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Valued Contributor
Boswd
Posts: 1,065
Registered: ‎04-26-2007
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Re: Opinions differ on effectiveness of FICO score

I just wanted to add that even though it may sound like I don't have any sympathy for these people going through foreclosure,  I do.   I would never wish this upon anyone.   It's such a horrbible life changing event.
 
But I just think you have to find fault where fault is do.  Not FICO, or the lending institution ( like I said to a certain degree).    In the case of my bad credit history,  I don't blame anyone but myself.   The collection agency's didn't make me swipe my cc.   The creidt card companies didn't make me swipe and use up all my available credit.    No one forced me not to pay.    I did all this stupid stuff on my own and I have no one else to blame but myself.    It's way to easy for people to blame others for their financial mistakes.   And signing on to allot of these subprime mortgages with outragouse interest rates and trying to convince yourself you can afford it,when in fact they knew they couldn't, is no one else's fault.
Regular Contributor
dazednconfused
Posts: 244
Registered: ‎04-16-2007
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Re: Opinions differ on effectiveness of FICO score

I have to chime in here.  I will say that I have no sympathy for the subprime lenders and have all the sympathy in the world for the borrower.  Yes, it is easy to sit here on our perches and say that the borrower should be educated and read the fine print before they sign the dotted line.  It is easier to sit here and say that they shouldn't have borrowed the money in the first place for a home that they couldn't afford.  However, the reality of the situation is this:  People need someplace to live.  They need a roof over their heads and, yes, I know, they could have rented.  But that's just not realistic for some folks and for some, it really doesn't make sense.  4 years ago when the housing market was booming, housing prices hit the roof.  Subprime lenders [as well as prime lenders] used ridiculous and devious methods to lure buyers into the market.  They teased them with low ARMS, no doc loans, whatever.  No one takes out a mortgage that they think they can't afford.  Key word, think that they can't afford.  They hear these teaser rates, the loan goes to close and either the rate changes at closing [frequent] or is going to change in 2 or 3 years [and they assume that their situation will change and they can get a better deal then].  Once at closing, the borrower is pretty much between a rock and a hard place.  Accept the deal [with the jacked up interest], or lose the house.  Where do they go then?  On the street?  Of course, the educated borrower would just walk away, right.  Wrong.  They don't.  They are already too far into the game to start over.  The lender has them by the kahunas.  So they take the loan.  A year goes by fine and maybe two years go by fine.  They are making payments, albeit struggling, but they make their payments.  Suddenly, those teaser ARMS are going to change.  The $1500 mortgage payment is now $2000 and those that were barely scraping by who thought that they would be in a better postition are not.  They can't afford the payments and then the foreclosure game begins...
 
I think the issue is with the subprime lenders, not the borrowers.  We all believe that things will get better with time.  We all believe that we will make more money in two/three years and believe that scores go up in 2/3 years.  We all believe that house values will increase and equity will increase.  In reality, it doesn't always happen like that.  It rarely does.  Suprime lenders prey on borrowers beliefs that these things will happen and convince the borrower that the 2/1 3/1 ARM is a great idea.  They fail to make it clear to these unsuspecting borrowers that this is probably a good idea only if the above occurs.  They don't tell them that if their situation stays the same or if they lose their job or their kid gets ill and they have medical bills out the wazoo that they will more than likely not qualify for a loan in 2-3 years.  And then what happens?  They are stuck, they can't pay, and the house is foreclosed on.  Anyway, enough of my soapbox.  Let it ride, that I believe that subprime is the offender and not the borrower. 
Moderator Emeritus
masdeocho
Posts: 2,050
Registered: ‎04-17-2007
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Re: Opinions differ on effectiveness of FICO score



dazednconfused wrote:
No one takes out a mortgage that they think they can't afford.  Key word, think that they can't afford. 

Many people have absolutely no idea what they can or cannot afford.
-----------------
Bartender, bring another round of FICOtinis please!

