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maxrandb Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 08:44 AM
Original message
House Broke
http://msnbc.msn.com/id/14251743/page/2 /

More "great" economic news. This country is headed for a frickin' disaster. The "haves" will be fine. The "haves-less and haves-not" are losing the American Dream.

Sad, sad story on MSNBC.

WEB EXCLUSIVE
By Jennifer Barrett
Updated: 6:35 p.m. ET Aug 8, 2006
Aug. 8, 2006 - When Shawn Howell saw the house in the summer of 2004, he thought he couldnt lose. The location-close to family and in an upscale subdivision in Louisville, Ky.,was perfect; the three-bedroom plus loft was just right. The price was a little high at $217,000especially as Howell's wife, Niki, had just given birth to their second child. But the couple learned they could purchase it with no money down by taking out two adjustable-rate mortgages. The monthly payments would start at a manageable $1,100. And Howell figured the value of their home could only go up in the five years they planned to live there. Instead, two years later, the family have put their home on the market for less than they paid for itdesperate to find a buyer before the bank forecloses on the property. "Looking back, I wouldn't advise anyone to do what we did," says Howell, an Iraq war vet who worked two jobs but still fell short on the monthly payments after they jumped by more than $300. "We just couldn't afford the house anymore."

Across the country, millions of homeowners are finding themselves in a similar situation. Real estate purchases that once seemed like such moneymakers have become financial burdens instead. U.S. homeowners now owe about $9 trillion in mortgage debt. Of that, about $425 billion in adjustable-rate mortgages-initially pegged at historically low rates, but designed to shift with market trends after periods ranging from one to 10 yearswill reset sometime this year, according to Freddie Mac, a government-sponsored housing financing company. Another $600 billion in home equity lines of credit (or HELOCs) and second-lien mortgage loans, which became popular when rates were low as a means of paying off credit card debt or financing home improvements, are also being readjusted. Those with fixed-rate mortgages payable over 15 or 30-year periods may be seeing little change, but those who banked on rates remaining near the 4.6 percent lows of 2003, are getting some unpleasant shocks when their mortgage bills arrive in the mail. As their payments rise, many are struggling to keep up. Foreclosures and delinquency rates are rising. And with the markets cooling in many regionsexisting home sales across the country have slipped for three months straight and new home sales nationwide have declining as wellthere are growing fears of a looming crisis. Howard Dvorkin, president and founder of Consolidated Credit Counseling Services, a nonprofit debt management organization, says up to 10 percent of those now seeking counseling are being squeezed by adjustable-rate mortgages or home equity loans. "And this is just the tip of the iceberg."

----------------------------------------------------------------------------------------
And if you think the Iraq War is not having any impact, read this!

That's exactly what happened to the Howells. In November 2004, Howell, a 36-year-old National Guardsman, was deployed to Iraq. While he was away, the combat pay helped to offset the monthly mortgage payments as they began to creep up. In addition, under the Servicemembers Civil Relief Act, his mortgage rate was capped at 6 percent as long as he was in active military service. But when he finished his tour in Iraq this January, the cap no longer applied and he stopped getting combat pay. Worse, while he was gone, someone had filled his old job. He found work as a stable manager for a nearby horse farm, and as a law enforcement dispatcher for the state's Department of Fish & Wildlife; but, even with the two jobs, he was earning about one-third less than he had in 2004. Meanwhile, the interest rate on the couple's largest mortgage climbed to 9.9 percent.


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soothsayer Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 08:46 AM
Response to Original message
1. It's irresponsible to sell houses to people who can't afford them.
Crazy, man, crazy.
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jpkenny Donating Member (224 posts) Send PM | Profile | Ignore Thu Aug-10-06 09:00 AM
Response to Reply #1
5. It's called "cash flow." They keep collecting interest on circulating
debt.
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maxrandb Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:43 AM
Response to Reply #1
9. Crazy like a fox!
With the new bankruptcy law, middle class Americans are either going to work two and three jobs to pay their bills, or we'll start seeing "poor houses" around the country.

Welcome back to the wonderful world of "indentured servitude".
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newspeak Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:59 AM
Response to Reply #9
40. yeah, doncha know that working two or three jobs
is the American way!!!! At least, that's what * told the woman who was working three jobs to support her family.
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NVMojo Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:15 PM
Response to Reply #40
75. someone needs to bend Bush and his cabal over and give them
a poorhouse enema!!!
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AnneD Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 11:53 AM
Response to Reply #40
94. Bush said that
it was uniquely American. In sweat shops they work 16 hrs for $2. In America, we work multiple jobs and put in the same hours an have roughly the same spending power as that sweat shop worker-except our sweat shops are a little nicer. Welcome to the NWO.
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theanarch Donating Member (523 posts) Send PM | Profile | Ignore Fri Aug-11-06 12:40 PM
Response to Reply #40
97. one presumes this is the same woman who...
...told Junior she had to work three jobs to support her handicapped child, only to have Junior conclude his homily to hard-working 'murk'n's by saying, "Three jobs, huh? Ya tired yet?" chortle, chortle...
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Snivi Yllom Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:29 AM
Response to Reply #1
24. It's irresponsible to BUY homes you cannot afford.
.
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Nederland Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:37 AM
Response to Reply #24
29. Thank you
at least some people in this party are still willing to say that people need to take some degree of responsibility for their actions.
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Demit Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:20 AM
Response to Reply #29
32. I agree. If you want to gamble, don't be shocked if you lose.
No money down? TWO (adjustable rate!) mortgages right from the get go? On one income? Did this guy even think about what could happen? I feel sorry for the couple, but you have to apply some basic common sense in everything you do, especially financially.
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cliss Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:26 AM
Response to Reply #24
33. I was waiting
for someone to say that.

Caveat Emptor = means Buyer Beware.

Notice, this warning comes in Latin. If it was written in Latin, that means it's been around for a long time. = meaning, the buyer has been foolish all the way back from the latin times.

When it comes to your own damn pocketbook, YOU must fight to keep as much money in there. Everybody is out there, wanting to get into your pocket book. (not much sympathy here).
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SoCalDem Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:29 PM
Response to Reply #24
52. We have bought three houses , and each time we only had a few
we could even LOOK at because we demanded houses we could afford..and would not allow ourselves to look at ones we could not afford.

We specifically looked at houses we could afford on one income..

It sucked to not be able to have a "cool house"..but at least we always had a house cheaper than renting, and it was one we could afford..

No matter how badly the market crashes, we should be ok in the house we paid $82k for in 1982.. Back then our town only had about 20K people and now it's beyond 150K and even in downturns in the market, our house has gone up in value because of the size of it, and the lot size... (and the new A/C, landscaping and new 30 yr roof helps too)

In 5 years when hubby retires, we hope we can clear enough to buy a used doublewide outright somewhere cheaper to live ..That's all I want...no house payment when we retire.. This place is too big for two people, but we can;t afford to move just yet..

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tbyg52 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 06:50 PM
Response to Reply #52
71. There was a shortage of affordable homes then...
...and there's a *huge* shortage now. The developers want to build McMansions, and people keep on buying them, at least in part because there's not much else, IMHO. Last time we moved, we managed to get a house at the price we wanted to pay, but it was quite literally the only even marginally acceptable one we saw in our price range. I'm not talking about exterior looks and floor plan--we have issues with those on the house we bought. I'm talking major structural problems and unsafe neighborhoods.
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sugapablo Donating Member (483 posts) Send PM | Profile | Ignore Thu Aug-10-06 10:33 AM
Response to Reply #1
26. It's not just houses...
They'll give credit cards to anyone, regardless of credit. Sell cars to people who can't afford the payments. All sorts of craziness, just to increase sales and the bottom line.

I had a real estate license and worked both sales and management. In sales, we had formulas based on people's income and debt and we wouldn't sell to anyone who couldn't prove they could handle, not only the payment, but have extra cash on the side for all the things that come with home-buying.

