each month to "guarantee" that the lender won't lose any money if the buyer can't meet the mortgage payments. In a few cases, it's the lender itself that purchases this insurance. Thus, if the buyer tosses in the towel, the lender hasn't lost anything.

Another interesting development in the last 30 years or so: the collateralized mortgage obligation (CMO). Lenders actually "sell" their mortgage to another corporation, which bundles the mortgages (hey - they're worth something, right? and they're guaranteed, right?) into a package of collateral which actually issues its own bonds. Buyers of the bonds "lend" money to the owner of the package, and receive dividends from the owner. Similar to you putting money into savings, and getting interest on it. So the CMO is actually a legal entity itself, borrowing money and paying "interest".

And as more and more folks bought houses they really couldn't afford:
1. seller's agent got a 6% commission on the sale price.
2. lender had an "insured" mortgage
3. lender "sold" new mortgages in a package deal to major banks
4. major banks took the packages and created CMOs
4. CMO issued bonds based on the "value" of its mortgage packages
5. CMO paid dividends to the firms which lent it money
6. lenders looked for more people to sell houses to
7. more buyers got "the house of our dreams" for a temporary low payment

and the circle goes round and round ... 'til it collapses of its own weight.

Ain't this fun? By the way, I doubt there will be a huge amount of "public" (federal) money paying for all this mess. The mortgages were insured, so only the homeowner gets swamped. More likely, there will be a temporary freeze on foreclosures, and on monthly payments (mortgage interest rates).

And besides - there isn't much public money left.

Tom (a/k/a Publius /bcforum/images/%%GRAEMLIN_URL%%/laugh.gif)

drooartz
01-28-2008, 02:38 PM
This issue is one I have thought about quite a bit myself. First a bit of background:

We're a young couple (early 30s), no kids. We have a mortgage on a modest house, fixed rate low interest -- partly due to excellent credit scores. While we both had a small amount of credit card debt before we were married, we didn't miss payments and paid it all off within the first year of being married. Now we have just the mortgage and one small car loan. A couple lean years with one of us out of work just strengthened our desire to live well within our means. My good solid Yankee parents taught me well. /bcforum/images/%%GRAEMLIN_URL%%/smile.gif

I do feel sympathy for folks who were truly misled, but find it hard sometimes to empathize too much. The math to figure out what you can afford isn't really that hard; we're talking Elementary Algebra.

Maximum Mortgage = What I Make - What I Spend - What I Save

I never want to see someone lose their home -- but had they taken a moment to stifle their lust for the bigger and better, they might have wound up in a situation similar to where we are. We bought what we could afford, which meant some sacrifices in what we could get. We don't have the latest and greatest, but we do have a nice home that meets our needs, and 2 reliable cars with no other debt. I was even able to put money aside to take a stab at the old car hobby. All this on 2 modest school district salaries. I received the same "low interest" offers, and into the recycle bin they all went.

So I wind up a bit torn -- I want to sympathize with folks who are facing housing turmoil, but I also don't want to reward the lack of self discipline and greed that got them (and good chunks of the economy) there in the first place.

Steve
01-28-2008, 02:48 PM
I work in real estate. Not as an agent, or a lender, but I help people to find good, honest assistance with buying or selling a home, anywhere in the country. I like to think that I am good at what I do.

Mostly, greed has been the cause of the situation. Not only people buying a home to actually live in, but speculators as well. Buying for "investment" purposes helped drive up prices on both coasts, and certain "hot" areas such as Las Vegas.

People believed that the market would continue to climb indefinitely (sound familiar?), developers threw up condominium developments up on spec, and the rest is history.

Interesting statistics.......in 2005, when the boom was really hitting its stride, I placed out over 500 customers,151 of whom actually closed on a property.

Last year, when everyone was singing the blues, I "only" placed 395. Of those, 154 bought or sold. The real numbers went UP! The speculators and the dreamers were out of the equation, that's all.

There are buyers out there still, but they are not nearly as quick to pull the trigger as they were. They don't have to be. Certain areas are still strong, have experienced almost no downturn at all, such as Phoenix AZ, Santa Fe NM to give a couple of examples. The midwest is generally strong still, with Chicago being the worst affected in the immediate area, and of course Michigan.

