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Old 05-22-2010, 07:42 AM
 
Location: Fairfield, CT
5,551 posts, read 8,231,273 times
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Quote:
Originally Posted by JViello View Post
Right. But on the other hand, the people had no business signing the papers either.

It really is a chicken or the egg thing.

For me, I tend to side on personal responsibility. There are a TON of things in this world that can be abused if a person so wishes. Food, drink, shopping etc. Do we blame the restaurants for serving food to a 500lb guy? Do we blame the package store for the drunks? Do we blame the stores for selling huge screen T.V.'s to people on state assitance?

The problem for me is that the government got involved. In a free market, the fools who signed the paper and the fools who loaned the money would BOTH go down in flames and the responsible people and responsible companies would be doing just fine. Now the government is taking OUR money (the responsible people) and bailing out the fools. Madness.

Peoples Bank is a perfect example. They are one of the healthiest banks in the nation right now. Why? They didn't get involved with any high risk loans and are flush with cash right now. They are trending WAY below the national average in troubled assest ratio.

Nevermind the fact the government AGAIN got involved and put pressure on banks to make these risky loans. The responsible banks said no. But like drug dealers, if one person won't sell...another will.

What bleeping business does the government have telling private industry who they "should" be taking on as customers? And what business does the government have getting into the private mortgage industry? (Over 50% the nations mortgages are government held with just Fannie and Freddie alone!)
That bolded paragraph hits the nail right on the head. The mortgage market hasn't been a free market for a very long time. It has gradually gotten worse over time, with a significant leap over the edge having been taken in the last decade, after the Clinton administration and that Barney Frank congressman pushed Fannie Mae and Freddie Mac to buy riskier and riskier mortgages. Coupled with artificially low interest rates and money that was too available, it created a huge mess.

Of course, the government's solution is to become even more involved than before, and create an even bigger problem, as they are doing as we speak. Today, the government not only is involved in the mortgage market; the government IS the mortgage market. It's a very dangerous situation.

I agree with personal responsibility, but I also don't have a huge problem with a bank who made a bad loan taking the loss on it. That's business. But of course, the banks are just passing the losses on to the taxpayer under our "Too Big to Fail" doctrine. Or taxpayers are picking up the costs of mortgage modifications, so that people can stay in homes that they should never have bought in the first place. We have now simply nationalized a lot of private debt.

So we have the government effectively propping up inflated housing prices, even as people are struggling with their budgets due to those high prices. It's absurd. But the banks went so far out on a limb lending against those values that if housing prices were to fall to their natural levels, it would set off a depression. So taxpayers, many of whom are not homeowners, must subsidize inflated housing prices. The situation is absurd. And the best part is, the whole idea that a rising house value makes you wealthy is a total chimera, because you can't truly cash out of your house as long as you need a place to live. Sure, you can borrow against it and lead yourself to financial ruin, as many did, but at the end of the day, a house is an expense, not an investment, and people who believe otherwise are kidding themselves.

We are going down the road to ruin because we refuse to be honest with ourselves about where we're going and how we got onto this path.
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Old 05-22-2010, 08:27 AM
 
Location: New England
8,155 posts, read 18,249,703 times
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Quote:
Originally Posted by dazzleman View Post
That bolded paragraph hits the nail right on the head. The mortgage market hasn't been a free market for a very long time. It has gradually gotten worse over time, with a significant leap over the edge having been taken in the last decade, after the Clinton administration and that Barney Frank congressman pushed Fannie Mae and Freddie Mac to buy riskier and riskier mortgages. Coupled with artificially low interest rates and money that was too available, it created a huge mess.

Of course, the government's solution is to become even more involved than before, and create an even bigger problem, as they are doing as we speak. Today, the government not only is involved in the mortgage market; the government IS the mortgage market. It's a very dangerous situation.

I agree with personal responsibility, but I also don't have a huge problem with a bank who made a bad loan taking the loss on it. That's business. But of course, the banks are just passing the losses on to the taxpayer under our "Too Big to Fail" doctrine. Or taxpayers are picking up the costs of mortgage modifications, so that people can stay in homes that they should never have bought in the first place. We have now simply nationalized a lot of private debt.

So we have the government effectively propping up inflated housing prices, even as people are struggling with their budgets due to those high prices. It's absurd. But the banks went so far out on a limb lending against those values that if housing prices were to fall to their natural levels, it would set off a depression. So taxpayers, many of whom are not homeowners, must subsidize inflated housing prices. The situation is absurd. And the best part is, the whole idea that a rising house value makes you wealthy is a total chimera, because you can't truly cash out of your house as long as you need a place to live. Sure, you can borrow against it and lead yourself to financial ruin, as many did, but at the end of the day, a house is an expense, not an investment, and people who believe otherwise are kidding themselves.

