Re: OT / An addiction to borrowing...

On Jul 27, 4:01 pm, "tiny dancer" <tinydancer...@xxxxxxxxxxxxxxxxx>
wrote:
"Poe" <haun...@xxxxxxxxxxxxxxxxxxxx> wrote in message

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tiny dancer wrote:
"E/C Annie" <blake_swann1...@xxxxxxxxxxx> wrote in message
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I work in the real estate dept of our local county court.  You cannot
imagine how depressing this work has become.  The ones that are buying
houses/condos, etc. and renting them are the ones I really get upset
about.  The buyer literally takes the money but doesn't pay the
mortgage company; the renter has no idea they're about to be evicted
from their home when they've done nothing wrong.  At least one of
these  shysters  has been convicted of fraud and is spending time in
jail.  This jerk was convincing a lot of the elderly folks that he
could have their home put in a trust, with him as trustee, so the
children would not have to worry about estate taxes.  Ah, how I
despise those who use the elderly, young, and disabled.  Scum of the
earth IMO.

At  least in my state the auctions are held at the courthouse, not the
homeowner's yard as in the recent suicide case - gunshot to head by
woman so her family could collect the insurance money.  Maybe she felt
guilty for spending money.  I don't know.

e/c annie
http://tinyurl.com/55b6no
GLOBE EDITORIAL
An addiction to borrowing...

July 27, 2008

EVIDENCE THAT American consumers are struggling to cope with their
debts - and failing - usually takes the form of statistics, such as
the soaring number of mortgages in default. But the problem found more
graphic expression Tuesday, when Taunton mother Carlene Balderrama
killed herself an hour and a half before her home had been scheduled
to go up for foreclosure auction. She left a note, police said,
telling her family to use her life insurance money to pay for the
house.

Hers is the most extreme version of a story that is unfolding in
hundreds of thousands of households across the country. How did so
many families borrow so much that any significant setback - a lost
job, an illness, an upward adjustment in a mortgage rate - was bound
to be ruinous?

The short answer is: easily.

Since the 1990s, consumers have been assaulted by offers from
companies eager to lend them money. Graduating students begin their
working years with credit card debt. And while critics of government
rescue efforts today blame the foreclosure epidemic on avaricious
homeowners who thought real estate prices would rise forever, greed
and undue optimism are as old as humankind. Only because of changes in
the financial-services industry and in government policy can consumers
with spotty credit borrow as much as they please.

Last week, The New York Times published chilling data on the imbalance
between Americans' saving and borrowing. In 1920, the average US
household had annual savings of $1,200 (in today's dollars) and had
$4,400 in total debt. In 2008, the average household is on pace to
save a measly $400 a year - even though incomes have risen
significantly - and owes $118,000.

To be sure, some households manage their debts better than others. The
Times also detailed the woes of a Pennsylvania woman named Diane
McLeod. She borrowed heavily, spent unwisely, and fell behind on her
debts after two medical emergencies. Her home is in foreclosure. One
can moralize: No, McLeod shouldn't have made impulse purchases from
home-shopping shows.

And still there are companies that want to lend her more.

Historically, banks and credit card issuers made money by lending to
people who seemed likely to pay it back. Consumers relied on advice
from financial institutions about what they could afford - and assumed
that no one would lend them more money than they could pay back.

But the business model of the credit card industry evolved, relying
ever more heavily on fees that make borrowers with fitful repayment
histories more lucrative to the card issuer than those who pay their
bills each month. Meanwhile, the securitization of mortgages -
packaging them together, cutting them up into tradeable securities,
and then selling them off to others - reduced mortgage brokers'
incentive to make sure their clients could repay their loans.

While financial institutions do run the risk that overwhelmed
customers will declare bankruptcy, they sought and got changes to
federal law that make it harder for borrowers to escape their debts.
When credit issuers have little reason not to lend, it's no wonder the
nation is awash with what the writer Barbara Dafoe Whitehead calls "a
tide of anti-thrift."

And to a disturbing degree, the US economy has come to depend on
consumers maxing out. Americans save less than 1 percent of their
disposable income. Consumer spending now represents more than 70
percent of the US economy. After the 2001 terrorist attacks, the only
thing President Bush asked of most Americans was to keep on shopping.

Even now, the short-term steps needed to keep a troubled economy
moving are at odds with the kind of thrift that would benefit debt-
laden households. Earlier this year, Congress and Bush approved
rebates meant to stimulate consumer spending; while the measure helped
to head off a more severe economic downturn, it also added to the
federal government's own ocean of red ink.

Government policy is moving slowly to curb the worst excesses. The
Federal Reserve Board has belatedly tightened lending rules to curb
the worst home-lending abuses. Mortgage lenders are now required to
document borrowers' incomes and verify that they can pay back any
loan. What's astonishing is that the Fed had to mandate what bankers
used to do out of simple self-interest, and that the mortgage industry
squawked about even this modest reform.

