So much for "predatory lenders"

[armor99]

12 pct. are behind on mortgage or in foreclosure - Yahoo! Finance=

Ok... so now the numbers are out. More fixed rate mortgages are failing than any other type right now. So maybe that cry of "predatory lender" can go away now? At a fixed rate, people knew exactly what they were getting themselves into. As usual... the facts are often ignored.....

[ziggy29]

I think the first wave was, in part, due to some adjustable rates resetting upward. That helped trigger an economic mess leading to another wave hitting those with fixed rate mortgages and delivering the double whammy of job loss and being "underwater" on their mortgage. Many of them may just be walking away.

[Martha]

Well, a bit misleading. The leading edge of the foreclosures were the subprime, adjustable rate mortgages. Now prime fixed rate foreclosures are increasing as the recession marches on. In any event, the percentage of subprime loans in bad shape is far higher than for fixed loans. The article goes on to say: At the same time, almost half of all adjustable-rate loans to borrowers with shaky credit were past due or in foreclosure.

[Westernskies]

Not surprising. Why pay your mortgage if you think there is a good chance that someone will step in and offer you "a mortgage relief package"? After all, your neighbor got one when he defaulted and you are not certainly not going to get an abatement or reset if you are current... so, a lot of folks are now CHOOSING to walk away, has nothing to do with their finances. So much for those of us who did without the HELOC-financed expensive toys, lavish vacations, and extravagant lifestyles. We LBYM, saved instead of spent, lived modestly, and paid our mortgages off early. Now we get to pick up the tab for these losers.

How did we change to a society that advocates rewarding failure and penalizing success?

Rant Over.

[armor99]

Quote:

Originally Posted by Westernskies Not surprising. Why pay your mortgage if you think there is a good chance that someone will step in and offer you "a mortgage relief package"? After all, your neighbor got one when he defaulted and you are not certainly not going to get an abatement or reset if you are current... so, a lot of folks are now CHOOSING to walk away, has nothing to do with their finances. So much for those of us who did without the HELOC-financed expensive toys, lavish vacations, and extravagant lifestyles. We LBYM, saved instead of spent, lived modestly, and paid our mortgages off early. Now we get to pick up the tab for these losers. How did we change to a society that advocates rewarding failure and penalizing success? Rant Over.

Now..now.. westernskies.... Remember... it is part of your social contract with America that you need to help these folks. They obviously did not know what they were doing. If we do not help them then the situation will just be worse for all of us.

Not everyone has a high enough intelligence like some of here in the forum to be able to plan out our lives and finances. Just because some of us were lucky and won the birth lottery, it is no reason that those with less ability should actually have any less than the rest of us...

Ok.. I think that will pretty much cover the alternate point of view... Am I getting better at understanding how the other side of this aguement thinks?

[freebird5825]

Quote:

Originally Posted by Westernskies ...How did we change to a society that advocates rewarding failure and penalizing success? Rant Over.

Excellent rant. Heck, you even made ME feel better.
I guess I have a bit of a thicker skin for this type of thing because I already live in the Great Welfare State.
Oh the stories I could tell of the abuse of unemployment, food stamps, welfare, child protective services, divorce courts, etc that goes on unabated here in the Empire State...but I won't bore you and get myself all w*rked up ranting.

[ChrisC]

Quote:

Originally Posted by freebird5825 Oh the stories I could tell of the abuse of unemployment, food stamps, welfare, child protective services, divorce courts, etc that goes on unabated here in the Empire State...but I won't bore you and get myself all w*rked up ranting.

Oh, do tell them here; they will be warmly received by many. You'll feel better after venting, too. That's how you roll, right?

[Zoocat]

When making a conclusion based upon data, it's important to actually analyze the data.

The important data is as follows:

12% of ALL homowners with a mortgage are behind OR in foreclosure

6% of fixed rate mortgages were past due or in foreclosure.

Therefore, this data does not in any way excuse predatory lending. The economy could easily account for the 6% of fixed rate mortgages in trouble.

