Viral Nature of Walking Away

[UCGal]

[quote=eavesdropper]”Mind Over Money investigates the shattering impact the recent global financial meltdown had on how economists think. Why did so few of the brightest minds in finance not only fail to predict the crash but also argue that it was impossible? With insights from experts and scientific experiments that highlight the hidden money drives in us all, NOVA explores a seismic shift in our efforts to understand the marketplace.”

I really enjoyed it, and found that it posed some plausible explanations. That being said, I do agree that the mortgage bankers themselves knew exactly what was going on, and wanted to exploit it. I was referring to being ethically and morally blinded by the money to be made by following that path. And it was too bad that the general public was still so trusting of their image of financial stewards (the wonders of advertising didn’t hurt there).[/quote]
FYI to other piggs… It’s available “instantly” on netflix… So if you’ve got a Wii or other means of streaming netflix, you don’t have to wait.

[bearishgurl]

[quote=eavesdropper]BG, agree with you completely, and admire your diligence in mapping out the byzantine details of the “boom/bust”. This was a massive meltdown, of enormous breadth, depth and complexity. There were so many players, some with major causal roles, and some that were responsible by failing to act; and there was a multitude of contributing actions and factors. . . . [/quote]

eavesdropper, the biggest contributing culprit I see to this mess is NOT talking heads or congressional members attempting to tunnel themselves through brown paper with a flashlight but (no disrespect here to Pigg mortgage brokers) yield-spread premiums. I do not believe in them. This “hidden-to-the-consumer back-room payment” by CW and other huge lenders ENCOURAGED independent mortgage brokers to push HIGH INTEREST loans with built-in EXPLODING devices in them to unsuspecting, unsophisticated borrowers, at the expense of more reasonable loan products or just rejecting the applicant outright. These mortgage brokers WERE PAID HANDSOMELY by lenders for these loans upon origination (on both the front and back ends), ALL THE WHILE KNOWING what effect the loan would eventually have on the borrower. From borrowers’ documents I have personally examined, their average closing costs ranged from 8%-20% of the loan amount. The 2 – 6 pts. upon origination that these “mortgage brokers” pocketed did NOT INCLUDE any additional “cash-out” of the applicant’s property that they were able to seduce out of them OR the yield spread premium they later collected from the lender.

In the “large thrift employee mortgage officer” model I previously discussed, these employees didn’t have any overhead. They came to work every morning to the bank, where they were provided a cublicle and receptionist. They worked on salary and benefits + maybe $200-$300 bonus for originating say a one-yr. T-bill product (or whatever the flavor of the month was at the time). They made their living on doing volume lending and small monthly and larger end-of-year bonuses based upon volume and customer satisfaction surveys. Sadly, many banks do not want to pay salary and benefits to this function anymore and farm it out to “independent contractors.”

Only very recently has the amount of YSP’s (paid to a mtg. broker) had to be disclosed to the borrower.

[quote=eavesdropper]. . . So many of the banks were left with the “kids” as customers.

My stepdaughter and her boyfriend have been approved to purchase a 2 BR, 2 BA home in a depressed semi-rural area. House is a foreclosure, and recently had its price lowered to $225K. I love my daughter, but she and her BF have no business buying a home, and no resources to keep it. She’s 22 years old, and is currently working high-end retail (5 mos on job), and her BF (28) works a minimum wage job in a mall kiosk (3 mos). She’s entitled to financial assistance with the down payment, with the closing costs, and with the mortgage rate (I swear, I’m waiting for them to tell her that there’s a government program that will pay her a stipend for buying a house!). Even with all that, I truly worry that they will lose this house inside of two years. Not only will that be a bad experience for her, I fail to see how this type of government-funded home buying activity is helping the economy. Maybe I’m just shortsighted.[/quote]

eavesdropper, maybe you can run the comps in the
“depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.