In management, when I rented properties, I ran credit checks on people and MAN, did some people have BAD CREDIT! Not just like hospotal bills and necessities, but Department Store charge cards LONG overdue!

Now there's two hands in this pot. One, it is COMPLETELY irresponsible to give a $10,000 line of credit to a college student with no job (my wife had that) and terrible to give an adjustable rate mortgage to someone who wouldn't be able to afford the payments if interest rates were to go up 1%. Yet both happen with regularity in this country.

However, people REALLY need to learn how to be responsible with their finances. It's one thing to go into debt because you got hit with devastating medical bills when your child was diagnosed with leukemia (my cousins), but quite another to be trapped in debt because you bought a new expensive car, a new wardrobe (not for work), new furniture, a new plasma tv, all on your little plastic friends.

They need to be responsible ESPECIALLY because there are so many businesses out there ready and willing to prey on them and are happy to have you in their debt. Hell, at Pirate games, you get a free t-shirt when you sign up for a credit card!
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Pab Sungenis Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 03:41 PM
Response to Reply #1
67. It's good business, though.
This way the financiers get the money AND the house when they're done, and can turn around and re-sell the house at full value.

A crooked financier can sell the same house three or four times in a ten year period, at next to no cost to them, and collect at least some interest and/or principal along the way.

We're buying a house ourselves, and the lady was salivating as she handed us all the mortgage qualification forms. When I said "no, we will be paying cash," she looked like someone had run over her dog.
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Maine-ah Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 06:02 AM
Response to Reply #1
79. It's a bit irresponsible to buy a house you couldn't afford in the
first place. If you take out an ARM, then you should count on the rate going up. If you take the time to figure out the payments at higher interest rates and realize you can't afford the payment, then you shouldn't go that route.

We spent years trying to find a house. We researched all the options in mortages and found that a 30 year with a locked rate was the best way to go, plus you can always refi when the rates go down, which is exactly what we did last Dec. and saved ourselves over 100 bucks a month.

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Tellurian Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 08:57 AM
Response to Reply #79
87. And what happens if you both lose your jobs?
Foreclosure?
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Maine-ah Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 12:58 PM
Response to Reply #87
98. get another job.
first thing you do as a responsible person, is get unemployment
second thing you do as a responsible person is go job hunting.


if you can't find a job that you *want* then you get one a mcdonalds or walmart or both to cover your house payment.
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shrike Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-12-06 09:56 AM
Response to Reply #98
114. Worked at McDonald's lately?
Think you can make enough there to cover a house payment?
At maybe 25 hours a week?
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Tellurian Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 08:22 AM
Response to Reply #1
83. Isn't the GOP's Plan to eradicate the middle class becoming apparent?
The cultural discrimination is apparent but not yet obvious to all.
Muslim vs Christian..A reprise of the Crusades beginning all over again.

I don't believe 100% financing is the culprit to American homeowners-
I do believe loss of employment is responsible for most of the foreclosures.

Just wait until the scale of foreclosures is elevated to 100's of 1000's of Mc Mansions
then it will be obvious...there is a concerted effort by who? Our evangelically
based government to impoverish the middle class reverting back to Middle Age serfdom
handily removing the culturally incorrect from our (American) society.
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susanna Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-12-06 01:17 AM
Response to Reply #83
111. That's what is disturbing...
The "culturally incorrect" think they are the GOP base, instead of the multi-millionaires who truly are...go figure.
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toopers Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-12-06 08:29 AM
Response to Reply #1
112. I guess it is perfectly fine to buy more than you can afford though . . .
no individual responsibility!
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DoYouEverWonder Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 08:47 AM
Response to Original message
2. The banks and lenders had no business
financing homes at ridiculous prices to people who didn't have the income to cover the payments. This result was/is inevitable.

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leftchick Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 08:49 AM
Response to Original message
3. support the troops eh?
this country is so fucked.
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Megahurtz Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 04:58 PM
Response to Reply #3
102. This country is so fucked that
buying a boat and living on it sounds like a better idea to me. :think:
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Lone_Star_Dem Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 08:55 AM
Response to Original message
4. Predatory lending practices lead to such things.
Shame on the lenders.
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cobalt1999 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:42 AM
Response to Reply #4
8. Shame on the buyers.
I had lenders approving me for up to $2 million loans when I was buying a rental property. I was shocked! There was absolutely NO WAY anyone should loan me (with my income) $2 million.

I would have been a fool and probably facing foreclosure if I had done that.

You have to be responsible for your own behavior and financial investments.

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maxrandb Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:48 AM
Response to Reply #8
12. Oh Great. Let's blame the people who bought into the American Dream
You tell the National Guardsmen, who just spent a year getting the shit blown out of him; "suck it up buddy, you didn't really believe Bush when he told you there was no end in sight to the rosey economy, so buy up, your' country needs you". or; "gee we really appreciate all your sacrifice and we really, really, really support the troops, but you know, someone had to do your job while you were gone, that's the breaks kid, maybe in another 9 years we'll raise the minimum wage."
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cobalt1999 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:58 AM
Response to Reply #12
15. I don't think the American Dream is to be in debt beyond your means.
If need two ARMs and no money down to buy the house, warning bells should be going off.

There is an element of personal responsiblity here, that's all.
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Virginia Dare Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:57 AM
Response to Reply #15
39. Unfortunately that is the way Americans have been
conditioned. It is constantly reinforced through the media. Buy buy buy, spend spend spend. You've got to have the latest and greatest technology. You need three cars, you must have a television in every room. You need a huge 5,000 square foot mansion in order to live comfortably, etc. etc. etc.
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LeftyMom Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 12:44 PM
Response to Reply #15
44. How are people to buy within thier means when there are no starter houses
being built?

The house I grew up in was built in the 70's and is 3 br, 2 ba, about 1500 sq ft. That's all the room we ever needed and enough for most families. Unfortunately they stopped making houses of that size in my area back in the 80's. If you buy into a new development (which is where the good schools are) around here, there are few houses below 2500 sq ft. and many are much larger (one new development is all 5 br houses- how many families need that much space?) So the average family is smaller, but thier house is bigger and it's almost impossible to buy a more practical house to keep clean, to furnish, to heat and cool and just to afford the payments on.

At least around here blaming people for overbuying makes about as much sense as blaming SUV buyers would if there were no smaller cars on the lot.
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cobalt1999 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:05 PM
Response to Reply #44
54. Some thoughts...
There are options to wholesale gambling of their financial future and ending up much worse than they are now.

1) Don't buy yet. In the 70's many people actually waited and saved many years to get ready to purchase a house. Yes, it sucks not to have your own house, but it's better than foreclosure/bankruptcy and the stress of trying to make payments you can't afford.

2) Maybe you don't buy in that great school district full of new developments. Buy a house that older 70's neighborhood anyway. It's better than losing everything.

3) Buy an empty lot in an area you like. Then build a smaller cheaper house. (I've done this and if you hire/manage the contractors yourself, you can get a lot more for the money). BTW, I wholeheartedly agree about the size of new homes, it's ridiculous.

My point is overbuying is not the only option, in fact it really isn't an option.

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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:32 PM
Response to Reply #54
59. It's just not that easy.
There is no such thing as a cheap house anymore. Your advice basically amounts to "You're not ever going to afford a house without taking some risks, so don't buy. Rent for the rest of your life". Because it's almost impossible to buy a first home without over-extending yourself to a certain extent, unless there are certain circumstances that just aren't common for most people.

It's more like:

1) Don't buy yet. Keep on paying exorbitant rent that is often equal to a mortgage payment, and never see a dime of it again or get to claim a deduction on the interest. You're never going to be like your parents with their paid off house, because things are never going to be like it was for them again.

2) The older, 70's houses aren't cheap anymore, either. Unless you live in a market that never blew up to begin with because there weren't a lot of jobs, those houses are out of reach with a fixed, higher interest mortgage as well.