It's goofy out there, but it's not as bleak as the media are trying to make it out to be..........

Mickey Richaud
01-28-2008, 02:51 PM
but it's not as bleak as the media are trying to make it out to be..........

Now, THERE'S a surprise! /bcforum/images/%%GRAEMLIN_URL%%/wink.gif

01-28-2008, 03:10 PM
No, say it aint so!
/bcforum/images/%%GRAEMLIN_URL%%/rolleyes.gif

Basil
01-28-2008, 03:49 PM
but it's not as bleak as the media are trying to make it out to be..........

Now, THERE'S a surprise! /bcforum/images/%%GRAEMLIN_URL%%/wink.gif

Of course I have no opinion on the topic of the Media. /bcforum/images/%%GRAEMLIN_URL%%/rolleyes.gif

Tinster
01-28-2008, 04:03 PM
We bought what we could afford, which meant some sacrifices but we do have a nice home that meets our needs, and 2 reliable cars with no other debt. I was even able to put money aside to take a stab at the old car hobby&lt;&lt;&lt;&lt; but I also don't want to reward the lack of self discipline and greed that got them (and good chunks of the economy) there in the first place.

Says it all!!

Like my grandma always preached:

"Save your money, pay cash, buy the best quality you can
afford and finance nothing but your house."

Works for me and the Mrs.

d

Steve
01-28-2008, 04:05 PM
We bought what we could afford, which meant some sacrifices but we do have a nice home that meets our needs, and 2 reliable cars with no other debt. I was even able to put money aside to take a stab at the old car hobby&lt;&lt;&lt;&lt; but I also don't want to reward the lack of self discipline and greed that got them (and good chunks of the economy) there in the first place.

Says it all!!

Like my grandma always preached:

"Save your money, pay cash, buy the best quality you can
afford and finance nothing but your house."

Works for me and the Mrs.

d

Words of wisdom indeed!

Tinster
01-28-2008, 04:39 PM
<span style="color: #CC0000">I'm from the UK - it's outside London"</span>

The Mrs is from Horsforth-it's in the UK, north of London
in the Dales.

/bcforum/images/%%GRAEMLIN_URL%%/thirsty.gif

d

bugimike
01-28-2008, 04:55 PM
Or as Willie the Shake once advised: "Neither a borrower nor a lender be!!" /bcforum/images/%%GRAEMLIN_URL%%/wink.gif

AngliaGT
01-28-2008, 06:07 PM
When I was in Sacramento,I remember reading an article about a developer who spent lots of time & money to get
a new upscale housing community built North of there.
Now he's asking the voters to vote against it now that
things aren't going his way.Ironic,isn't it?

- Doug

ccougill
01-28-2008, 06:49 PM
my step daughter is a real estate appraiser, as is her husband. January has turned out to be the biggest month they have ever had, due to the most part, from appraising foreclosures. They are averaging 2 foreclosures to every purchase they do.

judow
01-28-2008, 09:17 PM
For what it's worth I agree with many of the sentiments here and perhaps it was our New England background or just plain we've had debt and don't ever want it again attitude that we are as lawguy says living in the same house we built over 10 years ago and our income is far greater now then it was then. We've thought about getting a summer home but then the thoughts of maintaining two homes is not very appealing. Instead we are giving serious consideration to adding a "fun room" which will include a pool. It seems cheaper in the long run and the need for travel, two kitchens, two sets of clothing, extra vehicles, etc. won't be a need.

Part of me feels sorry for those who will face foreclosure but then there's that part of me that says "What were you thinking?"

I am sure it will all play out and maybe the lesson to learn is to really think before you leap.

terriphill
01-28-2008, 09:18 PM
When my husband and I first married everything was CASH. We saved and put a down payment on our first house. Next thing we were offered daily credit offers and like fools we accepted. Over the next couple of years, we used them. No problem until we hit a bump...lost job, income just dropped by 1/2. We had difficulty making payments...yada, yada, yada...eventually, we workied our way out of debt, but not without some hits to our credit rating.
Here's the hard part..although our credit was not great, we were offered three to five credit cards and home loan offers A DAY! What I have found is that these companies prey on people with poor credit. The worse your score, the more they offer.
At present we owe a house payment and a car payment...no more! I tell my boys...Credit cards are the devil! The companies are there to steal your money. If you can't afford it and you want it..work awhile..save and buy it!

