This is a prime example of people living above their means and keeping up appearances.

---

 

May 17, 2009

My Personal Credit Crisis

 

By EDMUND L. ANDREWS

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

 

Edmund L. Andrews is an economics reporter for The Times and the author of “Busted: Life Inside the Great Mortgage Meltdown,” which will be published next month by W.W. Norton and from which this article is adapted.

 

http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?_r=1

 

I'm so there right now. :(

Meanwhile, neither of us was paying attention to how easy our bank had made it to build up debt.

 

Weird - a writer for the New York Times placing blame on the bank rather than taking accountability himself for making bad decisions.  That Bob...he tricked me!

 

 

I think there is some responsibility on the banks' shoulders. They're businesses, and they want to make as much money as they can legally. But I think the VAST majority of the responsibility rests on consumers .. there's WAY too much blameshifting and scapegoating going on right now, and I think it's indicative of a lot of problems we're facing as a country.

 

Repeat after me: "The problem starts with ME. Not anyone else. But ME."

Meanwhile, neither of us was paying attention to how easy our bank had made it to build up debt.

 

Weird - a writer for the New York Times placing blame on the bank rather than taking accountability himself for making bad decisions.  That Bob...he tricked me!

 

 

 

This is why I have no or very little sympathy for people who bought more of a house than they could afford or were not financial mature/responsible to buy and maintain a home.

I think there is some responsibility on the banks' shoulders. They're businesses, and they want to make as much money as they can legally. But I think the VAST majority of the responsibility rests on consumers .. there's WAY too much blameshifting and scapegoating going on right now, and I think it's indicative of a lot of problems we're facing as a country.

 

Repeat after me: "The problem starts with ME. Not anyone else. But ME."

There is no responsibility on the bank.  YOU call them to make it happen.  YOU sign the papers.  They don't make YOU do anything, only provide options. 

 

The last thing you said, is 100% correct!

 

 

 

I would also say it became too easy for folks to use the easy money to cover deeper and harder issues in their lives.

I think there is some responsibility on the banks' shoulders. They're businesses, and they want to make as much money as they can legally. But I think the VAST majority of the responsibility rests on consumers .. there's WAY too much blameshifting and scapegoating going on right now, and I think it's indicative of a lot of problems we're facing as a country.

 

Repeat after me: "The problem starts with ME. Not anyone else. But ME."

There is no responsibility on the bank.  YOU call them to make it happen.  YOU sign the papers.  They don't make YOU do anything, only provide options. 

 

The last thing you said, is 100% correct!

 

 

 

 

So you don't believe in the concept of predatory lending? Or think the financial industry's fee/profit driven cliff dive into subprime, interest only, stated income and all the other wacky mortgage instruments are part of the problem?

How on Earth was this guy the Economics reporter for the NY Times??  It would seem that if anyone would be knowledgeable about the potential pitfalls of this sort of lending, he would be that person!

 

I am by no means an expert on these matters, but even I know that those adjustable rate mortgages posed a certain measure of risk...

I think there is some responsibility on the banks' shoulders. They're businesses, and they want to make as much money as they can legally. But I think the VAST majority of the responsibility rests on consumers .. there's WAY too much blameshifting and scapegoating going on right now, and I think it's indicative of a lot of problems we're facing as a country.

 

Repeat after me: "The problem starts with ME. Not anyone else. But ME."

There is no responsibility on the bank.  YOU call them to make it happen.  YOU sign the papers.  They don't make YOU do anything, only provide options. 

 

The last thing you said, is 100% correct!

 

 

 

 

I agree, BUT the back should be watching out for itself as well and GIVING a loan to someone who can just barely afford the payments is almost as bad as signing for one you know you can barely afford.

 

I think it was also irresponsible of them to be buying $700 in clothes from J.crew (or wherever) when they were so behind on everything else! How can you knowingly dig yourself further into debt on stuff you don't need or could buy elsewhere cheaper?

How on Earth was this guy the Economics reporter for the NY Times??  It would seem that if anyone would be knowledgeable about the potential pitfalls of this sort of lending, he would be that person!

 

I am by no means an expert on these matters, but even I know that those adjustable rate mortgages posed a certain measure of risk...

 

they were keeping up with the Jones'

 

I think it was also irresponsible of them to be buying $700 in clothes from J.crew (or wherever) when they were so behind on everything else! How can you knowingly dig yourself further into debt on stuff you don't need or could buy elsewhere cheaper?

 

I know, at least they could have gone a real store.  Just because you're poor, you don't have to look poor!  Sheesh!  :evil:

 

Meanwhile, neither of us was paying attention to how easy our bank had made it to build up debt.

 

Weird - a writer for the New York Times placing blame on the bank rather than taking accountability himself for making bad decisions.  That Bob...he tricked me!

 

If you read the entire article, the guy clearly takes responsibility for the mess he's gotten himself in. But the banks were absolutely enablers in this whole thing, and the part they played should be documented.

 

How on Earth was this guy the Economics reporter for the NY Times??

 

There's a big difference between Macro and Micro economics. And an even bigger difference between micro economics and personal finance.  This guy probably knows everything there is to know about GDP, trade defecits, CPI etc... But apparently nothing about how to live within your means.