The more troubling piece of data is that "almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure." The failure of these adjustible rate and interest only mortgages will be the next crisis IMHO. These are the "creative" mortgages that lenders wrote in all the bubble states.


"NEW YORK (AP) -- A record 12 percent of U.S. homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn't expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were past due or in foreclosure.
At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure."

[NW-Bound]

While the home buyers who were overreaching for their "American Dream" are guilty of financial stupidity, the mortgage and banking industries who loan them money are equally guilty. Trying to blame one group and not the other is like deciding whether the kettle is blacker than the pot.

Remember that both groups are being bailed out now with our tax money. How can anyone defend either group? Off with their heads!

I would have to agree with Martha and Oldbabe that some innocent unfortunate homeowners are now getting churned up in this economic cauldron. The people on this forum tend to be better off than the average US worker, and yet some of us have also been faced with job losses.

[Independent]

Quote:

Originally Posted by armor99 Now..now.. westernskies.... Remember... it is part of your social contract with America that you need to help these folks. They obviously did not know what they were doing. If we do not help them then the situation will just be worse for all of us. Not everyone has a high enough intelligence like some of here in the forum to be able to plan out our lives and finances. Just because some of us were lucky and won the birth lottery, it is no reason that those with less ability should actually have any less than the rest of us... Ok.. I think that will pretty much cover the alternate point of view... Am I getting better at understanding how the other side of this aguement thinks?

I don't think anyone has expressed that point of view on this thread.

Ziggy, Martha, and Oldbabe have all provided a different perspective.

[lets-retire]

Not in this thread, but definately on this forum.

[jug]

The avergage American is not good at math, thus to live by a budget is challenging. How is this evident? By the amount of home equity lines taken out, and used for goodies that they don't need.

In the home, good financial management needs good basic math skills along with discipline to look at reality and live within those numbers.

Unfortunately, many don't possess this combination, and with the loose credit of the past 10 years, and the media telling us that we must have it all, along with interest rates lowered after 9/11 pushing housing prices upward, the average Joe believed that he could have a Mac Mansion on his meager salary.

Bring in a lender, who should know better, but stretches the truth on the application, he convinces a poor sap making 50K a year that he can "manage" a 700K house, with the help of wifey who earns another 25K or so. It is the banker's job to see that this is quite risky, hence "predatory lending", the professional should know better, but the commissions and the selling of the loan to be packaged and securitirized is pressing on him.

Multiply this scene a few million times, and viola, we have the present situation, wife or hubby lost job, house is now worth under 400K, lender or who ever owns loan is underwater on this among many other loans, and we have the present situation.

Now is lender had used traditional underwriting practices, he would have denied poor Joe and wife the loan, forcing them to take a tandrum, and going for a cheaper home. This scene done several million times would have kept housing prices more reasonable and we wouldn't have our present fiasco.

I blame, bad math, bad discipline and above all, lenders who should know better.

jug

[Independent]

Quote:

Originally Posted by lets-retire Not in this thread, but definately on this forum.

The part about "no reason why those with less ability should actually have less than the rest of us" seems to say "we should all end up with exactly the same amount". I don't recall seeing that on any other thread, but who can say for sure? I can't claim that I've examined every post in every other thread, maybe someone said that somewhere. But why make the comment here instead of on the thread where it was made?

[ChrisC]

Quote:

Originally Posted by Independent The part about "no reason why those with less ability should actually have less than the rest of us" seems to say "we should all end up with exactly the same amount". I don't recall seeing that on any other thread, but who can say for sure? I can't claim that I've examined every post in every other thread, maybe someone said that somewhere. But why make the comment here instead of on the thread where it was made?

I don't recall and I don't believe anyone has made that claim, too. But I could be wrong. It appears to be an extrapolation of claims made by those that want the safety nets we have for the less fortunate to capture greater numbers of less fortunate people even when balanced against a downside risk of "moral hazard." I don't know of anyone who has posted on this forum who believes in equal outcomes regardless of personal sacrifice, work, or talent. In my opinion, the comment was made here because there's a tendency to steer the topic to a certain area of discussion, which gets debated ad nauseam.

