[eavesdropper]

[quote=briansd1][quote=bearishgurl]
I was referring to the same people to go to providers for repeat visits (2-4x mo) for themselves and/or their children and are usually just sent to the store to buy some ibuprofen or some other over-the-counter remedy. Since they have a very low co-pay, they just keep making appointments, even for just a hangnail. I’ve seen this phenomenon all my life, mostly with overprotective parents and hypochondriac adults.[/quote]

There have been empirical research showing that a significant co-pay (like $50) is very helpful in getting patient to use medical service judiciously.

I support higher copays.

Something like a flexible spending account combined with insurance wouldn’t be bad. Give people who use very little medical services something back at the end of the year. Something substantial like $500 or more. That might work for medicare/medicaid too.[/quote]

bearish, I am so with you on this one, girl! The healthcare problem in this country is extraordinarily complex (I speak as one who has worked in this arena for most of my life), and there is more than enough blame to go around for everyone concerned: insurance companies, hospitals/providers, government regulators, malpractice attorneys, pharmaceutical companies. However, nothing will improve until the public, across the board, is made aware of the high cost of healthcare. And nothing makes one more aware, as many of our less fortunate citizens know, than a direct hit to the wallet.

I remember listening to friends gripe about their high insurance premiums. This was the good old days, 25 years ago, when many of them were paying $600 or $800 per YEAR for family coverage. I’d ask them to pull out their hospital bill for the birth of their last child, and ask them who was going to be paying the $15,000 not covered by their premiums (don’t jump all over me – I am NOT defending the insurance companies. But you don’t want me to get started on them.)

There are people who spend hours clipping coupons each week so that they can get 20 cents off a $2.59 bottle of dish soap, who don’t think twice before going in to see their doctor. Very often, it’s something that medical intervention won’t help (common cold?), or something that they’ve already seen the doctor about but haven’t followed his/her advice, or sometimes it’s simply for the care and attention.

Until we get people to invest more of their own money in their healthcare, they won’t realize the true value of it, and how fortunate they are to have it. I agree with Brian: raise those co-pays on basic doctor visits, and reward patients who don’t abuse the system. I don’t mean to make this as simple as it sounds – it’s not simple at all. Medicine is far from an exact science. But there are high-maintenance patience who overutilize health services because they refuse to change their lifestyle choices and continue to engage in risky behavior. Think about it: if you continued to get into fender-benders month after month, year after year, would State Farm continue to be a good neighbor and pay the repair bills? Despite the sincerity of their commercials, I don’t think they would.

As for you, flu, once again you have chosen to start a thread with a topic that is both newsworthy and postworthy (two full pages of thought-provoking posts in less than 12 hours!). I commend you, sir. As for your original post, there are many of my betters on this board who have articulated their positions skillfully, and you have been gracious in acknowledging that you were ill-informed when you started the thread. It’s understandable that most people form opinions based on their own experiences; unfortunately, that’s been a major hurdle in health care reform. The problem isn’t that there are many people who simply don’t want to pay for insurance; it’s that they CAN’T get insurance, at any price. There’s also an assumption that all people receiving employer-sponsored health insurance are paying the same premiums and receiving the same coverage. Nothing could be further from the truth.

But the real problem is that health care has become very, very expensive. And this will become exponentially worse as the Baby Boomer generation ages. Health care delivery as it stands today, will be unsustainable in the future. If middle-class America wants to be able to access decent healthcare in the future, we need to adjust our expectations, and we need to take some personal responsibility.

[eavesdropper]

[quote=briansd1][quote=bearishgurl]
I was referring to the same people to go to providers for repeat visits (2-4x mo) for themselves and/or their children and are usually just sent to the store to buy some ibuprofen or some other over-the-counter remedy. Since they have a very low co-pay, they just keep making appointments, even for just a hangnail. I’ve seen this phenomenon all my life, mostly with overprotective parents and hypochondriac adults.[/quote]

There have been empirical research showing that a significant co-pay (like $50) is very helpful in getting patient to use medical service judiciously.

I support higher copays.

Something like a flexible spending account combined with insurance wouldn’t be bad. Give people who use very little medical services something back at the end of the year. Something substantial like $500 or more. That might work for medicare/medicaid too.[/quote]

bearish, I am so with you on this one, girl! The healthcare problem in this country is extraordinarily complex (I speak as one who has worked in this arena for most of my life), and there is more than enough blame to go around for everyone concerned: insurance companies, hospitals/providers, government regulators, malpractice attorneys, pharmaceutical companies. However, nothing will improve until the public, across the board, is made aware of the high cost of healthcare. And nothing makes one more aware, as many of our less fortunate citizens know, than a direct hit to the wallet.