 

I'm glad he was man enough to write a cautionary tale about his own short-comings. Of course, I'm sure he's hoping that book sells a few copies. :wink:

>There is no responsibility on the bank.  YOU call them to make it happen.  YOU sign the papers.  They don't make YOU do anything, only provide options. 

 

Donald Trump is famous for saying if you default on a $100,000 loan, it's your fault.  If you default on a $10 million loan, it's the bank's fault. 

 

"So you don't believe in the concept of predatory lending? Or think the financial industry's fee/profit driven cliff dive into subprime, interest only, stated income and all the other wacky mortgage instruments are part of the problem?"

 

Initially, it all boils down to every person being accountable and responsible for their own finances - I am reaaaaally right-brained and bad with numbers. However - I was raised with the mantra of "don't live beyond your means", and "if it sounds to good to be true, it probably is", so any time anyone approaches me involving finances, my eyebrow shoots up and my inner skeptic goes batsh!t. But I think it's a statement about our society that so many people (like the author of the article) simply dismiss reality because maybe they thought for a second that they could have that place they dream of and see on HGTV.

 

A few years ago, I had considered buying a modest condo in Cleveland so I could stop paying rent and "throwing money away". Granted, my math skills are bad but I did a lot of calculating so I had a rough idea of what I could afford. I found a place in a good neighborhood that needed some fixing up priced in the high $50s. Everything I number-crunched with my salary/debt/etc. seemed to jive with that, without putting me in too much of a bind. So many people my age own a home, a lot of people in the circle I run with place value on material things, and some would ask me "when are you gonna stop throwing money away?", so I figured geez, let's just check it out. 

 

I scheduled an appointment with one of the local banks in Cleveland - I wanted to gather some info, not sign a loan right away. Lo and behold, the loan officer - a friendly go-getter type a few years my junior assured me that if I wanted, I could get a loan for up to three times the price of the condo I spotted. Me, a graphic designer (a field that doesn't pay well) with a decent (not stellar) credit score and modest savings should be looking for something around $180K??? On what f'in planet?!? Wellllllll... I never did get that condo, and let's just say this particular bank has been in the news lately for not being up to par according to industry standards.

I agree everyone is personally responsible for themselves and not the bank. The problem is when these parties are both greedy, the Mr. and Mrs. Responsibles out there mop it up. So if people can't do math, and the banks are greedy, I think we do need some more oversight. 

As someone who took out a mortgage that was 1/3 what the bank wanted to give us, I have to ask, did these people do a budget even?

"So you don't believe in the concept of predatory lending? Or think the financial industry's fee/profit driven cliff dive into subprime, interest only, stated income and all the other wacky mortgage instruments are part of the problem?"

 

Initially, it all boils down to every person being accountable and responsible for their own finances - I am reaaaaally right-brained and bad with numbers. However - I was raised with the mantra of "don't live beyond your means", and "if it sounds to good to be true, it probably is", so any time anyone approaches me involving finances, my eyebrow shoots up and my inner skeptic goes batsh!t. But I think it's a statement about our society that so many people (like the author of the article) simply dismiss reality because maybe they thought for a second that they could have that place they dream of and see on HGTV.

 

A few years ago, I had considered buying a modest condo in Cleveland so I could stop paying rent and "throwing money away". Granted, my math skills are bad but I did a lot of calculating so I had a rough idea of what I could afford. I found a place in a good neighborhood that needed some fixing up priced in the high $50s. Everything I number-crunched with my salary/debt/etc. seemed to jive with that, without putting me in too much of a bind. So many people my age own a home, a lot of people in the circle I run with place value on material things, and some would ask me "when are you gonna stop throwing money away?", so I figured geez, let's just check it out. 

 

I scheduled an appointment with one of the local banks in Cleveland - I wanted to gather some info, not sign a loan right away. Lo and behold, the loan officer - a friendly go-getter type a few years my junior assured me that if I wanted, I could get a loan for up to three times the price of the condo I spotted. Me, a graphic designer (a field that doesn't pay well) with a decent (not stellar) credit score and modest savings should be looking for something around $180K??? On what f'in planet?!? Wellllllll... I never did get that condo, and let's just say this particular bank has been in the news lately for not being up to par according to industry standards.

 

The offer based on what you qualify for, but as you found out that doesn't mean you have to take out a loan for that much.

I agree everyone is personally responsible for themselves and not the bank. The problem is when these parties are both greedy, the Mr. and Mrs. Responsibles out there mop it up. So if people can't do math, and the banks are greedy, I think we do need some more oversight. 

As someone who took out a mortgage that was 1/3 what the bank wanted to give us, I have to ask, did these people do a budget even?

 

Bingo.  People ask me how I can afford to shop when they know my mortgage is $X,XXX or keep two houses?  I budget and keep track of any purchase over $5 bucks.  People fail to realize I have no debt, outside of the brownstone and no children.  I'm afraid to throw away bills as, I just shredded bills, etc. for the year 2001. I know exactly how much I spent every single day =/-$5.