[bearishgurl]

[quote=eavesdropper]BG, agree with you completely, and admire your diligence in mapping out the byzantine details of the “boom/bust”. This was a massive meltdown, of enormous breadth, depth and complexity. There were so many players, some with major causal roles, and some that were responsible by failing to act; and there was a multitude of contributing actions and factors. . . . [/quote]

eavesdropper, the biggest contributing culprit I see to this mess is NOT talking heads or congressional members attempting to tunnel themselves through brown paper with a flashlight but (no disrespect here to Pigg mortgage brokers) yield-spread premiums. I do not believe in them. This “hidden-to-the-consumer back-room payment” by CW and other huge lenders ENCOURAGED independent mortgage brokers to push HIGH INTEREST loans with built-in EXPLODING devices in them to unsuspecting, unsophisticated borrowers, at the expense of more reasonable loan products or just rejecting the applicant outright. These mortgage brokers WERE PAID HANDSOMELY by lenders for these loans upon origination (on both the front and back ends), ALL THE WHILE KNOWING what effect the loan would eventually have on the borrower. From borrowers’ documents I have personally examined, their average closing costs ranged from 8%-20% of the loan amount. The 2 – 6 pts. upon origination that these “mortgage brokers” pocketed did NOT INCLUDE any additional “cash-out” of the applicant’s property that they were able to seduce out of them OR the yield spread premium they later collected from the lender.

In the “large thrift employee mortgage officer” model I previously discussed, these employees didn’t have any overhead. They came to work every morning to the bank, where they were provided a cublicle and receptionist. They worked on salary and benefits + maybe $200-$300 bonus for originating say a one-yr. T-bill product (or whatever the flavor of the month was at the time). They made their living on doing volume lending and small monthly and larger end-of-year bonuses based upon volume and customer satisfaction surveys. Sadly, many banks do not want to pay salary and benefits to this function anymore and farm it out to “independent contractors.”

Only very recently has the amount of YSP’s (paid to a mtg. broker) had to be disclosed to the borrower.

[quote=eavesdropper]. . . So many of the banks were left with the “kids” as customers.

My stepdaughter and her boyfriend have been approved to purchase a 2 BR, 2 BA home in a depressed semi-rural area. House is a foreclosure, and recently had its price lowered to $225K. I love my daughter, but she and her BF have no business buying a home, and no resources to keep it. She’s 22 years old, and is currently working high-end retail (5 mos on job), and her BF (28) works a minimum wage job in a mall kiosk (3 mos). She’s entitled to financial assistance with the down payment, with the closing costs, and with the mortgage rate (I swear, I’m waiting for them to tell her that there’s a government program that will pay her a stipend for buying a house!). Even with all that, I truly worry that they will lose this house inside of two years. Not only will that be a bad experience for her, I fail to see how this type of government-funded home buying activity is helping the economy. Maybe I’m just shortsighted.[/quote]

eavesdropper, maybe you can run the comps in the
“depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.

[bearishgurl]

[quote=eavesdropper]BG, agree with you completely, and admire your diligence in mapping out the byzantine details of the “boom/bust”. This was a massive meltdown, of enormous breadth, depth and complexity. There were so many players, some with major causal roles, and some that were responsible by failing to act; and there was a multitude of contributing actions and factors. . . . [/quote]

eavesdropper, the biggest contributing culprit I see to this mess is NOT talking heads or congressional members attempting to tunnel themselves through brown paper with a flashlight but (no disrespect here to Pigg mortgage brokers) yield-spread premiums. I do not believe in them. This “hidden-to-the-consumer back-room payment” by CW and other huge lenders ENCOURAGED independent mortgage brokers to push HIGH INTEREST loans with built-in EXPLODING devices in them to unsuspecting, unsophisticated borrowers, at the expense of more reasonable loan products or just rejecting the applicant outright. These mortgage brokers WERE PAID HANDSOMELY by lenders for these loans upon origination (on both the front and back ends), ALL THE WHILE KNOWING what effect the loan would eventually have on the borrower. From borrowers’ documents I have personally examined, their average closing costs ranged from 8%-20% of the loan amount. The 2 – 6 pts. upon origination that these “mortgage brokers” pocketed did NOT INCLUDE any additional “cash-out” of the applicant’s property that they were able to seduce out of them OR the yield spread premium they later collected from the lender.

