Over the nearly twenty years I had owned a house in Chicago I had either refinanced or taken out a home equity line of credit at least five times, and not once did the lender write up a contract with terms other than those we had previously agreed on. The last mortgage I took out was for a variable-rate mortgage, but I was okay with that because I knew I was going to be selling the house before the rate was subject to adjustment.
When I bought my current townhouse the mortgage broker asked what I wanted, and then found me the best possible deal. He even had me sit in his office for a while while he waited to see if some index factor that would affect my rate was about to change in my favor so he could write me up for the lowest possible rate. Considering the low closing costs his agency was going to get since I was financing less than 30% of the purchase price (since I had a good chunk of the sale price of my old house to put down) I was very impressed.
I will have a 30 year mortgage at 4.5% fixed. Although I have in the past, I have taken 15 year fixed loans and paid them of early (because interest rates were higher), this time I will hold the mortgage for the full term. Why? Because in the next 30 years I know interest rates will (on average) be much higher than 4.5%…not just on mortgages, but on CD’s, bonds and other investment vehicles if I choose the most conservative investment route. So, why in the world would I want to pay this house off with cash when I can take that cash and invest it long term and earn more in interest, or reinvest in the stock market when the worst is over?
So, which is it? In the above you say that 1) the home buyers are responsible (100%) 2)The banks are complicit and 3) The banks aren’t solely responsible
Banks aren’t in the business to be nice to their customers, true, but they shouldn’t be in the business of stealing from them either. If someone lies and steals from you, you should feel cheated. Because you where cheated.
It’s amazing to me that folks are so ready to dump on home owners, the most uneducated party in the transaction, while giving complete crooks a pass. Do you remember what CNBC called the lonely few folks who made it onto their network to warn that there was something fishy about the housing market? Bubble heads. As in “don’t be a bubble head.” Alan Fucking Greenspan was encouraging everyone and their cat to get a loan- preferably an ARM rather than a fixed. Yet some poor schmoo “should have known”
It’s like blaming a women wearing a mini-skirt for being raped.
My job is safe (knock on wood), but my partner and I split up five months ago and I’ve been limping along trying to save the house. I’m three months behind and finally went and saw a HUD/FHA counselor last week who talked my mortgage company into looking at me for loan re-negotiation; they (Countrywide) has turned me down four times for assistance, but responded to the counselor.
I am uber-responsible, but life stuff happens. For the most part, we as humans can’t predict losing a partner, a job, our health, and so on . . .
And to add to my post: I’ve had another house on the market for over two years. It was all “sold” and my profit was almost in the bank when the buyer got disqualified. Since then I’ve had three buyers fall through and the other houses on the block are going for HALF of what I’m asking. I’m working on a short sell or deed-in-lieu.
I’ve been having trouble getting this link to work when I emailed it to someone earlier, so this may not go as planned, but there is an awesome article on the Yahoo front page today about the reasons it’s better to rent than buy. It caught my attention for two reasons.
One, my best friend, sister, husband and I are all looking to make a huge change. The idea in a nutshell is that we’re all fleeing Southern California where we’ve all lost just about everything and setting up house in Northern California where jobs in our industries pay more and are a little more plentiful. Second, I’m in my second semester of College (36 years old and on the Dean’s list! Go Me!) and there’s some terminology in the article that relates to my macroeconomics class, so all the better.
I hope this link works this time. I don’t have the patience to figure it out if it doesn’t.
I’m saying that homeowners who took out adjustable-rate or otherwise unaffordable mortgages are personally responsible. They can’t legitimately blame the banks, because the banks made an offer and that’s it. The homeowner then decided to take that offer - therefore, personally, they should be held responsible for their decision.
The banks were complicit in that they made those deals. They collectively took a huge risk, and ended up fucking everything up for everyone. I’m not saying they have the moral high ground or anything, but I’m also not going to agree when some knucklehead to bought a house they could not afford whines that the bank offered them the deal so obviously the bank is to blame.