 

Just imagine, if people bought homes in the city, for ⅓ the price they paid for the home in the burbs (because they need more space) they could have updated the house and added a bath and stlll been under the loan amount of the house they currently live in.  A house which is most likely less than the mortgage they have.  It amazes me that my initial mortgage and construction loan my condo was less than the house MayDay found.

 

I just look and laugh.  I can't imagine paying that for a house. 

 

Simple .. dont trust people who think they know money issues...

Pay attention to spending.. Pay yourself first before bills.. aka Save

I'm Age 25 with an Income-debt Ratio  of 4-1 ..

Only debt is college loan/hospital bill and have Roth IRAs and other savings/investment outlets

 

Feels good.. I'm somewhat where many my age are not. Some possibly wont ever get there.

 

Now I know that will change if/when I get married.

Trying to budget to allow friv spending that a woman does.

 

It helps to buy your house a long time ago. I bought my first one in 1972.

 

It had been on the market for several months, and buying a house was far from my mind. I went with a friend who was thinking about it, but he had too much debt and not enough income. I started thinking more seriously about buying a house as tensions with my bastard landlord escalated, and I made the seller a seriously low-ball offer. We met halfway, and then the paper chase began.

 

I applied for a VA-backed fixed-rate mortgage, and they really protected me from any mistake I might have made; two appraisers and inspectors went through the place from roof to basement and had a professional termite inspection done, and it took more than two months from application to closing. Luckily I bought as the neighborhood was bottoming out and some aggressive folks had formed a neighborhood association and partnered with city code enforcement to make life unpleasant for the absentee slumlords who had infested the area. A lot of them decided to leave, and it was a buyer's market for a while. My house is worth a lot more than my original investment plus improvements, and I'm in no hurry to sell (although I would consider a serious offer with cash or a good mortgage, no land contracts.)

 

Five years later the house next door came up for sale, and the realtor who had it was thinking about buying it himself. He owned some low-quality rentals and I didn't want his white trash and junk pickup trucks next door. The house was under a VA-backed mortgage with the same company who had mine, and it took considerable jaw-boning to get approval to assume the balance with a little cash to the seller for his equity, but I got it. It was a rental at first, but I swapped and sunk a ton of money and sweat equity into a major rehab. I still have both houses and they're both paid off. As I recall, in the early eighties the combined payment for both houses was less than $300.

Now I know that will change if/when I get married.

Trying to budget to allow friv spending that a woman does.

 

Women don't have a monopoly on that! You can quote me. The friend who couldn't qualify for the house I ended up buying, went out and bought a new Corvette instead. Two years later he was driving a used Super-Beetle.

It helps to buy your house a long time ago. I bought my first one in 1972.

 

It had been on the market for several months, and buying a house was far from my mind. I went with a friend who was thinking about it, but he had too much debt and not enough income. I started thinking more seriously about buying a house as tensions with my bastard landlord escalated, and I made the seller a seriously low-ball offer. We met halfway, and then the paper chase began.

 

I applied for a VA-backed fixed-rate mortgage, and they really protected me from any mistake I might have made; two appraisers and inspectors went through the place from roof to basement and had a professional termite inspection done, and it took more than two months from application to closing. Luckily I bought as the neighborhood was bottoming out and some aggressive folks had formed a neighborhood association and partnered with city code enforcement to make life unpleasant for the absentee slumlords who had infested the area. A lot of them decided to leave, and it was a buyer's market for a while. My house is worth a lot more than my original investment plus improvements, and I'm in no hurry to sell (although I would consider a serious offer with cash or a good mortgage, no land contracts.)

 

Five years later the house next door came up for sale, and the realtor who had it was thinking about buying it himself. He owned some low-quality rentals and I didn't want his white trash and junk pickup trucks next door. The house was under a VA-backed mortgage with the same company who had mine, and it took considerable jaw-boning to get approval to assume the balance with a little cash to the seller for his equity, but I got it. It was a rental at first, but I swapped and sunk a ton of money and sweat equity into a major rehab. I still have both houses and they're both paid off. As I recall, in the early eighties the combined payment for both houses was less than $300.

 

I know.  My mortgage was $250 and change. My maintenance fee was higher than my mortgage. lol

Now I know that will change if/when I get married.

Trying to budget to allow friv spending that a woman does.

 

Women don't have a monopoly on that! You can quote me. The friend who couldn't qualify for the house I ended up buying, went out and bought a new Corvette instead. Two years later he was driving a used Super-Beetle.

HELLO!!

 

 

Now I know that will change if/when I get married.

Trying to budget to allow friv spending that a woman does.

 

You might have known I'd take the bait on this one.  I really, really resent that comment.  I can promise you I am not the only woman that does not engage in "frivolous" spending nor the only one in a relationship where the woman is much more cautious about the money than the man is.  When mr. rockandroller and I got together, money was one of the big things we fought about for probably at least the first 2 years.  I still get on him if he is buying too many things that are "hobbyish" or just unnecessary, like alcohol.  I love hobbies and alcohol as much as the next person, but as MTS and a few others who have paid attention to my posts can tell you, I am very concerned about spending and money.  All women are not "shopaholics" who buy $800 purses, PLEASE stop perpetuating that myth.