Steve
01-29-2008, 11:27 AM
We have taken to using debit cards, this way we know that the money is there to pay for it before we go out,
and it saves hauling around large chunks of the readies.

lawguy
01-29-2008, 02:12 PM
I have no problem with credit cards. they are useful tools. I just checked the wallet and I have 3 on me with a combined limit of....well let's just say that if I charged them all up....I could buy a nice new shiny GMC extended cab 4x4. What keeps me from doing that?

Fear. Fear of bad credit? Fear of bill collectors? fear of finance charges?

Nope- fear of five feet four inches of economically responsible womanhood. I have the past fifteen years of marriage to her to thank for the fact that I own anything and owe little.

drooartz
01-29-2008, 02:50 PM
We use our credit card for most everything and it gets paid off in full every month. It's just a convenience thing so we don't have to carry a lot of cash and have some protection if the card number gets compromised (versus a debit card where the money is gone from your account in the case of fraud -- easier to argue about not paying for a fraudulent charge than trying to get your cash back).

All it takes is a modicum of financial discipline, something that seems to be hard to come by for some folks these days.

Tinster
01-29-2008, 04:09 PM
For what it's worth <span style="color: #FF0000">Dale</span> thought about getting a summer home but then the thoughts of maintaining two homes is not very appealing.

Actually, the Mrs. informed me any beach home I might build
better have a room for a live in maid 'cause the Mrs. was
not about to maintain two homes herself.

As usual, herself the financial analyst, was correct.
I spent the $$ on much more practical things- a custom
made tarpon boat Tres Gatos and restoring a 1969 bucket
of rusted bolts TR6!!

/bcforum/images/%%GRAEMLIN_URL%%/yesnod.gif

tony barnhill
01-29-2008, 04:53 PM
For what it's worth <span style="color: #FF0000">Dale</span> thought about getting a summer home but then the thoughts of maintaining two homes is not very appealing.

Actually, the Mrs. informed me any beach home I might build
better have a room for a live in maid 'cause the Mrs. was
not about to maintain two homes herself.

As usual, herself the financial analyst, was correct.
I spent the $$ on much more practical things- a custom
made tarpon boat Tres Gatos and restoring a 1969 bucket
of rusted bolts TR6!!

/bcforum/images/%%GRAEMLIN_URL%%/yesnod.gif
Well, during one of our unusually cold days not long ago, SWMBO turned to me & stated simply, "Next winter I will not be living where its cold. We need to find something for Jan-Mar where its WARM!"

I've never had a mortgage before so have never really paid any attention to things.....always figured the folks who were 'duped' into subprime loans were either fools or people who were trying to live beyond their means!

Credit cards? Good for using another man's money for 30 days while mine earns interest!

I've got lenders falling all over themselves wanting to talk with me about a mortgage...heck, even my local banker wants to talk about it even though he knows I might be buying out of the state!!

Brooklands
01-29-2008, 04:57 PM
We should be finishing up on a deal for a weekend place in the Poconos. Inspection is tomorrow. My financial planner has been getting the best rates for the small mortgage as this is a foreclosure, so we are getting it at about 60% of what it sold for 2 years ago. It needs some cosmetic work, but if the inspection shows it to be structurally sound, as I think it is, then we are getting a steal. And our fixed rate mortgage is still running less than most of the returns on our investments, so that works out okay too.

70herald
01-30-2008, 03:27 AM
...always figured the folks who were 'duped' into subprime loans were either fools or people who were trying to live beyond their means!

Credit cards? Good for using another man's money for 30 days while mine earns interest!



/bcforum/images/%%GRAEMLIN_URL%%/iagree.gif

Well maybe not fools but anyone entering into such a big commitment darn well better understand what the fine print means! Of course these are probably the same people who aren't putting aside anything for retirement either, so maybe fools is justified.

bugimike
01-30-2008, 11:26 AM
Well, the lastest on the news today is that the FBI is opening an investigation into lenders practices in this whole mess!!! This will be interesting to follow!

NutmegCT
01-30-2008, 11:34 AM
Well, the lastest on the news today is that the FBI is opening an investigation into lenders practices in this whole mess!!! This will be interesting to follow!

