Wednesday, November 19, 2008

It IS a Good Question

My dad sent me an article today which contained this article.

Obviously, we are not going to stop paying our mortgage. But this article does sort of highlight one of the downsides to bailing some of these folks out...

By the way, as a person who has been involved in the purchase of 2 homes, I know the following statement made by PE Obama is just not true.

"In a campaign fact sheet, President-elect Barack Obama says he ' "recognizes that the real victims in the subprime mortgage crisis are not the lenders, but the millions of borrowers who followed the rules and whose only crime was taking out mortgages that lenders told them they could afford." '

If you have ever applied for a mortgage, you know (or should know) you will get pre-approved to buy much more than you can afford. I don't really know why this is. Maybe lenders don't take into account ANY monthly payments that you'll be making, including a power, gas, or water bill, not to mention any car or credit card payment you may owe each month OR any tithing or charitable contributions you may make.

All that to say, I don't believe the lenders OR the borrowers are victims. Just because you don't know what you can or cannot afford, you do not become a victim. Even if it does make you feel better to think that way.


Alicia said...

Couldn't agree more!

Camille said...

While I 110% agree with you on the "victim mentality" being a problem and that the mortgage crisis absolutely should not be a "get out of jail free" card for people on their mortgages, I think it's important to understand what exactly caused the crisis in the first place. "Predatory Lending" isn't just approving people for more than their able to afford (which, agreed, happens to all of us. I spend $50K less on my house than what I was approved for because I didn't want to be over-extended). Predatory lending was where lenders - purely out of a desire to make a buck - offered loans to people who couldn't afford homes, period. People who, in less "booming" times would have not been approved. But, some lenders saw an opportunity to make money off of people who were being turned down by other lenders. These lenders gave money to people at a time when the housing bubble was soaring, and they gave them insane adjustable rate mortgages so that when the bubble finally burst and housing values plummeted, those interest rates went up to 20% and 30%.

The fact of the matter is that the lenders should never have given these people any loan at all, should never have approved them because their credit was so low - these are people with bad credit, low paying jobs, and mountains of debt. The unfortunate truth is that in a capitalist society, people will spend spend spend, and when they are told that they are approved (and how do they know, really? if you are "approved" for a credit card you apply for, chances are you think it's okay to have it). This is why there should have been mucho regulation on the lending practices so that people below a certain credit score, etc. would never have been lent to in the first place. I think this is an excuse to not own up to the debts you have? Absolutely not. But, I think the combination of overeager consumers and predatory lenders are to blame, and unfortunately all of us who are homeowners are in this together because foreclosures make all of our home values go down.

Ok, sorry if I sounded obnoxious. I'll shut up now. Glad your back (not sure if you were "gone," but there were no posts for a while!)

Greta said...

Agreed, many of those lenders were irresponsible and, in fact, predatory.

HOWEVER, and this is what I believe the root issue to be, if you are going to take on the responsibility of a mortgage and homeownership, you should be able to figure out what your monthly payments will be AND know whether or not you can afford to make them.

Just because I am offered, hounded, or tempted with a loan from said predatory lenders, I don't HAVE to take it. Why would I believe that some guy at the bank knows more about my financial situation than I do? That's kind of ridiculous....and just irresponsible. And for some, definitely not all, there was some greed thrown in there.

While I agree those lenders shouldn't have given loans to MANY of the people they did, I press back with the opinion that these people shouldn't have accepted loans they couldn't afford to make payments on. Yes, our natural tendency is to spend, spend, spend but I exercising a bit of self-control is a good thing and can save us all from a lot of heartache (insert housing crunch affecting entire U.S.).

Camille said...

Greta - I certainly agree with you, and personal and fiscal (ir)responsibility is definitely at the root of the problem. Hopefully we all learn from this to take a hard look at our own finances and make our own decisions instead of just "approved approved approved!"

Greta said...

Amen girl, amen.

Bek* said...

the problem is a government (republican exec. and democratic leg.) wanting to proudly proclaim that they created more homeowners and refused to check the agencies lending. the lenders profit by way of either collecting high interest or foreclosure.

and all the while, the american people are ever more expecting the government to wipe their butt for them. how 'bout starting with NOT bailing out lenders that were reckless because they get what they deserve. and what makes someone who shouldn't have bought a house in the first place more important than me (who is stuck with a house they can't sell because the market is so awful)? personal responsibility HAS to become a virtue again if we are to improve on any level as a country. period.

i could write so much more on this, but i won't. but i agree with you, greta...