Friday, August 17, 2007

The dummies

"Every improvident loan requires an improvident borrower to seek and accept it." -- George Will


The news has been filled with stories about all the people who are losing their homes due to foreclosures. I guess I'm supposed to be horrified and feel sorry for them,. I'm not and I don't.

What does bother me is the idea that the Federal government is supposed to step in and bail these folk out.


Well . . . because . . . uh, it's the fault of the companies that TRICKED them into mortgages they couldn't afford.

Yep! Sure is!

Jumped right out, grabbed these people and FORCED them to move into a house, and not just any house either! Nope! It was house they knew these folk simply couldn't afford to make monthly mortgage payments on.

(Oops. I forgot the exclamation point.)

Obviously Da Kid and Herself really screwed up when they bought their home last year. Got it all bass ackwards. The dummies.

First, they worked out a monthly budget based on what they were earning. Not what they might next month (or year or decade) but what they had been and not gross but net. From that they subtracted monthly expenses such as car payments, estimated utility bills, the cost of food, etc. The balance was what they had to pay a mortgage with each month.

With that information they went to the bank they'd been dealing with (individually and later together) for several years and showing their figures to a loan officer, pre-qualified for a boring, 30-year conventional mortgage that would cover a house costing up to X amount.

To make matters even worse, The Deadly Duo only gave serious consideration to houses within that limit. Yeah, they looked a several that exceeded that amount (and by quite a bit), but those were Grins and Giggle stops, usually punctuated with the line, "How the HELL could anyone afford to pay that kind of mortgage!" once the sales agent was out of earshot.

What a mistake.

Da Kid and Herself should have bought a house they couldn't possibly afford to pay the monthly mortgage on. If they had, if the Hildabeast and her herd get their way, we'd be paying their mortgage instead of them.

The dummies.

Labels: ,


Blogger pamibe said...

We can still pay our mortgage... just not any of the other bills! LOL! Just kidding, of course, but...
In the five years we've been here, the taxes went up, homeowners insurance doubled and so did our credit card payments because the government said 'collect 8 instead of 4'.

But we still pay the bills... by the grace of God, really. We don't expect anyone to pay them for us. The government stepping in and giving us our house? Isn't that called socialism? No, thanks.
I'd rather lose my home and live in a free country that keep it and live under Hillary's rule or one of her other Socialist cronies.

JMO, of course.

3:37 PM  
Blogger Norma said...

I've blogged about this a few times recently. One couple, profiled in WSJ, continued to eat out 3 times a week and vacation at Lake Tahoe, even though they knew in 2 years their interest only loan would jump to a fixed rate. Now it has and they can't afford it and the house is worth less than 2 years ago and they have no equity. And they weren't kids!

However, I need to correct you. This is all Bush's fault. He forced them to stop renting and take out a mortgage.

3:43 PM  
Blogger GUYK said...

ARMs are okay for some..but the trick is to get a fixed as as you can even if it means paying a point or so more. Hell, if rates go down refinance again!

No, I can't feel too sorry for the lenders who are getting stung on the sub primes and ARMs nor the borrowers. SHit happens and it just happened..just hope the taxpayer don't have to bail them all out.

4:57 PM  
Blogger PJ said...

When I read those offers like, We can loan you 125 percent of the value of your house! I cringe so bad, almost to the point of nausea. And you know people fall for that ... they know, or SHOULD know, the risk of doing that. Like, if a fire consumes your house, and you get your insurance settlement, you end up owing money to the bank.

I just get so damned sick of the But--but--but it's not my FAAAULLLLLT, those mean people made me do it! mentality I could spit nails.

11:00 AM  
Blogger doyle said...

I came across two new terms today: "Stated-income loans" and "undocumented income."

"Stated-income loans allow earners without a W2 tax form to simply say, 'This is how much money I make,' without going through a long, complex documentation process.. . ."

"If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash," said Julia Wei, a real estate and mortgage lawyer at the Law Offices of Peter N. Brewer in Palo Alto.