 

That being said, what a great article, and a great way to illustrate how "normal people" end up completely upside down through a combination of their own greed, stupidity and ignorance along with the greed of the banks.  The fact that the guy was an econ reporter is proof that this can happen to just about anyone with half a brain and as was pointed out earlier, "keeping up with the Joneses" combined with the irresponsible nature of banks (both on mortgage side and credit card side) to offer/lend you way, way more than you should rightfully have access to, has gotten so many people into trouble just like these folks are experiencing.  And a lot of people are not even close to as smart as this couple, imagine the holes that have been dug by people who really don't understand or know any better.  I mean, how many of you know people that are friends or co-workers who have lost their homes?  Two of my fairly good friends got into situations like this and I would have thought both would be "smarter than that," one with an ARM that quickly became unaffordable, the other bought too much house, could not keep up the payments and got foreclosed upon.

 

It's tougher and tougher out there, I feel sorry for those of you who purchased since 2002.

---

Cleveland mortgage refinancing boom lures homeowners but some face issues of decline in home value and credit problems

 

Posted by kkroll May 16, 2009 13:39PM

 

Options for homeowners having trouble refinancing:

 

• A refinance under the Obama "Home Affordable" program.
  
• A streamline FHA loan, if the existing loan was FHA.
  
• A small, unsecured loan to plug a small gap in the loan amount versus home value.
  
• Private mortgage insurance, which can cost $100 a month depending on loan amount and credit score.
  

 

 

http://www.cleveland.com/business/index.ssf/2009/05/cleveland_mortgage_refinancing.html

 

Now I know that will change if/when I get married.

Trying to budget to allow friv spending that a woman does.

 

You might have known I'd take the bait on this one.  I really, really resent that comment.  I can promise you I am not the only woman that does not engage in "frivolous" spending nor the only one in a relationship where the woman is much more cautious about the money than the man is.  When mr. rockandroller and I got together, money was one of the big things we fought about for probably at least the first 2 years.  I still get on him if he is buying too many things that are "hobbyish" or just unnecessary, like alcohol.  I love hobbies and alcohol as much as the next person, but as MTS and a few others who have paid attention to my posts can tell you, I am very concerned about spending and money.  All women are not "shopaholics" who buy $800 purses, PLEASE stop perpetuating that myth.

 

That being said, what a great article, and a great way to illustrate how "normal people" end up completely upside down through a combination of their own greed, stupidity and ignorance along with the greed of the banks.  The fact that the guy was an econ reporter is proof that this can happen to just about anyone with half a brain and as was pointed out earlier, "keeping up with the Joneses" combined with the irresponsible nature of banks (both on mortgage side and credit card side) to offer/lend you way, way more than you should rightfully have access to, has gotten so many people into trouble just like these folks are experiencing.  And a lot of people are not even close to as smart as this couple, imagine the holes that have been dug by people who really don't understand or know any better.  I mean, how many of you know people that are friends or co-workers who have lost their homes?  Two of my fairly good friends got into situations like this and I would have thought both would be "smarter than that," one with an ARM that quickly became unaffordable, the other bought too much house, could not keep up the payments and got foreclosed upon.

 

 

Money is usually the catalyst for a fight in relationships.  It can be the budgeting of money or the earning of money.

 

In this day an age men are just as bad and want boy toys, and as RnR points out, its not women buying $800 purses, its my people buying $4k man-bags.  LOL

 

I don't know anyone who's lost their home, but I've made my assistants (and their fiances)  read articles similar to this, so they understand that a house is serious responsibility!  Sacrifices and cutting out "non essential" spending will need to be made.

In retrospect the greed all seems obvious, but 4 years ago, no laypersons had ever heard of a sub-prime loan or saw the crisis approaching.  I almost fell victim to a refinancing scheme to pay off a big credit card debt.  I am so thankful that I never signed those papers.

 

http://www.citykin.com/2008/10/coldstream.html

 

bottom line is personal responsibility.  Why would anyone sign a loan, knowing that they dont have the income to support the payments.  That is if they have income.  Common sense should tell you that if you don't have a job, ie. income, you can't pay a loan or credit card debt.

 

Credit cards are the real evil.  Now you have all these credit card company's reviewing accounts, reducing credit limits, or all together closing accounts.

 

The banks let the devil lose, now they're trying to put a collar on him.

bottom line is personal responsibility. Why would anyone sign a loan, knowing that they dont have the income to support the payments.

 

But a lot of people did, and now they don't.  I don't know anyone who hasn't had to take a pay cut or who hasn't lost their job at this point.

bottom line is personal responsibility.  Why would anyone sign a loan, knowing that they dont have the income to support the payments. 

 

But a lot of people did, and now they don't.  I don't know anyone who hasn't had to take a pay cut or who hasn't lost their job at this point.

Dear, im speaking about people, who had no jobs or incomes that could not support a home the size they bought at the time they applied for a mortgage.

