Vent: Bailing out mortgage holders getting out of hand?

[teton]

<start vent>I must not have been fully awake this morning. On Good Morning America, they did a spot on a woman who wasn't making her mortgage payments. The bank 'adjusted' her mortgage from 7% to 4.8% so she could afford it. Can I pick out a house I want and then ask the bank to charge me the interest rate I can afford? I think it's a shame that people are losing their homes, but it's happening to a lot of them because they made poor decisions. I've been living in a cracker box the last eight years because it was what I could afford. I guess I should've over extended myself to get the home I wanted so I could get bailed out now. <end vent>

[Anonymous]

I hear ya, and I share your frustration.  The easy credit and housing price run-up that resulted have kept me renting for the past 6 years in Southern California by keeping housing prices out of reach.  Even making almost $100k/year I couldn't afford to buy anything reasonably close to work that I could tolerate before the "crash" (correction, I call it).  Now, I might finally be able to buy something decent for less than I can rent it, *if* I find a good deal on a short sale or REO. However, I'm hesitant to blame home owners in general.  I'm sure many of them used poor judgment or failed to do due diligence on such a huge financial decision, but I think a lot of them also got sucked into a market gone wild or were lied to or manipulated by unscrupulous lenders.

[Anonymous]

Amen!

I want a house.....I was living in Las Vegas during the boom from '99 to '08 and "could" have bought me a cracker box for $350K and would have qualified! I knew better and didn't do it, when I moved away in August those same houses for $350K weren't even selling for $180K....

Any how I have found the perfect house in Austin, TX, but can't get the loan because those who took advantage have killed my chances.....

My DP is 5%, my credit scores are in my sig and I can't get someone to loan me $150k w/ a $50K per year salary!!!!!!!

Message Edited by 1111mel on 10-09-2008 10:42 PM

[Anonymous]

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@Anonymous wrote:

Any how I have found the perfect house in Austin, TX, but can't get the loan because those who took advantage have killed my chances.....

My DP is 5%, my credit scores are in my sig and I can't get someone to loan me $150k w/ a $50K per year salary!!!!!!!

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Yikes. What reason(s) do they give?  I hope to be in a similar position next year and thought I'd sail through after seeing what other folks are getting approved with. Maybe not..

Okay, back to the topic.. It is hard for me to see people getting rewarded for making stupid decisions. I think stupid decisions were made by buyers and lenders and now both are getting a little helping hand. I hope we learned something so we don't have to go down this road again in the future. I also think the market needed this correction in some places and the more we interfere, the longer we draw out the consequences. On the other hand, if no one works around these people and their mistakes the rest of us will still be hurt in the end so..

[Myhearts]

Not true about the mtg. holders getting bailed out.  I can't get help because my DH had the nerve to work some mandatory overtime and when I went to apply to for assistance with my mtg and energy bills, we were told we don't qualify because he made too much money in the last 30 days.  Ain't that a trip?  Here we are confused as to what to pay first and can't get any help.  Everyone who got a new home did not go into the deal with their eyes wide open.  Builders sales reps did not give all the info we needed and the lenders they dealt with had all kinds of prgrms to put you into that would help you qualify and get the loan and incentives.  They did not help and didn't tell the whole truth, so in a way, we were set up.  That bailout money is not for every homeowner.  You have to be under a certain income for your family size to get help and for a family of 5 with 2 kids in college and one income, you can only make $4200/mo and we went over.

Hearts

[Anonymous]

I think we need to blame the mortgage companies who were giving people loans.  People do make bad choices, but you can't just blame the home owners.

My neighbor just lost her home to foreclosure.  Her husband was ill and from day one she called the mortgage company to work with her and they refused.  She even got 3 jobs to try to save the house, but didn't help.  She is now a widow with 2 kids trying to find a place to live.  So what bad choice did she make?

[DallasLoanGuy]

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@Anonymous wrote:

Amen!

I want a house.....I was living in Las Vegas during the boom from '99 to '08 and "could" have bought me a cracker box for $350K and would have qualified! I knew better and didn't do it, when I moved away in August those same houses for $350K weren't even selling for $180K....

Any how I have found the perfect house in Austin, TX, but can't get the loan because those who took advantage have killed my chances.....

My DP is 5%, my credit scores are in my sig and I can't get someone to loan me $150k w/ a $50K per year salary!!!!!!!

Message Edited by 1111mel on 10-09-2008 10:42 PM

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you arent telling the whole story

lots of debt? self employed?

your scenario is a slam dunk on the face of it.

 

 

[Anonymous]

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@Anonymous wrote:

So what bad choice did she make?

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I guess it all comes down to how you define "buying within your means".  In my book, that's buying small enough that you can afford to make the payments under some reasonably bad-case scenarios (temporary loss of job, economy tanking, etc), and have enough money left over for life insurance on the "breadwinner" to cover the mortgage in case of the true worst-case scenario (death of the breadwinner).  That's why I haven't bought yet.  It's difficult/unpleasant/unpopular to point fingers at someone who has suffered such painful and terrible experiences and say "it's your own fault", but the situation could have been avoided by proper financial/estate planning.  The problem is, it's human nature not to want to think about (and plan for) the worst-case scenarios.

[edited to add quote and fix typo]

Message Edited by BobSki778 on 10-10-2008 10:10 AM

Message Edited by BobSki778 on 10-10-2008 04:32 PM

[teton]

I do feel for these people losing their homes. My cousin lost her home earlier this year because of an ARM that put her payments out of reach. Can you see my point, though? I am living in 700 square feet because that was what I could afford eight years ago. I would like to buy something bigger. At my current income and the current interest rate, I can't. If I was offered the same 4.8% as the woman in the GMA story, it would make all the difference in the world. 

When you buy a house, doesn't the bank tell you how much your payments are going to be? The houses I am interested in would all cost me about $1200 a month because of the high property taxes in this area. That's about half of my take home pay. It's obvious to me that I can't afford that. I don't need anyone at the bank to tell me that. 

I don't know what your circumstances are, myhearts, but if people are losing their homes because of job loss, illness, or other things beyond their control, I'm all for helping them out. The same thing could happen to any of us at any time. If people are losing their homes because they bought a house they couldn't afford, I have much less sympathy. I still think it sucks that someone is losing their home, and I admit that if I was losing my home and the bank offered to lower my interest rate, I would jump on the chance. However, the fact that I have to pay over 6% interest to buy a home and someone else only pays 4.8% because they got themselves into financial difficulty ticks me off.

The lenders ARE a big part of the problem. I've heard of them falsifying documents to get people approved. However, can't most people look at their budget and know whether or not they can afford to buy something? 

[Anonymous]

I think lenders tell you what your initial payment is, but for an ARM, they don't tell you what all of the possible scenarios are.  People can look at their budget and determine what they can afford in terms of a monthly payment, but most rely on the lender to tell them how much house they can buy for that monthly payment.  What we probably need are stricter rules about disclosure for ARMs (including strongly worded statements such as "real estate markets are volatile and not guaranteed to increase - you may not be able to refinance to avoid a rate/payment increase, which may result in foreclosure if you are unable to make the higher payment" and such), so that people can really see what their payments might become and make more informed decisions about the risk.  Things like interest-only loans and negative amortization loans should probably be highly regulated, since they basically guarantee that your payment will increase (even if you are able to refinance).  You're basically relying on a higher future income to handle the payments.

My hope is that there will be some sort of large scale investigation of the mortgage industry to determine what abuses may have occurred and punish those lenders accordingly, but I'm not holding my breath.

[edited to fix typo]

Message Edited by BobSki778 on 10-10-2008 04:45 PM