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In 1992 the Feds gave birth to the sub prime mess to come to the aid of the poor and to help them obtain home ownership. This policy has been in place for some time and has finally come home to roost. The banks are hurting from this, not profiting as you suggest. True, there was no shortage of ruthless mortgage companies to add to the mix, along with delusional buyers. I find it humorous when people suggest that by voting for one party over the other will somehow save you from yourself. Be careful who you call on to rescue you, they may just answer your call.
Everybody is making excellent points. Banks offered risky loans, borrowers took more than they could afford to pay back and now everybody's in a mess. As lorriem pointed out, the blame goes right up the middle. But some homeowners are demanding that banks renegotiate favorable terms to maintain homes and lifestyles that they couldn't afford in the first place... and certainly can't now that they're underwater. If they could've afforded them, they would have taken fixed rate loans or refied long ago and wouldn't be facing foreclosure due to ARMs resetting.
Banks are taking the stance-- fool me once, shame on you; fool me twice, shame on me. They will negotiate with good credit risks, but they're ready to part company with those not financially qualified to keep the homes they're in. Sounds to me like lenders have wised up.
It is not all the banks fault. They offered you a variable mortgage that you knew could go up and so the fault lies right in the middle. Sorry to say that but just like the stock market bubble that burst in the 90's the same thing has and is now happening to the houseing market. After years of homes going to high just like the stocks did when they were worth nothing but people were paying big bucks for them.
It was obvious that I wouldn't afford the rate increase.. if it was to me it was to them too.. but the 'just refinance" line was something I Counted on.. If the financial EXPERTS didn't see that this would happen ... how could someone without all the insight into exactly how that market works predict it. It never ocurred to me that I would be locked of a refinance.. taht the product i needed would be "pulled from the shelf". That despite the fact taht I got my score up, paid my mortgage on time for 2 years.. ADDED value (well it was supposed to add value!! ) to the home with improving it (it was an awful home).. that I would be in this situation.. It was never introduced as even a possibility to me. I followd ALL the steps instructed to follow..did everything according to what I was told.. and still got screwed. If they did truly feel that i COULD afford $5000 a month (where it would eventually climb at the cap of 12.95%) why did they then not offer me a FIXED rate.. because obviously if they thik I can afford $5K a month I certainly woudl be able to swing$3K with no problem so how big a "risk" could I be? BUT.. they wouldn't give me a fixed.. ONLY an ARM.. why? I had NO outstandingly large debts (part of the reason my score wasn't so high was because I had very little, if any open lines of credit. Most of the stuff on my score was from my early to mid twenties when I went nuts pretty stupidly.. but paid all that off, learned a lesson and didn't touch another credit card!). The mortgae raised my score and I opened a card or two to raise my score and paid ALL on time.. while the old stuff finally started falling off!
Why do I feel it's the banks fault? Because i'm NOT paying a low "teaser" nterest rate ..as a matter of fact my rate is higher than the prime borrowing rate at that time. AT the start! I would say it WOULD BE unrealistic if I cuold only afford the house I bought with a 1 or 2%interest payment tacked on, howver, I'm not.. I was payinga 6.95% interest rate. So is it too much to ask to even KEEP my interest AT THAT LEVEL! If I was asking to ONLY pay an initial LOW TEASER like a 1 or 2 or even 3% I would understand. If I had an interest only that was not even paying down the principal AGAINST an now declining market.. I would understand.. BUT we're not talking that here.
And to Sean.. despite the fact that we made less in 2006..we managed to hang on to it and do what needed to be done AND started making more in 2007. I make enough to afford in the high 2's, low 3000 area for a mortgage.. it's tight. .but doable. Yes.. $4000 is WAY out of my range at this point.. and $4000 is just where theFIRST adjustment is..it's only going to go up from here!
So.. I DO fault the banks because they DID give us a false sense of security and it's okay.. then the rug gets pulled out..they leave us stranded AND take government assistance while still taking our homes.. then pretending that they are trying to "work something out!!". THAT is what makes this so despicable..
You don't really want to work with borrowers.. fine.. take our homes and take your losses.. but don't take our homes and then take gov't money to cover your losses while those you gave these products too KNOWING that the interest woudl adjust beyond their means but promised them it would be alright are left homeless, financially ruined and well .. just plain devestated. The banks will be just fine and dandy... but the homeowners.. the little guys.. they are hurting.. the taxpayers.. they are hurting.. because it's this mess that is causing our economy to crumble.