In the “large thrift employee mortgage officer” model I previously discussed, these employees didn’t have any overhead. They came to work every morning to the bank, where they were provided a cublicle and receptionist. They worked on salary and benefits + maybe $200-$300 bonus for originating say a one-yr. T-bill product (or whatever the flavor of the month was at the time). They made their living on doing volume lending and small monthly and larger end-of-year bonuses based upon volume and customer satisfaction surveys. Sadly, many banks do not want to pay salary and benefits to this function anymore and farm it out to “independent contractors.”

Only very recently has the amount of YSP’s (paid to a mtg. broker) had to be disclosed to the borrower.

[quote=eavesdropper]. . . So many of the banks were left with the “kids” as customers.

My stepdaughter and her boyfriend have been approved to purchase a 2 BR, 2 BA home in a depressed semi-rural area. House is a foreclosure, and recently had its price lowered to $225K. I love my daughter, but she and her BF have no business buying a home, and no resources to keep it. She’s 22 years old, and is currently working high-end retail (5 mos on job), and her BF (28) works a minimum wage job in a mall kiosk (3 mos). She’s entitled to financial assistance with the down payment, with the closing costs, and with the mortgage rate (I swear, I’m waiting for them to tell her that there’s a government program that will pay her a stipend for buying a house!). Even with all that, I truly worry that they will lose this house inside of two years. Not only will that be a bad experience for her, I fail to see how this type of government-funded home buying activity is helping the economy. Maybe I’m just shortsighted.[/quote]

eavesdropper, maybe you can run the comps in the
“depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.

[bearishgurl]

[quote=eavesdropper]BG, agree with you completely, and admire your diligence in mapping out the byzantine details of the “boom/bust”. This was a massive meltdown, of enormous breadth, depth and complexity. There were so many players, some with major causal roles, and some that were responsible by failing to act; and there was a multitude of contributing actions and factors. . . . [/quote]

eavesdropper, the biggest contributing culprit I see to this mess is NOT talking heads or congressional members attempting to tunnel themselves through brown paper with a flashlight but (no disrespect here to Pigg mortgage brokers) yield-spread premiums. I do not believe in them. This “hidden-to-the-consumer back-room payment” by CW and other huge lenders ENCOURAGED independent mortgage brokers to push HIGH INTEREST loans with built-in EXPLODING devices in them to unsuspecting, unsophisticated borrowers, at the expense of more reasonable loan products or just rejecting the applicant outright. These mortgage brokers WERE PAID HANDSOMELY by lenders for these loans upon origination (on both the front and back ends), ALL THE WHILE KNOWING what effect the loan would eventually have on the borrower. From borrowers’ documents I have personally examined, their average closing costs ranged from 8%-20% of the loan amount. The 2 – 6 pts. upon origination that these “mortgage brokers” pocketed did NOT INCLUDE any additional “cash-out” of the applicant’s property that they were able to seduce out of them OR the yield spread premium they later collected from the lender.

In the “large thrift employee mortgage officer” model I previously discussed, these employees didn’t have any overhead. They came to work every morning to the bank, where they were provided a cublicle and receptionist. They worked on salary and benefits + maybe $200-$300 bonus for originating say a one-yr. T-bill product (or whatever the flavor of the month was at the time). They made their living on doing volume lending and small monthly and larger end-of-year bonuses based upon volume and customer satisfaction surveys. Sadly, many banks do not want to pay salary and benefits to this function anymore and farm it out to “independent contractors.”

Only very recently has the amount of YSP’s (paid to a mtg. broker) had to be disclosed to the borrower.

[quote=eavesdropper]. . . So many of the banks were left with the “kids” as customers.

My stepdaughter and her boyfriend have been approved to purchase a 2 BR, 2 BA home in a depressed semi-rural area. House is a foreclosure, and recently had its price lowered to $225K. I love my daughter, but she and her BF have no business buying a home, and no resources to keep it. She’s 22 years old, and is currently working high-end retail (5 mos on job), and her BF (28) works a minimum wage job in a mall kiosk (3 mos). She’s entitled to financial assistance with the down payment, with the closing costs, and with the mortgage rate (I swear, I’m waiting for them to tell her that there’s a government program that will pay her a stipend for buying a house!). Even with all that, I truly worry that they will lose this house inside of two years. Not only will that be a bad experience for her, I fail to see how this type of government-funded home buying activity is helping the economy. Maybe I’m just shortsighted.[/quote]

eavesdropper, maybe you can run the comps in the
“depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.

