Posted on 07/29/2009 9:42:20 AM PDT by FromLori
About two weeks ago, the head of the House Banking Committee was agitating for lenders to loosen up their requirements again so that more of the folks who were not creditworthy could get loans to buy homes. Sound familiar? What was his name? Hmm... Barney Fwank?
They needed a study to find this out? Nearly every person I know who has lost their home has doen it by refinancing too much. Borrow agaisnt the house for cars, vacations, add-ons, etc. They’ve been used just like a credit card. As long as the value went up it was fine and dandy but as soon as the equity was used up and the property no longer worth more it was time to give the house up.
Except that borrower behavior is 100% limited by LENDER behavior. Every single one of these borrowers had a "financial professional" with access to vast sums of cash assuring them that it made perfect financial sense to do this.
Right, well considering we gave money to the bailed out banks so they would lend to ordinary Americans and small business which the lenders have declined to do and that banks are making standards unfairly high...people with credit scores well into the 700’s can’t get loans...perhaps the banks should come up with a reasonable standard for loans. Personally, I think credit scoring should be abolished and old fashioned underwriting used to make loans. You can talk about the government and unwise consumers but the bottom line is that the banks made a great deal of bad loans because they wanted to and thought they would make huge profits (even in bad times they still rigged the system to refuse exorbitant salaries and bonuses while investors took it on the chin)...they invented CDS and all the other financial goodies in order to make bad loans without personal risk...they would never have been able to leverage 40 to 1 without these things which basically crashed our economy.
Not only should the banks not have been bailed out, but a fair number of bankers should be in jail including the former CEO of Wachovia who totally screwed his stock holders and those who had IRA’s with Wachovia....the losses are well above 60 % in principle not profit. Why did this fool stick with losing stocks and funds? Because of the lovely commissions system; he could not turn down all that lovely money. None of them could...look at Goldman by all accounts up to their old tricks after Paulson kindly eliminated all their competitors. We must have some sort of proper reform of our financial institutions or this will happen over and over again.
Well Guns do not shoot themselves and no one put a Gun to their heads and forced them to buy and spend money they did not have so I feel no pity only anger at being forced to bail out irresponsible losers.
Well, we refinanced our house in Georgia...the one we were able to sell and even made a profit because my husband was injured by a doctor (malpractice) and was out of work for seven months...not to mention the bills not covered by insurance. Lucky for us, our house was still worth more than the amount we refinanced it for. Not all people refinanced their homes for frivolous reasons.
You are absolutely correct. No one twisted the banks arms...the idea that the government forced these poor bankers into loaning money is nonsense. They cried all the way to the er bank.
I have friends in Texas who borrowed at 100 % using highly questionable appraisals...the bankers will always find a way if they want to.
now losing because of illness or catastrophic injury, or bad timing or lost of jobs is one thing....but going into foreclosure because you used your house as a bank to buy luxuries is another...
Don’t paint everybody with the same brush. There were certainly a lot of people who were just engaging in wildly irresponsible spending on stuff they didn’t need. But there were also people who were financially unsophisticated and *did* have real needs for the money, like medical expenses, urgent home repairs like leaky roofs, etc. There were loan originators pushing these people into very expensive loans (both high origination fees and high interest rates), while neglecting to mention that the homeowner’s income/assets level made them eligible for very low cost financing options subsidized by the government. The irresponsible loan originators and the irresponsible lenders who funded those loans have long since run off with their fees (the actual lenders having resold the loans, often with major misrepresentation as to their characteristics).
There’s nothing wrong with pointing the finger at well-educated borrowers who were borrowing every penny they could get their hands on to fund and extravagant lifestyle, but there are a lot of innocent homeowners who didn’t do anything they could reasonably have been expected to know was unwise, and there are also a lot of very guilty loan originators and first-line lenders who should be the targets of criticism.
I kind of disagree with you there I see the CRE and the ACORN people as losers who had no right to sue the banks to give them loans and I see those who took mortgage after mortgage knowing or should have known they may not be able to repay them as pretty much the same.
What is the difference really? All taking loans they should have known when the piper comes to collect you are supposed to be able to pay is it the banks responsibility to GIVE you money for free for your leaky roof? Is that not another form of “redistribution” then whether they had “real needs” or not?
Initial purchases can be made that way, but once a loan is established, only 80% of the value can be refinanced. You are correct that suspicious appraisals are always possible.
I was just illustrating how this couple here in FLA refinanced over and over again, in a short period of time, with increasingly higher interest rates each time. Apparently their credit was not too good, and must have been hitting bottom with their last refinance. Each refinance seems to have been at 100% or more loan-to-value. There was plenty of blame to go around with their particular situation ... banks too eager to lend and borrowers too ready to spend, spend, spend.
We maintained a prudent approach on our California house. We purchased it in 1990 for $190,000 and have seen its value go up to $600,000 and now down to about $375,000. But we only refinanced once, and LTV is still well below the 80% threshhold. And our property taxes are quite low, comparatively speaking.
A few years ago, my relatives here in Florida had trouble understanding that a $500,000 home in San Diego was lower middle class. They couldn't envision the $1M+ tract house mini-mansions being built out there.
I do miss the weather in San Diego, tho.
my relatives here in Florida had trouble understanding that a $500,000 home in San Diego was lower middle class.
I live in the desert and moved to our second home when we retired, cashing out of our condo in San Francisco for big money in 2002. The person who bought it made $100,000 within one year by doing some work and fliping it. Then the next person bought, sold and made money. Then the last one to buy at over $1 million lost it recently to foreclosure. It’s now worth about what we sold it for when we retired.
We did a refi on our 40 year old house a few years ago, which we have lived in for over 32 years.
WE paid for a new roof with more insulation, new double pane windows and doors, new carpets, new driveway, a repaint job on the outside and several rooms inside, and replaced the 12-15 year old carpets.
That hopefully extended the ability to live longer in this house. (32+ years now).
Several friends and relatives just couldn’t understand why we didn’t do a $100k new kitchen and a $10K outside kitchen.
Our younger son at that time was still a chef and said “Our so called small kitchen was perfect for the two of us and good chef’s and cooks prefered smaller kitchens as they were near what they needed. He had me order a good size Charbroiler/Grill for outside cooking (about $200) and place it outside close to our kitchen. He had us put in a sliding window from the outside cooking area to an area over the kitchen sink to pass food out to be cooked and back in. Since then, he has served several special meals for up to 20+ using the Char Griller and the pass through window.
My wife did order a new side by side freezer/refrig, which has been a constant problem. We also replaced a 20 year old dishwasher.
Last year for my 70th birthday, my son, now a former chef, a friend and my wife prepped a great dinner party for 50 guests in about a half day before my birthday. Then, he finished it with the Char Broiler/Grill, the 15 year old gas cooking top and the 15 year old double ovens a few hours before the dinner.
As you note, not all refis are frivolous. However, most refis/seconds/lines of credit, we and our younger relatives have seen in this area were/are beyond frivolous.
Your rifi was the right rx for you and yours.
Great graphic art, which discribes so many so called “unfortunates” in America.
Your art and my reply below sums up a lot of the so called defaults:
http://www.freerepublic.com/focus/news/2303661/posts?page=15#15
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