Forum Replies Created
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AuthorPosts
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cooperthedog
Participant[quote=HLS]
The DISNEY link on my site has been popular. For those that don’t know, Disneyland is offering FREE admission on your birthday in 2009. No strings attached, you just need to register.Yes, the link is on my website.
No, I don’t make a penny from it.[/quote]
As far as link on HLS’ website, a Disney link for a free pass sounds pretty good, and is innocuous compared to some of the scam websites listed on piggingtons (eg “Help the US Gov’t Bailouit – make 28k a month…).
I know Rich doesn’t have control over google ads, but he still makes money from them, and even if many of these links are lame, this site is still great.
Participant[quote=HLS]
The DISNEY link on my site has been popular. For those that don’t know, Disneyland is offering FREE admission on your birthday in 2009. No strings attached, you just need to register.Yes, the link is on my website.
No, I don’t make a penny from it.[/quote]
As far as link on HLS’ website, a Disney link for a free pass sounds pretty good, and is innocuous compared to some of the scam websites listed on piggingtons (eg “Help the US Gov’t Bailouit – make 28k a month…).
I know Rich doesn’t have control over google ads, but he still makes money from them, and even if many of these links are lame, this site is still great.
Participant[quote=HLS]
The DISNEY link on my site has been popular. For those that don’t know, Disneyland is offering FREE admission on your birthday in 2009. No strings attached, you just need to register.Yes, the link is on my website.
No, I don’t make a penny from it.[/quote]
As far as link on HLS’ website, a Disney link for a free pass sounds pretty good, and is innocuous compared to some of the scam websites listed on piggingtons (eg “Help the US Gov’t Bailouit – make 28k a month…).
I know Rich doesn’t have control over google ads, but he still makes money from them, and even if many of these links are lame, this site is still great.
Participant[quote=HLS]
The DISNEY link on my site has been popular. For those that don’t know, Disneyland is offering FREE admission on your birthday in 2009. No strings attached, you just need to register.Yes, the link is on my website.
No, I don’t make a penny from it.[/quote]
As far as link on HLS’ website, a Disney link for a free pass sounds pretty good, and is innocuous compared to some of the scam websites listed on piggingtons (eg “Help the US Gov’t Bailouit – make 28k a month…).
I know Rich doesn’t have control over google ads, but he still makes money from them, and even if many of these links are lame, this site is still great.
Participant[quote=asianautica][quote=cooperthedog]
True, but the opportunity cost of the few thousand also must be taken into account.If your rate of return is higher from investing the buydown money, then you will “save” less over the life of the loan vs. investing it.
With rates at 5%, do you expect your investments to return more or less then that over the next 30 years? Another way to look at it is; would you be willing to invest in a 30 year bond at 5%, or would you be worried about future inflation or better returns from different asset classes?
I’m of the opinion that with fixed rates this low, I want to use as much of other peoples money as possible. [/quote]
Please run your numbers with your assumption. Use a $500k house w/ 20% down as the example. 5.25% w/ 3900 in fees and 6.25% w/ 0 fees. Let me know what you come up with.carlsbadworker, what kind of opportunity cost do you think you’ll lose with $3900 over 30 years. Please run your # and prove me wrong. I’ve came up w/ the numbers in my example.
With 5.25% rate, you’d pay $395k in interest over 30 years. with 6.25% rate, you’d pay $484k in interest over 30 years.[/quote]
Asianautica – there are two separate items:
1) Whether no cost loans are the best choice dependent on time frame.
2) Whether buying down a loan by paying points is a better use of capital then investing it.
As to the first, no cost loans will *always* be more expensive when fully amoritized, since the APR is higher. The lender requires a premium for this “service”. The point I was trying to make is that your time horizon determines the true APR (what you actually paid over the life of the loan). Using your scenario, you would be far better paying $3900 to get a full point (~20%) rate reduction over 30 years, and with a spread that wide, your breakeven would be only one year. In your case, the lender is charging a fortune for a no cost loan. A lender *should* adjust the no cost loan’s rate to factor in the loan amount (higher balances require less premium) as well as the % diff (a point means alot more at 5% then 7%), of course many lenders will NOT adjust for these factors and happily pocket the extra premium…
As to the second issue of opportunity cost, in your scenario above, your 4k buys you a full 20% rate reduction (full point from 6.25% to 5.25%), which I wouldn’t attribute to a bargain point buydown, but rather a very pricey “no-cost” loan (which may be the norm now). Either way, you would save a substantial 90k and you would need to make > 13% ROI if you invested the 4k to just breakeven. If your scenario used a more typical rate buydown (eg 1 point equating to a 5% (1/4pt) rate reduction), the ROI would be far less, especially if holding for fewer years.
Of course many people that intend to save and invest said funds just spend them, while paying down a mortgage is a sure return.
Participant[quote=asianautica][quote=cooperthedog]
True, but the opportunity cost of the few thousand also must be taken into account.If your rate of return is higher from investing the buydown money, then you will “save” less over the life of the loan vs. investing it.