I remember listening to friends gripe about their high insurance premiums. This was the good old days, 25 years ago, when many of them were paying $600 or $800 per YEAR for family coverage. I’d ask them to pull out their hospital bill for the birth of their last child, and ask them who was going to be paying the $15,000 not covered by their premiums (don’t jump all over me – I am NOT defending the insurance companies. But you don’t want me to get started on them.)

There are people who spend hours clipping coupons each week so that they can get 20 cents off a $2.59 bottle of dish soap, who don’t think twice before going in to see their doctor. Very often, it’s something that medical intervention won’t help (common cold?), or something that they’ve already seen the doctor about but haven’t followed his/her advice, or sometimes it’s simply for the care and attention.

Until we get people to invest more of their own money in their healthcare, they won’t realize the true value of it, and how fortunate they are to have it. I agree with Brian: raise those co-pays on basic doctor visits, and reward patients who don’t abuse the system. I don’t mean to make this as simple as it sounds – it’s not simple at all. Medicine is far from an exact science. But there are high-maintenance patience who overutilize health services because they refuse to change their lifestyle choices and continue to engage in risky behavior. Think about it: if you continued to get into fender-benders month after month, year after year, would State Farm continue to be a good neighbor and pay the repair bills? Despite the sincerity of their commercials, I don’t think they would.

As for you, flu, once again you have chosen to start a thread with a topic that is both newsworthy and postworthy (two full pages of thought-provoking posts in less than 12 hours!). I commend you, sir. As for your original post, there are many of my betters on this board who have articulated their positions skillfully, and you have been gracious in acknowledging that you were ill-informed when you started the thread. It’s understandable that most people form opinions based on their own experiences; unfortunately, that’s been a major hurdle in health care reform. The problem isn’t that there are many people who simply don’t want to pay for insurance; it’s that they CAN’T get insurance, at any price. There’s also an assumption that all people receiving employer-sponsored health insurance are paying the same premiums and receiving the same coverage. Nothing could be further from the truth.

But the real problem is that health care has become very, very expensive. And this will become exponentially worse as the Baby Boomer generation ages. Health care delivery as it stands today, will be unsustainable in the future. If middle-class America wants to be able to access decent healthcare in the future, we need to adjust our expectations, and we need to take some personal responsibility.

[eavesdropper]

[quote=ucodegen][quote UCGal]
They bought in Nov 1991 for $169k.

Somewhere along they way they pulled out an additional $390k (on top of their original loan.)

Amount owed: $582,589.15
Back to the bank today when no one would pay $350k at the steps.
[/quote]
Here is the kicker. Because the Home Equity Loan is generally considered for home improvement, the proceeds of the loan is not taxable as income. (390K virtually tax free)

The interest on the loans was tax deductible.

The loss of the property due to foreclosure has the potential to be deducted against future income – possibly at the value that the house was appraised at when they took out the Home Equity Loan.

The only counterbalance would have been the banks 1099 for loan loss forgiveness.. but that has been waived away for a while.
swwwweeeeettttt (CS) <-- no way related..[/quote] Yes, home equity loans were historically (prior to the year 1995) assumed to be for home improvement, and that is what the IRS tax deduction is based on. The guidelines are very clear (or at least as clear as anything the IRS writes): interest can be deducted only on the proceeds of the loan that are applied toward *substantial* home improvements: adding square footage/living space, building a garage, finishing your basement or attic, etc. Faux painting your living room, installing an Old English bar, spending $30K on electronics and velvet blackout drapes for a media room - these don't make the cut. That being said, it's not surprising that people assume that all home equity loan interest is tax-deductible. No less a trustworthy source than the Big Banks told us so, over and over on the public airwaves. By the mid-nineties, they were spending billions on advertising, pushing HELOCs on a greedy and gullible public, and even offering helpful suggestions on how to spend the money, should their customers not prove to be creative in that area. Plasma TVs (remember the mid-90s prices!), hot tubs, luxury vacations, expensive cars, even jewelry! A couple of the megabanks began offering a debit card with the loans, touting it as a convenient way to always have money available for those impulse purchase moments: "Use it for getaway weekends, for gifts, furniture, clothes...even for groceries." That's when I realized just how much trouble we were in: when the bankers we were supposed to trust were recommending that we use the equity in our homes to fill our refrigerators. And it would all be tax deductible. Is this a great country, or what?! Well, at least, it would be if the bankers ran the IRS.

[eavesdropper]

[quote=ucodegen][quote UCGal]
They bought in Nov 1991 for $169k.

Somewhere along they way they pulled out an additional $390k (on top of their original loan.)