We are going down the road to ruin because we refuse to be honest with ourselves about where we're going and how we got onto this path.
Great post! What I find almost more revolting are reverse mortgages. Okay, so they made 200K off your 150K loan on the way up, now they are going to make 150K on your 300K house on the way down or whatever. Only a fool thinks that's a good idea IMO.

Sigh...
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Old 05-22-2010, 08:41 AM
 
Location: Fairfield, CT
5,551 posts, read 8,231,273 times
Reputation: 5817
Quote:
Originally Posted by JViello View Post
Great post! What I find almost more revolting are reverse mortgages. Okay, so they made 200K off your 150K loan on the way up, now they are going to make 150K on your 300K house on the way down or whatever. Only a fool thinks that's a good idea IMO.

Sigh...
Well, paying a ton of interest is the price of living beyond your means.

There's nothing wrong with a bank making money lending you money to make it possible for you to buy something for which it would impossible to accumulate enough cash for an inordinately long period of time. Home mortgages are very necessary, and overall are beneficial within certain required constraints (which we have seriously abused).

Reverse mortgages are simply a way for people to stay in a house they can no longer afford, and push off the cost of that until after they're dead. That's it, in a nutshell. I don't see anything particularly wrong with a bank making money from that as long as the lending amount is reasonable enough that it can be recouped, rather than passed on as losses to the taxpayers under "too big to fail."
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Old 05-22-2010, 12:40 PM
 
Location: Central Virginia
834 posts, read 1,948,660 times
Reputation: 639
Quote:
What bleeping business does the government have telling private industry who they "should" be taking on as customers?
I agree with this also. The idea that everyone has to own a house is ridiculous. Some people aren't ready until they are into their 30's. Some will never be ready. The notion that homeownership is an entitlement is just plain wrong.
IMO, a good gage of whether is person is ready to buy a house is their downpayment. These loans of financing 100% were destined to fail. If a person cannot save 3% or 5%, that is probably a really good indication that they are not ready to own. There is so much more to home ownership than paying a mortgage. Owning a house is way more expensive than renting and if a person can't save any money to put down on a house, they are going to be in a world of hurt when they buy.

But to be fair, the older generation attempts to steer the younger generation the wrong way with comments like, "You're throwing your money away on rent." THAT is a statement whose time has passed. The only people who didn't lose a ton of money in the past 5 years ARE the renters! When I first got married back in 2000, the older women at my job were giving me the hardest time about renting. "You're wasting money! Now is the time to buy! Start building equity!" Looking back at 10 years of marriage, the only time we were saving money left and right was when we were renting. I love owning a house and can't wait to be a homeowner again, but a person should own a house because they want to, not because they think it's an investment or they think it's cheaper than paying rent.

There was a lot of bad advice floating around the past decade and hopefully everyone has learned a lesson. Heck, the mortgage company themselves were pushing us to borrow more than we wanted to when we bought our house in 2006. Telling us "You can always refinance down the road!" We knew better but how many people trust the banks and figure, "Hey these are the experts. They know what they are doing." If the banks couldn't see that these high risk loans were going to crash and burn, then how can Average Joe have seen it?
I just hope going forward, banks and buyers are wiser but I won't hold my breath.
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Old 05-22-2010, 12:49 PM
 
Location: Fairfield, CT
5,551 posts, read 8,231,273 times
Reputation: 5817
Quote:
Originally Posted by Yankeerose00 View Post
I agree with this also. The idea that everyone has to own a house is ridiculous. Some people aren't ready until they are into their 30's. Some will never be ready. The notion that homeownership is an entitlement is just plain wrong.
IMO, a good gage of whether is person is ready to buy a house is their downpayment. These loans of financing 100% were destined to fail. If a person cannot save 3% or 5%, that is probably a really good indication that they are not ready to own. There is so much more to home ownership than paying a mortgage. Owning a house is way more expensive than renting and if a person can't save any money to put down on a house, they are going to be in a world of hurt when they buy.

But to be fair, the older generation attempts to steer the younger generation the wrong way with comments like, "You're throwing your money away on rent." THAT is a statement whose time has passed. The only people who didn't lose a ton of money in the past 5 years ARE the renters! When I first got married back in 2000, the older women at my job were giving me the hardest time about renting. "You're wasting money! Now is the time to buy! Start building equity!" Looking back at 10 years of marriage, the only time we were saving money left and right was when we were renting. I love owning a house and can't wait to be a homeowner again, but a person should own a house because they want to, not because they think it's an investment or they think it's cheaper than paying rent.

