Sarah in SC
Moderator Emeritus
Dang, and I stirred y'all all up again over this, when I just wanted a handy place to put my book review. That'll teach me!
Dang, and I stirred y'all all up again over this, when I just wanted a handy place to put my book review. That'll teach me!
Evr, thanks for the validation! I feel like I needed it today. You rock!fwiw... I'll probably read the book based on your recommendation. Before I would have ignored it
You know how to have fun, Sarah. No guilt. We need little excuse to do some moralizing.Dang, and I stirred y'all all up again over this, when I just wanted a handy place to put my book review. That'll teach me!
Dang, and I stirred y'all all up again over this, when I just wanted a handy place to put my book review. That'll teach me!
Point made, but what we're talking about are two different things:
1) Why did a borrower get into the mess (who is to blame for the mortgage and borrowing);
2) Why did the borrower default, or choose to walk away (who is to blame for the bailouts and defaults);
Then vs. Now
The two are certainly linked but entirely different when it comes to analyzing the mess we're in as a country.
People who default, strategically or not, tend to blame everyone but themselves - or they take responsibility, but then go on to justify why/how they got to where they are: "It wasn't entirely my fault, and this is why." I'm sure some of that resides in my post above, despite the fact that we never defaulted or received bailouts for our situation. We stuck it out. From the outside looking in, it is easy to point to them and say "you signed the papers, you deal with this mess!" (#1 above)
What I'm trying to address is #2... As an investor and citizen, we should all be mad that these loans were created... mad that people signed for them... but IMO, more mad that the banks took unnecessary risk in lending the money (or that they were allowed to). After all... the people wouldn't be able to sign on the line if the banks weren't offering the ability to get the money. As evident from our society... when money is available people take it. Banks and regulation need to be held to a higher standard than people... after all, its the banks (and their investors) who lose when money is lent to an individual who is a high risk of default... and does.
No one here would loan their own money to someone at a high risk of default that didn't put anything down... and if they did, would you blame the 'thief' or blame the poster who took on the risk of lending the money? Humans will take advantage of situations that present themselves to improve their lives in the short term... investors prove this often with their foolish investing habits. So why are we going so easy on the banks/lenders... while attacking the individual borrowers so vigorously?
Because they are people... we can put ourselves in their shoes (or try to) and say "wow that was a bonehead decision, [I think] I never would have ever done that!"
What really gets to me are the bailouts that now exist to reward that bad behavior (banks and individuals both benefit from their poor decisions). My wife and I choose to pay a lot for the house we live in... and we made it work. Others weren't fortunate enough to be given the opportunity to make it work. I fully understand that one small change in our situation could have lead us to be in the pool of defaulters... and that is why I don't carry apathy their way pointing a finger in judgement.
Today we're being punished (relative to those receiving aid) because we refinanced on our own instead of modifying our mortgage... because we decided to stay in the house regardless of the fact that it was underwater (who cares, make the payment)... because we weren't backed by Freddie or Fannie and HARP wasn't available (tough luck)... because we stayed in our house while others walked away... because we were responsible and paid back our debt.
The policy is the problem... it is teaching (I mean allowing/encouraging) people to walk away when life gets tough. If you're a bank and you give out some bad loans... we'll take care of you. If you bought a house you couldn't afford and missed your payments... help is on the way.
One might ask... why didn't the building have a wall to prevent the option to jump in the first place? Policies to prevent people from making suicidal financial decisions would protect both the borrowers and the banks/investors...
Seems what we have right now... are nets at the bottom of the building catching people who were advised to jump and made the decided to. "I noticed you made a horrible decision to jump... let me bail you out of that mess"
who are you really more mad at... the ones jumping (gonna die regardless), or the ones who caught them giving a second chance to make the same mistakes again?
Personally, I'm more mad at the system that allows this abuse... then I am at the people abusing it.
That is a great lesson... and a very difficult one to teach. Too many parents today ignore it.
I guess that I have been lucky (I think it is more smarts, but who knows for sure)...
I actually blame the banks/finance companies/morgtage brokers more than borrowers. They were clearly putting people in mortgages that they knew or should have known the borrowers could hardly afford in order to collect their origination fee and profit on the services their subsidiaries provided in the process. They didn't care about the borrowers or the lenders/investors since they didn't have any skin in the game and only cared about collecting their fees.