Amount owed: $582,589.15
Back to the bank today when no one would pay $350k at the steps.
[/quote]
Here is the kicker. Because the Home Equity Loan is generally considered for home improvement, the proceeds of the loan is not taxable as income. (390K virtually tax free)

The interest on the loans was tax deductible.

The loss of the property due to foreclosure has the potential to be deducted against future income – possibly at the value that the house was appraised at when they took out the Home Equity Loan.

The only counterbalance would have been the banks 1099 for loan loss forgiveness.. but that has been waived away for a while.
swwwweeeeettttt (CS) <-- no way related..[/quote] Yes, home equity loans were historically (prior to the year 1995) assumed to be for home improvement, and that is what the IRS tax deduction is based on. The guidelines are very clear (or at least as clear as anything the IRS writes): interest can be deducted only on the proceeds of the loan that are applied toward *substantial* home improvements: adding square footage/living space, building a garage, finishing your basement or attic, etc. Faux painting your living room, installing an Old English bar, spending $30K on electronics and velvet blackout drapes for a media room - these don't make the cut. That being said, it's not surprising that people assume that all home equity loan interest is tax-deductible. No less a trustworthy source than the Big Banks told us so, over and over on the public airwaves. By the mid-nineties, they were spending billions on advertising, pushing HELOCs on a greedy and gullible public, and even offering helpful suggestions on how to spend the money, should their customers not prove to be creative in that area. Plasma TVs (remember the mid-90s prices!), hot tubs, luxury vacations, expensive cars, even jewelry! A couple of the megabanks began offering a debit card with the loans, touting it as a convenient way to always have money available for those impulse purchase moments: "Use it for getaway weekends, for gifts, furniture, clothes...even for groceries." That's when I realized just how much trouble we were in: when the bankers we were supposed to trust were recommending that we use the equity in our homes to fill our refrigerators. And it would all be tax deductible. Is this a great country, or what?! Well, at least, it would be if the bankers ran the IRS.

[eavesdropper]

[quote=ucodegen][quote UCGal]
They bought in Nov 1991 for $169k.

Somewhere along they way they pulled out an additional $390k (on top of their original loan.)

Amount owed: $582,589.15
Back to the bank today when no one would pay $350k at the steps.
[/quote]
Here is the kicker. Because the Home Equity Loan is generally considered for home improvement, the proceeds of the loan is not taxable as income. (390K virtually tax free)

The interest on the loans was tax deductible.

The loss of the property due to foreclosure has the potential to be deducted against future income – possibly at the value that the house was appraised at when they took out the Home Equity Loan.

The only counterbalance would have been the banks 1099 for loan loss forgiveness.. but that has been waived away for a while.
swwwweeeeettttt (CS) <-- no way related..[/quote] Yes, home equity loans were historically (prior to the year 1995) assumed to be for home improvement, and that is what the IRS tax deduction is based on. The guidelines are very clear (or at least as clear as anything the IRS writes): interest can be deducted only on the proceeds of the loan that are applied toward *substantial* home improvements: adding square footage/living space, building a garage, finishing your basement or attic, etc. Faux painting your living room, installing an Old English bar, spending $30K on electronics and velvet blackout drapes for a media room - these don't make the cut. That being said, it's not surprising that people assume that all home equity loan interest is tax-deductible. No less a trustworthy source than the Big Banks told us so, over and over on the public airwaves. By the mid-nineties, they were spending billions on advertising, pushing HELOCs on a greedy and gullible public, and even offering helpful suggestions on how to spend the money, should their customers not prove to be creative in that area. Plasma TVs (remember the mid-90s prices!), hot tubs, luxury vacations, expensive cars, even jewelry! A couple of the megabanks began offering a debit card with the loans, touting it as a convenient way to always have money available for those impulse purchase moments: "Use it for getaway weekends, for gifts, furniture, clothes...even for groceries." That's when I realized just how much trouble we were in: when the bankers we were supposed to trust were recommending that we use the equity in our homes to fill our refrigerators. And it would all be tax deductible. Is this a great country, or what?! Well, at least, it would be if the bankers ran the IRS.

[eavesdropper]

[quote=ucodegen][quote UCGal]
They bought in Nov 1991 for $169k.

Somewhere along they way they pulled out an additional $390k (on top of their original loan.)

Amount owed: $582,589.15
Back to the bank today when no one would pay $350k at the steps.
[/quote]
Here is the kicker. Because the Home Equity Loan is generally considered for home improvement, the proceeds of the loan is not taxable as income. (390K virtually tax free)

The interest on the loans was tax deductible.