3) Again, this just isn't realistic unless you live in a cheap area with no jobs. If you can afford to buy a lot of land, then you aren't exactly hurting for money.

I think it's sad that we've gotten to the point where it's ill advised for the average young middle class family starting out to buy a home, the way my parents did. They bought their first home in the early 70's, in their mid twenties with two young children. They didn't wait for years. They didn't have to. And that was during stagflation, for crying out loud. And they were far from wealthy.

It's sad we've gotten to the point where we point at a couple who are losing their home because of job loss, and say we don't feel sorry for them because they brought it on themselves. That we ignore all the other factors going into this mess, mostly contributed by the big corporations lining their pockets. And I think it's because we either don't want to admit that things were a lot different for those of us who started out years ago, or we don't want to think about how precarious things are for most of us who are one disaster away from ruin, even if we have some money in the bank and are solidly middle class. We hold on to denial, and think we're still at the point where working hard and saving money were enough. That the bad things happening today won't affect us because it's happening to people simply because they made bad choices. That it is impossible to buy a home now without overextending yourself to a certain extent.
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cobalt1999 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 04:27 PM
Response to Reply #59
101. I'm not unsympathetic to job loss or unforeseen events...
but you do have the responsibility to anticipate some events could happen.

I know you disagree, but paying rent is better than foreclosure/bankruptcy and then going back to paying rent again (assuming anyone will rent to you after that event impacting your credit rating).

Based on this article, yes, they would have been better off paying rent instead of seriously overextending themselves.

My point is, if you can't save enough for even a minimal down payment, then the odds of you keeping that house are very low. (I bet your parents had a down payment too). If you can't save up enough for the down payment and get a mortgage you can predict, then how are you going to handle insurance payments, house repairs, and other unexpected expenses without going under?

Again, I'm not unsympathetic, but the example in the article was of someone who was living with debt up to his nostrils and hoping the water wouldn't rise even one inch. That's just not responsible, especially when you have children (who are just a bundle of unexpected expenses in themselves).

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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 05:27 PM
Response to Reply #101
103. Of course we have such responsibility
And of course paying rent is better than foreclosure. I definitely don't think buying a home one cannot afford is a wise decision. My whole point is that skyrocketing housing costs have made first time home buying a much riskier prospect. And because that's a fact, I cannot fault people for taking that risk to the point that many in this thread are. I think some people could stand to step back from their own situation and not use themselves and their level of expertise as a measuring stick. Sure the ones doing the judging may have bought a house they could easily afford and allow themselves some wiggle room and secure good financing. Good for them. That does not follow that everyone else will have the same variables that make their choices equal by comparison.

Hindsight is always so much clearer, isn't it? It's easy to look at the aftermath this family is wallowing in, and say "That was such a bad move". Well, duh. But, things could have gone differently for the family in the article. He may not have lost his job, and the local market could have have been stable. Those are both factors outside of the direct control of that family. And no one would be the wiser to their financing decisions, and their risk would have paid off for them. Should they have taken the possibility of job loss and market changes in mind when making their decision? Sure, they should have. And it's possible they did. They just gaged the risk differently than others may have. Others have made similar choices but different circumstances made the risk pay off. And, not everyone is going to be as informed or are going to have the same options available. I think the discussion you and I are having is much more productive than simple "They had it coming, the idiots" type judgments.

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Recursion Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 03:35 PM
Response to Reply #54
66. I live in a city
Washington DC, to be exact.

There aren't vacant lots.

I'm scanning the Post real estate section: lowest-priced unit I can find is a condo for $300K.

The boarded-up houses in Northeast and central Northwest are owned, not surprisingly, by the same people who own apartment buildings near them... wow... smart way to put a squeeze on renters, if you ask me.

Despite the fact that my landlord is offering 0 services he did not offer last year, my rent has gone up by 10%. That is, I'm paying 10% more for exactly the same thing I was getting last year. And at $1100 per month for a 1 bedroom, that's actually very modest by the city's standards.

Some people say I should move out of DC. Well, I tried that a few years ago, and I found out that outside of cities, there aren't jobs. I could work at the Books A Million or as a security guard; that was it. And I'm not exactly unemployable; I'm a UNIX administrator. I'm in super high demand in the city, and in absolutely no demand in the sticks.

Meanwhile, the city's skyline is covered with cranes. These cranes are, first off, knocking down houses that in this market would sell for about $200,000 (which is cheap, for those who don't know DC real estate), and building on those lots "luxury condos" and rowhouses that proudly advertise that they start "in the low 500s"

I talked to my bank, and I could get a mortgage for a $300,000 condo. But, I would need a $40,000 down payment. Where the hell am I supposed to get that? I don't have bad credit or anything; the bank just wants that much up front.

Everyone I know my age who owns their house had their parents buy it for them. My parents didn't even pay for my college (no bitterness here or anything). I think people outside of the urban environment sometimes don't get that you can't just "start out" anymore.
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pokercat999 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 03:51 PM
Response to Reply #66
68. Unfortunately in your area the only answer is to commute long
distance. I suggest you try the Fredericksburg, VA area and get to DC via Virginia Railway Express. The VRE connects with the DC Metro and has some surprising options like emergency rides home, etc.
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tkmorris Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 07:10 AM
Response to Reply #66
81. Stop it.
You are a UNIX admin in Washington DC and you can't get a job outside the city? Please. NOVA is LOADED with jobs for people with that skillset and you know it. For that matter commuting in that area is not only possible, it is done by the majority of workers in the city. Trains run at least as far out as Manassas (I left the area 7 years ago so I dunno where they get to now) and I personally have worked in DC while living in the Leesburg area with only moderate commute problems.

If I still lived in that area I would be looking into some of the still existing out of the way locations in Northern Virginia or Maryland that are older and off the beaten path. The commute might be a tad long but the rewards are worth it. Head out route 50 well past the beltway. Out 66 past Dulles maybe. Somewhere up route 7, Leesburg or just north of it. In Maryland there is a lot out route 4, or south down in Waldorf or La Plata. Fredericksburg even is doable, if you really want to.

I don't mean to give you shit, really I don't, but move out of the damned city. It's cheaper and the scenery is better.
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Recursion Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 10:38 AM
Response to Reply #81
88. Sorry; I was counting NoVA as DC
Edited on Fri Aug-11-06 10:38 AM by dmesg
Same $hit, different state. And the late 90s "Reston boom" is pretty much gone now; there are jobs inside the beltway and on a thin corridor to Dulles. That's really it.
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LostinVA Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 11:27 AM
Response to Reply #81
92. It is cheaper, but still not affordable
Three years ago, my sister and BIL moved to Maryland outside of DC. They bought a 1,800 sft house, literally no land... no inspection, because 15 other people were bidding on the house. They paid well over $300,000 for it. An only OK school district, an only okay area.

My BIL had a very, very long commute every day... so long, my sister couldn't get a full-time job because of the kids' schedules.

They moved to Oklahoma.

Central VA is insane... but the whole NOVA area is way worse.
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earth mom Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 04:22 PM
Response to Reply #54
69. Disagree with your posts.
Buying a house is better than throwing money away on rent and living under a landlords thumb for the rest of your life. Sure, some people took a risk and optimistically bought when the future looked rosy for them. Who can predict the future?

Not only that, but the OP article was talking about people who bought a home that isn't all that expensive in todays market. I hardly see that as living high on the hog. People want a better life for themselves. They tried and it didn't work out, who hasn't made mistakes?

Also, I don't think it's fair to judge since we aren't in their shoes. Maybe you or I would never risk an A.R.M. loan, but some people feel it's worth the risk to have a place that they don't have to rent, and to actually be able to have a piece of the American Dream. I just can't fault someone for that.