Mike - at least it's a start. Seems that half of the problem is the "get it quick and easy" of the borrowers, and the "get their signature faster than they can think" of the lenders.

Onward through the fog!

Tom

bugimike
01-30-2008, 07:11 PM
It'll probably all trace back to the World Bank or something. That French financial debacle unfolding is something else too! These are all symptoms of some global back-room banking practices, I'll bet!!

Basil
01-30-2008, 07:13 PM
It'll probably all trace back to the World Bank or something. That French financial debacle unfolding is something else too! These are all symptoms of some global back-room banking practices, I'll bet!!

I'm glad they are looking into it and hope they nail anyone one who knowlingly broke the law.

NutmegCT
01-30-2008, 07:20 PM
global back-room banking practices

I'm not much for illuminati or cabal theories m'self. Just glad there's a relatively official, dis-interested body starting to peek under the carpet.

T.

JamesWilson
01-31-2008, 09:36 AM
Credit is useful.

Living beyond your means can be quite acceptable for the right purposes... so long as you can equally accept that it WILL catch up and then you'll be forced to compensate with a lower standard of living....

Student loans, for example. Something with long term benefits.

Live now... pay later.

bugimike
01-31-2008, 10:59 AM
Credit is useful as a convenience, not as a way of life! I'm not into conspiracy theories, cabals and the like either, but you can't tell me there aren't backroom deals and arrangements going on to the benefit of a privileged few with inside info!!!

NutmegCT
01-31-2008, 11:29 AM
"backroom deals and arrangements going on"

/bcforum/images/%%GRAEMLIN_URL%%/iagree.gif

Those "insider deals" go on all the time, in *many* different aspects of life. It's human nature.

But it's the increasing (?) number of folks who get into trouble due to irresponsibility that concern me, and the eventual long-term effects of their poor decisions on many more people than were originally involved.

I mean, no one forced them to sign those mortgage contracts without reading them. Federal law gives *every* residential mortgage applicant 3 days to read the contract and decide yes/no. That's written on the application.

T.

01-31-2008, 11:49 AM
Right, but how many actually do read it(other than me that is, and that's because I'm an anal retentive).

Dave Richards
01-31-2008, 02:40 PM
&lt;edit&gt; If you think this sounds bitter, you're right. I just did my taxes - and got screwed by the twin spectres of AMT and the marriage tax yet again.

This is the hidden paydirt for the government and something most people don't know about. You and I are funding America, my friend. If more people had to write checks to the IRS every month, instead of lamenting their "deductions" the income tax would be eliminated. The problem is the really big taxpayers are the silent minority.

It's counter-productive and very discouraging, e.g. show some initiative, make more money, the IRS introduces to the AMT.

Ok, I'm in for a penny, I might as well get a pound...

Please don't get me wrong, America is the best country ever, love it, or leave it (and speak English, please, while you're at it) and if it wasn't as great as it is, I would never be able to rant like this and thanks to all the Vets and especially to those who paid the ultimate price for me being able to say this...

If you add up the State sales tax, the IRS taxes, medicare, SS, unemployment, excise tax on fuel, school tax, county tax, all the other municipal taxes, and a few others I'm too frustrated to think about, and look at them as a percentage of your income, you are way over 50%, some years closer to 70%...now consider this: Serfs in Medieval times had to give 1/2 of their produce to the Land Lord.

And by the way, the Founding Fathers never conceived of, or condoned, an income tax for the Republic, I know, I know, times are different now, but enough is enough. How about some self responsibility, so we don't need to "cradle to grave" every single person...

Have I crossed the line on politics for the Forum yet??? Well, it is the Pub, you know! Thanks for listening (reading)

NutmegCT
01-31-2008, 02:47 PM
A more interesting aspect of this might be, would a mortgage be desirable if the interest weren't deductible?

Taxes are always a pain. The AMT formula desperately needs fixing - but then so do our highways and bridges. And there's been open discussion about the "marriage tax" and AMT for decades. Nothing new there.

Amazing to me that lenders were pushing their products to people with little supervision. More sales, more commissions, more mortgages, more CMOs.