I think there are a lot of people who perhaps expected to be doing better by this time, not worse, and maybe they were hedging their bets and borrowing a little too close to "too much" for their income, with the expectation that they would be doing much better in a few years.

 

This is why I never did the "graduated repayment" plan on my student loan - it was based on the fact that your payments would get bigger each year as you "expected" to earn more money each year.  I never expected to earn jack sh*t, so I never entered into that repayment plan, but I'm sure a lot of people maybe plan purchases that way?

I think there are a lot of people who perhaps expected to be doing better by this time, not worse, and maybe they were hedging their bets and borrowing a little too close to "too much" for their income, with the expectation that they would be doing much better in a few years.

 

This is why I never did the "graduated repayment" plan on my student loan - it was based on the fact that your payments would get bigger each year as you "expected" to earn more money each year.  I never expected to earn jack sh*t, so I never entered into that repayment plan, but I'm sure a lot of people maybe plan purchases that way?

 

 

Sorry, but when you don't have a job, haven't had a job, and have no savings (ie the 14k standard), you shouldn't be in a bank signing mortgage papers, no matter what the bank tells you.

 

 

bottom line is personal responsibility. Why would anyone sign a loan, knowing that they dont have the income to support the payments. That is if they have income. Common sense should tell you that if you don't have a job, ie. income, you can't pay a loan or credit card debt.

 

I agree that a lack of personal responsibility is the cause of a lot of the current problems. However, I think you severely downplay the role (and fault of) the greed of banks played in causing this crisis.

 

In any given field there are people who do it for a living and others who only have to deal with it on occasion. You can't expect those who buy a house a couple times in their life to be experts in the field like the bankers who do it for a living, just the same as you can't expect someone to go to court and defend themselves against someone employing a lawyer whose job is to win cases.

 

It's a lot like car repairs. Would you expect every single person to know as much about their car as an auto mechanic? Should each person be called irresponsible and an idiot if they took their car to a mechanic and the mechanic damaged their car in the long run? Should they have known the problem with their car and been able to figure out that the mechanic did something wrong even if it wasn't immediately apparent? There needs to be some protection against professionals duping the lay in a given field. Not everybody can be an expert in everything.

 

EDIT: And when I talk about people being duped, I'm talking about banks telling you you can afford something two to three times what you really can.  I bought a house for less than half of what the bank told me I could afford, and still wouldn't have been able to afford it had I not gotten a better job after I bought the house.  I had run all the calculations and thought I could afford it, and even though i knew the bank was full of crap, when they throw these outrageously high numbers atg you and tell you they won't sell you something you can't afford, etc., etc., even when you know they're full of it deep down it makes you feel a little better that your own (seemingly conservative) estimate is fine.

bottom line is personal responsibility.

 

I completely agree that responsibility is the bottom line, and buying without a solid plan of how to pay for the house was insane, though to some degree I understand how people get in over their heads with a house. When I got my house a couple years ago, my wife and I had done a pretty detailed budget of what we felt we could afford before even seriously looking at houses, (we didn't even pay attention to what the bank said we qualified for) but after moving in we found that our budget was a bit off. We hadn't counted on a second kid coming so soon, or that the house had been built without any insulation in the walls. Between heating the place, and buying all kinds of crap for the kid on the way, and a little DIY work to get some insulation in, our finances were really tight for a while. Fortunately we'd left a little wiggle room in our budget, or we could have ended up in real trouble. Also since we put down over 30% when we bought the place we were able to refinance to bring our payments down even further this spring.

bottom line is personal responsibility.  Why would anyone sign a loan, knowing that they dont have the income to support the payments.  That is if they have income.  Common sense should tell you that if you don't have a job, ie. income, you can't pay a loan or credit card debt.

 

I agree that a lack of personal responsibility is the cause of a lot of the current problems.  However, I think you severely downplay the role (and fault of) the greed of banks played in causing this crisis.

 

In any given field there are people who do it for a living and others who only have to deal with it on occasion.  You can't expect those who buy a house a couple times in their life to be experts in the field like the bankers who do it for a living, just the same as you can't expect someone to go to court and defend themselves against someone employing a lawyer whose job is to win cases.

 

It's a lot like car repairs.  Would you expect every single person to know as much about their car as an auto mechanic?  Should each person be called irresponsible and an idiot if they took their car to a mechanic and the mechanic damaged their car in the long run?  Should they have known the problem with their car and been able to figure out that the mechanic did something wrong even if it wasn't immediately apparent?  There needs to be some protection against professionals duping the lay in a given field.  Not everybody can be an expert in everything.

 

EDIT: And when I talk about people being duped, I'm talking about banks telling you you can afford something two to three times what you really can.  I bought a house for less than half of what the bank told me I could afford, and still wouldn't have been able to afford it had I not gotten a better job after I bought the house.  I had run all the calculations and thought I could afford it, and even though i knew the bank was full of crap, when they throw these outrageously high numbers atg you and tell you they won't sell you something you can't afford, etc., etc., even when you know they're full of it deep down it makes you feel a little better that your own (seemingly conservative) estimate is fine.

 

I'm not downplaying it, but common sense should tell a person, what they can and cannot afford.   

