nytimes.com:
When Harvey Clavon took out an exotic mortgage to refinance his home in Santa Clarita, Calif., three years ago, he thought he knew what he was doing.
Charles S. Faddis: We Cannot Afford This
I have no doubt that the Attorney General is acting in what he believes to be the country's best interest. I also have no doubt that launching this inquiry will have a catastrophic effect on the CIA.
UBS Whistleblower Sentenced to 40-Month Prison Term Puts Chill on Whistleblowing
Subprime Culprits Are Modifying Loans With Taxpayer Money: Center For Public Integrity
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Alt-A loans are considered less risky than subprime mortgages, but usually have lower credit quality than "prime" loans.
Alt-A loans were originally designed for borrowers with clean credit records, but with other issues that often meant they provided fewer documents or even no documents showing what they earned. These loans were attractive to investors in mortgage-backed securities because they offered higher yields than traditional "prime" home loans, but were underpinned by the cleaner credit records of the borrowers.
However, delinquencies on Alt-A loans have risen this year, prompting action from rating agencies. Investors have become a lot less willing to buy such loans in the secondary mortgage market.
Read More: http://www.housingnewslive.com
this fellow said he was duped. more like he made a bad decision betting that the bubble would keep growing. if anything, he duped himself.
Before news of the recession really sunk home, I had managed to lock in a fixed-rate mortgage with a reputable company. The interest rate appears a little high to some, but the operative word here is "fixed." Thus, I've been able to ignore telemarketers offering me all kinds of greatly reduced interest rates, which are "adjustable," so I'm not going to go there. I was burned before, but managed to escape before it was too late.
ARM's are not inherently bad. The premise is that you will receive a salary increase or get a better paying job and that would cover the rate increase. When home prices were reasonable your increase was negligible. Unfortunately, we had a big train wreck that no one saw coming. Home prices escalated and people were either layed off, had a salary decrease or their wages were stagnant. I had an ARM from 1992 until 1999 and it increased only $100.00/month over the 7 years. Would I do an ARM today? No way, but it did allow me the opportunity to buy my first home.
I agree. Back in the '90s an ARM locked in a lower interest rate for 5 years or thereabouts, giving you a chance to get a better paying job or maybe get a few more points on your credit score before refinancing.
Why can't President Obama issue an Executive Order to lower Interest rates on All MORTGAGES regardless of size or type to 4.5% Fixed immediately: no modifications, no refinances, no requalifying, just change the rates on the lenders computers -- plain and simple!!! Just do it! Everyone will have more cash to buy food, clothing, cars etc. on an ongoing basis!! Stimulate the economy by giving everyone a break! Not just Wall street! If it seems like a simplistic idea IT IS!! Remember KISS. All the problems we are having in this nation are made so much more compilcated than need be. We elected President Obama to change the way things have been done in the past i.e. complicated.
Lets get the change we voted for:
healthcare--single payer,
economy--see above,
wars-- get out now
education---free for all
jobs- close the border, buy American, shop Mom and Pop
There are many more simple things that can be done.
What can you think of?
Second!
What about people that rent? What do they get other than screwed?
He effectively bought a house on margin, betting the value would go up. He lost the bet. Sure the ARM was the vehicle he used but it's still his own fault.
This is the next housing crash. This is NOT news. 600 thousand ARM's due in 2010 and 2011.
These people need to get off there duff and refinance now. There are many programs and Gov. help available. What are they going to do, wait for the eviction notice?
amen! there are numerous refinancing programs out there for them to get out of their ARM loans! i'd be waiting in line when the doors opened!
The Banksters who caused the crashed were lent 24T$
They took TARP money for 30+B$ in bonuses, enough to have saved all the homes loans in default.
How many times do we need to hear this same story? A house is typically the biggest purchase of a person's life. It is also something that it often paid for over 15, 20, 30 years. Please tell me why anyone would even think about taking a risk with this? Sure, no one wants to expect that their home will lose 30% of its value, but why would you take a risk if you know that you can only afford the minimum payment.