The bubble can't expand forever. Sounds like a Ponzi pyramid to me. But even more amazing is how little people actually "work" to understand where their money actually goes. Big house, big car, big boat. It ain't the lender that bought those things. The lender made it possible for the ill-informed to become ill-invested.

Tom

Tinster
01-31-2008, 02:58 PM
I'm laughing Tom at your comment <span style="color: #FF0000">BIG BOAT</span>.

It is no great secret that I'm an avid sport fisherman.
You have no idea how many <span style="color: #009900">BIG BOATS </span>
have been offered to me at great deal prices over the past 6 months !!

I'm awful I know BUT we get a bit of a grin cruising thru
the marinas and seeing "for sale" signs on at least 50%
of the MacYachts the owners can't even afford to fill with
fuel.

Color me- no debts and loving life in my Red Mako and
Red Six. Yup, I can afford fuel for both.

NutmegCT
01-31-2008, 03:11 PM
Dale - I think we're some of the lucky few. No debt here either. Paid off mortgage, paid off car loan, etc. And at 37mpg in my Mazda I can afford gas no problem (tho' I've cut back on driving).

I keep thinking of that tv commercial last year - Smiling guy shows us his new house, new car, country club membership, etc. Says "How did I do it? I'm in debt up to my eyeballs. Somebody help me!"

Really sad that so many people couldn't "wait" and save up the funds to buy responsibly. Remember that line from West Side Story? "Everything's free in America!".

'til the bills arrive, anyway.

tom

01-31-2008, 03:16 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:]A more interesting aspect of this might be, would a mortgage be desirable if the interest weren't deductible?
[/QUOTE]

I wouldn't even mind that if they'd let me at least deduct State and property taxes again. As it is...

That said we bought a foreclosed property, so I at least did ok out of this debacle.

AngliaGT
01-31-2008, 05:20 PM
.... and I found out that my retirement checks are
taxed - & then I need to declare them as income for our
2008+ returns.

- Doug

NutmegCT
01-31-2008, 05:28 PM
That said we bought a foreclosed property, so I at least did ok out of this debacle.



Alan - are there many foreclosed properties in your area? Were you looking specifically for a property under foreclosure? Last night there was a segment on the news about a "foreclosure bus" that was taking potential buyers around neighborhoods with lists of foreclosed houses. Thought it was strange - as not all properties for sale are under foreclosure.

Tom

WhatsThatNoise
01-31-2008, 07:26 PM
I have no idea what's going on...

We just pass em off...

For example...My Great-Great-Grandfather bought the one I'm living in now...

What's up with all you transients?

bugimike
01-31-2008, 07:55 PM
And like I said...(with no political agenda, believe me!) Ron Paul has a point!!! "Government funding" and the way it is administered is a MAJOR problem that needs addressed (in a number of ways, perhaps some socialist some libertarian and some somewhere in between!!)!!

NutmegCT
01-31-2008, 08:31 PM
maybe the mortgage mess just represents a much larger issue: how are young folks educated to learn about credit, spending wisely, and financial planning?

T.

tony barnhill
01-31-2008, 08:37 PM
maybe the mortgage mess just represents a much larger issue: how are young folks educated to learn about credit, spending wisely, and financial planning?

T.


They AREN'T!!

terriphill
01-31-2008, 08:44 PM
AAAH! Good question....My husband and I learned about these things through the school of hard knocks.
I am presently pushing for our Middle School to offer a mandatory economics class to all 8th graders. It should also be a part of the High School curriculum and again at least 1 economics class as part of a college degree. My generation missed this for some reason...not a part of the "curriculum" in any of my educational background.

tony barnhill
01-31-2008, 08:49 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:]mandatory economics class to all 8th graders. It should also be a part of the High School curriculum[/QUOTE]
Depends on what one means by 'economics classes'...I've got a double major in my undergraduate degree in economics & nowhere in that curriculum did I ever take classes on reading mortgages, balancing checkbooks, investing & saving - all those things that a person needs to understand before even thinking about supply & demand & their effects on GNP!

NutmegCT
01-31-2008, 08:50 PM
Tony: "they aren't"

bingo

Terri: it's a positive step to put it in the curriculum, definitely. But perhaps a more important step would be that kids only get money when they do work. No "free" $50/week allowance (!), no pre-paid or daddy-paid cell phone, no "teen credit card", etc. Earn it, don't borrow it (or freely get it).

