Interesting Article in Today's Post about Phoenix

[nickluva]

Originally Posted by blisterpeanuts

A person with common sense?

You say that now but would you have said the same back then when everything was booming?? The average joe doesn't know of a bubble burst

[Rick Lee]

Originally Posted by nickluva

You say that now but would you have said the same back then when everything was booming?? The average joe doesn't know of a bubble burst

The boom or bust has nothing to do with not reading what you sign or understanding how mortgages work, especially ARM's and very especially Option ARM's. Even if the boom had continued, I can guarantee that many of the same people who are in trouble now, would be in trouble then when they learned of the prepayment penalties on refinancing out of their Option ARM's. Those are the kinds of people who are particularly bad at reading and math and there's no rescuing them. If you have an ARM that can adjust BEFORE your prepay expires, guess what that means.

It's one thing to splurge on consumer items you can't really afford and can really live without. That just racks up credit card debt. Getting into exponentially larger debt because you can't be bothered to read what you sign or edumacate yourself about how mortgages and negative amortization work, well, that's a much different problem.

[nickluva]

Originally Posted by Rick Lee

The boom or bust has nothing to do with not reading what you sign or understanding how mortgages work, especially ARM's and very especially Option ARM's. Even if the boom had continued, I can guarantee that many of the same people who are in trouble now, would be in trouble then when they learned of the prepayment penalties on refinancing out of their Option ARM's. Those are the kinds of people who are particularly bad at reading and math and there's no rescuing them. If you have an ARM that can adjust BEFORE your prepay expires, guess what that means.

It's one thing to splurge on consumer items you can't really afford and can really live without. That just racks up credit card debt. Getting into exponentially larger debt because you can't be bothered to read what you sign or edumacate yourself about how mortgages and negative amortization work, well, that's a much different problem.

True indeed. Everybody should know more about mortgages and they work before even buying a home but the reality is that very few do and these homesellers and mortgage companies were aware of that and took full advantage of these people.

[Rick Lee]

Originally Posted by nickluva

True indeed. Everybody should know more about mortgages and they work before even buying a home but the reality is that very few do and these homesellers and mortgage companies were aware of that and took full advantage of these people.

And that's where personal responsibility, which is rare in this country, comes into play. I worked in retail mortgage in the late 90's and recently in subprime wholesale just before the collapse. Believe me, with the culture of that business, the constant harassing from realtors, the 100% commission pay structure, intense competition and ubiquitous type-A personalities, you ain't never gonna see a loan officer tell a prospective borrower, "Hey, I can get you approved and into this house. But it's probably not the best financial move you can make." Even if that kind of loan officer existed (though he'd starve very quickly and go into another line of work), there are plenty of others to take that kind of borrower.

Also, don't discount the role that race and politics played in all this. Imagine if loan officers turned away borrowers, who they knew they could get approved!!!! Talk about screaming for a discrimination lawsuit. Bottom line is that if you're old enough to sign a contract, you need to be responsible for understanding the terms. In my own experience, 98% of my clients were hispanic or other minority-owned mortgage shops. And 100% of their borrowers were non-native English speakers. Those guys absolutely pillaged their own people with points, prepay's, kickbacks, you name it. Sure, there might have been some legit. shops that turned those people away. Look what it got them. Those borrowers went somewhere else, someone else got paid and those borrowers are still just as screwed with an expiring teaser rate.

[blisterpeanuts]

Originally Posted by nickluva

You say that now but would you have said the same back then when everything was booming?? The average joe doesn't know of a bubble burst

Nick I agree with you that the average person with a mediocre education doesn't have much of a clue, despite the voluminous information out there--libraries, websites, governments, maybe even their own parents.

But there used to be a tradition of living within one's means that seems to have gone by the wayside. Something happened during the affluent 1960s and now a thrifty person is looked down upon as some sort of unfashionable cheapskate or lowlife. People mock menial jobs like fast food or Walmart type stores and call them "McJobs". This is not the generation of Americans that lived through the Depression, won two world wars and flew to the moon.

This country is living high on a credit card and it's time to stop partying and act a little more responsibly. Let's start by teaching this stuff in high school. No one should graduate without knowing what a mortgage is, how to balance a check book, what compounding interest means, why you should pay off your credit card each month, etc. Why isn't this stuff required?

I'd rather spend that $150 billion on education than pour it down the drain in the form of a "stimulus package" that will merely teach people that they can get away with irresponsible borrowing. Don't worry, Big Brother will always be there with a bailout. Anyway it's all about politics. I wish just one of the presidential candidates had the guts to say it like it is.

[end of soapbox]

[artvandelay]

Good post blisterpeanuts.

My in-laws call me cheap because, though I make more than they do, I don't buy my small kids $80 shoes or finance nice new cars, or host "no reason" parties every other weekend. Living below one's means is sadly frowned upon, but I've learned to regard "cheap" as a compliment (different than stingy).