 

Now I do agree that there needs to be punishment for those who have purposely deceived consumers.

 

But as I stated earlier, if you DO NOT HAVE A JOB (and you're not independently wealthy) how can you walk into a bank and seriously expect to pay a mortgage?

But as I stated earlier, if you DO NOT HAVE A JOB (and you're not independently wealthy) how can you walk into a bank and seriously expect to pay a mortgage?

 

It's not about not having a job. Those aren't the people I'm talking about. I'm talking about the people that have a job and aren't perfectly sure what mortgage they can afford. It's even harder to guess whether you are being conservative enough on your estimate when the bank is giving you outrageous numbers to compare against (especially before it was widely publicized how unscrupulous they were being).

 

The "no job mortagees" are used to justify all of this the same way "welfare queens" were used to justify bashing public assistance. They are a small minority of people who are in trouble with their mortgages. Of course some mortgagees were dishonest, ignorant, or just flat out stupid signing these mortgages. But there were also intelligent people who really thought they could afford the mortgage (especially first-time home buyers) that were duped into buying a little more than they really could afford, especially if some unexpected expenses came their way. The banks know the most about what people can and cannot realistically afford, much moreso than people who have never owned a home before. That is why I place most of the blame on them.

The "no job mortagees" are used to justify all of this the same way "welfare queens" were used to justify bashing public assistance. They are a small minority of people who are in trouble with their mortgages.

 

True, and I like your illustration.

But as I stated earlier, if you DO NOT HAVE A JOB (and you're not independently wealthy) how can you walk into a bank and seriously expect to pay a mortgage?

 

It's not about not having a job.  Those aren't the people I'm talking about.  I'm talking about the people that have a job and aren't perfectly sure what mortgage they can afford.  It's even harder to guess whether you are being conservative enough on your estimate when the bank is giving you outrageous numbers to compare against (especially before it was widely publicized how unscrupulous they were being).

 

The "no job mortagees" are used to justify all of this the same way "welfare queens" were used to justify bashing public assistance.  They are a small minority of people who are in trouble with their mortgages.  Of course some mortgagees were dishonest, ignorant, or just flat out stupid signing these mortgages.  But there were also intelligent people who really thought they could afford the mortgage (especially first-time home buyers) that were duped into buying a little more than they really could afford, especially if some unexpected expenses came their way.  The banks know the most about what people can and cannot realistically afford, much moreso than people who have never owned a home before.  That is why I place most of the blame on them.

 

So you mean to tell me that none of the above people, had/have the "bigger, better, new" bug?  If they were first time home buyers, its possible they had no research or guidance from a family member.

 

I just can't get on the "blame the bank for it all" bandwagon.

I don't blame them for it all. I blame them for a lot of it though.

 

Is everything all or nothing with you? I never said nobody had the bigger is better bug. I never said all of the blame was on the banks.

 

I just can't get on the "all people losing their houses were greedy idiots" bandwagon.

 

EDIT: And with this post I will retire from this thread for the day.  I am in a super-pissy mood and I am sure I will unnecessarily offend someone with my tone if I post any longer.  I still stand by the principle of what I have posted, however.

It actually looks like mortgage brokers were the most manipulative, because they were often able to parlay their connections to prospective home-owners into mortgages that maximized their profit to the detriment of the house-buyer. This seems to have been especially true amongst minorities and the white working-class. They were trusted members of the community and took advantage of the trust and the perception of knowledge to screw folks over.

 

Banks made some mistakes, but the class difference usually meant they were the bad-actor in the market - there are exceptions - WaMu and the like.

I just can't get on the "all people losing their houses were greedy idiots" bandwagon.

 

I'll jump on the "all people losing their houses were greedy idiots" bandwagon, but add that banks that are foreclosing like there's no tomorrow are run by greedy idiots also.

I don't blame them for it all.  I blame them for a lot of it though.

 

Is everything all or nothing with you?  I never said nobody had the bigger is better bug.  I never said all of the blame was on the banks.

 

I just can't get on the "all people losing their houses were greedy idiots" bandwagon.

 

EDIT: And with this post I will retire from this thread for the day.  I am in a super-pissy mood and I am sure I will unnecessarily offend someone with my tone if I post any longer.  I still stand by the principle of what I have posted, however.

 

OH please. We all have different points of view and non of us should take it personal.

 

I think we can agree it's a combination of the major points we've both listed, but I feel like some people wanted to buy, didn't read or understand what they were signing, bit off more than they could chew.

 

As I've said before, many could have bought homes in the city for less, upgraded and added things and had a much more manageable mortgage in the event any financial issues.

 

Oh....and they make pill for those "super-pissy" moods.  Check aisle 2.

That's a good paralell jam40jeff.  I know the buyer should beware and personal responsibility is obviously important but nobody is even being taught how to balance their check book or how to safely and properly use credit cards, never mind how to buy a house or deal with banks and financing.  Most people really do not know any better and go to the bank or realtor, bring all the documents and believe them when they say they're eligible for X amount of loan.  It makes no sense to a person of average intelligence why a bank would want to lend people more than they could reasonably afford to pay back because they assume the banks really want to get their money back and are the "authorities" on how much they can afford.  There are a LOT of really not intelligent people out there who put their faith in institutions like this. 