Now if we're talking overextending oneself to buy a McMansion, Hummer, Louis Vuitton handbags and Jimmy Choo shoes and all that other wasteful crap, now that's another story. But a starter home? Naw, I can't blame people for that at all.
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AnneD Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 12:02 PM
Response to Reply #44
95. I have not seen a decent starter house
in ages....they just don't build them anymore. Hubby and I continue to rent because we refuse to get sucked into THAT much debt. We are thinking about purchasing land and getting a builder to build and pay cash outright if we live in Houston in our retirement. The houses we can afford are not in safe areas. Our other option is to retire to a smaller town.
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Tight_rope Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:20 PM
Response to Reply #15
50. YES....The True American Dream is "TO BE IN DEBT"!
We are all American slaves. I say it everyday to all my friends.
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tbyg52 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 07:24 PM
Response to Reply #15
72. An element, yes...
...but the predatory lenders must share the blame. It's not OK to rob somebody just because they leave their purse on the car seat.
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Demit Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:29 AM
Response to Reply #12
34. Regardless of what others promise, you have to look at your financial
situation and run your own numbers based on your own bank account. Hey, when I bought, I would have preferred a nicer house closer to where I really wanted to live too. But my finances said Sorry. HERE'S what you can afford, and be financially safe. The American Dream is to own your own house. It's not to pretend you are richer than you are.

And this man's troubles are rooted in his financial bad choices. That he is a National Guardsman compounds them, but it is not the cause.
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Lone_Star_Dem Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:57 AM
Response to Reply #8
14. Umm, predatory lending practices takes advantage of a buyers ignorance
That's what they prey on a buyers ignorance thus the phrase. It's considered an amoral and often illegal practice.

I never said the buyer wasn't responsible for their purchase, however. I simply said shame on the lenders for practicing the very tactics you described.
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Tansy_Gold Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:30 AM
Response to Reply #14
25. Predatory lending generally only works if the borrower
doesn't know enough to know he/she is being screwed.

When I was house-hunting a few months ago, I wanted to avoid anything looking even remotely like a major mortgage. I had sufficient cash from the sale of my house to buy something without going into debt; I didn't need to "move up" from what I had.

But I found a house and property I fell in love with, and I could have bought it with no mortgage except that it needed some repairs and upgrades. A high-pressure realtor tried to talk me into financing, and then he found me a lender who was willing to put me into the $1000-a-month mortgage range. Now get this -- I had only a temp job paying $11/hour that I would be leaving as soon as I moved, with no immediate prospects for any other income, and yet they were ready to shove the papers in front of me! I said, "Wait a minute! I can't pay this! I can't pay this AND pay the utility bills, much less groceries, gas, insurance. . . .Are you NUTS?"

Their reply was that they didn't care about the other bills I might have during the month -- as long as I made enough to cover their debt, they were fine.

Guess what -- I refused. I found another place, have virtually no mortgage, and I sleep a whole lot better at night.

But I can see where someone who doesn't know much about budgeting and financing and who is blinded by the shining temptation of HOME OWNERSHIP would get suckered in.

Shame on the predatory lenders who set out to fleece the ignorant.


Tansy Gold
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 12:04 PM
Response to Reply #14
41. Blaming the corporations is silly *sarcasm*
Edited on Thu Aug-10-06 12:07 PM by Pithlet
These people deserve what they get. It's the price for not being perfect. The world will be inherited by the perfect people who never make mistakes. The rest of us deserve no sympathy. Except for the corporations who benefit financially from these mistakes, and make matters worse, of course. They're innocent and deserve no harsh judgment. How silly to think that have any responsibility? That only applies to the little people. Little people should never take any financial risks in order to attempt to have a better life. They should know that the odds are stacked against them, like the perfect people do, even when these attractive offers are dangled before them. It's all their fault. Don't be suckered into feeling any sympathy for them. Reserve your sympathy for the poor corporations and ignore the fact they also took risks when loosening their requirements for loans. :sarcasm:

Seriously, I do think the family made a terrible mistake, and this is a pretty extreme example. But I still feel awful for them. And all of these foreclosures that will be coming in are a terrible thing, and not to be callously disregarded. It will affect us all when the economy tanks. I think it's foolish to think that everyone facing these foreclosures are idiots who deserve what they get. Either way, the effect on the economy will be just as bad whether we feel sympathetic or self-righteous.
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Lone_Star_Dem Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 12:58 PM
Response to Reply #41
45. I don't get the heartless disregard that dominates now-a-days
Edited on Thu Aug-10-06 01:06 PM by Lone_Star_Dem
Even if a person doesn't care when these practices lead to a family losing everything. You'd think they'd care when they realize that the end result is the corp's get more and our economy is going down the drain. That means they're going to suffer too. We all are going to pay for these lending practices that have been allowed to take place.

I just don't get the f-them mentality. My home is paid for but I still care about all of this. :shrug:
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:18 PM
Response to Reply #45
49. I think
a lot of people who feel callous disregard for the people facing foreclosures now are those who bought their home when things were a lot different. Even with the market slowing down, if you live on the east or west coast, or great parts of the midwest, there is no such thing as a starter home anymore. Oh, and I'm sure none of them took pleasure at all in the values of their homes they bought before the bubble doubling and tripling, making ARM rates virtually the only choice for those starting out. New home buyers face much bigger risks then they used to if they happen to want to live anywhere where there are jobs. I don't think it's fair, and just a tad self righteous to point at and judge people for only doing what they themselves did when the risks weren't so great. My parents would not be where they are today if the market had been like it is now, when they purchased their first home. No way.
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Tansy_Gold Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:28 PM
Response to Reply #49
58. I agree, Pithlet
There's a real "I got mine and I'm okay, so it must be those who are in difficult straits got there because they were greedy/stupid/didn't do their homework/whatever" attitude.

Never, ever, ever blame the corporation that suckered them in.

I damn near lost my almost-paid-for house last year when my husband died of lung cancer. Life sometimes throws you a curve. Same thing with the couple portrayed in the OP's article -- life threw them a curve in the form of the Iraq "war" that took away a job and an income they were counting on. Who knows what might have happened if these people were able to keep their income, pay off one of those ARMs (one might have been short-term, essentially a down-payment), and go on with the rest of their payments? But because life threw them a knuckleball, it's their own fault??? I don't get it.

The lenders who took advantage of them always make out and are never blamed for anything. Not in my book: any lender who takes advantage of someone, who puts the borrower in an unreasonably risky situation, is every bit to blame. The lender will always come out ahead -- they'll end up owning the property.

When I went through hell with a large, well-known bank trying to get the mortgage I eventually decided I didn't want, I told them flat out, "Look, you're getting a $500,000 house as security for a $100,000 loan, so what's your problem?" Their response was, "We're not in the real estate business." I laughed and said, "Then why don't you give me the money as an unsecured loan?" They didn't think it was so funny.

Is anyone trying to suggest that these people who are losing everything somehow defrauded the poor, innocent banks that lent them the money? Is anyone accusing these people of buying a property they knew would decline in value over the period they would own it and using an inflated value to screw the mortgage company? Give me a break!

We've all seen people lose their homes via a host of unforeseen disasters, whether it's the collapse of Enron or another megacorp, through the changing job market, through natural disasters, through the general catastrophe that is the boooosh administration. And we usually have some sympathy for them because it looks like they've worked hard and tried to make their payments and build up equity in their home. Well, so did these people. It just happened that the disaster hit them before they had time to build up that equity. So do we fault them for not having done whatever it was they did sooner? Again, I don't think so.

The system screwed them far more than they screwed themselves. They were trying to buy into the same American dream a lot of us did.

I was very lucky. I had enough insurance (not much, but enough) to pay off the mortgage. Furthermore, I was lucky enough to price the house just right and find a buyer at just the right time. Was I smarter than the average seller? I don't know. But I do know that my realtor was closing one and sometimes two sales a week right up until my sale closed the end of March, and then she didn't close another one for almost two months. That's how dramatically the market changed.

So when I read about situations like this, I know damn well that there but for the grace of whatever god or gods exist go I.