With rates at 5%, do you expect your investments to return more or less then that over the next 30 years? Another way to look at it is; would you be willing to invest in a 30 year bond at 5%, or would you be worried about future inflation or better returns from different asset classes?
I’m of the opinion that with fixed rates this low, I want to use as much of other peoples money as possible. [/quote]
Please run your numbers with your assumption. Use a $500k house w/ 20% down as the example. 5.25% w/ 3900 in fees and 6.25% w/ 0 fees. Let me know what you come up with.carlsbadworker, what kind of opportunity cost do you think you’ll lose with $3900 over 30 years. Please run your # and prove me wrong. I’ve came up w/ the numbers in my example.
With 5.25% rate, you’d pay $395k in interest over 30 years. with 6.25% rate, you’d pay $484k in interest over 30 years.[/quote]
Asianautica – there are two separate items:
1) Whether no cost loans are the best choice dependent on time frame.
2) Whether buying down a loan by paying points is a better use of capital then investing it.
As to the first, no cost loans will *always* be more expensive when fully amoritized, since the APR is higher. The lender requires a premium for this “service”. The point I was trying to make is that your time horizon determines the true APR (what you actually paid over the life of the loan). Using your scenario, you would be far better paying $3900 to get a full point (~20%) rate reduction over 30 years, and with a spread that wide, your breakeven would be only one year. In your case, the lender is charging a fortune for a no cost loan. A lender *should* adjust the no cost loan’s rate to factor in the loan amount (higher balances require less premium) as well as the % diff (a point means alot more at 5% then 7%), of course many lenders will NOT adjust for these factors and happily pocket the extra premium…
As to the second issue of opportunity cost, in your scenario above, your 4k buys you a full 20% rate reduction (full point from 6.25% to 5.25%), which I wouldn’t attribute to a bargain point buydown, but rather a very pricey “no-cost” loan (which may be the norm now). Either way, you would save a substantial 90k and you would need to make > 13% ROI if you invested the 4k to just breakeven. If your scenario used a more typical rate buydown (eg 1 point equating to a 5% (1/4pt) rate reduction), the ROI would be far less, especially if holding for fewer years.
Of course many people that intend to save and invest said funds just spend them, while paying down a mortgage is a sure return.
Participant[quote=asianautica][quote=cooperthedog]
True, but the opportunity cost of the few thousand also must be taken into account.If your rate of return is higher from investing the buydown money, then you will “save” less over the life of the loan vs. investing it.
With rates at 5%, do you expect your investments to return more or less then that over the next 30 years? Another way to look at it is; would you be willing to invest in a 30 year bond at 5%, or would you be worried about future inflation or better returns from different asset classes?
I’m of the opinion that with fixed rates this low, I want to use as much of other peoples money as possible. [/quote]
Please run your numbers with your assumption. Use a $500k house w/ 20% down as the example. 5.25% w/ 3900 in fees and 6.25% w/ 0 fees. Let me know what you come up with.carlsbadworker, what kind of opportunity cost do you think you’ll lose with $3900 over 30 years. Please run your # and prove me wrong. I’ve came up w/ the numbers in my example.
With 5.25% rate, you’d pay $395k in interest over 30 years. with 6.25% rate, you’d pay $484k in interest over 30 years.[/quote]
Asianautica – there are two separate items:
1) Whether no cost loans are the best choice dependent on time frame.
2) Whether buying down a loan by paying points is a better use of capital then investing it.
As to the first, no cost loans will *always* be more expensive when fully amoritized, since the APR is higher. The lender requires a premium for this “service”. The point I was trying to make is that your time horizon determines the true APR (what you actually paid over the life of the loan). Using your scenario, you would be far better paying $3900 to get a full point (~20%) rate reduction over 30 years, and with a spread that wide, your breakeven would be only one year. In your case, the lender is charging a fortune for a no cost loan. A lender *should* adjust the no cost loan’s rate to factor in the loan amount (higher balances require less premium) as well as the % diff (a point means alot more at 5% then 7%), of course many lenders will NOT adjust for these factors and happily pocket the extra premium…
As to the second issue of opportunity cost, in your scenario above, your 4k buys you a full 20% rate reduction (full point from 6.25% to 5.25%), which I wouldn’t attribute to a bargain point buydown, but rather a very pricey “no-cost” loan (which may be the norm now). Either way, you would save a substantial 90k and you would need to make > 13% ROI if you invested the 4k to just breakeven. If your scenario used a more typical rate buydown (eg 1 point equating to a 5% (1/4pt) rate reduction), the ROI would be far less, especially if holding for fewer years.
Of course many people that intend to save and invest said funds just spend them, while paying down a mortgage is a sure return.
Participant[quote=asianautica][quote=cooperthedog]
True, but the opportunity cost of the few thousand also must be taken into account.If your rate of return is higher from investing the buydown money, then you will “save” less over the life of the loan vs. investing it.