The loss of the property due to foreclosure has the potential to be deducted against future income – possibly at the value that the house was appraised at when they took out the Home Equity Loan.

The only counterbalance would have been the banks 1099 for loan loss forgiveness.. but that has been waived away for a while.
swwwweeeeettttt (CS) <-- no way related..[/quote] Yes, home equity loans were historically (prior to the year 1995) assumed to be for home improvement, and that is what the IRS tax deduction is based on. The guidelines are very clear (or at least as clear as anything the IRS writes): interest can be deducted only on the proceeds of the loan that are applied toward *substantial* home improvements: adding square footage/living space, building a garage, finishing your basement or attic, etc. Faux painting your living room, installing an Old English bar, spending $30K on electronics and velvet blackout drapes for a media room - these don't make the cut. That being said, it's not surprising that people assume that all home equity loan interest is tax-deductible. No less a trustworthy source than the Big Banks told us so, over and over on the public airwaves. By the mid-nineties, they were spending billions on advertising, pushing HELOCs on a greedy and gullible public, and even offering helpful suggestions on how to spend the money, should their customers not prove to be creative in that area. Plasma TVs (remember the mid-90s prices!), hot tubs, luxury vacations, expensive cars, even jewelry! A couple of the megabanks began offering a debit card with the loans, touting it as a convenient way to always have money available for those impulse purchase moments: "Use it for getaway weekends, for gifts, furniture, clothes...even for groceries." That's when I realized just how much trouble we were in: when the bankers we were supposed to trust were recommending that we use the equity in our homes to fill our refrigerators. And it would all be tax deductible. Is this a great country, or what?! Well, at least, it would be if the bankers ran the IRS.

[eavesdropper]

[quote=ucodegen][quote UCGal]
They bought in Nov 1991 for $169k.

Somewhere along they way they pulled out an additional $390k (on top of their original loan.)

Amount owed: $582,589.15
Back to the bank today when no one would pay $350k at the steps.
[/quote]
Here is the kicker. Because the Home Equity Loan is generally considered for home improvement, the proceeds of the loan is not taxable as income. (390K virtually tax free)

The interest on the loans was tax deductible.

The loss of the property due to foreclosure has the potential to be deducted against future income – possibly at the value that the house was appraised at when they took out the Home Equity Loan.

The only counterbalance would have been the banks 1099 for loan loss forgiveness.. but that has been waived away for a while.
swwwweeeeettttt (CS) <-- no way related..[/quote] Yes, home equity loans were historically (prior to the year 1995) assumed to be for home improvement, and that is what the IRS tax deduction is based on. The guidelines are very clear (or at least as clear as anything the IRS writes): interest can be deducted only on the proceeds of the loan that are applied toward *substantial* home improvements: adding square footage/living space, building a garage, finishing your basement or attic, etc. Faux painting your living room, installing an Old English bar, spending $30K on electronics and velvet blackout drapes for a media room - these don't make the cut. That being said, it's not surprising that people assume that all home equity loan interest is tax-deductible. No less a trustworthy source than the Big Banks told us so, over and over on the public airwaves. By the mid-nineties, they were spending billions on advertising, pushing HELOCs on a greedy and gullible public, and even offering helpful suggestions on how to spend the money, should their customers not prove to be creative in that area. Plasma TVs (remember the mid-90s prices!), hot tubs, luxury vacations, expensive cars, even jewelry! A couple of the megabanks began offering a debit card with the loans, touting it as a convenient way to always have money available for those impulse purchase moments: "Use it for getaway weekends, for gifts, furniture, clothes...even for groceries." That's when I realized just how much trouble we were in: when the bankers we were supposed to trust were recommending that we use the equity in our homes to fill our refrigerators. And it would all be tax deductible. Is this a great country, or what?! Well, at least, it would be if the bankers ran the IRS.

[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.

[eavesdropper]

[quote=CA renter][quote=eavesdropper] In truth, the financial institutions had shifted their focus completely, from making profits via sound financial management practices to making astronomical profits from the changing housing market. The guys who had the financial brains and education should have recognized the beginnings of the boom for what it was, but were instead blinded by the money to be had. At that point it became necessary to shed personnel who were skilled in fiscal management and replace them with those who could create new products when conditions that had created earlier boom markets became unsustainable (interest-only mortgages and negative amortization loans are two of them that come to mind) and those who could sell them.

There’s plenty of blame to go around in this mess. But the financial wizards are the ones that were supposed to know better. At least that’s what they told us for as long back as I can remember.[/quote]

Totally spot on, eavesdropper, UCGal, and BG.