[bearishgurl]

[quote=eavesdropper]BG, agree with you completely, and admire your diligence in mapping out the byzantine details of the “boom/bust”. This was a massive meltdown, of enormous breadth, depth and complexity. There were so many players, some with major causal roles, and some that were responsible by failing to act; and there was a multitude of contributing actions and factors. . . . [/quote]

eavesdropper, the biggest contributing culprit I see to this mess is NOT talking heads or congressional members attempting to tunnel themselves through brown paper with a flashlight but (no disrespect here to Pigg mortgage brokers) yield-spread premiums. I do not believe in them. This “hidden-to-the-consumer back-room payment” by CW and other huge lenders ENCOURAGED independent mortgage brokers to push HIGH INTEREST loans with built-in EXPLODING devices in them to unsuspecting, unsophisticated borrowers, at the expense of more reasonable loan products or just rejecting the applicant outright. These mortgage brokers WERE PAID HANDSOMELY by lenders for these loans upon origination (on both the front and back ends), ALL THE WHILE KNOWING what effect the loan would eventually have on the borrower. From borrowers’ documents I have personally examined, their average closing costs ranged from 8%-20% of the loan amount. The 2 – 6 pts. upon origination that these “mortgage brokers” pocketed did NOT INCLUDE any additional “cash-out” of the applicant’s property that they were able to seduce out of them OR the yield spread premium they later collected from the lender.

In the “large thrift employee mortgage officer” model I previously discussed, these employees didn’t have any overhead. They came to work every morning to the bank, where they were provided a cublicle and receptionist. They worked on salary and benefits + maybe $200-$300 bonus for originating say a one-yr. T-bill product (or whatever the flavor of the month was at the time). They made their living on doing volume lending and small monthly and larger end-of-year bonuses based upon volume and customer satisfaction surveys. Sadly, many banks do not want to pay salary and benefits to this function anymore and farm it out to “independent contractors.”

Only very recently has the amount of YSP’s (paid to a mtg. broker) had to be disclosed to the borrower.

[quote=eavesdropper]. . . So many of the banks were left with the “kids” as customers.

My stepdaughter and her boyfriend have been approved to purchase a 2 BR, 2 BA home in a depressed semi-rural area. House is a foreclosure, and recently had its price lowered to $225K. I love my daughter, but she and her BF have no business buying a home, and no resources to keep it. She’s 22 years old, and is currently working high-end retail (5 mos on job), and her BF (28) works a minimum wage job in a mall kiosk (3 mos). She’s entitled to financial assistance with the down payment, with the closing costs, and with the mortgage rate (I swear, I’m waiting for them to tell her that there’s a government program that will pay her a stipend for buying a house!). Even with all that, I truly worry that they will lose this house inside of two years. Not only will that be a bad experience for her, I fail to see how this type of government-funded home buying activity is helping the economy. Maybe I’m just shortsighted.[/quote]

eavesdropper, maybe you can run the comps in the
“depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.

[eavesdropper]

[quote=bearishgurl][quote=eavesdropper] eavesdropper, maybe you can run the comps in the “depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.[/quote]

Believe me, BG, I’ve done all that, and more. I’ve actually created scenarios where I tell them to think about how happy and excited they are now, and then to think about a possible situation a couple years down the road where only one of them is employed, and they’re not able to make the payments. Or their furnace goes bust (in February), and they don’t have $5,000 to replace it. I’ve asked them to think how they’re going to feel when the bank sends them those letters, and then the sheriff comes to get them out of the house. I’m not trying to be cruel; I think that it would be heartless to let them go into this without them knowing that this is a very real possibility. They’ve already asked my husband for assistance with the down payment. Because I had already proposed to him (without their knowledge) that we give them a very small amount toward d.p., I agreed, but warned him that we had to sit down with them, and make it clear that we would not be able to contribute further, or make “loans” when stuff went wrong.