 

I mean, look at all the seemingly intelligent people who were ripped off by Bernie Madoff, who "should have known better."  People from old money, people who grew up knowing something about investments and savings, and they were all taken because they trusted the wrong people and didn't do the necessary research, because the payoff was attractive and seemed a guarantee when they talked to others already involved.  At some point, there has to be shared responsibility by those doing the lending.

This is a wonderful and tragic piece--tragic in the greek / tragic hero sense

That's a good paralell jam40jeff.  I know the buyer should beware and personal responsibility is obviously important but nobody is even being taught how to balance their check book or how to safely and properly use credit cards, never mind how to buy a house or deal with banks and financing.  Most people really do not know any better and go to the bank or realtor, bring all the documents and believe them when they say they're eligible for X amount of loan.  It makes no sense to a person of average intelligence why a bank would want to lend people more than they could reasonably afford to pay back because they assume the banks really want to get their money back and are the "authorities" on how much they can afford.  There are a LOT of really not intelligent people out there who put their faith in institutions like this. 

 

I mean, look at all the seemingly intelligent people who were ripped off by Bernie Madoff, who "should have known better."  People from old money, people who grew up knowing something about investments and savings, and they were all taken because they trusted the wrong people and didn't do the necessary research, because the payoff was attractive and seemed a guarantee when they talked to others already involved.  At some point, there has to be shared responsibility by those doing the lending.

 

I couldn't agree more!!

In fact, I think they are just starting to talk about things like how to use credit cards responsibly and responsible spending, and I still think the media is getting it mostly wrong.  It's not about the external, small band-aid things like cutting back on your dry cleaning or how many fresh flowers you buy, it's about making a budget and figuring out what's coming in and what's going out each month and starting with the fixed expenses, then figuring out what's extraneous above that. And if the fixed isn't working and more is required to go out than is coming in, altering your situation even if it's uncomfortable - getting rid of a car or cars, going back to an apartment, taking 2nd jobs, whatever.  Nobody is talking about that, they're just spewing about switching to a cheaper monthly plan for your cell phone or whatever and it makes me want to pull my hair out.

OK, so I lied about no more posting (much to the chagrin of the mods).  Thanks, MTS, Aisle 2 cured my pissiness.  (By the way, I was attempting to stop as I could feel the frustration of the day building, it had very little to do with this trhead but other things going on at work, so no I am not taking anything personal here.)

 

It makes no sense to a person of average intelligence why a bank would want to lend people more than they could reasonably afford to pay back because they assume the banks really want to get their money back and are the "authorities" on how much they can afford. There are a LOT of really not intelligent people out there who put their faith in institutions like this.

 

I would take it even further and say that some pretty intelligent people were duped, especially people that had never lived on their own, or never owned a house before, or both.  Many of these people didn't buy a house for what the bank told them.  They may have bought a house for half what the bank told them, when in reality the bank gave them a value 3 times what they can afford.  Trusting the number the bank tells you is one thing (and probably not the best idea, although I'd hesitate to call someone stupid for believing the lender), but believeing YOUR ESTIMATES when they come out to a value half of what the bank told you is hardly stupid.  So a lender tells you you can afford a $200k house.  You buy a $100k house and really can only afford $80k because you didn't anticipate medical expenses, house repairs, how much you'll spend to maintain the house, etc.  Add to that that many of these people may not be able to find a better job or may have lost their job altogether, and that they can't refinance because the value of their house has plummeted below the principal they owe on the home (or at least low enough that the bank won't refinance) and you can see how a lot of honest, intelligent people may have gotten into trouble.

 

I will reiterate that there were of course some greedy people, and they deserve blame.  There were most assuredly a good amount of stupid people as well, and they deserve some blame.  But in every case, the banks KNEW WHAT THEY WERE DOING to these people, regardless of whether the people realized it or not.  That is what makes them culpable in my book.  Here's an example:  If someone tricks a person who is mentally retarded into doing something most people would know not to do, who would you blame?  The same can be said here.  Of course people with IQs well above 60 were duped, but the point is that the situation was difficult to plan for and comprehend, even for some fairly intelligent people.  Is it right to blame people who didn't understand what they were getting into when they were being pushed by people who DID understand what they were pushing these people into and did it anyway?

As I've said before, many could have bought homes in the city for less, upgraded and added things and had a much more manageable mortgage in the event any financial issues.

 

I hate the exurbs as much as you, but the foreclosure problem is both in cities and the suburbs.  It is not just because a bunch of people bought huge McMansions they couldn't afford.  Besides, not everyone can afford a fixxer-upper.  You may get a lower price on the home, but there are usually serious issues which need to be corrected before the house is livable and violation-free.  For someone that has just put a lot of their purchasing power into obtaining a home loan, how are they supposed to come up with the capital to fix the house up?