As for the bolded part, I don’t think the financial wizards were blinded at all. They were making more money than they could ever have imagined just 10-20 years before. They were NOT going to stop that gravy train, and figured they would just plead ignorance when the SHTF. That’s why we have “The Crisis That Nobody Ever Saw Coming,” when in fact, we have plenty of evidence that LOTS of people saw it coming and were trying to sound the alarm many years ago. Think about it…why do you think they keep repeating the point that “nobody knew”? They are trying to get that message out to the sheeple so that we don’t go after them with pitchforks.

Problem is, if they acknowledged that they knew what was going on, they’d be in jail right now instead of sailing around on their yachts (and “doing God’s work”), courtesy of taxpayers’ money.[/quote]

CAR, I see your point, and agree with much of what you say. However, I recently saw a documentary (NOVA on PBS) that talked about mental beliefs and attitudes that could explain why at least some of the “smart guys” didn’t see this coming. It’s called “Mind Over Money”, and it’s available for instant viewing on the PBS website, or if you belong to Netflix. Here’s the description from the website:

“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).

[eavesdropper]

[quote=CA renter][quote=eavesdropper] In truth, the financial institutions had shifted their focus completely, from making profits via sound financial management practices to making astronomical profits from the changing housing market. The guys who had the financial brains and education should have recognized the beginnings of the boom for what it was, but were instead blinded by the money to be had. At that point it became necessary to shed personnel who were skilled in fiscal management and replace them with those who could create new products when conditions that had created earlier boom markets became unsustainable (interest-only mortgages and negative amortization loans are two of them that come to mind) and those who could sell them.

There’s plenty of blame to go around in this mess. But the financial wizards are the ones that were supposed to know better. At least that’s what they told us for as long back as I can remember.[/quote]

Totally spot on, eavesdropper, UCGal, and BG.

As for the bolded part, I don’t think the financial wizards were blinded at all. They were making more money than they could ever have imagined just 10-20 years before. They were NOT going to stop that gravy train, and figured they would just plead ignorance when the SHTF. That’s why we have “The Crisis That Nobody Ever Saw Coming,” when in fact, we have plenty of evidence that LOTS of people saw it coming and were trying to sound the alarm many years ago. Think about it…why do you think they keep repeating the point that “nobody knew”? They are trying to get that message out to the sheeple so that we don’t go after them with pitchforks.

Problem is, if they acknowledged that they knew what was going on, they’d be in jail right now instead of sailing around on their yachts (and “doing God’s work”), courtesy of taxpayers’ money.[/quote]

CAR, I see your point, and agree with much of what you say. However, I recently saw a documentary (NOVA on PBS) that talked about mental beliefs and attitudes that could explain why at least some of the “smart guys” didn’t see this coming. It’s called “Mind Over Money”, and it’s available for instant viewing on the PBS website, or if you belong to Netflix. Here’s the description from the website:

“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).

[eavesdropper]

[quote=CA renter][quote=eavesdropper] In truth, the financial institutions had shifted their focus completely, from making profits via sound financial management practices to making astronomical profits from the changing housing market. The guys who had the financial brains and education should have recognized the beginnings of the boom for what it was, but were instead blinded by the money to be had. At that point it became necessary to shed personnel who were skilled in fiscal management and replace them with those who could create new products when conditions that had created earlier boom markets became unsustainable (interest-only mortgages and negative amortization loans are two of them that come to mind) and those who could sell them.

There’s plenty of blame to go around in this mess. But the financial wizards are the ones that were supposed to know better. At least that’s what they told us for as long back as I can remember.[/quote]

Totally spot on, eavesdropper, UCGal, and BG.

As for the bolded part, I don’t think the financial wizards were blinded at all. They were making more money than they could ever have imagined just 10-20 years before. They were NOT going to stop that gravy train, and figured they would just plead ignorance when the SHTF. That’s why we have “The Crisis That Nobody Ever Saw Coming,” when in fact, we have plenty of evidence that LOTS of people saw it coming and were trying to sound the alarm many years ago. Think about it…why do you think they keep repeating the point that “nobody knew”? They are trying to get that message out to the sheeple so that we don’t go after them with pitchforks.

Problem is, if they acknowledged that they knew what was going on, they’d be in jail right now instead of sailing around on their yachts (and “doing God’s work”), courtesy of taxpayers’ money.[/quote]

CAR, I see your point, and agree with much of what you say. However, I recently saw a documentary (NOVA on PBS) that talked about mental beliefs and attitudes that could explain why at least some of the “smart guys” didn’t see this coming. It’s called “Mind Over Money”, and it’s available for instant viewing on the PBS website, or if you belong to Netflix. Here’s the description from the website:

“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).

[Author]

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