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I think the borrower is the start of it (after all, they decide whether to get a loan or not and are given all of the terms when they apply for it) and if they can not pay, then the lender will suffer for any poor practices they have made (lending is a risk as well).
A lender takes a risk of judging if the person is reliable and honest enough to pay their bills, a risk yes, but in the end, the buyer is the one who chose to pay the amount for the home and agreed to the terms of repayment of the loan.
Should not the buyer be ultimately responsible here? They are the end of the link. The lender could pay their bills if the buyer could pay theirs. Saying it is the lenders fault that they "believed" the buyer when they claimed they could pay it back is like telling people who get suckered by fraud that its their own fault that someone lied to them and then excusing the fraudulent party of their actions.
Many of us did not buy these overpriced homes and many of us read the loans offered and saw their eventual staged increases. We did not take part, and so we avoided being stuck with overpriced homes and loans that would eventually be too high.
I watched these "home buying shows" as they were very popular during the boom and it was amazing to see people buy these extremely overpriced homes (often 3 to 4 times above their value) and quibble over a few thousand dollars when negotiating trying to get their payments to a start they wanted and then completely ignore and nod away at the lender telling them their payments in 2-3 years would double or triple.
I watched one couple say "well, our minimum of 1800 a month will be a bit tight, but we got the home we wanted so we are willing to accept that" while completely ignoring the fact that the lender stated to them that their payments would go up to 3600 after two years. They "accepted" this because they "believed" they were going to be better off in the future and that their home was going to grow fast in value, so they would be able to afford it.
So is the lender wrong? In terms of a very risky business decision, sure... they should have known these people were deluding themselves, but... those people claimed they could, claimed that they would be able to afford it, signed the contract and accepted the responsibility.
If the lender takes on too many loans like this, and the loans fail, they should fall just as the buyer falls if they can no longer afford. I am not excusing responsibility from any party here, but the issue of this discussion is not people walking away from a home they can not afford, but walking away from a poor decision that they can.
A person who walks away from a home they agreed to buy and that now has gone underwater is 100% at fault. There is no excuse for them. The lender may have taken a risky loan, but the buyer is the one choosing to break the deal.
As I said, you might make the argument if the people couldn't afford their home anymore and couldn't make the payments, that would be a different discussion though. In this case, the buyer doesn't want to accept their loss and wants to dump it on another. The buyer is the cause here.
Think of it like this. If we didn't have all these people going out and paying stupid prices for these homes and agreeing to stupid loans, housing would have never reached the levels it did. The market was created by the buyer as they are the market. If they refuse bad deals, the market reflects that and products and prices change to meet it.
Using that mindset- The drug purchaser is at the end of a link, too. So I guess we put the onus on the buyer, holding the dealer harmless?
Last edited by Magnolia Bloom; 08-16-2011 at 05:33 PM..
And if, when loans were sold, often even before the first mortgage payment was made, lenders weren't so quick to bundle and sell what they knew to be crap and greedy investors/lending institutions weren't so quick to buy crap, with no paper backing it up......... oh, but, no, I forgot. We don't hold corporations to the same standards as the average American. They are bullet proof. Freakin teflon.
I'm embarrassed to say that I was working in the closing department of a major home builder during this cluster f of greed. Starry-eyed families that were told that they could afford a first and a balloon mortgage. Average Joes that believed that if the lender said they could do it, they certainly could. After all, the lender wouldn't make a risky loan. The lender knew more about rising property values than they did.....
Were there greedy folks out there? Yes. I outed a guy with six fraudulent loans, all set to close on the same day. But I saw the families at the closing table- their kids and all their belongings in a truck outside, just waiting to sign on the dotted line and live the American dream that they never thought they would have. They believed the lie. And now they get kicked in the gut by their neighbors who are holier than thou and talk about ethics.
I am not so stupid to have anyone tell me what I can or can't afford. It is I who knows what I bring in and If I have a brain I will know what I can afford and many just signed to get into a home they never could afford in the first place.
I would not get an adjustable rate mortgage , never! It would be a fixed rate mortgage on a home I can afford. I would know what my mortgage payment is because there are too many other areas such as homeowners insurance, upkeep and taxes that could go up and are not fixed.
Too many people believed the dream and that is just what they got . Then they woke up and had to come to reality they couldn't afford the dream. Oh yes, it was greed. It was all , the banks, the buyers, the sellers, shadow banking that did not have to go under the guide lines of any legislation to keep the greed down.
It was a sick exploitation of the buyers , but they too had a part in it. Their wants exceeded what they could afford.
Depends on the loan, but yes... it can if someone gets the right loan. If they double up payments or triple up them, they could effectively get the home with much less paid over time.
Why do you ask this question though?
Even better, If one has cash , pay cash. No interest!
Even better, If one has cash , pay cash. No interest!
Sure, that would be ideal and some do save to afford that, but rent expense has to come in play concerning that. It all depends on which is cheaper, paying rent to save for the sale or paying interest.
Sure, that would be ideal and some do save to afford that, but rent expense has to come in play concerning that. It all depends on which is cheaper, paying rent to save for the sale or paying interest.
Paying a home off is the goal. And buying a home one can afford.
Life is like a game of chess. One move and if it is good will go well, if it is bad it can end the game and one is a loser.
[quote=Taratova;20464833]When all those borrowers put their name on the contract it is their responsibility to pay that mortgage. To sit in a home for free for years and deliberately not paying their mortgage is fraudulent. I do not support them as many others struggle to pay their mortgages each month.
These people are abusing the system , some states , it takes up to three years to go through the mortgage process. Many buyers of expensive homes have put no money down and live in homes they could not afford in the first place.
The lawyers are collecting money in the process. The banks are in trouble now and it may well do the United States economy in,- for millions of mortgages are not being paid to the banks.
quote]
This was a friend of mine and she drove me nuts. Bought a house with no money down, made what I make which isn't enough to buy a house in CA, and her mortgage was more than her monthly take home salary. She paid the 1st mortgage maybe a year and the 2nd occasionally. She then stopped paying the 1st mortgage in 2007 (had gotten her foreclosure notice). For some reason the bank kept her there until March of this year. They paid her $3500 to leave the house as long as it was broom clean. She didn't pay for years and she was working. Why she didn't try to sell or pay something or at least save $$ I don't know. Talking to her about finances makes me feel like Suzy Orman. She had zero business buying and then was worried how the foreclosure would affect her buying in the future. I told her unless she starts earning a bunch more $$, she has no business buying a home. All this while she took a trip to Vegas for her daughters bday (and paid for the entire thing), had a very expensive phone AND paid for her adult kids phones, yes, she is an idiot. I love her but she frustrates me.
It is not unethical in my opinion to bail on a mortgage for a house that was wildly overvalued that you can no longer afford, no. To do it simply because you can and you don't want to pay it anymore is unethical, but not illegal.
But the person still got a loan on the wildly overvalued home. It wasn't overvalued to them then, just now that the bottom has fallen out. People would def take advantage of any equity earned on that house but they won't take the losses? Wrong in my opinion.
You didn't agree to keep up your payments as long as the house is worth more than you owe.
This foreclosure epidemic is a real problem.
If you foreclose simply because you owe more than it's worth, you're a pig.
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