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Thread: It's not your money

  1. #25
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    Jun 2003
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    Post Re: It's not your money

    many bad loan officers didn't give the customers a clear choice of taking a higher rate and payment that would be fixed forever... the customers knew that their rates would be locked for only 2-3 years but didn't know the ramifications (amount of monthly payment increase) if a renewal was not available at the time of the loan converting... a few other lenders in order to make more money, strapped the borrowers with a pre payment penalty that extended 1 year longer than the fixed period of the loan... those were the worse cases and that in my opinion should be illegal... no one anticipated or could have known that the house values would have gone down and prevented these folks from refinancing into a better loan.. there are currently laws and disclosures that explain these things to the borrowers but a poor loan officer that does not do their job, can put a borrower in a position where they are not making the best decision...

    these are rare cases compared to the majority of closed loans but I've talked to enough of them to know that bad lending practices did in fact happen.... for the most part, borrowers need to do better in making better decisions... a few more specific disclosures in big bold print could have prevented these in my opinion..

  2. #26
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    Post Re: It's not your money

    Yeah, Bigeasy........and when you're in the emotional throes of buying your first home.......it's really easy for folks to just not pay close attention to details.
    I think anyone who planned on staying in their home indefinitely and yet took out an adjustable rate mortgage was just foolish. To me, the security of knowing that your interest rate is fixed is worth paying a bit more.
    I'll just bet that a lot of these first time homebuyers weren't told clearly the differences.......and were too ignorant to realize what could happen. Everyone's vision got clouded by greed.................and who really thought that the housing bubble could continue indefinitely? Talk about WANTING to believe something!

  3. #27
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    Re: It's not your money

    That's exactly my point about personal responsibility. If you are buying a home it is your obligation to become educated. There is a plethora of informaiton out there. Why is it government's job to idiot proof everything. I've purchased two homes now, one while married and one while divorced. In both cases it was my job to come to the table prepared.

    I would guess its less first time home buyers and more those that took out all their equity, or they bought into a bigger house at a variable rate.

    Don't forget, the investors that poured the funds into the credit market to allow those lower place loans also impacted this in a large way. That funding dried up when the interest rates were raised by the Fed and people couldn't keep paying. So those investors pulled their money.

    And I'm not being naieve that there shouldn't be rules. I'm just an advocate for expecting adults to act like adults. I got into huge trouble with credit card debt while in college. It was completely my fault and I got myself out of it. I learned a very valuable lesson. One that others already knew without getting into trouble.

  4. #28
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    Post Re: It's not your money

    It's not the govt.s job to "idiot-proof" everything- nobody ever claimed it was. Regulating financial institutions and lenders is not "idiot-proofing" everything.....it's just doing the minimum to keep things stable. Because in the long run, whether or not people act foolishly and are ignorant about financial details- things like this end up negatively affecting all of us.
    I agree with you that people need to be more informed.......and IMO, our schools do a terrible job educating our kids an civic and economic realities. Hopefully, most people would learn this stuff at home- but that seems to happen less and less frequently these days.
    Lots of people were told to lie about their income....and they did! There's lots of blame to go around here.....but isn't the over-riding reality that we just can't count on people or institutions to always act honestly or morally- and so we need regulation? Especially today- when the lure of greed seems to overtake much of anything else.
    It would be wonderful if every citizen was up to speed on every aspect of finance that affects their life.......and all the myriad ways that institutions and banks plan to manipulate and separate them from their money. But we don't live in that perfect world......and I still think the imperative to carefully watch and regulate these institutions is more "do-able" than expecting every consumer to be perfect.
    And here's what Investipedia has to say about it:

    "Biggest Culprit: The Lenders
    Most of the blame should be pointed at the
    mortgage originators (lenders) for creating these problems. It was the lenders who ultimately lent funds to people with poor credit and a high risk of default. (To learn more about subprime lending, see Subprime Is Often Subpar.)

    When the central banks flooded the markets with capital liquidity, it not only lowered interest rates, it also broadly depressed
    risk premiums as investors sought riskier opportunities to bolster their investment returns. At the same time, lenders found themselves with ample capital to lend and, like investors, an increased willingness to undertake additional risk to increase their investment returns."

  5. #29
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    Re: It's not your money

    customer has been paying 600 in rent gets approved for a mortgage that is 1200 per month.. due to illegal wife who now makes cash under the table cleaning houses...PARTY'S ON!!!! I've paid off my car now I've got $400 more in disposable income...PARTY'S ON!!! I had a good year in remodeling homes..I can handle a 500 increase...let's MOVE!! Party's ON!!!!

  6. #30
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    Post Re: It's not your money

    Quote Originally Posted by big easy View Post
    customer has been paying 600 in rent gets approved for a mortgage that is 1200 per month.. due to illegal wife who now makes cash under the table cleaning houses...PARTY'S ON!!!! I've paid off my car now I've got $400 more in disposable income...PARTY'S ON!!! I had a good year in remodeling homes..I can handle a 500 increase...let's MOVE!! Party's ON!!!!
    Exactly Bigeasy- WHY would any reputable lending institution give this couple a mortage with a $1200 monthly payment? You can't really blame people for wanting to own their own homes- isn't that the dream of most Americans? Every administration loves to tout its home ownership statistics. People aren't wrong just because they wanted to BELIEVE...and were encouraged, in some case, by outright lies, to believe, that they could own a home.
    The ultimate responsibility for this rests with the banks and lenders- who let greed get in the way of good business sense- that's the bottom line.

  7. #31
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    Re: It's not your money

    No, the ultimate responsibility lies in the person who AVOIDED the rules and lied to the system and took out loans the knew they couldn't repay.

    Your analogy is like saying a store deserves to be stolen because it put product out there for someone to grab.

  8. #32
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    Post Re: It's not your money

    Quote Originally Posted by MeganG View Post
    No, the ultimate responsibility lies in the person who AVOIDED the rules and lied to the system and took out loans the knew they couldn't repay.

    Your analogy is like saying a store deserves to be stolen because it put product out there for someone to grab.
    Not at all. Your analogy makes no sense......because I've never said that people who can't afford mortgages should have them. Obviously people shouldn't lie on legal papers.
    When did banks and lenders stop verifying income? When did they stop insisting that borrowers meet minimum standards of ability to pay back? When did a borrower's credit application stop being checked and verified by the ones lending the money?
    Sorry, MeganG........you just won't convince me that any of these lenders were either smart or right by somehow NOT doing these things.......things that have historically guaranteed that risk is low because those who lie will be found out.......and refused mortgages.
    And there is a lot of evidence that many of these lenders lied to applicants and encouraged them to lie as well......all to process as many mortgages as possible for maximum profit when they were re-sold. It was a RACKET. When banks held onto the mortgages they gave out- these kinds of things couldn't happen. Sure, there will always be folks who for various reasons have to foreclose or can't handle the loan- but not anything like what we're seeing today.
    To blame those who believed they could get a McMansion type mortgage on a McDonald's income......and did get them....is to just absolve these lenders of any responsibility for making bad loans.
    How can you justify that?

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