Man can't pay mortgage, then wonders why car loan has high interest rate

[FUEGO]

Trial loan modifications hurt borrowers' credit histories - Dec. 28, 2009

Axelrod, a municipal employee who lives outside Chicago, entered a trial mortgage modification program this spring.

He had not fallen behind in his mortgage, but he was finding it harder to make ends meet after his overtime was cut and his property taxes skyrocketed. Told it would not hurt his coveted 750 score, Axelrod secured a $565 reduction in his monthly payments.

Eight months later, Axelrod is still stuck in the trial modification, trying to satisfy his loan servicer's endless requests for documents.

And to his horror, his credit score has plummeted to 644.
"It's completely destroyed my credit," said Axelrod. "If I had known it would affect my score, I would have never entered the program."

....

Axelrod is already feeling the impact of his lower credit score. He ordered a new car this summer, believing it would come with a lower monthly payment. It arrived in mid-December.

But because of his newly blemished credit background, his two credit unions turned him down for a car loan. His dealership told him the best he could get is a 12% rate, a hefty hike from the 4.7% he was paying before.
"This is the biggest nightmare," he said. "My credit is completely useless."

Just wanted to share a funny article I saw this morning. Seriously? Guy doesn't particularly care to keep paying his mortgage that he agreed to, gets it modified and it dings his credit. Then he can't find a NEW CAR LOAN for less than 12%.

Why does it surprise this gentleman that defaulting on your debts (which is what a loan workout/modification is) leads other creditors to think that you are more likely to default on future debts?

And if this guy is so broke that he can't pay the $565 extra that he originally agreed to, does he really need a NEW car with the concomitant loan and monthly payment?

Amazing!

 

[Meadbh]

Gee, it's almost like people believe they have an inalienable right to borrow money. Is that in the US constitution somewhere?

 

[Westernskies]

Trial loan modifications hurt borrowers' credit histories - Dec. 28, 2009

Just wanted to share a funny article I saw this morning. Seriously? Guy doesn't particularly care to keep paying his mortgage that he agreed to, gets it modified and it dings his credit. Then he can't find a NEW CAR LOAN for less than 12%.

Why does it surprise this gentleman that defaulting on your debts (which is what a loan workout/modification is) leads other creditors to think that you are more likely to default on future debts?

And if this guy is so broke that he can't pay the $565 extra that he originally agreed to, does he really need a NEW car with the concomitant loan and monthly payment?

Amazing!

+1 - Welcome to the new entitlement mentality! You can have it all- and without repercussions if you decide those pesky monthly payments cramp your lifestyle. Not paying your mortgage has become the latest fashion - Let's all subsidize this clown getting his mortgage reduced so he can take the money he says he doesn't have and go buy a new car!

When can we expect to see legislation outlawing such egregious behavior by lenders who have the audacity to assess interest rates based on the demonstrated probablility of getting their money back ? We all know the the electorate needs more programs to protect them from themselves.

Maybe he could get a good interest rate on a new ride from GM (Government Motors)

Rant over.

 

[jimnjana]

Really a reflection of how ignorant people in general are regarding personal financial matters.

 

[deserat]

Yet another story about 'entitlement':

December 25, 2009
Many homeowners who are tens thousands of dollars underwater on their mortgages — meaning they owe more than the value of their homes — have decided it’s just not worth it. Some, like Heather Baker, can even afford their payments, but they’re walking away anyway.
Baker is done with being a homeowner. Last month, she stopped paying her mortgage.
"Who says that my American dream has to be a home with a white picket fence and all of that?" says Baker, sitting at her dining room table.
But that’s not what she was saying three years ago when she bought her four-bedroom home in a distant suburb of Washington, D.C. Baker was about to turn 40 and felt like she needed to own.
"I was like, ‘Wow, you know, I need to have a home. I need to be in a home,’ " Baker says. "My birthday was in September. I purchased the house in August. So I got the house before I turned 40, but it wasn’t a great investment."
She figures the house she bought for $465,000 won’t sell for more than $225,000 now. That lower figure is what a house down the street went for earlier this year in a foreclosure auction. Like a lot of people, Baker bought her house with no money down. The mortgage broker she worked with told her she qualified for the loan based on her credit score alone.
"He was like, ‘Go get whatever house you want. It doesn’t matter.’ And that’s pretty much what I did, unfortunately," Baker says.
Starting to sound familiar? Baker’s experience is a classic case of the mixed-up logic that ruled the housing boom. But there’s a difference: Baker is solidly upper middle class. She has a good income and can actually afford her payments.
"I’m looking at the investment part of it," she says. "Not just, ‘OK, yes, I can afford this house.’ But I just don’t see it as a good investment."
Baker and two daughters plan to live in this house payment-free for the next several months. Then, before her foreclosure is finalized and her lenders kick her out, she’ll move into a rented townhouse that’s almost as big as her house. She’ll pay hundreds less each month and cut her commute in half.
"I hate to sound cold and uncaring and contract-breaking, but I’m really OK with it," Baker says. "I’m actually looking forward to moving." …

