Now they think housing bust will linger to mid 2009...

#51
#51
**ORANGEBLOOD** said:
ARM's should be against the law. It is a way for banks to prey on the uneducated home buyer.
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How many other things do these "uneducated home buyers" purchase without shopping? Did they just go out and buy a new Mercedes or a 108" HDTV even though they couldn't afford it? No, I would bet 99% of them shopped around to get the best pricing for their budget. The fact that they fail to educate themselves on the biggest purchase of their lives is not anyone else's fault.
 
#52
#52
These are all good points. This subject can be argued back and forth all day. But, people are told their whole life, " smoking cigarettes are bad for you", and what I am saying is that personal finance doesnt come that easy for alot of people. Trust me I see it almost everyday. Its evident when you hear that the average American family carries $7000 in credit card debt. I feel the ARM is a way to prey on desperate home buyers. Should they educate themselfs and know better? yes. Are they desperate because they are buying a home outside their price rage? Yes. But the warnings of how bad these loans can turn are not made clear to the uneducated buyer. For me using the cigarette arguement is not severe enough. This is more like crack.
 
#53
#53
**ORANGEBLOOD** said:
Should they educate themselfs and know better? yes. Are they desperate because they are buying a home outside their price rage? Yes. But the warnings of how bad these loans can turn are not made clear to the uneducated buyer.
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I can't agree with that. First, when did "buying a house outside their price range" become smart? Look at your paycheck and then look at your bills. If it does not add up then you don't buy.

You are also given the opportunity to read every document of your loan and it spells out your future payments. Don't understand then ask questions. The fact people can just sign for a $250k purchase without reading about it is beyond my comprehension.

Ignorance is no excuse and gives responsible people no incentive. They will learn a tough lesson but it will be valuable in the future. Sorry but I don't have much sympathy to people who fail when they are given the info to succeed.
 
#54
#54
**ORANGEBLOOD** said:
The problem is, you are in the minority. In that you are educated enough to handle your arm. The fact is arm's were created by the banks to make them huge chunks of money. The bank will put up with one customer (you) who makes his arm work for him, while there are mass amounts of home owners going bankrupt solely because of these mortgages. It IS WITHOUT A DOUBT THE NUMBER ONE REASON FOR FORECLOSER IN AMERICA. This problem is massive, and could be discussed on pages and pages in this thread. I just feel that a product that causes so much financial distress in America (and always has) should be done away with. The average home buyer would do whatever it takes to get them in the home of their dreams. If that banker says " Why dont we try this for a year and see how it works?" Joe Homeowner is going to jump all over it. Homeowners for the most part never think about worse case scenarios, hense the arm's and all the foreclosers.

JMO

Dont mean to get on a soapbox here, this just happens to be my kinda topic.:)
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On a certain level, I can understand your frustration with how these ARM's take advantage of dumb people. But That is not the job of the gov't. There are plenty of people that should know better that are also caught up in this mess... not because of ignorance but because of greed. Why would anybody take an adjustable rate when the interest rates are already at all time lows? They have nowhere to go but up. You just had a lot of people that figured they could save a few hundred dollars per month by getting an adjustable rate for 5 years or so and then turn around and refinance.
 
#57
#57
call me simple, but if I could advise the young in buying a home, I would tell them to strap on all the house they can stretch to afford, even using creative finance if necessary. certainly they need to be aware of the risks involved, but right now the rates are low, prices are low and they should expect tremendouse appreciation very soon. It will be the largest earning asset for the vast majority and they'll be using nearly 100% bank money to earn that appreciation. By far the best way for the relatively young to build some capital. Quelling that is just senseless.

I'm not advocating senseless risk, but it can be an enormous boon in 5 years to folks who are willing to live a little tight for a few years to get that better house in a better locale.
 
#58
#58
Like i said this can be arued both ways all day. You all have very good points, some that I agree with completely. I do think that if you guys had to look at some of these people face to face, that are in very serious financial trouble. Young families that, alot of times are in their first home, couples with kids, you might change your mind about not having simpathy for the people that made bad decisions. This is the type of decision that changes a family forever. The people are blind to the fact that one greedy moment can change their families lives forever. These are not criminals that decided to rob a bank or kill someone, they are husbands and wives that want to give their children nice places to live, and a home to be proud of. They are being held accountable for their actions, and are paying the ultimate price for their greed and bad decisions.
 
#59
#59
but we generally make poor macro decisions when we start look at individual cases for perspective. It's the problem with our welfare situation today. we make decisions based upon individual plight and that only exacerbates the problem for those to follow. it's reckless decision making IMO.
 
