The Invisible Rich

[novaman]

My initial thought is that these people deserve exactly what they get.





Should borrowers know better -- yes. But the simple fact is that many don't, and it is terrible what is happening to some of them. I would encourage people on this board to have a little empathy.

So does that mean that you support a government bailout of all these people going into foreclosure??

 

[novaman]

This article couldn't be more true. I've known for a while now never to judge people by appearance or what they drive....case in point....

I had a family come into my dental practice many years ago. well dressed, hubby drove a 7 series BMW and wife a jag. my staff oohed and aahed over them. They Got some work done over a period of time and never paid the bill. We sent our normal escalating letters. Finally the wife called letting me know that she was in marketing and could help my business....turns out they couldn't pay the bill. Sent to collection, they moved away, never to be seen again.

Another story... Had a guy come in that I'd seen around town before. Hard to miss. He always wore the same blue overalls and had a scraggly beard. Looked kind of like a mountain man. Drove a late model honda. Comes in for some dental work. We get to talking and it turns out he made a fortune starting an early internet service provider company that was eventually bought out by a larger company. He is RE and lives comfortably on the buyout....so the mountain man is loaded....you just never know.

 

[Gumby]

Actually, it does not mean I support a bailout. The moral hazard implicit in such a course of action is obvious -- those who did know better and were merely speculating on continued price appreciation will now speculate with greater abandon because they know the government will bail them out. No, what I am suggesting is that certain people drop the the "holier than thou" attitude and have a little heart. Many of the people who are going into foreclosure were simply ignorant and naive. They are real people experiencing real suffering. It is bad enough without the added scorn of those of us fortunate enough to better understand and appreciate financial matters.

 

[mh]

Actually, it does not mean I support a bailout. The moral hazard implicit in such a course of action is obvious -- those who did know better and were merely speculating on continued price appreciation will now speculate with greater abandon because they know the government will bail them out. No, what I am suggesting is that certain people drop the the "holier than thou" attitude and have a little heart. Many of the people who are going into foreclosure were simply ignorant and naive. They are real people experiencing real suffering. It is bad enough without the added scorn of those of us fortunate enough to better understand and appreciate financial matters.

is it really "many" of the people ? i don't know one way or the other.
my personal gut feeling is that in fact most of them knew what they were doing and then rolled the dice. it would be interesting to see some statistics...

 

[armor99]

Ultimately, your life belongs to only one person, and that is yourself. It is for this reason that every decision that you make in life, both the good and the bad, are in fact your fault. If a lending institution decided to outright lie to someone about the terms of their loan, then obviously these folks were not at fault, because the erroneous information they were presented, caused them to make a bad decision. However, the claim that these folks did not "know any better" is equivalent to removing personal responsibility from their decision. No one is entitled in life to more than what their own mind and decision making ability can get for them. If you choose to make bad decisions then you should have to live with the results. Everyone in their lives make mistakes, and hopefully they are small and you learn from them.
It drives me crazy listening on the news to the govt attempting to pass a bill to "bailout" all of these folks loosing their homes due to "predatory lenders". Was there some form of coersion that went on in the bank that I am not aware of? Did the loan officer produce a gun and force these people to sign up to a mortgage they could never hope to pay back? What about the banks themselves? They have lost millions of dollars in defaulted loans. Should the govt bail them out too, because the loan officers did not "know any better" as well? If the claim is to be made that someone needs to be helped because they "do no know any better", then I would make the claim that there are places these folks can go where they do not have to make any decisions anymore at all. Although completely safe, a life devoid of having to make decisions for myself is not a life I would choose to have. I appologize if this sounds cold to anyone, but the truth often is.

 

[MasterBlaster]

Where was all this talk about "predatory lenders" when people were taking cash-out refinancings to buy SUVs and to pay down their charged up credit cards ?

It's only now, when the party is over, that something needs to be done.

 

[Bigritchie]

I really do not understand why ARM's are even legal, and I really do not understand why people took them out when rates were at a all time low. With over 70 lender's having went under this year already they are paying the price for doing ARMs, and the news of countrywide today is just scary.

I did reap the benefits of the undocumented income though when we purchased our home, that was right up my self-employment alley.

 

[dgalbraith100]

I have no problems with ARMs, IO loans, or alot of other "fancy" loans. It is up to the person using it to understand what it gets you, and what it doesn't.

I bought my current house using an ARM. Got a almost 1% lower rate for a 7/1 ARM than fixed would have been. When it goes to adjust, I'll either pay it off, or refinance, or just let the rate ride depending on which makes most financial sense.

If my wife had to go mortgage shoping without my knowledge, my advice to her would be get a fixed rate. Why? because she doesn't really understand how those different loans work. (I've tried, but she just isn't interested in learning it right now.. probably cause she has me to do it)

Laters,
-d.

