Mortgage insurance

[snickerd3]

Whatever happened to buying @ three times the household income? There are articles in the paper out here now showing people having bought at 10 times their income levels. I understand that it isn't completely their fault but people should be held responsible for their actions.

greedy, predatory lenders who were more interested in making $ than doing what was right. If they didn't do it, the person would just go down the street to the next bank and the next bank until they found someone that would.

There's no way I'd even buy a house 3 times the household income. we bought a house we could still make payments on AND have a life if either of us lost our job.

 

[Flyer_PE]

^I will grant that there were misdeeds on the part of lenders. However, I think this column deserves a read.

 

[wilheldp_PE]

greedy, predatory lenders who were more interested in making $ than doing what was right. If they didn't do it, the person would just go down the street to the next bank and the next bank until they found someone that would.
There's no way I'd even buy a house 3 times the household income. we bought a house we could still make payments on AND have a life if either of us lost our job.

So, predatory lenders forced these people to buy houses that were WAY out of their price range? I don't know about you, but I have never been approached out of the blue by a bank asking me to buy any house, much less one I couldn't afford. When I wanted a house, I sought out the bank. They pre-approved me for more house than I could comfortably afford, but it was still my responsibility to make sure I didn't get into a mortgage that would break me. All this shit of looking for somebody to blame is really pissing me off. The fact of the matter is these people probably had no business owning any house, much less the one they ended up buying. But now their complete lack of fiscal or personal responsibility is being rewarded by the government.

 

[mudpuppy]

^ When I went in for a pre-approval, I was pressured to borrow more than I did. I could easily see someone without my financial acuity being mislead into thinking they could afford a lot more than they really could.

 

[wilheldp_PE]

^ When I went in for a pre-approval, I was pressured to borrow more than I did. I could easily see someone without my financial acuity being mislead into thinking they could afford a lot more than they really could.

That is the definition of fiscal and personal responsibility. If you are making a decision to buy a house, YOU have to do the investigation into what you can and cannot afford. There are thousands of car salesmen trying to talk people into paying sticker price, and people who pay it deserve what they get. It is not my responsibility, nor that of the government/taxpayers, to bail these people out because they didn't have the foresight to do some research before going into a high pressure sales situation.

 

[mudpuppy]

I get what you are saying, but I think you are overburdening the consumer. Not everyone is capable of making those calls on their own. Just because you are smart enough to do it doesn't mean everyone else is. By your logic, everyone should also be able to determine whether it is safe to take a drug on their own and thus we can do away with the FDA. Should all people also have to figure out on their own if a bridge is safe to cross by using their own engineering analysis? No need for licensed engineers then.

Without any protection from the government, you end up with Rockefellers and Vanderbilts (or Banks of America and Countrywide Financials). But that's ok, because people were stupid enough to buy stuff from them and let them get away with what they did. So no skin off our noses. Right.

 

[wilheldp_PE]

I get what you are saying, but I think you are overburdening the consumer. Not everyone is capable of making those calls on their own. Just because you are smart enough to do it doesn't mean everyone else is. By your logic, everyone should also be able to determine whether it is safe to take a drug on their own and thus we can do away with the FDA. Should all people also have to figure out on their own if a bridge is safe to cross by using their own engineering analysis? No need for licensed engineers then.

Everybody should know their own personal finances (i.e. how much money they make and how many fixed bills they have). If that requires special knowledge that Joe Six Pack doesn't have, then the American populace is dumber than I give them credit for...and that's pretty effin' dumb. I don't expect every person to do the level of research that I do before making a purchase, but simply looking at a payment plan (which I believe is required by the bank/mortgage broker) should indicate to Joe "Hey, I won't be able to afford this place in 5 years when my ARM resets or the balloon payment comes due". That is my first point...basic financial knowledge is required in order to buy a house. If you do not possess this knowledge, you have no business buying.

My 2nd point is that if Joe does lack common financial sense, then he deserves to pay for his own ignorance. There is no right mandated by the Constitution that "the right to own ones home shall not be infringed". Joe made a mistake. Joe should lose his house and go back to renting. How is he any worse off (other than a tarnished credit rating)? Why should billions of taxpayer dollars be flushed down the toilet so that Joe can afford to keep the house that he can't afford?

Rewarding ignorance leads directly to more ignorance.

 

[Flyer_PE]

Without government intervention, there would have been no incentive for the banks to make the bad loans in the first place. Think it through, why would I, as a lending institution, make loans that I know are likely to go into foreclosure? I'm a lending institution, not a real estate institution. I don't want the house, I want the interest. The reason they were writing loans to people who couldn't afford them was because they would then turn around and sell the steaming pile to the US government through Fanny and Fredie. When the loan went into default, the tax payer, not the lender, would be on the hook for the debt. On top of that, the federal government was encouraging this behavior through the Community Reinvestment Act of 1977.

 

[benbo]

Without government intervention, there would have been no incentive for the banks to make the bad loans in the first place. Think it through, why would I, as a lending institution, make loans that I know are likely to go into foreclosure? I'm a lending institution, not a real estate institution. I don't want the house, I want the interest. The reason they were writing loans to people who couldn't afford them was because they would then turn around and sell the steaming pile to the US government through Fanny and Fredie. When the loan went into default, the tax payer, not the lender, would be on the hook for the debt. On top of that, the federal government was encouraging this behavior through the Community Reinvestment Act of 1977.

Obviously the consumers are responsible for their own behaviors vis a vis their mortgage and payment. You are responsible for your own finances and the banks should be as well.

But the banks are also at fault, especially for their own demise. I do not believe it was entirely clear that the government was going to scoop up every stinking pile. Otherwise places like Wachovia and WM wouldn't have gone out of business if it was that easy. Granted, the government is doing that now, which is not good.