 

[Orchidflower]

Oh, yeah...I know a few people like these myself. They're screws need to be tightened to me. All you can do is shake your head and walk away.

 

[bbbamI]

"I was like"
"He was like "

...and they loaned her $465k.....

 

[ziggy29]

More proof that a semester of personal finance should be a high school graduation requirement. Unfortunately when people do this they often get publicity in a "woe is me" sense, and then they are victims of evil lenders who are trying to screw them over. Oh, yeah, and "we the people" have to help clean up their messes.

 

[FUEGO]

Gee, it's almost like people believe they have an inalienable right to borrow money. Is that in the US constitution somewhere?

Sorry, can't put my hand on a copy at the moment. I think every copy in America has been used up due to the pervasive toilet paper shortage we are experiencing in these difficult economic times.

 

[Meadbh]

Baker is solidly upper middle class. She has a good income and can actually afford her payments.
"I’m looking at the investment part of it," she says. "Not just, ‘OK, yes, I can afford this house.’ But I just don’t see it as a good investment."
Baker and two daughters plan to live in this house payment-free for the next several months. Then, before her foreclosure is finalized and her lenders kick her out, she’ll move into a rented townhouse that’s almost as big as her house. She’ll pay hundreds less each month and cut her commute in half.
"I hate to sound cold and uncaring and contract-breaking, but I’m really OK with it," Baker says. "I’m actually looking forward to moving." …

This is totally unethical on Baker's part. Just because the law does not mandate financial accountability doesn't mean she isn't morally accountable for paying her debts.

 

[ziggy29]

This is totally unethical on Baker's part. Just because the law does not mandate financial accountability doesn't mean she isn't morally accountable for paying her debts.

Agreed. If someone is truly in over their head and way underwater, they need to do what's best for their family, not what's best for the lender -- and that can mean walking away.

But if one can readily afford the payments, then it becomes highly unethical regardless of the amount of negative equity. It's not like the borrower is going to give the lender a $100,000 check if the home's value doubled... the borrower assumes the risk AND the reward of changes in home values.

 

[W2R]

Maybe these people are smart.

When I couldn't afford a car, I took the bus and when I couldn't afford the bus, I walked.

When I couldn't afford a house, I rented an apartment and when I couldn't afford to rent an apartment, I rented a room.

When I couldn't afford to eat steak, I ate noodles. And when I couldn't afford to eat noodles, once or twice I was reduced to the infamous ketchup soup, that we discussed in another thread.

So now, I am 61 and I have a house and car free and clear, and I eat expensive food. But I spent years of my life walking and living in less than ideal quarters and dining on ketchup soup, years that these people are spending living in gorgeous homes with fancy cars and coming home to steaks on the grill.

Are those of us who cannot do these things, due to solid ethics installed in our upbringing, simply chumps? Seems like it.

 

[ziggy29]

Are those of us who cannot do these things, due to solid ethics installed in our upbringing, simply chumps? Seems like it.

And unfortunately, with enough "negative reinforcement" for being responsible, some folks may "unlearn" their upbringing. I'm already starting to reconsider some aspects of it.

We may have to rewrite the fable about the grasshopper and the ant. I know that the more I see, the more it seems like being the ant is for suckers as the ants are called on to increasingly rescue the grasshoppers from their own irresponsible decisions. It has actually caused me to rethink how I approach my long-term financial goals.

 

[bbbamI]

Nope...I'd never consider myself a chump for paying my bills. If I ever tried to pull a stunt like those people, my late grandfather would find a way to materialize and thump me on the head.

If I buy it, I'll pay for it. If I can't afford it, I'll do without.