9.4.2011: TU 805. EQ 815.
Valued Contributor
Boswd
Posts: 1,065
Registered: ‎04-26-2007
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Re: Opinions differ on effectiveness of FICO score

That is a very good post in defense of the homebuyer.   As I stated before   Subprime Lenders are at fault to a certain degree for their marketing and advertising schemes.   but utimatley it up to the homebuyer to be able to understand what everything means and if it is too confusing then seek advice from experts who can put it in terms they can understand.   The bottom line is people were getting approved for very high mortgages and people were taking that amount and using it the full extent.  As I stated earlier  if a bank approves me for $100,000 for a car loan, knowing how much I make,  I am not going to buy a new Mercedes.   That is what alot of people have done.   Having a household income of around $80,000  and getting pre-approved for $600,000 and then go out and buy a $600,000.   Now that is not the lenders fault, that is just plain foolishness   And on top of that they were sucked into the whole interest only for the first five years and then having to pay the interest plus principle once the 5 year term was up, all the while convincing themselves that they can afford it and would put money away to prepare, when in fact they didn't
   Financial experts have been warning people of this going back a few years that once these interest only mortgages principlescome due you will see a sweeping foreclosure issues because people got in over their heads with mortgages they couldn't afford.
I mean bottom line,if you have to search the internet to obtain a mortgage loan, that immedialty has to be a red flag that you are not going to get a good.dealople weren't ready to buy houses yet, they just weren't.    People do need to do their research on home buying, on what it cost, what it may cost for upkeep, having and emergency funds for when the boiler breaks down, or you need your roof repaired,  too many people were so blinded by the "American Dream" of being a home owner they were willing to sign anything.   
Regular Contributor
dazednconfused
Posts: 244
Registered: ‎04-16-2007
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Re: Opinions differ on effectiveness of FICO score

Exactly.  Many people have no idea and I believe subprime plays a huge role in convincing them that the can afford mortgages that they absolutely can not..Don't get me wrong, I think that the borrower should know exactly what they can afford and I think that the borrower has to have fiscal responsiblity, however, there exist many possibilities as to why they agree to take on a mortgage that they can't afford.  I am sure that that they think they can at the time...
Valued Contributor
Boswd
Posts: 1,065
Registered: ‎04-26-2007
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Re: Opinions differ on effectiveness of FICO score

I think after you do your household budget and when having the mortgage terms presented to you and if your signafgant other pulls you to the side and say's  "  Honey, are we going to be able to afford this along with all of our other bills?'    and the answer is  " We'll make it happen"   then that is when it is time to walk away and rethink your priorities and decide how much you can really afford and decide if this is the right time to buy or should just wait or look for a cheaper home.  
Moderator Emeritus
masdeocho
Posts: 2,050
Registered: ‎04-17-2007
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Re: Opinions differ on effectiveness of FICO score

You're assuming that people do a household budget.
-----------------
Bartender, bring another round of FICOtinis please!

9.4.2011: TU 805. EQ 815.
Regular Contributor
dazednconfused
Posts: 244
Registered: ‎04-16-2007
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Re: Opinions differ on effectiveness of FICO score

I agree 100%. What ever happened to teaching econ/finance in schools.  Too many people live by the seat of their pants in search of the all elusive American Dream. No one has a saving's account anymore and no one seems to put money away for a rainy day.  They live paycheck to paycheck, credit card to credit card and then people wonder why the economy is such a mess. There's no get rich quick out there.  It's just hard work, diligence, patience and common sense.
Valued Contributor
Boswd
Posts: 1,065
Registered: ‎04-26-2007
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Re: Opinions differ on effectiveness of FICO score

LOL    I know it,    but I would hope that people would when going into making the largest purchase of their lives.  
 
*trust me I am not sitting on some perch looking down on people,  I am on the bottom on the credit food chain.   Exp - 566,  TU 540  EQ - 600*  
Valued Contributor
Boswd
Posts: 1,065
Registered: ‎04-26-2007
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Re: Opinions differ on effectiveness of FICO score


I agree 100%. What ever happened to teaching econ/finance in schools.  Too many people live by the seat of their pants in search of the all elusive American Dream. No one has a saving's account anymore and no one seems to put money away for a rainy day.  They live paycheck to paycheck, credit card to credit card and then people wonder why the economy is such a mess. There's no get rich quick out there.  It's just hard work, diligence, patience and common sense.
 
 
I could not agree more.

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