The banks could solve the problem by looking at every loan adn re-evaluating. Yes, some are really beyond help.. if they could only truly afford a home with an unrealisic long term sustainable % rate they can't be saved.. but then there are those like me who are paying an normal interest rate.. making mortgage payments of upwards of $2000 every month (mine was $3300!!).. but you're still going to throw them out? It just doesn't make any sense whatsoever. I'm not even asking them to decrease the loan amount to the value the house would be now on the market, if I am upside down.. If I owe more on the house thant it's worth. fine.. I bought at the wrong time adn will pay for that later when I don't build any further equity.. but I am willing to stay in the home and pay to live here!
If my house went into foreclosure and I do what I plan on doing ie:taking all the stuff I put into it out and selling it off to recoup some of what i put in.. then they will be lucky to get 200K for it. My neighborhood is a first time buyer neighborhood with over 200 homes for sale. First time homebuyers are having the hardest times getting mortgages right now..so homes arent moving.. Even a short sale will be very difficult at this point. Rather.. I'm begging them to allow me to STAY here and Pay them at best exactly what i have been for over 2 years OR maybe slightly less.. but they'd still be getting back principal plus interest. Want to compensate.. extend the maturity date so in the end I pay interest over a longer period of time! Here.. property taxes will be about $700 /month for them to carry this house while they try to sell it in foreclosure.. not to mention all they'd have to do to have it ready for sale, plus realtor fees if it doesn't sell at auction.. etc.
It just doesn't make much sense.. unless you realize they want to foreclose on you so that they can collect money from the Feds and whatever they'd get for your house and walk away feeling LITTLE if any pain for THEIR mistakes and the mess that they had the BIGGEST hand in creating (yes, again homeowners had a hand too.. ).
I blame the banks and the people who made these products available in teh first place.. made us all believe our dreams were within our reach adn then yanked that dream right out from under us. And again.. I ddin't buy a fairytale.. I put money down, money in. . . was paying principal AND a normal interest rate.. not a low teaser.
Everybody is making excellent points. Banks offered risky loans, borrowers took more than they could afford to pay back and now everybody's in a mess. As lorriem pointed out, the blame goes right up the middle. But some homeowners are demanding that banks renegotiate favorable terms to maintain homes and lifestyles that they couldn't afford in the first place... and certainly can't now that they're underwater. If they could've afforded them, they would have taken fixed rate loans or refied long ago and wouldn't be facing foreclosure due to ARMs resetting.
Banks are taking the stance-- fool me once, shame on you; fool me twice, shame on me. They will negotiate with good credit risks, but they're ready to part company with those not financially qualified to keep the homes they're in. Sounds to me like lenders have wised up.
I get your point if your talking about someone paying a low low interest rate.. someone in the say 2 or 3% interest for two years. or interest only. But what about someone paying principla plus a 6.95% interest rate! Why didn't they offer me a fixed rate and ONLY give me an ARM. If they truly felt I could afford a $5000/month mortgage.. then certainl $3000 should be a breeze right?
My credit score wsan't stellar.. Wnat to know why? At abut 18 or 19 and in my early twenties I was irresponsible with my money.. credit cards were easy money. A lesson I'm sure many at that age learn. I did learn a lesson.. paid it all off and vowed NEVER to touch another credit card. Had NO IDEA NOT haing a credit card was a BAD thing to do. So.. the old stuff was still there and no open lines of credit. Had to go open some. Score not horrible, but not stellar.. Got the mortgage.. and paid on time.. that raised my score.. opened a few not many, lines of credit. THAT raised my score! Some old stuff fell off.. that raised my score.. but still some other stuff is still lingering there.
I bought a starter home.. a home at hte ENTRY level of the real estate market.. Ididn't go for a mcmansion.. I didn't even go for an udpated started.. I went for a piece of junk starter.. I CAN afford to pay a mortgage like everyone else on the block.. heck.. I'm probably paying more than someone who was in their home since 2000/2001! more than half my block. What I can't afford is the product that they pigeon holed me into.. that they told me " don't worry..just get that score fixed.. you're LTV will be higher in two years with pay down of rpinciple, appreciation (and no I didn't think prices would keep climbing at the pace they were..but certainly didn't think it would crash!) and the improvements adding value. and by that point you'll be right where you'll need to be for us to give you a fixed interest rate"..
I didn't buy more house than I cuold afford. If they had offered me the right package to purchase said house.. this wouldn't be an issue. I'd haev my monthly mortgae payments paid .. maybe late once or twice if things got a little tough with the recession..but in the end.. I would be fine!! They would get their principal plus interest and I would have my house!