Tansy Gold

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MissB Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 04:38 PM
Response to Reply #58
70. I'm sorry for your loss.
:hug: Glad you were able to work out the house situation.
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mbperrin Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 08:39 AM
Response to Reply #58
85. Thank you! And for those who are so sure they've missed all
the traps, wait til the inflation rate of 30% and more coming in the very near future destroys your savings and current purchasing power, makes you pick between electricity, food, or medicine (any one), and when the "ability to choose to die" becomes a "responsibility" and then a "duty" to die. Anyone who's still plugged into this money economy for everything is about to get the shock of their lives. Why do you think M3 money measures are secret now, or why the definition of the CPI has been changed so often in the last 5 years? The next thing is going to make the great depression look like a casual outing. Go ahead and think conspiracy theorist or just plain nutcase. It's OK.
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One_Life_To_Give Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 12:15 PM
Response to Reply #49
96. Compassion for individuals but concerned/callous toward the group
The problem is not as simple as just Callous or Compassionate towards a specific individual in a difficult situation. The run up in the market and the building of McMansions didn't start because of high risk lending practices but was sustained by it. So it has resulted in the current high cost of homes and lack of availability of starter housing.

It took two willing parties to create this situation. I don't beleive either group should be given a free pass with regard to who is responsible.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 02:25 PM
Response to Reply #96
99. The majority of people losing their homes didn't live in McMansions
A lot of the reasons for the market exploding were greedy wealthy people that were buying homes as investments to flip for a profit. I'm not going to shed too many tears for any of those that may have been burned. It's the middle class who are being caught in this crunch, and as a group they're being unfairly blamed for this. It's one thing to acknowledge that there are risky and unwise financial moves that can result in disaster. I would never dispute that, because obviously it's true. But the callous disregard for families losing everything they own that has been displayed here is absolutely misplaced. The playing field is far from even. These companies spend millions of dollars in promotion, and make deceptive offers they know will likely ruin people, to make a buck. In an era where affordable housing is close to non-existent, and the economy tanking, and predatory lenders are greater than ever, I'm going to reserve the majority of my ire for them. I think the con artist dangling the carrot deserves more callous disregard than the person wanting to live the American Dream reaching for that carrot. And it is their actions that are impacting the rest of us, not the fact that there are, always have been, and always will be people desperate for their own home. If they never preyed upon these people, we wouldn't have the mess we're facing now. I think all the talk of McMansions and greed is inaccurate and smacks of blaming the victim, much like the Reagan administration did to people on welfare with the whole welfare queen myth in the 80's.

I'm sorry, but it's going to take a lot more than a National Guardsman serving in Iraq choosing an ARM to finance his home to pique my sense of outrage. And when he loses his home after his employer gave his job to someone else while he was deployed, I'm going to feel awful about it when his family loses their home.
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One_Life_To_Give Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 03:59 PM
Response to Reply #99
100. We all should feel compassion for this soldier
But compassion should not blind us as well. Home sales did not slow a couple years ago because of a loosening in the requirements used for Mortgage qualification. It allowed many people to continue to make money in what should have been a downward market. The real estate industry was able to add years to a good market cycle by doing this, but now we see the cost.

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zanne Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 08:27 AM
Response to Reply #45
84. I think it's the Republican/Libertarian influence...
I know exactly what you mean, Lone_Star_Dem. Even a decade ago, you wouldn't find such condemnation for people who are down on their luck. It's a blame-the-victim mentality.
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maxrandb Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 11:25 AM
Response to Reply #84
90. Yeah! It's easy to have no compassion when you're born with a
Silver Spoon in your mouth.
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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 11:50 AM
Response to Reply #84
93. Yep. Discipline is apparently the answer to everyone's problems.
Nothing bad ever happens to people. If they're in a financial bind, it must be their fault. The middle class is shrinking because apparently most of us have become status hungry idiots who know nothing about finances. It has nothing to do with policy and corporate greed. It has nothing to do with the fact that affordable housing is almost non-existent anymore. Jobs are disappearing. Gas prices are outrageous. Healthcare costs are skyrocketing, and people are finding themselves in huge debt through no fault of their own. Those are all just excuses. People today are just stupid, and it's their fault. I've got mine and managed to hang on to it even though my life hasn't always been perfect, so it must mean I'm superior to others less fortunate. They just didn't make the right choices. Pull yourself up by the bootstraps! :eyes:

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shrike Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 11:22 AM
Response to Reply #45
89. We no longer live in the "land of the free"
But the "home of the prey." And WE'RE the prey. We're like musk oxen, and some of us know enough to get in a circle with our horns out, and some don't. And when one of the ignorant "falls victim," the rest of us shrug and move on -- should've known better.

Personally, I think the sooner people recognize this the better off they'll be. (If you're going to live in Darwin's wet dream -- my apologies to the great man -- you damn well better be cognizant of that fact.) Educate, educate. Be aware. But I also wish that one day, the musk oxen would realize we out number "them." And that, unlike the real musk oxen, we're armed -- figuratively AND literally, I suppose.
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Rockholm Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:35 AM
Response to Reply #8
27. Agree Cobalt. They overextended.
And they were not very smart people, obviously. It appears that if their ARM has already gone up, then they had a 1-year ARM. DUMB DUMB DUMB. I hate to say it, but I have little sympathry for people who fall for these predatory lending practices.
To top it off, in some markets, 2004 was the peak of the market.
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Gormy Cuss Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:40 PM
Response to Reply #27
53. When you're told that you can afford it, when your co-workers are
all buying house with similar deals, and you're terrified that you'll be priced out of the market if you wait any longer, it's easy to fall into the trap. A generation ago the mortgage market imposed much tougher standards and qualifying for a mortgage was a sign of personal fiscal responsibility. I think that many people do not understand how the market has changed. Nowadays, anyone with a pulse and a mediocre credit rating will be offered a mortgage deal. When someone says you qualify, the temptation is great to simply take the broker's word for it especially if you're not someone with much sophistication about finances. Sure, we can look down and say 'serves you right for being dumb' but I think it would be more productive to level the playing field and regulate lending standards a bit more, not just for primary mortgages but for their demon spawn, HELOCs.

I say this as someone who is immune to the sales pitches and who has laughed in the face of people who try to get me to take on too much debt. Sleazy mortgage brokers don't waste much time on me.

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OzarkDem Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 06:36 PM
Response to Reply #53
109. Lenders and realtors are less ethical these days
During the early 80's, no matter how much you may have wanted your dream home, a bank or lender would not approve your loan if they thought your mortgage would take too large a percentage of your income.

Today, they don't care, their standards are much looser.
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warrens Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:51 AM
Response to Reply #8
30. In some cases, events you can't foresee can have an enormous impact
Like bankruptcy, the main causes of foreclosure are job loss, illness, and divorce. In the case cited at the end of the piece above, the guy's job was given away while he was in Iraq and he couldn't find another that would pay the same, even though he worked TWO jobs.

Blaming this guy is plain unfair.

If someone was out buying houses he couldn't afford just to flip them, well, that's their problem. But going after someone with a reasonable mortgage that suddenly accelerated just as he hit the skids for something that was not his own fault....
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Demit Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:38 AM
Response to Reply #30
35. You think taking out two mortgages to buy a house is reasonable?
After putting no money down? The guy laid his own foundation for disaster. He gambled on everything going right in order to be able to afford that house. Everything would have had to go right. That's a reckless thing to do.
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alfredo Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:51 AM
Response to Reply #30
36. I had one of those unforseen incidents. Actually several. First I had
first refusal on the house we were renting. It was sold out from under us. We were told to vacate in two weeks. I found a rental, but one day before moving in, the deal fell through. So there we were one day from eviction and no home. Fortunately I knew the law on evictions, and the land lady knew them but ignored them.

She was supposed to give us a written eviction notice and 30 days to vacate. I informed her of the law on eviction day. So I had already contacted a realtor friend, lined up the money, and set out to find a place within my budget in that 30 day window.