With rates at 5%, do you expect your investments to return more or less then that over the next 30 years? Another way to look at it is; would you be willing to invest in a 30 year bond at 5%, or would you be worried about future inflation or better returns from different asset classes?
I’m of the opinion that with fixed rates this low, I want to use as much of other peoples money as possible. [/quote]
Please run your numbers with your assumption. Use a $500k house w/ 20% down as the example. 5.25% w/ 3900 in fees and 6.25% w/ 0 fees. Let me know what you come up with.carlsbadworker, what kind of opportunity cost do you think you’ll lose with $3900 over 30 years. Please run your # and prove me wrong. I’ve came up w/ the numbers in my example.
With 5.25% rate, you’d pay $395k in interest over 30 years. with 6.25% rate, you’d pay $484k in interest over 30 years.[/quote]
Asianautica – there are two separate items:
1) Whether no cost loans are the best choice dependent on time frame.
2) Whether buying down a loan by paying points is a better use of capital then investing it.
As to the first, no cost loans will *always* be more expensive when fully amoritized, since the APR is higher. The lender requires a premium for this “service”. The point I was trying to make is that your time horizon determines the true APR (what you actually paid over the life of the loan). Using your scenario, you would be far better paying $3900 to get a full point (~20%) rate reduction over 30 years, and with a spread that wide, your breakeven would be only one year. In your case, the lender is charging a fortune for a no cost loan. A lender *should* adjust the no cost loan’s rate to factor in the loan amount (higher balances require less premium) as well as the % diff (a point means alot more at 5% then 7%), of course many lenders will NOT adjust for these factors and happily pocket the extra premium…
As to the second issue of opportunity cost, in your scenario above, your 4k buys you a full 20% rate reduction (full point from 6.25% to 5.25%), which I wouldn’t attribute to a bargain point buydown, but rather a very pricey “no-cost” loan (which may be the norm now). Either way, you would save a substantial 90k and you would need to make > 13% ROI if you invested the 4k to just breakeven. If your scenario used a more typical rate buydown (eg 1 point equating to a 5% (1/4pt) rate reduction), the ROI would be far less, especially if holding for fewer years.
Of course many people that intend to save and invest said funds just spend them, while paying down a mortgage is a sure return.
Participant[quote=asianautica][quote=cooperthedog]
True, but the opportunity cost of the few thousand also must be taken into account.If your rate of return is higher from investing the buydown money, then you will “save” less over the life of the loan vs. investing it.
With rates at 5%, do you expect your investments to return more or less then that over the next 30 years? Another way to look at it is; would you be willing to invest in a 30 year bond at 5%, or would you be worried about future inflation or better returns from different asset classes?
I’m of the opinion that with fixed rates this low, I want to use as much of other peoples money as possible. [/quote]
Please run your numbers with your assumption. Use a $500k house w/ 20% down as the example. 5.25% w/ 3900 in fees and 6.25% w/ 0 fees. Let me know what you come up with.carlsbadworker, what kind of opportunity cost do you think you’ll lose with $3900 over 30 years. Please run your # and prove me wrong. I’ve came up w/ the numbers in my example.
With 5.25% rate, you’d pay $395k in interest over 30 years. with 6.25% rate, you’d pay $484k in interest over 30 years.[/quote]
Asianautica – there are two separate items:
1) Whether no cost loans are the best choice dependent on time frame.
2) Whether buying down a loan by paying points is a better use of capital then investing it.
As to the first, no cost loans will *always* be more expensive when fully amoritized, since the APR is higher. The lender requires a premium for this “service”. The point I was trying to make is that your time horizon determines the true APR (what you actually paid over the life of the loan). Using your scenario, you would be far better paying $3900 to get a full point (~20%) rate reduction over 30 years, and with a spread that wide, your breakeven would be only one year. In your case, the lender is charging a fortune for a no cost loan. A lender *should* adjust the no cost loan’s rate to factor in the loan amount (higher balances require less premium) as well as the % diff (a point means alot more at 5% then 7%), of course many lenders will NOT adjust for these factors and happily pocket the extra premium…
As to the second issue of opportunity cost, in your scenario above, your 4k buys you a full 20% rate reduction (full point from 6.25% to 5.25%), which I wouldn’t attribute to a bargain point buydown, but rather a very pricey “no-cost” loan (which may be the norm now). Either way, you would save a substantial 90k and you would need to make > 13% ROI if you invested the 4k to just breakeven. If your scenario used a more typical rate buydown (eg 1 point equating to a 5% (1/4pt) rate reduction), the ROI would be far less, especially if holding for fewer years.
Of course many people that intend to save and invest said funds just spend them, while paying down a mortgage is a sure return.
Participant[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.
[/quote]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.Participant[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.
[/quote]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.Participant[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.
[/quote]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.Participant[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.
[/quote]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.Participant[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.
[/quote]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. -
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