#60
#60
BigPapaVol said:
call me simple, but if I could advise the young in buying a home, I would tell them to strap on all the house they can stretch to afford, even using creative finance if necessary.
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may not be the best advice in today's market. I saw lots of people make bundles on money a few years ago but that's pretty much done now.

**ORANGEBLOOD** said:
I do think that if you guys had to look at some of these people face to face, that are in very serious financial trouble. Young families that, alot of times are in their first home, couples with kids, you might change your mind about not having simpathy for the people that made bad decisions.
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I would look them in the face and tell them I did exactly what they couldn't do. While I understand their position, I made my first house one I could afford and made it my home. I did not over-extend myself and risk my family's financial future on hardwood floors, crown moulding and granite countertops.
 
#61
#61
utvolpj said:
may not be the best advice in today's market. I saw lots of people make bundles on money a few years ago but that's pretty much done now.



I would look them in the face and tell them I did exactly what they couldn't do. While I understand their position, I made my first house one I could afford and made it my home. I did not over-extend myself and risk my family's financial future on hardwood floors, crown moulding and granite countertops.
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So did I, but you have to understand this problem is not about you or I. It is however, about a large part of the country. Like I said personal finance should be a manditory class in high school.
 
#62
#62
**ORANGEBLOOD** said:
[/b]
So did I, but you have to understand this problem is not about you or I. It is however, about a large part of the country. Like I said personal finance should be a manditory class in high school.
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You don't get it, of course it's about every American citizen. And no it's not a large part of the country affected but a small %. Who do you think pays for programs like these?

I'll say it again, until we stop the ridiculous entitlement mentality in this country there will be no need for personal responsibility. Why does anyone need finance classes when the gov't will just bail you out?

This issue wasn't caused by bad finance skills, it was caused by bad math skills. Subtract your bills from your net pay and, if it comes out negative, you are in trouble. Although it's not surprising that the gov't is so set on helping these people since they don't understand that concept either.
 
#63
#63
**ORANGEBLOOD** said:
The problem is, you are in the minority. In that you are educated enough to handle your arm. The fact is arm's were created by the banks to make them huge chunks of money. The bank will put up with one customer (you) who makes his arm work for him, while there are mass amounts of home owners going bankrupt solely because of these mortgages. It IS WITHOUT A DOUBT THE NUMBER ONE REASON FOR FORECLOSER IN AMERICA. This problem is massive, and could be discussed on pages and pages in this thread. I just feel that a product that causes so much financial distress in America (and always has) should be done away with. The average home buyer would do whatever it takes to get them in the home of their dreams. If that banker says " Why dont we try this for a year and see how it works?" Joe Homeowner is going to jump all over it. Homeowners for the most part never think about worse case scenarios, hense the arm's and all the foreclosers.

JMO

Dont mean to get on a soapbox here, this just happens to be my kinda topic.:)
Click to expand...

I still have some parts of this thread to read, but this post strikes me.

I am a lender, and I can promise you, it makes NO, I repeat, ZERO sense to make loans where I'll "put up" with one person paying it right while everyone else goes bankrupt. Saying that leads me to believe that you have NO idea how much money we, as the lender, lose when someone files a 7 and walks away from a house.

Let's say we loan 80k on a 100k home. 80% LTV, a very safe number. If Joe Blow walks away from his 80k loan, 9 times out of 10, we are going to get, at best, 60k out of that home. That's a direct $20k loss, and that doesn't include any loss of projected interest earnings that we have projected and slapped on the books already.

There are many reasons for the market problems, but to say lenders use ARMs to prey on uneducated people is just an ignorant statement. I can assure you, telling someone to get out of their home not knowing where their children will sleep once they do is a terribly hard thing to do, and not something ANY lender uses ANY product to try and do.
 
#64
#64
**ORANGEBLOOD** said:
I agree with most of that. I do feel like a part of these borrowers are never given a worse case projection. Which helps tremendously in their decision making.
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They are given a worst case projection. There is a section in EVERY SINGLE Note and Disclosure statement in the world that reads something like this:

"I agree to the terms and conditions of the loan set forth. I further understand that my failure to repay this loan could result in, but not limited to, repossession, foreclosure and litigation."

And right below that, is where you sign.

Now, if you want to say it's fine or small print, then that goes back to the consumer not doing their job and reading the paperwork. The lender fulfills their legal responsibility by putting on the paperwork, he/she is not obligated to say it orally, even though I do.
 