She’s been complaining about all the long hours she’s putting into work, trying to build up the cash she needs for closing. I’ve told her that she can’t stop once they’re in the house; they have to continue working at that level until they have at least $20K or $25K ready cash in the bank. I’ve told her that the house will be a veritable millstone around their necks if she gets a lucrative job offer in another city, or if they suddenly decide they want to live in another state while they’re still young and childless. At one point (with another property they wanted to bid on) the b.f. asked me how much money were they going to make on the house (i.e., how much would the value rise) over the next 3 years; I was particularly distressed by this one because not only did it show that he didn’t have a clue as to what was happening in the real world, but also that he hadn’t been listening to a word that any of us had been saying. Of course I took the opportunity to tell them that if they decided they wanted to sell two years down the road, they risked the house being worth $50K or $60K of dollars less than what they bought it for, and, further, point out that, even once values start to pick up in this area again, they are probably never going to rise at even close to the rate they did in the aughts.

Believe me, we’ve tried to school them. But what I hear from them, and others in their peer group, is “We’re tired of throwing away money on rent. We want our money to grow.” I then ask them how they will feel if they pay a down payment and a mortgage for 3 years, and then the bank takes the house away (leaving a big black mark on their credit reports) because one of them lost their job for a few months. They cite the low interest rates, and we point out that we bought houses back in the 80s at mortgage rates twice or 3x what they are today, and they can do it too. Nothing sinks in.

So BG, we’ll support them as much as we can, emotionally, and with free labor. I sincerely hope that I’m wrong, and that this turns out really well for them. And, in truth, rentals are becoming more and more scarce in these parts, and rents are in the stratosphere in many areas, so if they can make it through the next few years and get some money saved up, it might work out.

[eavesdropper]

[quote=bearishgurl][quote=eavesdropper] eavesdropper, maybe you can run the comps in the “depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.[/quote]

Believe me, BG, I’ve done all that, and more. I’ve actually created scenarios where I tell them to think about how happy and excited they are now, and then to think about a possible situation a couple years down the road where only one of them is employed, and they’re not able to make the payments. Or their furnace goes bust (in February), and they don’t have $5,000 to replace it. I’ve asked them to think how they’re going to feel when the bank sends them those letters, and then the sheriff comes to get them out of the house. I’m not trying to be cruel; I think that it would be heartless to let them go into this without them knowing that this is a very real possibility. They’ve already asked my husband for assistance with the down payment. Because I had already proposed to him (without their knowledge) that we give them a very small amount toward d.p., I agreed, but warned him that we had to sit down with them, and make it clear that we would not be able to contribute further, or make “loans” when stuff went wrong.

She’s been complaining about all the long hours she’s putting into work, trying to build up the cash she needs for closing. I’ve told her that she can’t stop once they’re in the house; they have to continue working at that level until they have at least $20K or $25K ready cash in the bank. I’ve told her that the house will be a veritable millstone around their necks if she gets a lucrative job offer in another city, or if they suddenly decide they want to live in another state while they’re still young and childless. At one point (with another property they wanted to bid on) the b.f. asked me how much money were they going to make on the house (i.e., how much would the value rise) over the next 3 years; I was particularly distressed by this one because not only did it show that he didn’t have a clue as to what was happening in the real world, but also that he hadn’t been listening to a word that any of us had been saying. Of course I took the opportunity to tell them that if they decided they wanted to sell two years down the road, they risked the house being worth $50K or $60K of dollars less than what they bought it for, and, further, point out that, even once values start to pick up in this area again, they are probably never going to rise at even close to the rate they did in the aughts.

Believe me, we’ve tried to school them. But what I hear from them, and others in their peer group, is “We’re tired of throwing away money on rent. We want our money to grow.” I then ask them how they will feel if they pay a down payment and a mortgage for 3 years, and then the bank takes the house away (leaving a big black mark on their credit reports) because one of them lost their job for a few months. They cite the low interest rates, and we point out that we bought houses back in the 80s at mortgage rates twice or 3x what they are today, and they can do it too. Nothing sinks in.