[lets-retire]

Quote:

Originally Posted by Independent The part about "no reason why those with less ability should actually have less than the rest of us" seems to say "we should all end up with exactly the same amount". I don't recall seeing that on any other thread, but who can say for sure? I can't claim that I've examined every post in every other thread, maybe someone said that somewhere. But why make the comment here instead of on the thread where it was made?

You are correct in that the exact words are not used. However the sentiment is often expressed on this forum. This is the last I'm going to speak of it here, I don't want to hijack the thread.

[ERD50]

Quote:

Originally Posted by Oldbabe When making a conclusion based upon data, it's important to actually analyze the data.

Agreed - maybe we can re-direct back to some data?

In my case, I recently looked back at the ARM I took out (a re-fi) ~ 7 years ago. I'm terrible at legalese, but there was a short (3 page, lots of white space, big font) document that spelled out the conditions very plainly.

So, can anyone post a link to ne of these documents that would "trick" someone into getting a loan that they could not understand (which means they should not have signed it to begin with)? I'm curious about this.

Another factor could well be that ARMs are being adjusted *downward* at this point (mine was adjusted down, 4.375 now )

Quote:

I blame, bad math, bad discipline and above all, lenders who should know better. jug

How about govt policies that encouraged those lenders to make loans to people who could not afford them? Yes, PLENTY of blame to go around. The only antidote I see is education.

-ERD50

[armor99]

Quote:

Originally Posted by ERD50 Agreed - maybe we can re-direct back to some data? In my case, I recently looked back at the ARM I took out (a re-fi) ~ 7 years ago. I'm terrible at legalese, but there was a short (3 page, lots of white space, big font) document that spelled out the conditions very plainly. So, can anyone post a link to ne of these documents that would "trick" someone into getting a loan that they could not understand (which means they should not have signed it to begin with)? I'm curious about this. Another factor could well be that ARMs are being adjusted *downward* at this point (mine was adjusted down, 4.375 now ) How about govt policies that encouraged those lenders to make loans to people who could not afford them? Yes, PLENTY of blame to go around. The only antidote I see is education. -ERD50

Yes... I agree.... education is almost always the answer to such problems. I would love to see new mandates for public education to include such topics.... Might write my congressman later today to suggest it...

[NW-Bound]

Quote:

Originally Posted by ERD50 The only antidote I see is education. -ERD50

That, and no moral hazard to either the lenders nor the borrowers. Bitter pills are needed as part of the "education" process. People are generally not stupid. Get burned once, or seeing someone gets burned, they will learn.

But then, we all know this. The problem is to get some voters and their politicians to agree.

[lets-retire]

I agree there is definitely a lack of education when it comes to basic financial issues. When I took consumer economics in high school it dealt with theories that were not applicable to the real world of most people. It was more of an introductory macro-economics class. About the only thing I learned in the four month class was how to write a check and balance a checkbook. The class was a requirement for graduation so everyone who graduated had it.

I can't tell you how many disadvantaged people I've dealt with know the basic principle of don't sign anything unless you understand it.

[jug]

Quote:

Originally Posted by ERD50 How about govt policies that encouraged those lenders to make loans to people who could not afford them? Yes, PLENTY of blame to go around. The only antidote I see is education. -ERD50

I agree, but if the programs were designed to make loans to people in underserved areas that could afford to repay them, I see no problem. However twisting the arm of a bank to engage in poor underwriting practices under any circumstances is wrong. What I would like to know is what percentage of the poor underwritten loans were written under Government pressure.

I do believe that the bulk of the problem in underwriting was due more to greed, such as banks and loan brokers gathering up as many loans as possible to re-sell to secondary buyers for a quick profit, as opposed to the banks having their arms twisted to make such loans.

Profit I believe was the motive more than anything.

jug