Cash earners in Palo Alto include waiters and waitresses, day laborers, migrant workers or any other undocumented workforce.
- Palo Alto Online

"[L]enders peddled an array of unconventional loans outside the . . . traditional sphere of business. Some loans made home purchases possible for borrowers with weak credit histories or undocumented incomes." - Washington Post

Remembering all the hoops they jumped through, and now if the politicians get their way and they end up having to help pay other peoples' mortgages . . . like I said, Da Kid and Herself are dummies.

5:31 PM  
Anonymous William Oliver said...

What you've written is sound, but it's limited to folk who want to buy a house and live in it. If someone wants to *speculate* in real estate, then knowing the prudent amount is not so obvious.

I know quite a few folk who made a pretty penny buying houses, fixing them up, and flipping them. The trick there has little to do with the issues you're writing about; it has to do with timing the market. And in that sense, the mortgage companies are acting like venture capitalists.

In an entrepreneurial setting like that, certaintly the person asking for financing should have done his or her homework; but it is the nature of the entrepreneur to believe that he or she can do things even though the numbers don't look all that good. That's the risk, and that's where the reward is. In that setting, it *is* the job of the venture capitalist to throw a little bit of the cold water of reality on things.

That doesn't mean that the entrepreneur becomes a "victim" if things don't turn out, or that the venture capitalist somehow exploited anybody. But the dynamic is a little different than in the buying-a-house-to-live-in scenario.

1:43 PM  
Blogger Deborah said...

Thank you for saying what I've been thinking! I'm so tired of this victim mentality that's so pervasive these days. Such as: I borrowed money I can't possibly ever pay back so someone else has to pay it for me! Or: My house was destroyed during a hurricane and I didn't have insurance, so someone owes me a house! And from the other side: I loaned someone more money than they could ever pay back so someone has to repay me!

Why should we, the taxpayers, be expected to pay for someone else's mistakes? If my friend loses their wallet I'll be happy to help them out with groceries, gas for their car, or a few bucks to get them through to payday. But I resent taxpayer money used to bail out someone who made the decision to not buy home owners insurance and then lost the house to a fire, hurricane, or floods. Do I feel sorry for them? Yes, and I'll donate food, clothing, whatever I can to help them. I believe that's a function of society, not the government. We have to get past this idea that the government owes us anything except what is guaranteed under the Constitution. And I don't remember see home ownership anywhere in the Constitution.

11:39 AM  
Anonymous William Oliver said...

Deborah, you make a good point, but let me ask you a question.

You say that it is *your* responsibility to help someone if they are in a fix -- if *your* friend loses his or her wallet, then you'll help him or her out. That's great, and I firmly believe that charity is best done locally.

But what about the person who doesn't live next to you, and who doesn't have a friend that feels the same as you? What about the person who lives in a community that is also destitute.

Are they just shit our of luck? Do their kids starve just because they aren't lucky enough to know you?

Or do we as a society also have charitable obligations that are similar to those you observe privately?

5:15 PM  
Blogger doyle said...

If Deborah checks back I'm sure she'll reply for herself, Billo.


I don't like your word, "obligation." To me that word carries the connotation that whether I want to or not, a third party -- like government -- has assumed an authority that allows them to make me give up what is mine and require that I give it to somebody else.

It's no longer my choice or decision on who we help, in what way or if I want to help at all. It's now an obligation, a requirement that must be complied with to keep from being penalized.

As for society's "charitable obligations," they are what we as individuals make of them.

Helping a neighbor or friend in time of need, to me, is the best example of just that. It's something done not as an obligation, but because it strikes the individual as the right thing to do.

As for someone in need I don't know being SOL, I guess so.

That's, of course, assuming that I AM responsible for the hypothetical individual and situation you offered. After all, as an individual it IS my choice.

Isn't it?

(The starving kids is a really nice touch, billo. When did you start taking lessons from Ted Kennedy?)

7:22 PM  

Post a Comment

Links to this post:

Create a Link

<< Home