While the borrowers knew or should have known that they couldn't afford these mortgages, in many cases they weren't sophisticated enough to know or perhaps expressed some reservations and the bank/finance company/mortgage broker convinced them that they could afford it.
The only problem I have with this thinking is... a salesman is a salesman is a salesman... would you think the same thing of someone who sold someone a car they could not afford? or a boat? how about a gym set? Where do we stop putting blame on the salesman and move it to blame on the purchaser
Don't get me wrong, I actually agree with you in theory.... the purchase of a house is larger than the things I listed... but it is the job of the lender to police the salesmen.... IOW, if you go to buy a car, the saleman will sell you the most expensive car you will agree to buy... and then you go to finance and get told 'sorry, you can not afford this car'.... with these home loans, there was no lender 'police' doing the job they should have.... but I really don't care until the gvmt decides to bail them all out and it is costing me....
Really? You don't show your household budget to the car finance guy. As long as you have a decent credit score you will be approved.IOW, if you go to buy a car, the saleman will sell you the most expensive car you will agree to buy... and then you go to finance and get told 'sorry, you can not afford this car'....
And more diligent than either.My guess is that anyone posting on this board is more smart than lucky
I feel I'm pretty smart doing what I do with what I have; i.e., mainly avoiding stupidity. I think I was more lucky than smart to get what I got. Lots of things fell into place that I really wasn't focused on happening.My guess is that anyone posting on this board is more smart than lucky
.......My sisters housecleaner bought a house with a stated income loan. Here in San Diego where real estate is super pricy. No way someone making $10/hour should have qualified for a $450k mortgage... but she did somehow. And yes, she was foreclosed on. At the time my sister was asking her how she could afford the house... The housecleaner just kept saying the broker and realtor told her she qualified. This is a woman without a high school diploma who worked freelance doing house cleaning... so it's questionable whether she should have known better.
Really? You don't show your household budget to the car finance guy. As long as you have a decent credit score you will be approved.
I agree that a salesman is a salesman, etc...
But the banks/underwriters are not salespersons (mortgage brokers are). And they failed to do due dilligence on the credit worthiness of the borrowers.
Why? Because they knew if they could keep the loan solvent long enough to sell it off on the secondary market, their bank would not be on the hook.
At the time of the bubble the secondary market was far bigger than fannie/freddie (the only game in town these days). The big investment banks were buying up mortgages as fast as they could to turn into derivitives.... and playing the odds that people would pay their mortgages long enough to [-]dump [/-]sell these derivitives to investors.
The underwriters only had to make sure the loan stayed current for a year.
Even now the lookback is only 2 years, I believe.
The investment banks that were buying and repacking these "debt instruments" only was on the hook long enough to resell them in traunches.
My sisters housecleaner bought a house with a stated income loan. Here in San Diego where real estate is super pricy. No way someone making $10/hour should have qualified for a $450k mortgage... but she did somehow. And yes, she was foreclosed on. At the time my sister was asking her how she could afford the house... The housecleaner just kept saying the broker and realtor told her she qualified. This is a woman without a high school diploma who worked freelance doing house cleaning... so it's questionable whether she should have known better.
And this is why I have sympathy for some borrowers. The reality is that someone working for $10/hour isn't going to be able to afford to buy a home, no less a $450k home. But if someone comes along and says you can own a home, why wouldn't you take a chance of a lifetime to own your own home and potentially better your family's life especially if the "professionals" keep telling you that you qualify. If I was in their shoes and a once in a lifetime chance to own a home came along I could see someone taking a chance.
I just do not think that someone who is poor is all that stupid to not know they can not afford $3,000 per month payment on a house... plus taxes, utilities etc. etc.... no matter who tells them they can...
This is the age of entitlement, they think they should have it all, because other folks do, or for some other not so obvious reason.
Texas Proud said:I just do not think that someone who is poor is all that stupid to not know they can not afford $3,000 per month payment on a house... plus taxes, utilities etc. etc.... no matter who tells them they can...
But let me throw out another thought on this... who made the final decision and signed the forms
And we're all above-average, too.My guess is that anyone posting on this board is more smart than lucky