So BG, we’ll support them as much as we can, emotionally, and with free labor. I sincerely hope that I’m wrong, and that this turns out really well for them. And, in truth, rentals are becoming more and more scarce in these parts, and rents are in the stratosphere in many areas, so if they can make it through the next few years and get some money saved up, it might work out.

[eavesdropper]

[quote=bearishgurl][quote=eavesdropper] eavesdropper, maybe you can run the comps in the “depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.[/quote]

Believe me, BG, I’ve done all that, and more. I’ve actually created scenarios where I tell them to think about how happy and excited they are now, and then to think about a possible situation a couple years down the road where only one of them is employed, and they’re not able to make the payments. Or their furnace goes bust (in February), and they don’t have $5,000 to replace it. I’ve asked them to think how they’re going to feel when the bank sends them those letters, and then the sheriff comes to get them out of the house. I’m not trying to be cruel; I think that it would be heartless to let them go into this without them knowing that this is a very real possibility. They’ve already asked my husband for assistance with the down payment. Because I had already proposed to him (without their knowledge) that we give them a very small amount toward d.p., I agreed, but warned him that we had to sit down with them, and make it clear that we would not be able to contribute further, or make “loans” when stuff went wrong.

She’s been complaining about all the long hours she’s putting into work, trying to build up the cash she needs for closing. I’ve told her that she can’t stop once they’re in the house; they have to continue working at that level until they have at least $20K or $25K ready cash in the bank. I’ve told her that the house will be a veritable millstone around their necks if she gets a lucrative job offer in another city, or if they suddenly decide they want to live in another state while they’re still young and childless. At one point (with another property they wanted to bid on) the b.f. asked me how much money were they going to make on the house (i.e., how much would the value rise) over the next 3 years; I was particularly distressed by this one because not only did it show that he didn’t have a clue as to what was happening in the real world, but also that he hadn’t been listening to a word that any of us had been saying. Of course I took the opportunity to tell them that if they decided they wanted to sell two years down the road, they risked the house being worth $50K or $60K of dollars less than what they bought it for, and, further, point out that, even once values start to pick up in this area again, they are probably never going to rise at even close to the rate they did in the aughts.

Believe me, we’ve tried to school them. But what I hear from them, and others in their peer group, is “We’re tired of throwing away money on rent. We want our money to grow.” I then ask them how they will feel if they pay a down payment and a mortgage for 3 years, and then the bank takes the house away (leaving a big black mark on their credit reports) because one of them lost their job for a few months. They cite the low interest rates, and we point out that we bought houses back in the 80s at mortgage rates twice or 3x what they are today, and they can do it too. Nothing sinks in.

So BG, we’ll support them as much as we can, emotionally, and with free labor. I sincerely hope that I’m wrong, and that this turns out really well for them. And, in truth, rentals are becoming more and more scarce in these parts, and rents are in the stratosphere in many areas, so if they can make it through the next few years and get some money saved up, it might work out.

[eavesdropper]

[quote=bearishgurl][quote=eavesdropper] eavesdropper, maybe you can run the comps in the “depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.[/quote]

Believe me, BG, I’ve done all that, and more. I’ve actually created scenarios where I tell them to think about how happy and excited they are now, and then to think about a possible situation a couple years down the road where only one of them is employed, and they’re not able to make the payments. Or their furnace goes bust (in February), and they don’t have $5,000 to replace it. I’ve asked them to think how they’re going to feel when the bank sends them those letters, and then the sheriff comes to get them out of the house. I’m not trying to be cruel; I think that it would be heartless to let them go into this without them knowing that this is a very real possibility. They’ve already asked my husband for assistance with the down payment. Because I had already proposed to him (without their knowledge) that we give them a very small amount toward d.p., I agreed, but warned him that we had to sit down with them, and make it clear that we would not be able to contribute further, or make “loans” when stuff went wrong.