 

[bow-tie]

I have no problems with ARMs, IO loans, or alot of other "fancy" loans. It is up to the person using it to understand what it gets you, and what it doesn't.... -d.

I agree.

It's both good and bad. More and more responsibility is falling on us as consumers. We need to be smarter about a lot of things - personal finance, medicine, law, accounting... you name it. It's great for those of us who are interested and eager to be informed. But it can really bite us in butt if we don't take the time to educate ourselves.

Example - Could be why a lot of people have 401ks invested in guaranteed income type stuff. They don't know any better / any worse. Maybe they appreciate what they don't know, so they are playing it safe. Is that wrong? Really depends on the person, methinks.

 

[jazz4cash]

Although I agree its the consumers responsibility, I think some of us lose touch with what its like to be "on the margin". I recently heard the story of how my grandparents became the very first homeowners in our family. They were renting in Wash DC when they "discovered" the home they were renting was for sale. In order to pull this off, they went to the local neigborhood loan shark for the down payment....it all worked out in the end. I am in favor of "bailouts" for the homeowners in many cases ONLY because it works in favor of the overall economy in the long run. This is EXACTLY what happened when the Fed cut rates because the subprime problems were spreading throughout the market. Wall St Journal profiled some subprime borrowers in Detroit recently. One loan was for 9.75 for two years before resetting 12%. Nowadays, that constitutes usary. If this homeowner has made a 9.75 payment for two years, somehow there should be a way for them to stay in that home.........to do otherwise will eventually cause home values throughout that market to tumble. I'm no fan of D Trump, but I agree with his advice for homeowners such as this to "stay in your home, go back to the bank, and demand a better deal"

 

[roadkill]

Was there some form of coersion that went on in the bank that I am not aware of? Did the loan officer produce a gun and force these people to sign up to a mortgage they could never hope to pay back?

I happened to catch a reality type show where a real estate agent was trying to help a young married couple who were first time home buyers. I almost fell out of my chair when they indicated that their budget was $516,000.

 

[roadkill]

 

[Sarah in SC]

Thanks Roadkill, for an awesome cartoon!
LOL!

 

[73ss454]

Man, that's funny and not funny all at the same time.

 

[Milton]

Many of the people who are going into foreclosure were simply ignorant and naive.

These same "ignorant and naïve" people also enjoy the right to vote, own firearms, have children, etc. They can't have it both ways.

Either one is a competent adult, with all of the attendant rights and responsibilities; or one is not.

 

[armor99]

These same "ignorant and naïve" people also enjoy the right to vote, own firearms, have children, etc. They can't have it both ways.

Either one is a competent adult, with all of the attendant rights and responsibilities; or one is not.

Well said Milton! I could not have put it better...

 

[Gumby]

A depressingly large number of people are allowed to vote --- for the candidates I oppose.

 

[heyyou]

How many of those mortgages are for typical starter homes in a former cow pasture and how many are for McMansions w/new car or a cash-out refi? I do feel for the familes struggling for their first home, but not for a re-fi or the conspicuous consumers. Recently, a columnist wrote that all those interest dollars that are going to financial institutions would be better spent if they were invested directly into the economy. Paying interest is like taxation, a necessary evil with an ineffcient middleman.

 

[lets-retire]

Recently, a columnist wrote that all those interest dollars that are going to financial institutions would be better spent if they were invested directly into the economy. Paying interest is like taxation, a necessary evil with an ineffcient middleman.

I would have to disagree. What are the banks, but part of the economy. The interest adds to the bottom line of a company. That company has owners and it adds to the bottom line of those owners. The same as if it were spent at Kmart, Belk, Ford, etc. I would say, though, that paying interest is a waste most of the time.

 

[Milton]

I would have to disagree. What are the banks, but part of the economy.

Yes, I agree. It is not like banks bury money in deep caverns, never to be seen again.

 

[bow-tie]

I would have to disagree. What are the banks, but part of the economy. The interest adds to the bottom line of a company. That company has owners and it adds to the bottom line of those owners. The same as if it were spent at Kmart, Belk, Ford, etc. I would say, though, that paying interest is a waste most of the time.

I figured most of it was used to fund the obscene pay package(s) for senior management....

 

[Gumby]

I figured most of it was used to fund the obscene pay package(s) for senior management....

Which then trickles down to the yacht manufacturers, mansion builders and diamond merchants, or so they say.

 

[bow-tie]

I prefer it trickle down to the dividend yield, but methinks they don't care what I prefer.

 

[SecondCor521]

I figured most of it was used to fund the obscene pay package(s) for senior management....

I would bet most of the interest paid in is paid back out to bank depositors and goes to bank operations (employee's salaries, bank buildings and ATMs, etc.). All of which subsequently circulates in the economy.

2Cor521

 

[mickeyd]

My Simple LBYM plan: For every $10 of income, spend less than $9.99.