Yep - believe it or not, those "freebies" are commonplace now. Many parents apparently just give stuff/money to kids instead of sharing time with them. What did my neighbor get his son for his 16th birthday? An Alfa-Romeo. Good lord, I turned 16 in 1964. I got a firm and hearty handshake, and a day at Six Flags Over Texas (lived in Fort Worth).

T.

Edit: PS, that's the same 16 year old who "doesn't like to do yard work or work outside" . Yeesh ....

terriphill
01-31-2008, 09:14 PM
Oh I agree with this spoiled generation..believe me. The cell phones, IPODs, game systems they bring to school while eating thier "free and reduced lunch" But, they can't add and subtract without a calculator and balancing a checkbook is not even in their realm of possiblities. My boys don't have these things (and we could afford them) unless they buy them.
I know its not PC to say, but if parents are not going to do thier job, it falls to the one area of these kids lives where there is some measure of inluence...the schools. We already teach ethics, morals, "Just say no" to drugs and sex, driver's ed,and on and on...(and you wonder why they can't name the planets in our solar system, read and write, or add simple strings of numbers)
Instead of "No Child Left Behind" for schools....it would be the responsiblility of the home to teach the "other stuff" Its too bad you can't legislate parenting......Maybe before a new parent leaves the hospital they could be given a "curriculum" that outlines what they should teach their children and at what age. We could even have tests periodically to ensure that the parents are doing their jobs! /bcforum/images/%%GRAEMLIN_URL%%/smile.gif

NutmegCT
01-31-2008, 09:22 PM
Well, there's one way (at least) to solve the "cheap and easy" problem. It happened in the 1930s. Not pretty. But the people I know who were young adults in the 1940s sure knew how to budget their time and money.

I read a sign outside a bomb shelter store (yep - that's what it was - the year was 1962). Sign said "affluence will break our nation".

There's still time to fix this. But if we don't actually see what our kids are required to learn in school, and if we don't make sure it's really worthwhile, then we'll see more and more of the "bling" mentality. And that's not pretty either.

Today I was buying groceries. So many of the young parents (mostly women) had carts with a couple of kids. At least half of the mothers I saw (around 100) were slowly moving their carts through the aisles, talking on their cell phones about ... generally nothing. Ignoring the kids.

Anybody see the segment on Good Morning America today about the young family with a four year old weighing over 100 pounds? Only way the parents keep the kid from screaming and throwing tantrums is by giving her whatever food she wants. Argh.

T.

SteveL
01-31-2008, 09:24 PM
We could even have tests periodically to ensure that the parents are doing their jobs! /bcforum/images/%%GRAEMLIN_URL%%/smile.gif


Are you mad(insane)?? If you require the parents to actually get involved
in their children's education, they'll be dumber than they are now, and we
can't have that...

edit for spelling...

NutmegCT
01-31-2008, 09:38 PM
"Tests periodically to ensure that the parents are doing their jobs"

not as insane as it seems ... how 'bout this: parents' income tax (or welfare payment) is "adjusted" based on how the kids are doing in school.

hmmmm .... not as insane as it seems ...

T.

SteveL
01-31-2008, 09:46 PM
how 'bout this: parents' income tax (or welfare payment) is "adjusted" based on how the kids are doing in school.

hmmmm .... not as insane as it seems ...

T.

I'll go for this, the little bugger gets a "D", Mamma looses
a C-note...

I Like it...

tony barnhill
01-31-2008, 09:49 PM
You know, we have to have licenses to drive a car, licenses to hunt, licenses to operate a boat, licenses to fly airpanes, licenses to start & operate a business, licenses for everything except to parent! (No, a marriage license is not a license to parent - its a license to have legal sex!)

...& every license for which we apply has a test that's taken after a period of instruction...where's the license to have children?

SteveL
01-31-2008, 09:53 PM
...& every license for which we apply has a test that's taken after a period of instruction...where's the license to have children?

What are we going to do with all these unlicensed children??

tony barnhill
01-31-2008, 10:00 PM
...& every license for which we apply has a test that's taken after a period of instruction...where's the license to have children?

What are we going to do with all these unlicensed children??