There was a lot of bad advice floating around the past decade and hopefully everyone has learned a lesson. Heck, the mortgage company themselves were pushing us to borrow more than we wanted to when we bought our house in 2006. Telling us "You can always refinance down the road!" We knew better but how many people trust the banks and figure, "Hey these are the experts. They know what they are doing." If the banks couldn't see that these high risk loans were going to crash and burn, then how can Average Joe have seen it?
I just hope going forward, banks and buyers are wiser but I won't hold my breath.
Paying a mortgage <=> building equity. For a long time, the vast majority of the mortgage payments being made are interest. Much of the 'you're throwing money away renting' mentality was predicated on the assumption that home values would increase 20% per year, so you were 'missing out' if you didn't own.
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Old 05-22-2010, 04:41 PM
 
Location: Central Virginia
834 posts, read 1,948,660 times
Reputation: 639
Quote:
Originally Posted by dazzleman View Post
Paying a mortgage <=> building equity. For a long time, the vast majority of the mortgage payments being made are interest. Much of the 'you're throwing money away renting' mentality was predicated on the assumption that home values would increase 20% per year, so you were 'missing out' if you didn't own.

Exactly. The sad thing is, you STILL hear this from some people! There are people who think prices are on their way back up, if you don't buy now, you'll miss the boat, renting is wasting money, prices cannot fall much further. Realtors were really bad about pushing this also. When we were looking for our house back in 2006, our realtor was pushing us to buy the first house we looked at. I heard a lot of

"prices can't drop much further"

"interest rates are going up as we speak"

"buy now or you risk being shut out of the market"

"now is the best time to buy"

"why pay a landlord when you can be building equity"

We bought in 06 and watched our house lose value in 07 and 08. Finally we decided to just cut our loses and move because it didn't seem like the house was going to stop dropping in value.

I can't stand to hear people old enough to know better pushing 23 year old newlyweds into buying because they think renting is a waste. It's not.
It is nice to see that CT really didn't have the crash that other markets did. I'm house hunting now and while I know that there's a possibility the house can still drop in value, it's not going to crash. Honestly, I would not even consider buying a house in Florida, Arizona, Nevada or California. They still have a loooong way to go as far as foreclosures hitting the market. The gov't is sitting on a ton of foreclosures trying to stem the tide but sooner or later, those homes have to hit the market. It's a huge, stinking mess that once again falls on the burden of the taxpayers.
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Old 05-22-2010, 10:39 PM
 
Location: Connecticut
24,763 posts, read 40,368,739 times
Reputation: 7037
Quote:
Originally Posted by dazzleman View Post
Reverse mortgages are simply a way for people to stay in a house they can no longer afford, and push off the cost of that until after they're dead. That's it, in a nutshell.
I agree. For an elderly person who has a lot of equity in their home, it may be necessary as a last resort to tap that equity and still be able to stay in their home. I know someone doing that and it has worked out well. They have health issues now and will probably not be in their home much longer though but without that reverse mortgage they would have been out of there a long time ago. Jay
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Old 05-22-2010, 10:58 PM
 
Location: Connecticut
24,763 posts, read 40,368,739 times
Reputation: 7037
Quote:
Originally Posted by Yankeerose00 View Post
The idea that everyone has to own a house is ridiculous. Some people aren't ready until they are into their 30's. Some will never be ready. The notion that homeownership is an entitlement is just plain wrong.

IMO, a good gage of whether is person is ready to buy a house is their downpayment. These loans of financing 100% were destined to fail. If a person cannot save 3% or 5%, that is probably a really good indication that they are not ready to own. There is so much more to home ownership than paying a mortgage. Owning a house is way more expensive than renting and if a person can't save any money to put down on a house, they are going to be in a world of hurt when they buy.

But to be fair, the older generation attempts to steer the younger generation the wrong way with comments like, "You're throwing your money away on rent." THAT is a statement whose time has passed. The only people who didn't lose a ton of money in the past 5 years ARE the renters! When I first got married back in 2000, the older women at my job were giving me the hardest time about renting. "You're wasting money! Now is the time to buy! Start building equity!" Looking back at 10 years of marriage, the only time we were saving money left and right was when we were renting. I love owning a house and can't wait to be a homeowner again, but a person should own a house because they want to, not because they think it's an investment or they think it's cheaper than paying rent.

There was a lot of bad advice floating around the past decade and hopefully everyone has learned a lesson. Heck, the mortgage company themselves were pushing us to borrow more than we wanted to when we bought our house in 2006. Telling us "You can always refinance down the road!" We knew better but how many people trust the banks and figure, "Hey these are the experts. They know what they are doing." If the banks couldn't see that these high risk loans were going to crash and burn, then how can Average Joe have seen it?
I just hope going forward, banks and buyers are wiser but I won't hold my breath.
I agree with your first two paragraphs but do NOT agree with the second two. Definitely people need to save and have a downpayment before buying a home and there are those who should not buy. But quite frankly renting is throwing away money. After 30 years you have nothing and you never really know when the landlord will tell you it is time to leave so you may have to move multiple times which will cost you.

