Housing foreclosures /financial mess etc

[Jim Smith]

Just watching CSPAN about this mess we are in and the experts even said its difficult to understand all the rules of financial arena. They also said that there are so many novices/inexperienced folks out there its no wonder there is a problem. It seems like somebody always wants to make it complicated rather than simple.

On a talk radio program the other day , a person who worked for one of the loan companies said when one loan company started the creative financing we all followed suit. The person also said they are good hard working people, but good hard working people still need to follow the rules that make good sense.

Also in financial jargo does anybody know what a228 is??

Thanks.

 

[TboneMan]

I think Michael Douglas said it best in the movie "Wall Street" :



The point is, ladies and gentlemen, that: Greed, for lack of a better word, is good. Greed is right; greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge — has marked the upward surge of mankind and greed, you mark my words



The finance companies (banks, S&L's, internet loan sharks) are guilty of being greedy. They wanted to make more and more money by putting more and more people into houses. Ignoring the obvious facts that some buyers were high risk or were purchasing WAY too much house for their salary level.



Home builders are greedy. Build lots of expensive houses (that they build with relatively cheap labor) and sell them for huge profits.



Real Estate agents are greedy. Need I say more.



Joe/Jane Q public home buyer were just stupid to allow all these people to take advantage of them and put them in a bad situation. If these people had done some simple math before they signed the loan documents, their situation wouldn't have been so bad. They believed the hype and sales pitches. They were greedy too. They wanted bigger and better, exceeding what they could afford.



Greed got all of them in the situation. Unfortunately, we will all now pay for it (in some way). Whether through gov. hand outs, weak dollar, roller coater stock markets, try to buy some gold jewelery for a gift :-0.

 

[Alphacowboy]

I just dont understand HOW, anyone can blame the banks, lenders, and brokers for this mess in the housing forcloser mess.



The way I see it, these people never should have gotten loans, but a couple years ago, lenders were told they HAD to give loans to people with pour credit, because they felt that they were being descrimitive to low income familys. So, the Government forced them to make these loans available to these unqualified people. So, then these people got loans for houses WAY outside thier means, then when the variable rates on thier ARMs readjusted, they were already morgaged to the hilt and couldnt pay thier bills. SO, whos fault is it? You think the banks are making money on these people? Hell no they arnt, morgage companies and banks are dropping like flies because they were forced to make bad loans that they never would have done in the first place. No one loans money to someone they pretty much know is not going to beable to pay them. You are looking a this all the wrong way, people got big eyes and decided to over extend them self so that they could have the coolest house on the block. Its NOT the lenders fault, its the buyer. The consumer is 100% at fault for getting greedy, not the lender.



The housing market on the other hand is a mess thanks to production builders. They got greedy and built WAY more homes than the market could support anyway, and flooded the supply. Now there are sooooo many homes out there, thier just isnt enough buyers, and then it all went to hell.



It will level out, let these people default and go back to renting, or a smaller home that matches thier budget! The housing market is correcting itself, and in a matter of 2 years, will be on the track back to normal. In January there will be another adjustment in the ARM loans, and will flush out the last of the over extenders, and should put a hold on the down slide. Housing prices are over enflated, and will drop some, but with time, they will go back up, just not as fast as they did in the past 10 years. Its like everything, it will correct itself... . THAT IS, if the government stays out of this. They start offering assitance to these finacially irresponsible people and this mess will only get worse. Yeah it sucks for the people going through this, BUT, they did it themselves, they need to suffer the consequences and learn from it.



I hate to say it, but how many of these forclosers also had maxed out credit cards, big auto loans, and other over extended credits? I would bet 90% of them are in this catagory... . so should that mean that its the credit card companies, car dealerships and finacings fault too???? I think not.

 

[jeepit]

and how many were just paying interest? and not even paying principal.....

 

[SHobbs]

You know something just ain't right when you buy a home say at $120k and after lets say 30 yrs. you pay back $240 or more.



Home ownership is a dream of mine, I will build my own though. I have the plans an electrician and plumber when I need that. Of course I may be nearly 50 when this happens. Single dad and single income with a daughter in college some things just have to wait. I could get into a home easily but I know better.

 

[RGardner]

The lenders were at fault in some instances, when they got over inflated appraisals on homes to be able to make the loans. But I agree most of the blame is on people who had to have more home than they needed or could afford.

 

[JLEONARD]

And I did the opposite this summer. Downsized, paid off what little was left on the old house, put a few shillings in the bank and I am now mortgage free!!Oo.

Feels good.

 

[Gene Arnold]

You could call my response, “A View from Down the Road a Piece. ” I spent nearly fifty years in the people business (I’m a retired pastor). I counseled people of all ages, married and single, wise and foolish, white collar and blue collar, wealthy and poor. You get the idea.