We're all not McMansion buying .. equity tapping for our vacation and toys buyers here people.. it's easy to make us out that way so that you can all feel better about what is happening to us.. but it's not true.. not true at all!
AND.. I THINK BY PAYING MY 6.95% INTEREST RATE MORTGAGE OF $3300 MONTH (that's is with taxes and insurance, btw) ON TIME FOR 2 YEARS MORE THAN PROVES THAT I'M NOT THE RISK THEY THOUGHT I WAS. I ONLY AM A RISK NOW BECAUSE I'M FACED WITH A SIGNIFICANT INCREASE IN PAYMENT BROUGHT ON BY THE ADJUSTMENT OF THE INTEREST RATE!! WOULDN'T EVEN BE AN ISSUE IF THAT HADN'T OCCURRED...ALL THEY'D KNOW IS THAT I'M A GOOD BORROWER WHO IS PAYING THEIR MORTGAGE ON TIME.. AS WELL AS MY OTHER OBLIGATIONS!! IT'S THE INTEREST RATE CLIMB AND THE SUBSEQUENT MISSED PAYMENTS THAT HAVE NOW BROUGHT DOWN MY SCORE.. Just to mention yet again.
Last edited by TristansMommy; 04-14-2008 at 05:11 PM..
In 1992 the Feds gave birth to the sub prime mess to come to the aid of the poor and to help them obtain home ownership. This policy has been in place for some time and has finally come home to roost. The banks are hurting from this, not profiting as you suggest. True, there was no shortage of ruthless mortgage companies to add to the mix, along with delusional buyers. I find it humorous when people suggest that by voting for one party over the other will somehow save you from yourself. Be careful who you call on to rescue you, they may just answer your call.
sure.. initially they are hurting.. BUT they are getting handotus from the government AND repossesing the houses. This fiasco has now spread BEYOND subprime into conventional prime and convential ALt-A mortgages.. those are borrowers most likely able to pay a normal interest rate.. like myself.. but the banks are refusing.. or maybe I shouldn't say banks.. cause apparently Im' owned by some mysterious investor group of some sort!
NO.. banks will be just fine.. why.. becaues they are getting money from the feds.. interest rate cuts from teh feds.. all of it.. while passing NONE of it on to the rest of the taxpayers who are the ones fitting the bills.. oh.. and those that own these homes in or going to foreclosure are taxpayers too! So we get it twice!!
Nope.. they're foreclosing and making up their "losses" in the gov't handouts they are taking. And I say yet again.. if they were really hurting those CEO's wouldn't be making their ridiculous bonuses etc. with all this going on.
You keep saying you don't want to be judged why would you put this on a public forum?
In my opinion, I think you want to hear that it's o.k. to walk away to ease your conscience. You want to rip everything out that you put in and leave the banks with a shell because your plan didn't turn out as you wished and now no one is jumping through hoops for you. Stand in line. Lots of people have problems with the mortgage industry. You think your the only one? Lots of people have problems with the bail out.
You signed the suicide note. You took the chance on buying a fixer upper. You took the chance of the rate going up. You took that chance that your life situation may change. You took a chance and bought in an area you don't even like that much. Hey - you even went stated income!!! Real estate has and always will be a gamble. Life changes. If you want to walk away. Just do it. Your looking for sympathy and complaining about everything but you want no judgements. Insane.
You say you counted on a refinance. Did the bank guarantee that to you in 2 years time ?
Well it's too late now. Short sell or foreclose. Put it behind you and look forward.
One bit of advice though..live below your means and understand all risks. The ARM was a risk. You didn't look at both sides of it to see if you could handle both the good side (values increase, easy refi) and the bad (values stagnate or drop and ARM resets to higher rate).
I myself am not a gambler and have never signed on for variable rate loans. No one, absolutely no one can tell what the future holds.
Oh, no Oprah scares me. I just know a lot of people who work PT at Sbucks simply for the health benefits!
There was an episode on Oprah about this woman who was upside down on her house (bigtime), maxed out on CCs and spent all her money on herself before her kids (She looked like a Barbie Doll-A very insecure one at that) and even their health insurance.
She wrote the show asking for help, and they brought her on with Suzie Orman. One of the things she spent money on everyday was Starbucks. Among other things, Suzie suggested that she get a job there working PT so her children could have health insurance, and she could bring some money in.
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