She’s been complaining about all the long hours she’s putting into work, trying to build up the cash she needs for closing. I’ve told her that she can’t stop once they’re in the house; they have to continue working at that level until they have at least $20K or $25K ready cash in the bank. I’ve told her that the house will be a veritable millstone around their necks if she gets a lucrative job offer in another city, or if they suddenly decide they want to live in another state while they’re still young and childless. At one point (with another property they wanted to bid on) the b.f. asked me how much money were they going to make on the house (i.e., how much would the value rise) over the next 3 years; I was particularly distressed by this one because not only did it show that he didn’t have a clue as to what was happening in the real world, but also that he hadn’t been listening to a word that any of us had been saying. Of course I took the opportunity to tell them that if they decided they wanted to sell two years down the road, they risked the house being worth $50K or $60K of dollars less than what they bought it for, and, further, point out that, even once values start to pick up in this area again, they are probably never going to rise at even close to the rate they did in the aughts.

Believe me, we’ve tried to school them. But what I hear from them, and others in their peer group, is “We’re tired of throwing away money on rent. We want our money to grow.” I then ask them how they will feel if they pay a down payment and a mortgage for 3 years, and then the bank takes the house away (leaving a big black mark on their credit reports) because one of them lost their job for a few months. They cite the low interest rates, and we point out that we bought houses back in the 80s at mortgage rates twice or 3x what they are today, and they can do it too. Nothing sinks in.

So BG, we’ll support them as much as we can, emotionally, and with free labor. I sincerely hope that I’m wrong, and that this turns out really well for them. And, in truth, rentals are becoming more and more scarce in these parts, and rents are in the stratosphere in many areas, so if they can make it through the next few years and get some money saved up, it might work out.

[eavesdropper]

[quote=bearishgurl][quote=eavesdropper] eavesdropper, maybe you can run the comps in the “depressed rural area” that your stepdaughter is wanting to make an offer on and present it to her, showing that $225K (or thereabouts) is too much $$ to offer, emphasizing all the work that needs to be done to the property to make it livable. Try to see if you can talk to her about what it’s like to feel trapped due to being overmortgaged and how that will take away her future choices in life when/if her credit is affected in the future . . . anything to get her and the boyfriend to rethink purchasing right now.

Based on your post, I agree that this couple is too financially unstable to deal with the commitment of a mortgage right now. An unexpected pregnancy could completely blow them out of the water and cause them to go on public assistance.[/quote]

Believe me, BG, I’ve done all that, and more. I’ve actually created scenarios where I tell them to think about how happy and excited they are now, and then to think about a possible situation a couple years down the road where only one of them is employed, and they’re not able to make the payments. Or their furnace goes bust (in February), and they don’t have $5,000 to replace it. I’ve asked them to think how they’re going to feel when the bank sends them those letters, and then the sheriff comes to get them out of the house. I’m not trying to be cruel; I think that it would be heartless to let them go into this without them knowing that this is a very real possibility. They’ve already asked my husband for assistance with the down payment. Because I had already proposed to him (without their knowledge) that we give them a very small amount toward d.p., I agreed, but warned him that we had to sit down with them, and make it clear that we would not be able to contribute further, or make “loans” when stuff went wrong.

She’s been complaining about all the long hours she’s putting into work, trying to build up the cash she needs for closing. I’ve told her that she can’t stop once they’re in the house; they have to continue working at that level until they have at least $20K or $25K ready cash in the bank. I’ve told her that the house will be a veritable millstone around their necks if she gets a lucrative job offer in another city, or if they suddenly decide they want to live in another state while they’re still young and childless. At one point (with another property they wanted to bid on) the b.f. asked me how much money were they going to make on the house (i.e., how much would the value rise) over the next 3 years; I was particularly distressed by this one because not only did it show that he didn’t have a clue as to what was happening in the real world, but also that he hadn’t been listening to a word that any of us had been saying. Of course I took the opportunity to tell them that if they decided they wanted to sell two years down the road, they risked the house being worth $50K or $60K of dollars less than what they bought it for, and, further, point out that, even once values start to pick up in this area again, they are probably never going to rise at even close to the rate they did in the aughts.

Believe me, we’ve tried to school them. But what I hear from them, and others in their peer group, is “We’re tired of throwing away money on rent. We want our money to grow.” I then ask them how they will feel if they pay a down payment and a mortgage for 3 years, and then the bank takes the house away (leaving a big black mark on their credit reports) because one of them lost their job for a few months. They cite the low interest rates, and we point out that we bought houses back in the 80s at mortgage rates twice or 3x what they are today, and they can do it too. Nothing sinks in.