The problem with what you say is that you are only looking at the last 5 years. I own real estate. I did not lose any money over the last five years because I did not buy or sell anything in that time. History has shown that people that buy and keep real estate for the long term are better off in the long run.

Many young people today do not look at it that way. They look at things in the short term only. A home is NOT the stock market to be bought and sold like a day trader. If you kept that home bought in 2006, it would most likely be worth a lot more in 2036 when it is paid off. It is a long term investment and there really is nothing like the feeling of owning your own place and the pride that comes with it. This is one of the greatest strengths of this country. Jay
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Old 05-23-2010, 05:05 AM
 
Location: Fairfield, CT
5,551 posts, read 8,231,273 times
Reputation: 5817
Quote:
Originally Posted by JayCT View Post
I agree with your first two paragraphs but do NOT agree with the second two. Definitely people need to save and have a downpayment before buying a home and there are those who should not buy. But quite frankly renting is throwing away money. After 30 years you have nothing and you never really know when the landlord will tell you it is time to leave so you may have to move multiple times which will cost you.

The problem with what you say is that you are only looking at the last 5 years. I own real estate. I did not lose any money over the last five years because I did not buy or sell anything in that time. History has shown that people that buy and keep real estate for the long term are better off in the long run.

Many young people today do not look at it that way. They look at things in the short term only. A home is NOT the stock market to be bought and sold like a day trader. If you kept that home bought in 2006, it would most likely be worth a lot more in 2036 when it is paid off. It is a long term investment and there really is nothing like the feeling of owning your own place and the pride that comes with it. This is one of the greatest strengths of this country. Jay
Owning is definitely a long-term proposition, and I believe that for most people, owning is better over the long run. With renting, you're never done paying, and the rent is always going up. Owning provides a hedge against inflation by locking in the price you pay (assuming you don't foolish 'tap' into the equity of your home later and increase your payments), and offers the promise that you will one day be done making payments, something that will never happen with renting (assuming once again that you don't borrow against the house and spend the money).

However, every theory has its limits. The problem we've had is the idea that you should pay anything, whether you can afford it or not, and not even consider the shorter-term costs of ownership versus renting. When the cost of ownership versus renting becomes as out of whack as it did in the past few years, that's a big sign of a market bubble. People were told to continue to buy for investment purposes, regardless of whether they could actually afford it or not. That was a huge mistake.

I think a lot of people would have been better off renting until the market cooled off. Some people should never own, because they just don't know how to manage it well enough.
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Old 05-23-2010, 07:28 AM
 
Location: New England
8,155 posts, read 18,249,703 times
Reputation: 3279
Quote:
Originally Posted by dazzleman View Post
Paying a mortgage <=> building equity. For a long time, the vast majority of the mortgage payments being made are interest. Much of the 'you're throwing money away renting' mentality was predicated on the assumption that home values would increase 20% per year, so you were 'missing out' if you didn't own.
I agree, but there are exceptions. IMO if you TREAT your purchase as an investment, it can give a high rate of return. For instance. (And this was some of my plan if I moved to NC) Instead of purchasing a home for say $300K, you purchase a home or condo for roughly half the amount. If you double up on your mortgage payments on the small home, you'll have it paid IN FULL in just over 5 years and save over $100,000 in interest.

I planned on putting a large chunk down on a cheaper home in NC and continue to pay my current mortgage amount which would have been about double. The house would be paid for in 5 years I would be sitting on over 200K in equity. Do that one or two times over 15-20 years and you'll have put a significant amount of money in your own pocket instead of the banks and potentially be sitting on a $600K property paid in full.

Quote:
Originally Posted by JayCT View Post
I agree. For an elderly person who has a lot of equity in their home, it may be necessary as a last resort to tap that equity and still be able to stay in their home. I know someone doing that and it has worked out well. They have health issues now and will probably not be in their home much longer though but without that reverse mortgage they would have been out of there a long time ago. Jay
Oh sure, that's great except you are now handing several hundred thousand dollars of your estate over to a bank, and leaving your family with no inheritance.

I'd rather sell the house, rent a nice place for close to what my property taxes would have been anyway, create a trust, invest the money and let it earn a return as I use it instead it costing me money to use it. I would rather not hand over my hard earned assests to a bank that already made over twice what my original loan was in gross profit. A reverse mortgage is as poor of an investment as is a first mortgage. Only banks get rich.
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