My finances were not where I wanted them to be, but I was willing to downsize to find a place that would do the job for us.

I found the house, bought it and kept enough money in savings and investments to cover most, if not all of the mortgage costs.

A few years later I got a career ending injury. I still owed 60 grand on the house after down the payment and monthly mortgage payment, but I had enough socked away to handle the debt. Understand that at that time my investments were returning more than the 7% I was paying in interest. It was better to pay the interest rate because I was still 2-3 percent in the black when looking at the money I had in the markets.

When bush took office I knew my money wouldn't be safe in the markets. I cashed out and put it in savings. It wasn't making money there, but it wasn't losing either. I sucked it up and glad I did. As soon as I was put out on disability, I could cash out the Thrift Savings Plan from my job. That combined with my investments and savings was enough to pay off the house and buy some much needed furniture.

Always give yourself an out. Always make sure you don't put yourself in a situation where your only choices are bad. If I hadn't had that investment account and the Thrift Savings Plan that was going like gangbusters, I couldn't and wouldn't have bought this house. Faith that things will always go right is foolish. Plan for the worst, hope for the best.

You need some discipline. You need to put a large chunk of money away before even considering buying a house. That discipline is even more important in this anti worker economy.
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fudge stripe cookays Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 12:17 PM
Response to Reply #30
42. Bull.
Edited on Thu Aug-10-06 12:18 PM by fudge stripe cookays
When we went looking for our house (in a very cheap market-- Texas), we purposely bought WAY below what we could afford in case one of us got laid off (it was 2002). We wanted to make sure we could make the payments on one income.

We could have afforded a $160-$170,000 house. We bought one for $105,000 with a fixed 5.something % interest rate and still had a little extra to put toward some new appliances. Guess what? I got laid off last fall. We made out just fine. Why? Because we PLANNED FOR THE UNEXPECTED.

What this guy did was incredibly dumb. I'm not saying I don't feel bad for him, but there are all sorts of home-buying classes if you look at community groups or local realtors. We went to one before we bought.

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NVMojo Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:32 PM
Response to Reply #42
77. fudge stripe cookays, we did the same thing in 03 and I got laid off
middle of this year and we were ok. But it is hard for some to turn down those McMansions in a tight seller's market ...believe me, in the area where we have this house, that's what it's like.
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fudge stripe cookays Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 06:09 AM
Response to Reply #77
80. It's called discipline.
You know, self control? Some people have it, some people don't. I saw a gorgeous house I would love to have had with a pool and some other really nice options, but I knew that if we had just one small fuck up, we'd be in deep doo-doo. I was right.

People today are WAY too concerned about impressing other people with their McMansions and SUVs and other crap. Like I said-- I feel bad, but they have to take some responsibility in this.
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JerseygirlCT Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:36 PM
Response to Reply #8
73. I have to agree.
You just don't buy that far above your means. If the loan offer sounds too good to be true, it probably is.

I feel badly for these people, but they made some bad choices.

(Except for the vet. He couldn't have predicted that, and there ought to be some better protection for him).

Yes, these are terrible, predatory loan practices. But the person assuming that mortage is responsible for his/her own choices.
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mccoyn Donating Member (512 posts) Send PM | Profile | Ignore Thu Aug-10-06 09:04 AM
Response to Original message
6. 9.9% interest for a house, ouch.
Thats $20,000 a year for a $200,000 mortgage, before paying any principle. I hope they find a buyer, they will be shocked how much money they have after getting out of that.
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Sagan Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:19 AM
Response to Original message
7. I refused to do an ARM in 2002

It was one of my only "not negotiable" issues regarding the purchase of our home here in Austin.

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B3Nut Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:48 AM
Response to Reply #7
11. ARMs are *bad news*
We had to get one when we first bought our house, but we refinanced after a year and now we're locked in. Good thing, that. The corporations are really getting ugly...

Todd in Beerbratistan
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maseman Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:20 AM
Response to Reply #11
21. ARMS are actually not bad
...if you get one when the interest rates are high. But when people were getting 5% interest rates and then doing ARMS that was pure ludicrous.

The above threads talk of "Who's fault is it?" I think it is both the snake oil salesmen of mortgages/lenders but it is also a consumer responsibility to know and understand EXACTLY what they are getting into.

When I bought my house three years ago (I was 28) I didn't know the difference between a fixed rate, ARM, no money down, etc. deals. I spent about a month reading and asking people what it all meant. At the end of the day I knew during low rates you get a fixed rate (5.8% baby) and put 5-10% down on it. This stuff isn't rocket science, but consumers must educate themselves.
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HughBeaumont Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:13 AM
Response to Reply #7
20. Avoid ARMS like the plague . ..
My friend is paying for that mistake as we speak. I have a 30 year fixed at 5.375%. Of course, that doesn't absolve me of home repair costs . . . :-(
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CottonBear Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:45 AM
Response to Original message
10. I thought that a Nat'l Guardsman could not lose his/her job while deployed
This is a sad story. However, even if he hadn't been deployed, they would have been in trouble. What the hell were they thinking when they bought a house they couldn't afford when they had two children including a newborn? My parent's generation worked for years before buying or building bigger homes and moving out of starter homes. People today want it all now. They can't afford to drive their gas guzzlers or pay their mortages. Foreclosures in my area are up yet new and expensive houses are sprouting up everywhere.
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maxrandb Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 09:51 AM
Response to Reply #10
13. Remember, the Pretzledent said; "it's patriotic to spend" after 9/11
Edited on Thu Aug-10-06 10:14 AM by maxrandb
Lenders just don't give a shit, especially with the new Bankruptcy Law. Why this guy didn't go through the VA for a loan is beyond me.
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Bridget Burke Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:46 PM
Response to Reply #10
62. My parents' generation had the GI Bill of Rights....
Which included low-interest home loans for vets. My father didn't use the loan; he was called back on active duty for the Cold War. But his widow (my mother) did.

Too bad that Iraq is not a "real" war.

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Recursion Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 03:25 PM
Response to Reply #10
65. You can't, but employers often don't know or don't care
As I shilled down below, contact the National Committee for Employer Support of the Guard and Reserve if you know of cases of employers violating depolyed servicemembers' right to return to their job after deployment.
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stepnw1f Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:00 AM
Response to Original message
16. Alot Good Their Money Will Do for Them
I'd say the wealthy will be in for a wake-up call, unless they help others. Reason may go out the window when the shit hits the fan.... just saying. History is a really good thing to study in this case.
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Kolesar Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:02 AM
Response to Original message
17. I think the availability of "cheap loans" drives up home prices
People can finance a bigger loan for a bigger house because the bank offers them a cheap ARM. The borrower(s) make a "promise" to themselves that they will budget better and be able to afford higher payments as the ARM interest-rate starts to rise. Else, the borrowers plan to refinance in a few years.

Actually, I took out an ARM for 8% in 1994 when rates were 9.5%. I refinanced with a traditional 30 year mortgage in 1998 when rates dropped to the 6% range. I could have afforded any of those loans. I just did not want to start paying 9.5%. I came out ahead.
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maxrandb Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:08 AM
Response to Reply #17
18. People also took out ARM's when gas
Edited on Thu Aug-10-06 10:09 AM by maxrandb
was $1.20, not $3.20 a gallon. I don't know what the "economic experts" are looking at, but if they were to look at my monthly gas bill (both what I'm paying at the pump and in the house), electric bill, and grocery bill, they might just see a "little" bit of inflation.

Some people could afford that mortgage, but the price of everything is going up, and wages are not. This is going to get ugly unless we do something to fix it.
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Kolesar Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:11 AM
Response to Reply #18
19. Another $50/month for gasoline and another $100/month for natural gas
Or worse! Depends on your commute and your climate. good point
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Rockholm Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:37 AM
Response to Reply #17
28. Lack of inventory drives up home prices.
Availability of money is but one small factor.
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dbackjon Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 03:04 PM
Response to Reply #17
63. Tell me about it
Still saving for first house, but the market is so hot in Nashville that I don't know when I will be able to afford a house.