So BG, we’ll support them as much as we can, emotionally, and with free labor. I sincerely hope that I’m wrong, and that this turns out really well for them. And, in truth, rentals are becoming more and more scarce in these parts, and rents are in the stratosphere in many areas, so if they can make it through the next few years and get some money saved up, it might work out.

[jpinpb]

[quote=eavesdropper]
Aside from clear-cut cases of predatory lending, most people should have known that they couldn’t afford an $850,000 house on a $70,000 household income. [/quote]

While the blame for all this can be spread all over the place (mostly greed on everyone’s part) I have to say that it boils down to basic math for people buying a house. There just is no excuse. Everyone knows basic math and either you have the money or you don’t. Most people just ignored it, thinking prices would keep going up and they can flip. For those who bought and ran the numbers and made sense, but lost their jobs, that’s a genuine reason for not paying.

As for your stepdaughter, at least she has her whole life ahead of her. Maybe she can recover from it. It must be frustrating to share your knowledge and to be ignored and come back w/the irrational exuberance of how much will it rise in a couple of years. Sometimes people have to fall down and experience it on their own. Very hard to stand by and let that happen. Natural instinct is to help. Just don’t hurt yourself in the process. Continually helping puts you in the enabler position.

[jpinpb]

[quote=eavesdropper]
Aside from clear-cut cases of predatory lending, most people should have known that they couldn’t afford an $850,000 house on a $70,000 household income. [/quote]

While the blame for all this can be spread all over the place (mostly greed on everyone’s part) I have to say that it boils down to basic math for people buying a house. There just is no excuse. Everyone knows basic math and either you have the money or you don’t. Most people just ignored it, thinking prices would keep going up and they can flip. For those who bought and ran the numbers and made sense, but lost their jobs, that’s a genuine reason for not paying.

As for your stepdaughter, at least she has her whole life ahead of her. Maybe she can recover from it. It must be frustrating to share your knowledge and to be ignored and come back w/the irrational exuberance of how much will it rise in a couple of years. Sometimes people have to fall down and experience it on their own. Very hard to stand by and let that happen. Natural instinct is to help. Just don’t hurt yourself in the process. Continually helping puts you in the enabler position.

[jpinpb]

[quote=eavesdropper]
Aside from clear-cut cases of predatory lending, most people should have known that they couldn’t afford an $850,000 house on a $70,000 household income. [/quote]

While the blame for all this can be spread all over the place (mostly greed on everyone’s part) I have to say that it boils down to basic math for people buying a house. There just is no excuse. Everyone knows basic math and either you have the money or you don’t. Most people just ignored it, thinking prices would keep going up and they can flip. For those who bought and ran the numbers and made sense, but lost their jobs, that’s a genuine reason for not paying.

As for your stepdaughter, at least she has her whole life ahead of her. Maybe she can recover from it. It must be frustrating to share your knowledge and to be ignored and come back w/the irrational exuberance of how much will it rise in a couple of years. Sometimes people have to fall down and experience it on their own. Very hard to stand by and let that happen. Natural instinct is to help. Just don’t hurt yourself in the process. Continually helping puts you in the enabler position.

[jpinpb]

[quote=eavesdropper]
Aside from clear-cut cases of predatory lending, most people should have known that they couldn’t afford an $850,000 house on a $70,000 household income. [/quote]

While the blame for all this can be spread all over the place (mostly greed on everyone’s part) I have to say that it boils down to basic math for people buying a house. There just is no excuse. Everyone knows basic math and either you have the money or you don’t. Most people just ignored it, thinking prices would keep going up and they can flip. For those who bought and ran the numbers and made sense, but lost their jobs, that’s a genuine reason for not paying.

As for your stepdaughter, at least she has her whole life ahead of her. Maybe she can recover from it. It must be frustrating to share your knowledge and to be ignored and come back w/the irrational exuberance of how much will it rise in a couple of years. Sometimes people have to fall down and experience it on their own. Very hard to stand by and let that happen. Natural instinct is to help. Just don’t hurt yourself in the process. Continually helping puts you in the enabler position.

[Author]

Posts