After watching some major “train wrecks” (beginning many years before the sub-prime crisis) I am of the opinion that some people should never even think about buying their own home. Years ago I began to counsel against it in the cases of persons of average to below average incomes who are unable to do their own maintenance and repair work. I watched some of these people who were barely able to meet their monthly payments struggle to live in a home that was falling apart around them. These cases had nothing to do with the quality of the house but with the years of neglect because they didn’t know how do the simplest tasks such as painting, fixing a leaky roof, replacing a faucet washer, etc. and couldn't afford to hire it done. Among others who should not buy their own home for the time being are those who don’t understand even the simplest principles of finances. For example, I once counseled a hard working, salt of the earth couple who had an above average income, but couldn’t understand why their bank kept bouncing their checks. When I inquired how long it had been since they had balanced their check book, they replied, “Over three years!” If a person will get some knowledge about money and credit before "taking the plunge" he will spare himself years of pain.



I was in my mid-forties when I bought my first home in 1978. Had I bought sooner I suspect I might have had a lot of trouble since I had almost no understanding of what credit really is and what risks and obligations one takes when he enters into a contract. I have to smile to myself when I hear the complaints about high interest on mortgages. In 1978 I thought I’d scored really well when I was able to get an eleven and one-half percent mortgage!:{ I had friends who paid fourteen percent.



I’ve been retired for about six years and things may have changed in some ways, but probably not by much. In my years of dealing with troubled individuals and families I met only a handful whose high school or college education had included even one course that taught them how to balance a check book, much less the facts about debt, credit, or anything whatever about financial planning. My own daughter once told me she couldn’t understand why a check had bounced when she had called the bank and asked what her balance was that day! Also, have you noticed that advertising for cars, furniture, appliances, etc. often doesn’t give the price of the item, but only gives you the monthly payment? I’ll bet that the average person can’ tell you what his total debt load is; only what his monthly payment total is.



Well, this turned out to be longer than I intended. Forgive the ramble.



Gene

 

[Alphacowboy]

Gene, your right on. I am maxed out, and probably bought more than I should have. Looking back I kind of wish I hadnt, but I know why I bought this place. I bought it because I knew if I didnt pull the trigger I was going to not only move, but lose a very viable investment. I was living with my grandparents, and remodeled the basement. My grandfather then passed away the same year I finished it. My grandmother didnt want the big house and wanted to move closer to all her friends. So, I was stuck with moving to who knows where, or buying the house. I got a heck of a deal on the place, so I just couldnt walk away. 370k for 9. 5 acres, 2300sqft house, and its also in an area that is quickly developing. In less than a year it has appreciated in value by over 100k, maybe even more. BUT, if I wasnt a handy person, and not in the construction trade, there is NO WAY I would have even thought about buying this place. It needs work, alot of it. And I think that is where alot of these people got in trouble too. They watched these shows on tv of people flipping houses, and making quick profits. Problem is, most of that work was shotty! But, people still bought the places.



Greed is a main issue with it all, but it definately isnt just greed on the bank side. Heck, banks are the ones getting royaly screwed on this deal. They are stuck with numorous homes that they cant sell for even close to what they were morgaged at.

 

[p-Bar]

We live in San Diego area , some of the highest prices in the country. My wife is in real estate licensed for over 20 yrs. not an opportunist. ARMS were creative financing as said in previous thread. The lenders were expecting everything to continue to go up and the buyer would refi in 3 or 5 years. Well that wasn't the case. These loans were also 100% financing. So where is the partnership/ commitment?. My nephew was in new home sales for 5 yrs made lots of money and sold alot of 5 yr ARMS so this isn't over yet. The 3 year ARMS are coming due now then 2 more years and the 5's come due. These are not gov. backed loans just smoke and mirrors by the lenders. P. S. my wife would NEVER suggest these loans to any of her clients.

 

[jwilliams3]

The blame starts with something called the United States Federal Reserve (which is not even a US government entity by the way).
It keeps handing the money (printing out of thin air) out and look at what you get: over inflated home and property values, a worthless U. S. Dollar and a nation about to go belly up in credit card debt ($1 Trillion outstanding).

Right now the Fed makes available/adds about $10B into circulation each day to keep the country afloat, the problem is that it has devalued the dollar down next to nothing. When you devalue the dollar/currency of this nation it hurts the nations poor, middle class etc. the most... .

Take a look around Gas is $3. 00, Diesel is $3. 50, Milk is almost $4. 00, Orange juice $4+ (per gallon)... .

Everything is ok right?

 

[daveshoe]

"Every debt will be paid,either by the borrower or the one lending the money"--C. Vernon Meyers.

If only the banks were the ones guaranteed to take it on the chin for creating this mess,the above statement would be true. The sad facts are that the bankers and lawyers made these loans knowing that they were bad from the start. They dumped most of the paper on the secondary market well before the loan resets would come due. Some of this junk is held by concerns outside the united states,but the amount still held here will probably be bailed out by the taxpayers, based on what has happened historically.

 

[bighammer]

Also in financial jargo does anybody know what a228 is??

A 2/28 is a loan for people with a not so good credit rating. Basically, it's an ARM with a 2 year fixed teaser rate. If you can pay the payments for 24 months and establish good credit, you can refinance and get a conventional loan with better terms. (the 2/28 has a significant adjustment after 2 years and typically adjusts every 6 months.

Late on a payment, or forget to refinance and things get tough to get out of.

 

[Missouri Mule]

Sub prime loans(mortgage) hurt a lot of people and people buying homes over their budget doesn't help either.

Seems to me a fix rate mortgage would be better, you can always refinance if interest rates go down.