But also, it isn't as though these people were going into their neighborhood bank and getting a loan from Mr. Smith who knew their grandpa, and the same bank held the loan for 30 years. A lot of these loans were done through mortgage brokers, and financial institutions took and bundled these loans, and anything else you could possibly imagine, into CDOs and started trading them like baseball cards. With mark to market accounting rules, and a tanking housing market the ponsy scheme had to come down.

At least that's how I see it from my limited knowledge.

 

[dastuff]

^ A+ for that limited knowledge.

 

[Capt Worley PE]

There's no way I'd even buy a house 3 times the household income. we bought a house we could still make payments on AND have a life if either of us lost our job.

Same here. we bought at <three times the lowest of our two incomes. Which was wise considering I was downsized three years later...

 

[jeb6294]

There are thousands of car salesmen trying to talk people into paying sticker price, and people who pay it deserve what they get.

You're crazy...when I got my car the dealer told me that was the price they only gave to their "special" customers. He wanted me to go home and think about it and come back the next day but I jumped at the deal right then so he couldn't change his mind. The only thing it didn't have was one of those cool license plate frames with the name of the dealer on it so I asked him if they could throw one in. I was a little worried that I had blown the deal because he said he'd have to check with his sales manger, but he said it was okay...phewww. He even set me up with someone right at the dealer who could get me financing instead of going to my stupid credit union.

 

[snickerd3]

^^ you rock :th_rockon:

Anytime my hubby gets a car, he specifically asks them to remove all stickers/plate frames that advertise the dealer. They aren't paying him to advertise for them.

 

[wilheldp_PE]

^^ you rock :th_rockon:
Anytime my hubby gets a car, he specifically asks them to remove all stickers/plate frames that advertise the dealer. They aren't paying him to advertise for them.

No, but you are paying them to advertise if you don't pay attention. In the "tax, title, license and fees" portion of the final tally, there is usually an advertising fee. I have seen it everywhere I have bought a car, and I have refused to pay it every single time. I even had a "sales manager" tell me that "it's the cost of doing business". I responded "Exactly! It's YOUR cost of running YOUR business. It's not my responsibility to pay for that, it's your responsibility to take that out of your profit margin on the vehicle."

 

[DVINNY]

I agree completely, it's hard to feel bad for all the people out here right now who can't afford their mortgages when they planned on making a quick buck at the economies expense.
Whatever happened to buying @ three times the household income? There are articles in the paper out here now showing people having bought at 10 times their income levels. I understand that it isn't completely their fault but people should be held responsible for their actions.

^^ HOLY CRAP.

I bought at about 1.5 times our annual income, but financed for 15 years, hence the $2,100 /mo.

I couldn't imagine 3 times, let alone 10 times the income.

 

[MGX]

"The bank approved me, so I figured I could afford it". I hear this and marvel at the cop-out mentality.

Of course methods of loaning debt today has nothing to do with your actual ability to pay it back, so what do we expect?

 

[RIP - VTEnviro]

^I've always been amazed at the people who are 'house poor'. I worked in an outer suburb of NY right after college. This was 2002-03 when there was a housing boom and a lot of people were moving away from the city post-9/11. You'd get these semi-high end McMansions. 3000-3500 SF going for $650k and up from there to some that listed closer to $1M.

I did a lot of inspection work on these subdivisions so I spent a lot of time there. You'd have a family with 3 small kids, a mom that might work part time, and a dad with a mid-level but not executive job somewhere. 2 big SUVs in the driveway as well, and a big fancy riding mower for a half acre lot. I never figured how they could afford these places. I gotta imagine they were up to their ears in debt.

 

[IlPadrino]

Whatever happened to buying @ three times the household income? There are articles in the paper out here now showing people having bought at 10 times their income levels. I understand that it isn't completely their fault but people should be held responsible for their actions.

When bought our house in Ventura County, CA in 2004 for $450,000. We're a single-income family and there is NO WAY I come close to $150,000/year income on Uncle Sam's salary. You can't really apply such a simple parametric guideline across the entire US - you've GOT to take into account locality and comparable rental rates.

Monthly debt-to-income ratios are a much more realistic guideline to "debt health", anyway... For example, FHA requires the front-end mortgage (PITI) to be no more than 31% of your gross monthly income and the back-end total monthly debt obligation (including the mortgage and all other debt payments) to be no more than 43% of your monthly income. For energy efficient homes, the ratios can be up to 33%/45%. I think the FHA ratios are higher than most others.

The problem arises when the interest rate grows unexpectedly and the debt-to-income ratio goes up drastically... that's why I think the solution to this mess should be simple:

Allow for low interest rates with no refinance necessary. If you can't afford a 4.5% interest rate, you're either A) an idiot for buying the house in the first place or B) a speculator who warrants no help. In both cases, you should get what you deserve... foreclosure.

It kills me to think the government will buy down debt (which is nothing more than a subsidy!).

 

[DVINNY]

^^ Going by that number of 31%, and an income of $12,500/mo. My mortgage would be $3,875. That is INSANE.

If I were to do that, I'd expect to be in the handout line as well.

I thought having mine on a 15 yr. loan and a payment of $2,100 was high. I can't believe that's what the bank would allow. If so, no wonder the dumbass banks are going broke.

 

[IlPadrino]

I can't believe that's what the bank would allow. If so, no wonder the dumbass banks are going broke.

I wouldn't presume to tell anyone how they should spend their money... but at about $9,000/month before taxes (which, in my case are lower than most) and a $2,500 mortgage (which is about $500 more than a lease would cost), we're not in a handout line and I'd like to think we're not dumbasses.

What am I missing in life?