Irrelevant that they're 'unlicensed'....completely relevant that the majority of parents aren't prepared or capable (or interested in) the hard job of raising children...evidenced by the grocery store story above!

Heck, if they don't understand basic finance enough to recognize bad mortgage ideas, how can they recognize the problems they're creating for their 'unlicensed' children by their actions?

terriphill
01-31-2008, 10:46 PM
You know, we have to have licenses to drive a car, licenses to hunt, licenses to operate a boat, licenses to fly airpanes, licenses to start & operate a business, licenses for everything except to parent! (No, a marriage license is not a license to parent - its a license to have legal sex!)

...& every license for which we apply has a test that's taken after a period of instruction...where's the license to have children?

You even have to have a license to catch a fish!!!

SilentUnicorn
02-01-2008, 05:19 AM
No offense folks but the people in this mortgage mess are only mimicking what our government is doing. The powers that be are in the red, and to compensate they just tax us, or borrow more to create more revenue...it is just a vicious circle we are trapped in. Kind of a trickle down theory. or monkey, see monkey do.
Good advice was given to me by my parents, dont sign anything you don't read and understand. words to live by. Tho when i closed on my house and sat there and read EVERY piece of paper they tried to slide under my nose, i could feel the exasperation in that room, to bad for them.
if this country were to get into the black then i feel that we would not have half the financial roller coaster i have seen the last couple of weeks.


mark

NutmegCT
02-01-2008, 06:19 AM
"If this country were to get into the black then i feel that we would not have half the financial roller coaster i have seen the last couple of weeks."

/bcforum/images/%%GRAEMLIN_URL%%/iagree.gif

Seems to me that if folks actually cared about what their kids are learning, the "common sense" would trickle *UP* to goverment at the highest levels. Unfortunately, human nature prefers turning over responsibility to others, so there's more time for fun fun fun!

Gotta pay the piper eventually folks.

Would be really interesting to have members actually ask their local school boards how the curriculum covers "decision making for a responsible life". I'd imagine the gobbledy-gook the school boards answer, if they even understand the question, would just be a recitation of textbooks and course names. But ask them to actually prove the kids are learning responsibility. They'd be speechless. Amazing - and goes to show a major part of why we're in the mess we're in.

T.

JamesWilson
02-01-2008, 06:54 AM
If kids don't learn responsibility from their parents and families its hopeless imagnining they'll learn it or have it taught to them anywhere else....

Responsibility starts at home... and most education does too, for that matter....

School Boards are susceptible to political and social pressure and I certainly wouldn't want them straying from the three Rs (that seem troublesome enough teaching) into teaching what other people imagine is "responsibility"....

WhatsThatNoise
02-01-2008, 07:03 AM
And as more and more folks bought houses they really couldn't afford:
1. seller's agent got a 6% commission on the sale price.
2. lender had an "insured" mortgage
3. lender "sold" new mortgages in a package deal to major banks
4. major banks took the packages and created CMOs
4. CMO issued bonds based on the "value" of its mortgage packages
5. CMO paid dividends to the firms which lent it money
6. lenders looked for more people to sell houses to
7. more buyers got "the house of our dreams" for a temporary low payment

and the circle goes round and round ... 'til it collapses of its own weight.

Ain't this fun? By the way, I doubt there will be a huge amount of "public" (federal) money paying for all this mess. The mortgages were insured, so only the homeowner gets swamped.

Had a late dinner w/ a economics professor last night...
When I brought up this thread he started laughing like a madman...

He said that basically they are always coming up with new ways to victimize / exploit stupid people...Don't worry about it.
Like the people who buy lottery tickets/gamble & purchase cars from J.D.Byrider.

They'll take out a subprime for 30 years...
Own the house for a day and reverse mortgage it.

He basically thought the whole thing was kinda funny.

NutmegCT
02-01-2008, 07:17 AM
"the whole thing was kinda funny"

yeesh - that's not very encouraging, on many levels.

Hundreds of thousands of foreclosures, economic downturn, stock market dropping 20%, unemployment rising - not kinda funny to me ...