In this context, it's harder to attribute the financial troubles of a
family in Taunton or a free-spending mother in Pennsylvania solely to
bad decisions or bad luck. Consumers are learning the hard way. What's
still needed is a change in the culture of the financial-services
industry, and recognition from Congress that there's more to financial
regulation than letting the borrower beware.

It's amazing to me how home loans have been made these past ten years or
so. Back in the olden days, when we bought our first home, both buyers
and lenders were much more conscious of keeping people from over-buying.
When I hear about people having a first loan and a second loan, simply to
buy the house in the first place, it tells me 'perhaps these people
should have purchased a little *less* home to begin with.  I mean, who
can afford to buy their dream home right out of the gate?

td

Exactly.

Every house I've ever owned was something we could afford with less than
one income, just in case either of us lost our job. When I buy a car I
take really good care of it, get it paid off, then keep it going for as
long as is practical. More recently, we're in a home that is small
compared to our peers, but we were able to pay if off, so now all we owe
are taxes and maintenance. I am not really all that frugal, love to eat
out, take care of myself with little goodies I enjoy, but I actively
manage my debt. I've always had it in the back of my mind how quickly I
could become a bag lady if hit with a stroke of bad luck, so I try to take
precautions against that.

I am not saying my approach is for everyone, but I do think that many
people got ahead of themselves with loans and big homes, a lot of times it
seemed to me to impress others, then the bottom fell out. I guess there
was indeed some predatory lending, but there was also addictive borrowing
in SPADES.

That's exactly how we've always been too.  Got the house paid off, and just
owe taxes, upkeep.  I did use our home equity to pay for the kids college
tuition, when necessary, but we always got each semester paid off in full
prior to the next one.  And the kids didn't end up with huge college loads
to pay off after graduation.   We've used the equity line of credit on
occasion to make large home improvements, but again, always paid it off.  We
do use credit cards, but always pay the balance off in full each month.
When I did work, we were accustomed to living on one income, so we just
banked my checks to build up our savings account when we were younger.  I
still drive my '92 Mazda, mostly because I love my car.  It's a five speed,
and it drives so nice, and now I'm one of the fortunate few who aren't
getting absolutely killed by gas prices.  My car gets very good gas mileage.
Most of our friends were always *upgrading* their home status, buying
newer/bigger/better.  While we were content with what we had, while having
the ability to spend more time with the kids, family, etc.  Not having to
work night and day to make bigger and bigger house payments.  That's why I'm
torn about bailing out these people from their foreclosures.  For many of
them, if they didn't 'have to' buy such expensive homes, they wouldn't be in
the boat they are right now IMO.

td
Have to agree with you about bailing out the too big, too soon homes.
Most of us actually started with something under 2,000 sq ft, no pool
in the back yard, etc. Most people at closing are thinking about the
moving van, etc. not the mound of papers that they are signing. Not a
very smart thing to do.

Speaking of lines of credit .... did you know they can be used by
either borrower without the other one having any knowledge of a loan
having been made? I didn't until it happened to my sister who was in
the middle of a divorce about 10 years ago. She was due to get the
house, but the atty kept telling her there was an outstanding balance
on it. Yep, there was. Her dh had taken a LOC without her knowledge
or signature to either support his business, possibly the spare
apartment he had in town.

I only feel sorry for the elderly folks who got talked into "trusts"
and making fly-by-night folks their trustees. Yes, it was stupid on
their part to do such a thing, but the bottom line is that they
thought they would be saving their homes for their kids.

e/c annie
.

Relevant Pages

  • Re: the "subprime mortgage crisis"
    ... financial institutions to lend lots more money to low-income borrowers. ... made to people that normally would not qualify for a loan under the rule of ... left after you pay all your other bills. ...
    (rec.sport.football.college)
  • Re: OT / An addiction to borrowing...
    ... job, an illness, an upward adjustment in a mortgage rate - was bound ... working years with credit card debt. ... people who seemed likely to pay it back. ... federal law that make it harder for borrowers to escape their debts. ...
    (alt.true-crime)
  • Re: This is just stupid...
    ... mortgage lenders in the States are going down the toilet. ... I figure I'll pay it off in 15. ... We have so many loan programs it'll make your head spin. ... are buying houses now often will get an 80% loan to cover the house ...
    (alt.2600)
  • Re: This is just stupid...
    ... mortgage lenders in the States are going down the toilet. ... I figure I'll pay it off in 15. ... We have so many loan programs it'll make your head spin. ... house - you don't have 20% of the loan value paid off, ...
    (alt.2600)
  • Re: Just a quick note to all...
    ... to pay, this list goes on and on. ... In Florida, as I read, the property taxes at ... the loan in the first place. ... a mortgage and putting down 5% or less. ...
    (rec.music.beatles)
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