Weren't we all taught that if something sounds too good to be true, it is because it is? I don't like seeing people lose their homes, but I also think that it is time that many people realize that there are risks that you take or you don't. When you take that risk, you should be prepared to deal with the consequences.
I don't doubt that there were some legitimate victims out there who were really scammed, but I have yet to meet one. Every homeowner who I know has overextended themselves are in that situation because:
A.) They figured they'd make some easy profit on the 'always rising, never falling' price of homes and sell before the reset kicked in..
B.) They could open a HELOC on the inflated value and buy those expensive toys they've always wanted, but you know, couldn't actually afford.
I owed some back taxes, and went in to a tax firm for advice. (This was right before the housing bubble burst.)
The sweet lady, who was helping me with my taxes, tried to talk me into using her as a financial advisor.
She then proceeded to try to twist my arm into buying a home with an ARM. I said "everything I read in the newspaper, is that you should stay away from ARMs".
She said, "its my business to know what is happening with the market. Now is best possible time to buy a home! It will be easy for you to refinance."
She was written up in the newspaper for having convinced the largest number of first-time home buyers to buy homes.
Fortunately, I didn't buy a home, and I now realize that she was pushing me to buy a home I never could have afforded.
I think she should be in jail for all of the people she hurt.
I am tired of people blaming home buyers for using bad judgement, when the real blame belongs with the con-men and women who were willfully tricking them into buying.
why in the world anyone would consider, much less sign up for, an ARM is just beyond me. i hate to kick anyone while they're down, but i blame the homeowners for their problems just as much as the banks.
"but i blame the homeowners for their problems just as much as the banks."
A voice of reason. So many people seem to want to paint a picture of The Big Bad Business vs The Good Powerless Little Guy. It's not so simple.
one thing that IS simple: don't buy something that you know beforehand you can't afford.
Who knows what it's going to take to fix this mess brought on with blame for the banks that did the lending, the folks that didn't bother to read/understand their mortgages and/or WWAAYY over extended themselves (even before the economy tanked) and congress for their roll in encouraging lending without adequate "safety" checks to many individuals. There definately isn't 1 sole entity to point the fimger of blame at.
It almost wouldn't suprise me in the great bailout society that we live in if congress attempts something similar to the rapid depriciation business tax credits that small busineses have available to them as a way to "reset" the principle on the loan to something more manageable. But by doing something like that then the gov't would be further diminishing their income intake, although some of that would be offset in the form of theoretically less demand from the states that have property taxes since they'd have more folks in thier homes and paying property taxes to the local/state governments.
Was the "old school" mortgage lending practices of fixed with 20% down really that bad of a thing??? Sure, home ownership would be lower, however the default rate on those loans would also be lower.
"Was the 'old school' mortgage lending practices of fixed with 20% down really that bad of a thing???"
No, it was in fact quite healthy.
My cousin and her husband just lost her home to foreclosure. Their ARM reset to $1700/mo. They were struggling before the loan even reset. For years I wondered how they could afford the mini mansion---both of them were in their early twenties when they got the house and neither had a college degree or special training. This is their second foreclosure and they filed bankruptcy last year. It's totally ridiculous.
What's totally ridiculous? Their behavior?
Americans were far too trusting of their financial institutions. I wonder how many people are still falling for this type of thing.
It's what we do best.
http://www.newsweek.com/id/213575
nice link
Are we going to have to bail-out another group of financially ignorant home owners? He took on a gamble, hoping to win. He lost. That's the way the game is played. Gambling should never be bailed out, as it only encourages other gamblers. What's that old saying about a f**l and his money?
So they file bankrutcy, leave the house, and become renters again which is what they were before they bought a house they could not afford.
Of course as renters you have to pay more income tax.
When they were only paying interest (or part of the interest) they were in effect renters. They just got the advantage of the interest and property tax deduction.
Good point
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First Posted: 08-27-09 07:53 AM | Updated: 08-27-09 08:16 AM