Tom

bugimike
02-01-2008, 07:23 AM
Yeah, those economics profs have a GREAT sense of humor, don't they!! Kinda like a nuclear scientist saying "Chernoble, now there was a funny incident!!" /bcforum/images/%%GRAEMLIN_URL%%/eek.gif

69tr
02-01-2008, 07:39 AM
It is sad, but this goes beyond the mortgage mess. Has anyone driven past an auto dealership or looked at ad's in the paper? Has anyone noticed that the prices of the cars are nowhere to be found. All you get is the "low monthly payment"

They don't mention that you will be making this payment for 5 to 7 years. You could probably buy another car for the interest you will be paying.

We are an instant gratification nation.

Very few people have the ability to pay cash for everything. (cars, house) when they are getting started. What they can do is only finance what they can afford to pay.

I agree that personal finance should be mandatory in high school.

Pete

aeronca65t
02-01-2008, 09:34 AM
If kids don't learn responsibility from their parents and families its hopeless imagining they'll learn it or have it taught to them anywhere else....

Responsibility starts at home...and most education does too, for that matter....

School Boards are susceptible to political and social pressure and I certainly wouldn't want them straying from the three Rs (that seem troublesome enough teaching) into teaching what other people imagine is "responsibility"....

+1

Teachers can have a useful and positive effect, but Responsibility Starts at Home.
If a person has grown up with parents who are thoughtful, responsible role models, they are far less likely to end up being selfish, narcissistic or irresponsible.

It's funny but after being a teacher for 35 years, here's one thing I believe:

Even parents (or guardians) who are not "intellectual" or "perfect" can raise good (and responsible) kids as long as they remain engaged with their children.
Too may families don't seem like "families" to me....more like a random group of people all living under the same roof.
I've had poor kids raised in poverty-level homes that went on to become thoughtful and responsible citizens. Because their parents care about them.
And I've seen kids from wealthier families with lots of "perks" that end up living train-wreck lives because everytime they acted-out, they were either given a pill or an I-Pod.

Good schools can certainly help...there are still too many sub-par schools (and teachers).
But no matter what the local school is like, parents should <u>never</u> abdicate their duty to raise responsible children.

Sadly, many of the people who have over-spent in this mortgage mess were raised by people from my generation....I see it with some of my friend's kids.

NutmegCT
02-01-2008, 09:52 AM
/bcforum/images/%%GRAEMLIN_URL%%/iagree.gif

"And I've seen kids from wealthier families with lots of "perks" that end up living train-wreck lives because everytime they acted-out, they were either given a pill or an I-Pod. "

why does the name Britney Spears come to mind.

ask yourself, who are the "American Idols" of young people today. the "bling" generation didn't invent itself; the money had to come from somewhere.

if you want to get really depressed (!), take a look at this:

https://www.pbs.org/wgbh/pages/frontline/kidsonline/etc/synopsis.html

The "always online, lots of electronic goodies, unsupervised kids" that'll have a *lot* of problems in the future.

Unless we do something to fix it.
Tom

terriphill
02-01-2008, 09:59 PM
My 13 year old son and I were talking the other day about what he thought he would like to study in college. The conversation eventually turned to all of his classmates who think they are going to become "super rich" pro athletes. He was quiet for a minute and then said, "You know, I think I would rather be the owner....he's the guy who pays the players. I figure that makes him a WHOLE lot richer." /bcforum/images/%%GRAEMLIN_URL%%/cool.gif

Steve
02-01-2008, 10:09 PM
Hmmmm, that young man has a good head on his shoulders. /bcforum/images/%%GRAEMLIN_URL%%/thumbsup.gif

mailbox
02-01-2008, 10:50 PM
It is sad, but this goes beyond the mortgage mess. Has anyone driven past an auto dealership or looked at ad's in the paper? Has anyone noticed that the prices of the cars are nowhere to be found. All you get is the "low monthly payment"

They don't mention that you will be making this payment for 5 to 7 years. You could probably buy another car for the interest you will be paying.

We are an instant gratification nation.

Very few people have the ability to pay cash for everything. (cars, house) when they are getting started. What they can do is only finance what they can afford to pay.

I agree that personal finance should be mandatory in high school.

Pete




Saw a commerical for Chase credit cards today. The theme song playing in the background was " I want it all! And I want it NOW!" THIS is what is wrong, IMHO. /bcforum/images/%%GRAEMLIN_URL%%/nopity.gif