In fact, I think they are just starting to talk about things like how to use credit cards responsibly and responsible spending, and I still think the media is getting it mostly wrong.  It's not about the external, small band-aid things like cutting back on your dry cleaning or how many fresh flowers you buy, it's about making a budget and figuring out what's coming in and what's going out each month and starting with the fixed expenses, then figuring out what's extraneous above that. And if the fixed isn't working and more is required to go out than is coming in, altering your situation even if it's uncomfortable - getting rid of a car or cars, going back to an apartment, taking 2nd jobs, whatever. Nobody is talking about that, they're just spewing about switching to a cheaper monthly plan for your cell phone or whatever and it makes me want to pull my hair out.

AMEN!!!  Preach on Sistah RnR!!!  Preach!!

 

From this poll, you can see many people here on UrbanOhio don't have a budget.

http://www.urbanohio.com/forum2/index.php/topic,16034.0.html

 

If someone came to you or you went to the bank, in 30 minutes, how many of you know the following for the year 2007:

• Net income
  
• Housing Cost
  
• total utilities payment (all forms)
  
• total credit debt.
  
• total Car cost
  
• Total insurance cost (all forms)
  
• total medical cost
  

 

Many folks can't do that.  Lots of people need a serious course in financial responsibility and need to remember all the stuff you see in magazines, tv, movies, YOU DO NOT NEED.  This season new "it" bag, you don't need it.  That tacky house with two garage spaces in front, you don't need it!  That new car, you don't need it.  That vacation to aruba,  you don't need it.

 

OK, so I lied about no more posting (much to the chagrin of the mods).  Thanks, MTS, Aisle 2 cured my pissiness.  (By the way, I was attempting to stop as I could feel the frustration of the day building, it had very little to do with this trhead but other things going on at work, so no I am not taking anything personal here.)

 

Please, you're a level headed poster here.  Nobody takes conversations like this "personal".  I know it's hard to believe, but I too have had a few "pissy-bitch" moments, so it's understandable.  :wink2:

 

 

Besides, not everyone can afford a fixxer-upper.  You may get a lower price on the home, but there are usually serious issues which need to be corrected before the house is livable and violation-free.  For someone that has just put a lot of their purchasing power into obtaining a home loan, how are they supposed to come up with the capital to fix the house up?

 

How true! Even if you have it inspected by an experienced contractor and get an estimate of costs before you place an offer on the house, you're almost certain to get blindsided once work starts and unanticipated problems are found. Whatever estimate the contractor says is worst-case, double it; even then, you shouldn't be surprised when that falls short. I've seen projects abadoned after two or three years of struggle by buyers who were reasonably experienced and went in with their eyes open.

As a wet behind the ears youth I laughed at all my friends that ran out while still in college to buy their first home so they could flip flip flip it in a couple of years. Now they are all stuck with horribly overpriced loans that they will be paying off for the rest or their working lives. They laughed at me then for assuming that house prices would ever decline.

 

Then again I was the guy who bought the relatively fuel efficient KIA when gas was 1.97 a gallon. My rationale was "this car will last me until they stop making gas powered automobles". You should have seen the crazy looks I got for that.

 

But what bothers me is that most people have no sort of rainy day fund for themselves. Even worse, people have a credit card for such emergencies. If I became unemployed today, I could easily go for five or so months without a job before it started really hurting my lifestyle. I'm happy being the grumpy old meiser who lives below his means.

 

 

Besides, not everyone can afford a fixxer-upper.  You may get a lower price on the home, but there are usually serious issues which need to be corrected before the house is livable and violation-free.  For someone that has just put a lot of their purchasing power into obtaining a home loan, how are they supposed to come up with the capital to fix the house up?

 

How true! Even if you have it inspected by an experienced contractor and get an estimate of costs before you place an offer on the house, you're almost certain to get blindsided once work starts and unanticipated problems are found. Whatever estimate the contractor says is worst-case, double it; even then, you shouldn't be surprised when that falls short. I've seen projects abadoned after two or three years of struggle by buyers who were reasonably experienced and went in with their eyes open.

 

Thats exactly what I learned.  Also, never trust the banks (or current home owners) appraiser or home inspector.  He/She should be independent.

 

Make sure they are listed on the American Society of Home Inspectors and have errors and omissions insurance!  The person should specialize in the type of home you're buying. (ex. if you're buying a historic home, you don't want a new build inspector)

As a wet behind the ears youth I laughed at all my friends that ran out while still in college to buy their first home so they could flip flip flip it in a couple of years. Now they are all stuck with horribly overpriced loans that they will be paying off for the rest or their working lives. They laughed at me then for assuming that house prices would ever decline.

 

Then again I was the guy who bought the relatively fuel efficient KIA when gas was 1.97 a gallon. My rationale was "this car will last me until they stop making gas powered automobles". You should have seen the crazy looks I got for that.

 

But what bothers me is that most people have no sort of rainy day fund for themselves. Even worse, people have a credit card for such emergencies. If I became unemployed today, I could easily go for five or so months without a job before it started really hurting my lifestyle. I'm happy being the grumpy old meiser who lives below his means.

 

 

 

Ding...ding..ding.  If you are a home owner, you should have accumulated enough savings in order to pay your major fixed bills, utilities and groceries for 6/9 months.