[quote=23109VC]true – life is not fair. but one would hope that someone in gov’t, would stand up and say “hey, you know what – if you took out a loan on a $750,000 house, lied bout your income and claimed you made $300k/year when in reality you made about $50k – and now you can’t afford the house b/c your teaser rate is up and the neg am arm has reset – TOUGH $HIT”
I’ve heard a few people hint at personal responsibility, but they all fall back on how we have to keep people in their homes, and how we have to punish these horrible predatory lenders…
predatory lending? i’m sure a lot of lenders put guns to people’s heads and told them they had to sign the dotted line… you know what – if someone is dumb enough to buy stuff they can’t afford b/c they “wanted” to belive the BS they got fed by teh lenders – they deserve what they get.
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Why would the bank need to put a gun to their head when they’re *offering* a 125% negatively amortizing 1yr ARM with payments half their rent, and the cash back to buy a new car?
If you have any doubts, your realtor will tell you how RE only goes up (with the NAR propaganda to prove it), the builder will throw in granite countertops if you buy today (and will conveniently provide a banker to “streamline” your loan). Your broker will assure you that stated-income isn’t lying, “everyone is doing it!”. What about the ARM, aren’t those risky, you ask… Not according to the Fed chairman, in fact you’d be a fool not to get an ARM…
You have to realize that the bailouts are NOT designed to save the poor homeowners, they’re designed to save the banks and overall financial system.
In the decades before the bubble, foreclosures spread misery to plenty of unfortunate people who weren’t overextended, but lost their homes to job loss, medical bills, etc. Do you recall any major gov’t programs to help them? No, because the lenders could sell the property to recoup the principal. Now that the lenders are on the hook, homeowners need rescuing!
Sure, there are alot of people who did not show personal responsibility and bought tons of crap they couldn’t afford, but “poor” people have always wanted more, especially the opportunity to buy a house. If the bank gives them the oppportunity, they’re going to take it. Add to that all the first time buyers suckered into purchasing at the top & the use of HELOC’s as free money.
Both parties are culpable, and I would argue that the banks, who ostensibly make it there business to manage risk, should take the most blame.
For instance, what would you do in this situation:
Let’s say you owned a late model luxury car worth ~30k. You put an ad in the paper, listing the car at 33k. and three people responded. The first offers 30k in cash. The second is willing to offer full price, but can only put down 15k in cash, and asks that you to carry the note for 3 years @ 6%, s/he is gainfully employed with good credit. The third is a teenager, who just has to have your “dope ride”. s/he is working at the burger barn part-time and has saved almost $500 over the summer! s/he can afford $100 per month as a payment.
Do you;
A) Take the 30k cash and run.
B) Take half the value in cash, and get a 10% premium, plus interest from the guy who has some skin in the game.
C) Sell it to the teenager for 35k, with a 5k cash rebate (to get a phat stereo system), plus 3k in fees which will be rolled into the loan. Write up your genius 125% ltv, teaser loan (interest only, neg-am, spread over 50 years). Using the teenagers stated income from burger barn – 120k/yr and 550 FICO score. To really make qualifying E-Z, offer no payments for the first 3 months, then a low $99 for the next year. Include fine print that the loan will reset thereafter at a 12% subprime rate and corresponding $500/mo payment. Sit back and watch the dough roll in, confident in knowing that you can always repossess the car to recoup your money in case of an unlikely default.