Too many big houses being built, too many people thinking they can make the payments, too many people spending (borrowing on) the anticipated rise in prices.
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newportdadde Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:25 AM
Response to Original message
22. Newsflash - Don't use ARMS when rates are at 40 year lows.
Edited on Thu Aug-10-06 10:34 AM by newportdadde
Just were do you think the rates are going when prime is 1%? Reminds me of people buying tech stocks on margin in 99.

Your buying a house people, not a 100 piece of junk from China at the local Walmart, do some research and investigate! And I don't mean ask your freakin buyer agent, go to the library get on the web figure it out. Only a complete FOOL would have went with an ARM the last few years.

EDIT: Even worse, this one couple bought no money down... :eyes:
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Tempest Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:57 AM
Response to Reply #22
38. Newsflash - Not everyone has access to traditional fixed rate loans
There's a reason why ARMs were popular.

Or did that fact escape you?
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newportdadde Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 12:31 PM
Response to Reply #38
43. It didn't escape me, they were idiots.
If you have to purchase a home using NO MONEY DOWN loans and ARMs then perhaps buying a home was not the appropriate option for them.

Whats next the guy complains about how much his rent-to-own TV costs?

Its people like this who overextend themselves on credit that help create the very bubble which crushed him.

This guy thought he would take a free ride on the bubble, he thought he would get it all, no money down, ride the appreciation wave and then cash out in a few years. He lost, its 100% his own fault. All the signs were there interest was only going to go up and he should have planned appropriately.



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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:00 PM
Response to Reply #43
46. It's a shame they picked this guy as an example.
Because now, instead of discussing the real issues, those of us who made better choices and are sitting pretty can feel relief that it isn't us, and maybe also feel just a little self-righteous about that. It's better than facing the reality that every single one of us in the middle class is vulnerable, no matter how smart we are. I'll admit that my first thought when reading this article was, "Thank God I didn't get an ARM when I purchased my first home back in '03". Yes, we made a good decision in going for the smaller house in order to secure a fixed, low interest loan. But we also live in an area where the housing market didn't explode, and that certainly helped, too. Almost everywhere else in the country, we wouldn't have been able to finance the way we did. It's not as if the entire middle class population of the country could just move to the south. I'm not going to pretend there wasn't at least some luck involved in how we're sitting right now.

I think it's a shame that man didn't make a better, more informed choice, and I do think he bares some responsibility for what is happening to his family. Undoubtedly there are people who made very foolish decisions financially, and it leads to their ruin. But, I don't think that is what is at the root of the overall problem. It's not as if there's a sudden increase in stupid, gullible people. It's not as if most of us are incapable of making a wrong decision. Thinking that being knowledgeable about finances and making the best decisions will absolutely protect you from financial ruin is a bit naive. We can't ignore that the middle class is shrinking, and that it isn't all our fault. Pointing at this poor family and judging them won't help anyone. It just plays to those who want to remove our safety nets and destroy the very things that made middle class life possible.

They would love for us all to think this is just the stupid people getting what they deserve. They want us to feel smug and safe, thinking the bad things will never happen to us, because we never make bad choices. It's smart of them to point out a horrible case of bad decision making to make us think that is why the economy is tanking, and foreclosures are sky-rocketing.
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maxrandb Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:14 PM
Response to Reply #46
57. There are several other stories in the original MSN Story
the guy with two mortgages is only one example. Did he make a bad choice? It seems pretty obvious to me that he did, but if you recall, everyone was talking non-stop about the "booming" housing market. Hell, even the sky was not the limit. A 600 square foot house in a crappy section of San Diego was going for $700,000 cause it was on the ocean, and the owners got multiple bids in an hour, all above the asking price.

As another poster pointed out, builders are not building starter homes anymore. New contruction in our area of town requires that the home be over 2700 square feet.

Even for 200K, this guy would be living in the slums in Va Beach.

But, a lender comes to you and says; "I have a way to get you into that house with no money down, and the housing market is soaring now", it would be tempting to jump at the chance to own your own home.

Even the guy everyone is sighting as making a bad decision had no problem when his mortgage was $1100 a month.

Do the lenders have any responsibility at all!?

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Pithlet Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:42 PM
Response to Reply #57
61. I agree.
Some seem to be ignoring or not placing enough blame on the fact that he lost his job. Never mind that it was illegal in the first place to fire him. It was probably not the smartest choice to buy that home with those terms, but I think there were factors outside of this bad decision that led to their predicament, and had just as much to do with it if not more. I don't think too many people pointing the finger at this family can actually claim that they're 100% safe from financial hardship, and that there weren't other factors outside of their brilliant financial strategery that place them where they are.
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Tempest Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:21 PM
Response to Reply #43
51. I guess you missed the part where he came back from Iraq
And his job was gone and the only one he could find paid less than his previous one.

It appears things were going fine until he was sent to Iraq.
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Tight_rope Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:05 PM
Response to Reply #43
55. Yeah..That will teach his ass to vote for Bush* & join the armed services!
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Phx_Dem Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:08 PM
Response to Reply #38
48. How is that?
most first time FHA loans are fixed, all you need is a down payment. There are "high risk" lenders that offer ARMs and fixed rate loans. As several posters have pointed out, getting a ARM during a period of low interest rates is incredibly stupid.
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OzarkDem Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 06:32 PM
Response to Reply #48
108. Agree, I don't see how anyone HAS to buy w/ an ARM
buy what you can afford, not what you wish for.
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OzarkDem Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 06:31 PM
Response to Reply #38
107. If you have to use an ARM to buy
then only buy something that is well below what you can afford, particularly when interest rates are low.

Always assume a possible worst case scenario (working for lower pay, etc.) Never assume your income will increase to keep pace with the rise in your mortgage payment. Never buy a home at the max amount you can afford unless you know your future is damn secure and the market in which you are buying is great (read: lots of new homes being built in your area means the value of your home won't go up for quite a while).

Making a decision to buy a house is an incredibly serious responsibility, not like buying a car. Making bad choices can screw up your finances for years to come. Renting is better than losing tens of thousands of dollars.
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Snivi Yllom Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:28 AM
Response to Original message
23. I have zero sympathy for these people
But the couple learned they could purchase it with no money down by taking out two adjustable-rate mortgages. The monthly payments would start at a manageable $1,100. And Howell figured the value of their home could only go up in the five years they planned to live there.


How fucking irresponsible and stupid can you be to buy a house you cannot afford with very questionable financing.
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Virginia Dare Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:54 AM
Response to Reply #23
37. I'm not sure...
but there are a whole lot of irresponsible and stupid people out there, and the debt that these people are carrying will be the downfall of our economy eventually.
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FreeStateDemocrat Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:38 PM
Response to Reply #23
60. I agree, the key is "in an upscale subdivision " not someone who
was just trying to get into a house but overreached to buy more than necessary to provide basic housing. If they were reaching for a basic house I would be more sympathetic. I've been there and I compromised and bought what I could afford not what I really wanted Knowing that I couldn't reasonably make the payments.
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One_Life_To_Give Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 11:13 AM
Response to Original message
31. Do people only listen to those with a financial stake in transaction?
Someone in the National Guard should of had plenty of people to discuse this with, who have experience in home purchases, finance etc.