 

[harley]

I don't know. I was solidly in this "ethical" camp in the other thread, but I was seriously swayed by the arguments about the banks having set up contracts that allowed people to walk away without significant penalty, so tough luck for them. I have to say, if I was in some of these people's situation I might consider walking too. Of course, I don't think I'd have allowed myself to get into a position where my home was considered an investment. My home has always been my home, and not something I'd want to walk away from for financial reasons.

 

[ziggy29]

I was solidly in this "ethical" camp in the other thread, but I was seriously swayed by the arguments about the banks having set up contracts that allowed people to walk away without significant penalty, so tough luck for them.

That would be fine and dandy if deadbeat borrowers and banks were in a vacuum together without affecting the deals that good borrowers (and depositors!) get from banks, but they aren't.

 

[clifp]

I can't blame Heather for what she is doing.

However, I can hope and will urge my Congressman that when they looking at new measures for home owners etc, that the modify the Mortgage Debt Forgiveness Act so that folks like Heather get hit for a tax bill for the forgiven debt.

 

[brewer12345]

This is totally unethical on Baker's part. Just because the law does not mandate financial accountability doesn't mean she isn't morally accountable for paying her debts.

Didn't we just have this discussion? These folks never really owned a house. They owned an option on a house. The option is now hugely underwater so they are making the economically rational decision to walk away. If I owned shares in a company faced with this situation and they did not walk away I would sue management and the board.

 

[Westernskies]

I can't blame Heather for what she is doing.

However, I can hope and will urge my Congressman that when they looking at new measures for home owners etc, that the modify the Mortgage Debt Forgiveness Act so that folks like Heather get hit for a tax bill for the forgiven debt.

I can blame her for what she is doing to us.. This is a conscious choice, not a hard-luck situation. Her irresponsible actions (like others of her ilk) are costing responsible taxpayers and consumers billions of our hard earned dollars.

I hope the IRS hammers her on the unearned income and her mortgage company ruins her credit. She consciously made this bed, she needs to be willing to lie in it.

She will probably be on the daytime talk shows next year, extolling the virtues of screwing your creditors and bemoaning their punitive responses.

This whole situation makes me want to puke.

 

[freebird5825]

I can blame her for what she is doing to us.. This is a conscious choice, not a hard-luck situation. Her irresponsible actions (like others of her ilk) are costing responsible taxpayers and consumers billions of our hard earned dollars.

I hope the IRS hammers her on the unearned income and her mortgage company ruins her credit. She consciously made this bed, she needs to be willing to lie in it.

She will probably be on the daytime talk shows next year, extolling the virtues of screwing your creditors and bemoaning their punitive responses.

This whole situation makes me want to puke.

What he said.

 

[brewer12345]

Again, what has this individual done that any corporation would not do?

 

[Westernskies]

Again, what has this individual done that any corporation would not do?

Is this how you rationalize irresponsible and reckless financial behavior resulting in a taxpayer-funded [-]handout[/-] bailout?

 

[REWahoo]

Again, what has this individual done that any corporation would not do?

I agree, but I'm not proud of it.

<curmudgeon hat on>
To my way of thinking this is sad justification for lack of personal and corporate responsibility. We've allowed this sort of reasoning to replace the concept of "do the right thing" and I don't think we're a better society as a result.
<curmudgeon hat off>

 

[brewer12345]

The bankruptcy code and corporate law are explicitly set up to give debtors relief when things do not go well. It is actually one of the things that drove people to the US in the first place because it replaced debtors' prisons. So this is about economic actors making rational decisions for their own benefit. We all do the same thing every day and there is nothing im/moral about it. If you change the game by tightening the availability of relief for debtors, beware the wider consequences.

 

[unclemick]

The bankruptcy code and corporate law are explicitly set up to give debtors relief when things do not go well. It is actually one of the things that drove people to the US in the first place because it replaced debtors' prisons. So this is about economic actors making rational decisions for their own benefit. We all do the same thing every day and there is nothing im/moral about it. If you change the game by tightening the availability of relief for debtors, beware the wider consequences.

I watched the History channel on the French Revolution the other night and had warm and pleasant thought's about those fine folks who cut my dividends of some of my Norwegian widow stocks - JPM, C, BAC.



Duh - the solution for a low credit score is a higher interest rate?

heh heh heh - I'm struggling coming up with sympathy for either party in this situation. The French razor for the boards of directors is possibly too extreme - but I will mellow after they restore my dividend cuts. .

My ancestors came ahead of the Russian Czar's draft in the 1800's.