#65
#65
**ORANGEBLOOD** said:
I do think that if you guys had to look at some of these people face to face, that are in very serious financial trouble. Young families that, alot of times are in their first home, couples with kids, you might change your mind about not having simpathy for the people that made bad decisions.
Click to expand...

In my years in finance so far, I have done the foreclosure on about 10-15 homes, directly. Where I personally went to peoples homes and changed the locks with their goods still inside.

It sucks, no other way to say it, I hate it for them, which is why I say strongly, there is nothing that would drive me to purposely put someone in that position.
 
#66
#66
If you cant afford a house then dont buy it. I dont live in a house for that reason, granted I rent and I've heard the stories of throwing my money away. I have two kids and they are in a great school system where I live. I wouldn't even know how to begin in terms of buying a house. I would never buy on an adjustable interest that is for sure.
 
#67
#67
Renting is not always a bad option. Sometimes you have to take into account taxes and maintenance and see if its worth it.

In Monterey, your an idiot if you buy a house.
 
#68
#68
utvolpj said:
may not be the best advice in today's market. I saw lots of people make bundles on money a few years ago but that's pretty much done now.
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but it's not done. the current retrench has made it reality again. I'm not talking making bundles, I'm talking about getting large earning asset that grows geometrically and use the lenders money to do so. I'm not advocating making poor decisions, but there aren't many other ways to use someone else's cash to earn your own.
 
#69
#69
BigPapaVol said:
but it's not done. the current retrench has made it reality again. I'm not talking making bundles, I'm talking about getting large earning asset that grows geometrically and use the lenders money to do so. I'm not advocating making poor decisions, but there aren't many other ways to use someone else's cash to earn your own.
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Rental Property:)
 
#70
#70
i have a load of that too, but it's the same principal. commercial rental has been the best for me. we're using lenders to provide the earning capital.
 
#72
#72
**ORANGEBLOOD** said:
I dont have any commercial, but I do have several houses. Its a bit of a headache at times but well worth it.
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My landlords have two other rental properties, they have to be making some money, property tax is high around here. I know back in 99 my brother's property tax was 8,000.
 
#73
#73
GoVols817 said:
I still have some parts of this thread to read, but this post strikes me.

I am a lender, and I can promise you, it makes NO, I repeat, ZERO sense to make loans where I'll "put up" with one person paying it right while everyone else goes bankrupt. Saying that leads me to believe that you have NO idea how much money we, as the lender, lose when someone files a 7 and walks away from a house.

Let's say we loan 80k on a 100k home. 80% LTV, a very safe number. If Joe Blow walks away from his 80k loan, 9 times out of 10, we are going to get, at best, 60k out of that home. That's a direct $20k loss, and that doesn't include any loss of projected interest earnings that we have projected and slapped on the books already.

There are many reasons for the market problems, but to say lenders use ARMs to prey on uneducated people is just an ignorant statement. I can assure you, telling someone to get out of their home not knowing where their children will sleep once they do is a terribly hard thing to do, and not something ANY lender uses ANY product to try and do.
Click to expand...

I believe that will actually be a 40k loss spread over several lenders. Too many people are doing 80/20 or 80/10/10 loans and roll the loan costs into the mortgage or the 2nd. It's not just the ARM's that are causing problems, it's using an ARM with one or more seconds to finance 100% or more of the purchase price leaving absolutely no wiggle room.
 
#74
#74
KentheOrange said:
I believe that will actually be a 40k loss spread over several lenders. Too many people are doing 80/20 or 80/10/10 loans and roll the loan costs into the mortgage or the 2nd. It's not just the ARM's that are causing problems, it's using an ARM with one or more seconds to finance 100% or more of the purchase price leaving absolutely no wiggle room.
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I am actually a lender who does not transfer my loans and I don't do 80/20s. We will do 90% purchase money and up to 95% refi depending on credit and circumstance. So the example I gave, like I said, is a direct $20k loss, not counting the planned earned interest.
 
#75
#75
**ORANGEBLOOD** said:
ARM's should be against the law. It is a way for banks to prey on the uneducated home buyer. Just because a homebuyer is not educated about the finance business does not mean they should be sheared by a slick talking banker. If you cant afford your mortgage on a 15 year fixed then you cant afford the house. To bad that personal finance is not a manditory class in high school. It might help alot of this country's debt problems we have today. :banghead2:
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ridiculous. most arms are fixed for 5 years. who is to say 5 years from now interest rates wont be lower than they are now. and historically the average homeowner has been far better in arms than 30 or 15 fixed. If i got a loan now i would definetly get an arm. by far the best value right now.
 
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