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I had a lively discussion last nite over dinner concerning "whose fault is it that we have 2 million (?) foreclosures. One one hand first time home owners were handed a ticket to fullfill the "American Dream". "step right up, sign right here...no I don't need any money...here are the keys to your house".
On the other hand generations of people before them bought millions of homes with due deligence, their life savings at stake and a clear understanding of the consequences of their purchase.
So, who is at fault here? Greed on behalf of the money lenders? Gov. agencies that allowed "rules" to flow right down the toilet? Mothers and fathers that wanted the best for their familys? And...?
Quite honestly, I'm not quite sure myself and this is my business as a real estate investor.
What do you think?
je
As with all things in life...moderation is the key. I think it was wise of first time home buyers to take advantage of programs geared to help them get in a home of their own but they should have been advised to purchase within their means. The problem came about when they bought out of their price range. This may have been partly their fault but I have to say I believe the builder, realtors (and I'm a Realtor), the mortgage brokers/lenders IN SOME CASES may have encouraged them to buy more home than they could afford. I don't think they intentionally jeopardized the client's homeownership, they just gambled on appreciation and lost. There are many honest builders, Realtors, and lenders out there who truly want to help families buy homes but greed played a part in it as well.
I agree they are both at fault, but the borrowers are more at fault.
If I have a dream I can fly, and I jump off the Nations Bank tower to prove it, is that my fault or the fault of Nations Bank?
Personal responsibility.
Re:
"Borrowers are more at fault". There's no doubt in my mind that this augument could be won at every turn.However, why "more"? (Note that I am not defending irresponsibility). Didn't the lending participate in "fraud"-ie: enabling a weak buyer to buy a house that he was damn sure the buyer would never be able to afford? I know you know what an ARM loan is. I know. Probably 98% of this board knows. But how many first-time buyers know what it means? I'm not quite sure.I'm serious.
Again, let me emphasize, I'm not taking a postion here-mearly opening it up for some discussion and thought.
BTW-Do you all know that is just as easy TODAY for a first-time buyer to buy a house in Charlotte NC for $100 down. Right. ONE HUNDRED dollars. 6% mortgage.FHA loan which I believe, correct me if I am wrong,is still one of our government agencies.
I might add that it is totally disclosed at settlement how this buyer is buying the house.
I have spoken to dozens of lenders and real estate people regarding these loans and all the answers seem to come back the same.
"I can qualify anyone that is a first time buyer for a loan. As long as he has a pay stub,no bankrupcies, has not been locked up in the past for murder or kidnapping".A lender friend of mine said to me he would be out of business if it were not for FHA loans. My point? The beat goes on-don't kid yourself.
je
I agree that both lenders and buyers are at fault, but the buyers more so. However, there are plenty of people out their that also ran into trouble with issues like losing their jobs. Then, it is no one's fault, really.
I think FHA loans are important to have, but maybe the qualifications should be more strict. Take myself for example. I am 25 years old, have $10,000 in the bank, excellent credit (780 credit score) and want to buy a house. The catch is that I am a teacher and only make 32K a year. Between student loans, my car payment and rent ($800 monthly by itself), I can survive easily (no credit card debt), but can not actually SAVE money for the down payment. The 10K was inherited. I would never be able to afford a home (one I'd live in anyway) without getting an FHA loan.
If someone is dumb enough to lend you a sum of money you can't possibly pay back, shame on them. For you to sign the contract shame on you....What really bugs me as a potential buyer is that I'm competing with people willing to live paycheck to paycheck, they are the ones who bid the prices up to begin with. I'm hoping all this easy money is drying up...
However, why "more"? (Note that I am not defending irresponsibility). Didn't the lending participate in "fraud"-ie: enabling a weak buyer to buy a house that he was damn sure the buyer would never be able to afford? I know you know what an ARM loan is. I know. Probably 98% of this board knows. But how many first-time buyers know what it means? I'm not quite sure.I'm serious.
They are "more" at fault because you shouldn't mess with your home.
This rash of foreclosures isn't just about first-time home buyers, it's also about people taking money out of their homes. Home equity loans for elaborate landscaping, or pools, trips or furniture. I saw it a lot. People relied on inflated home prices to justify these loans, and now that the prices are coming down, they owe more than their homes are worth.
When we recently closed on our home in Charlotte, the closing attorney remarked that he never sees equity anymore.
BTW, the public library is FULL of information about home loans and buying your first home. First-time homebuyers could have and should have done some research to protect themselves.
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let me add to my post