I agree with this, but I think there is a difference between a calculated risk and a Hail Mary. It seems to me that some of the loans being written practically required eternal increases in house prices for them to work.
Absolutely true. The person looking for a loan came up with no money down loans and forced the mortgagers to accept. They invented a variable rate and forced banks to accept it. But when they forced banks to take no money down they went too far. Sometimes they refused to reveal how much money they earned. That was clearly stepping over the line. it is good that we give the blameless bankers billions in tax money. They have been cheated so badly, I bet they have trouble enjoying themselves at expensive resorts paid for by TARP money. Thank god we made sure they kept extremely high pay and huge bonuses. How could they survive such mistreatment?
I notice you haven’t received any responses to this from responsible homeowners in trouble who might actually be helped. Figures.
If responsible Republicans in trouble are fine with believing the bullshit meme (read: lie) that only irresponsible people will be helped, there’s not a lot that you or I or President Obama can do about it. Once they realize that they’ve been duped by the right wing press, by then it might be too late, and the money all gone. It’s ok with me if the money allocated is used up by responsible Democrats first.
Maybe Rick Santelli or Rush Limbaugh will help them out.
But, to be serious, I feel bad for people in trouble, no matter their political affiliation. I realize I shouldn’t even be in this thread since home ownership is alien to me and it’s hard to understand what happened here. All the talk about fixed rate and variable and whatnot is like a foreign language. I’ve always rented, never ever wanted to own a house. I’m with Anaamika, don’t want the responsibility. People tried to make us feel like losers because we didn’t buy into the American Dream (no house, no car, no credit cards other than a debit card, all by choice). But we’re totally debt-free, with only our rent, utilities and phone/internet to pay each month. We don’t have a lot of money, but we have no dark cloud of debt hanging over our heads either. I feel sorry for those who do.
However, if I was a responsible homeowner who played by the rules and had something beyond my control affect my ability to pay my mortgage, I’d at least go to that web site and scope it out, see if I was eligible for help.
I looked at it, Sam. Please remember that we bought the house less than one year ago. Plus, my spouse and I are unemployed. There is no way they’re going to refinance a less-than-one-year-old mortgage for 31% of nothing. The “bullshit meme” notwithstanding, it doesn’t look like it will help little responsible me.
I am so sorry to hear all your difficulties. To the OP - I said this before - as an Argentinian I can tell you that somehow you’ll manage: hard working people usually do.
Good luck.
Perdita, best of luck in surviving, you can do it, and things will turn.
After my wife and I lost our home last year (fixed rate mortgage that we could afford killed by major medical issues causing unemployment), we started renting a home. This rental home was perfectly affordable for us, with room for a small savings, and we were able to get in a lease to own program so we were getting something back from the rent. After 4 months there, I lost my job, was unemployed for about 3 months, and took a 33% salary cut (I was making less than 50K to begin with) to get back to work. We are doing the paycheck to paycheck thing now, but surviving. My wife just survived the initial round of cuts with her employer, and we continue to pay the bills.
If she gets laid off, there is now way we can afford to keep it… but since we are renting instead of buying, there will be no bail out for us. If we fail, we fail, if the banks fail, here is a couple of billion to prop you back up.
The problem is you were going to sell the house ,so a variable rate was OK. But if the crash came at the wrong time and it was impossible to unload your house, you would be castigated by people on this board for not knowing better. You were vulnerable . You could have been in the same hole because you took a chance.
I had taken out the adjustable rate mortgage in 2003 and sold the house in 2006; was there any hint of a future crash during that time frame? I sold the house “as is” and priced it accordingly so it sold within sixty days of when I listed it. Yes, had I waited another year I could have been in trouble, which was one of the reasons I sold it when I did.
Here’s an great, animated explanation of how we got into the credit crisis: http://jonathanjarvis.com/crisis-of-credit. It clearly explains the roles of the bankers/investors and how they created the situation.