Most of the people you are reequired to deal with in the process have a financial stake in the decision, so there input must be concidered suspect. Making the largest financial transaction of your life is not the time for OJT in the home buying process. People need to consult friends and relatives with experience and especially more life experience. There are plenty of us who have seen housing markets decline and interest rates rise.
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Tight_rope Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 01:05 PM
Response to Original message
47. Advice to Shawn Howell..."CUT YOUR COAT ACCORDING TO YOUR SIZE!"
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Miss Chybil Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 02:08 PM
Response to Original message
56. Employers are required to hold jobs for deployed military. nt
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Recursion Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 03:23 PM
Response to Original message
64. To Howell and other Guardsmen/Reservists
I'm hearing more and more disturbing talk of employers blatantly avoiding their responsibility to re-hire deployed Guard and Reserve servicemen and servicewomen. This is unlawful and there is a remedy. If you or someone you know has had this happen, contact the National Committee for Employer Support of the Guard and Reserve. They have resources to help keep your employer from screwing you over.
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Roland99 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:02 PM
Response to Original message
74. Interesting. House prices are still rising here in Louisville....
perhaps more rapidly than in the past.

A newly built house I bought for $158,000 in 1998 and sold for $198,000 in 2003 (5 years and $40k in appreciation) would now go for about $235,000 (another home in the same development is going for $246,000 right now). That's another $40k or so in appreciation in just 3 years.

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llmart Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-10-06 10:25 PM
Response to Original message
76. I just have a hard time with these younger couples.................
who want everything right away. Now I know I'm showing my age but what ever happened to living in an apartment, saving every last nickel you can get your hands on (aka doing without unnecessary things)and watching your savings grow until you have a sizable amount to put down on the purchase of a small, older house that you can fix up if need be? That's what we did and many of our generation did in the early 70's. We had one car for the first 9 years of marriage, no vacations, ate out about once a year on our anniversary, etc. etc. etc. It's called delayed gratification. I thought I'd died and went to heaven when we bought our first house which was a fixer upper, but we did one repair at a time. We didn't even have any furniture when we moved in except our bed and our toddler's crib, and one used rocking chair plus our portable TV. I never, ever felt deprived. As I said, I was so happy I couldn't sleep for weeks before we moved in.

Oh, and by the way, my husband was in the National Guard at the time. Yes, we knew some young couples who bought nicer homes than we did but after three decades they are no better off than we are and yes, some of them are still fighting debt because they had no financial common sense. But they were the rarity at the time. Most newlyweds just knew they would be in a one bedroom apartment for several years before they could buy a house.
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LordLovesAWorkingMan Donating Member (272 posts) Send PM | Profile | Ignore Fri Aug-11-06 12:22 AM
Response to Reply #76
78. That's the real price of granting credit
People get the idea that they can buy anything as long as they can make the payments. The sad truth is that there is a housing bubble now, and too many people are willing to help prop up the demand side by signing up for loans that do not amortize.

It's so simple...if the loan doesn't amortize, don't buy with the assumption that the asset value will lower the present value of the note. Those days have ended. If that means that people live in rentals and save more, so much the better for them in the long run.

A good rule to live by is this: Interest is for earning. not paying.
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apnu Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 07:39 AM
Response to Original message
82. key word here: "two adjustable-rate mortgages"
adjustable-rate mortgages are a scam designed to abuse lower income or credit troubled people.

I wouldn't touch an adjustable-rate mortgage if my life depended on it. Its for that reason that I still rent an apartment at 33. Only get a loan if its a fixed rate, if you can't then suck it up and continue to rent or drive that beater of a car you already have.
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One_Life_To_Give Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 06:21 PM
Response to Reply #82
106. Maybe ARM's are marketed like a scam, but
they have their place. You can save some money or it could cost you some money depending on the movement of the markets. What I see people getting into trouble with is you shouldn't be using one of these if you can't sustain the maximum payment that an ARM could adjust to. Taking a gamble with losses you can cover is one thing. Taking one that will put you into bankruptcy is quite something else.
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susanna Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-12-06 12:51 AM
Response to Reply #106
110. Exactly.
Edited on Sat Aug-12-06 12:52 AM by susanna
We have an older duplex that needed a great deal of work, and we saved a while until we got started (about 7 years ago). We then secured an ARM home equity loan. It should be paid off shortly (two months or so). Our original mortgage will also be paid off by next February. The ARM home equity served us well during the low interest periods we've recently been through; we installed a new roof and forced air heating (I told you it was an old home!).

So ARMs DO have their place. Would I ever use one (or two) to buy a home? No, not personally. But that's because I understand real estate and mortgages (Mom's in real estate and taught me well). Now, if the story from the OP is about someone who did not have that knowledge, well, that's a tough way to learn that lesson. But learn it they did.

Disclaimer: this is not to say that I think the OP's guy is somehow stupid; he just might not have been aware of all the pitfalls of what he did. His employer firing him is straight up crap; they should read the law about that until it sinks in or they get sued for it.

on edit: clarity

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Mountainman Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 08:51 AM
Response to Original message
86. To a lot of people there are many reasons to do what they shouldn't.
Edited on Fri Aug-11-06 09:02 AM by Mountainman
The idea of owning your own space is as old as humans are. The funny thing is that you really don't "own" it until you pay it off, but it is your space while you can pay for it and generally you decide what you do with it.

Also the ego gets in the way. Some people need the status symbol of owning and not renting. I had an uncle and aunt who always rented apartments. They were DINKS. The rest of the family bought homes. We kind of looked down on them for never "owning" their space. But they didn't give a shit what we thought. They were a cool couple. They had an enjoyable life together. They traveled, they had and active social life. The rest of the family worked at the factories to make their house payments and didn't have much left over. If they stayed in the same house they usually paid off the mortgage and had some money left to pass on to the kids when they died and the house was sold.

A lot of people need the wife, 2.5 kids, a house in the burbs so the rest of the church community can see that they live a good clean life. I have a brother-in-law like that. We went to a 50th birthday party for him and his whole church group was there. Many of them own mc mansions in the burbs of Los Angeles. The cost of the houses are over $600K. They have to commute several hours to work each day. The lots on these houses are barely bigger then the house's footprint. The sun can't shine unless it high in the sky because the hight of the houses and the closeness of them.

But they all feel like they are doing what God wants them to do. Get up everyday. Work to pay for the house, SUV, kids, private school and go to church on Sunday to get their weekly fix of guilt and intolerance. I had nothing much to talk about with them since our lifestyles are so different. One wife had a new boob job and she spent the whole time walking around in a tight t-shirt. The wrinkles in her face didn't seem to go with the perky new boobs though. The kids there seemed starved for attention. The had on a lot of attention getting jewelry and tattoos with lots of skin showing.


But they all were in admiration of the one with the biggest house. The party was at that house. The owner sort walked around like the cock of the walk. Maybe this is just how I saw them and complete BS on my part.

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Tansy_Gold Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 11:27 AM
Response to Reply #86
91. Not only are they doing what their God wants them to do,
but the fact that they are succeeding (financially, materially) is evidence that their God approves of them, of what they do.

I have a cousin who is like this. His whole career has been a kind of "dare" to his God -- "If I can get away with this and come out ahead, it means it's okay with God." He's done some things that I think are pretty slimy, but it's okey-dokey with the Man Upstairs so he keeps on doin' it.

And no, i don't speak to this born-again asshole.



Tansy Gold
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zanne Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 05:51 PM
Response to Reply #91
105. He never heard of free will, huh? nt
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-11-06 05:44 PM
Response to Original message
104. No money down?
Here's a clue: You CAN'T FUCKING AFFORD IT!!!!!

Now, I always say that both parties should be more responsible, but the number of numbnuts imbeciles who bought houses way above their means with no-money-down ARMs in the last few years is truly ridiculous. There's a very small part of me, when I see stories like this...
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Eurobabe Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-12-06 09:24 AM
Response to Original message
113. Sold a house to a real jerk in Cincinnati earlier this year
This guy was the worst client I ever had, a total Napoleanic know-it-all anal engineer computer geek. The y delayed settlement, were a general pain in the ass, etc. Anyhow, he and wifey maxed themselves out on an interest only loan to buy the place, I bet the shit is going to hit the fan for him shortly (LOL). They were most likely Bushbots too, given the area.

Can't think of anyone who deserves it more!
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