Wednesday, November 12, 2008

Spreading the Stupid Around

I nearly dropped the phone when the mortgage broker told me I could afford a $700,000 mortgage. It was 4 years ago when my wife and I bought our current house, and I knew there was no way I could make the monthly payments on on 700k.

And coming up with a downpayment on a house that expensive was a fantasy. But the mortgage broker started talking about about adjustable rate mortgages, low down payments, about refinancing.

My head started to spin, and eventually we ended up with a mortgage that was significantly less than half of what she was offering. I just didn't believe that i could afford what she said I could afford and I ended up with a 30-year fixed rate mortgage at 5%.

Fast forward to today. Since refinancing and taking equity out as if the house was a giant ATM is off the table, it seems pretty likely I would be having trouble making those payments. Now I hear on the news that the federal government and various large mortgage holders will be rescuing all the people who got in over their heads by reducing interest rates, the amount of outstanding principal, extending the life of certain loans etc.

Which means that if I was a greedy bastard who paddled up shit creek by buying a giant house I couldn'd really afford, I could avoid foreclosure by relying on a government bailout, and then, in a few years when the real estate market recovers, sell the house for a profit.

Stupidity and greed are thus not punished but rewarded, and will doubtless flourish and spread. This may be the way to save the economy, but it sure annoys the hell out of me.


TN said...

Too bad more people didn't think like you did.

My stomach heaves a little bit every time I see a story about predatory lending. I think, yes lenders shouldn't have been pushing volatile loans on people, but there's another person involved in these scenarios.

This trend that cheerfully paints the stupid as victims does them an even greater disservice, by robbing them of accountability. As you point out.

I saw a story about this poor family who was foreclosed upon and didn't know where to turn. They claim that they were taken advantage of by an evil mortgage broker and duped into a mortgage they ultimately couldn't afford. I will have to take the news anchors word for it, as the families commentary was translated as noone in the family could speak English.

Can't speak English but happily conduct the largest purchase of your life in a language you can't speak? WTF?


MeatAxe said...

Apparently in 'foreign' countries nobody ever deceives anyone else or lies or steals.

That's why its so easy for evil predatory American mortgage brokers to take advantage of these poor immigrants.

Must be nice in all these foreign places where everyone is so ethical.

Or maybe we're racists for assuming they were ignorant and they were just as greedy as the rest of us...

Or maybe they were just greedy...

Anonymous said...

I'm one of the stupid who has to say "until you can walk a mile in someone else's shoes..." It's easy to judge when you aren't one of the people facing losing your home by gambling on a crap economy. Thousands of people are in the same situation. People making good-decent wages, who are college educated, now struggling from bad advice from an economy that never should have existed. B/c we trusted the experts.

Yeah, shame on us.

But shame on you and the judgers like you, too, for allowing it in your own backyard.

MeatAxe said...

Hi there Anonymous,

Let me say first of all that I have a great deal of sympathy for your situation. You are in a tough spot and it must be awful.

I don't think buying a modest house in Reno makes you a "greedy bastard who paddled up shit creek by buying a giant house you couldn't really afford." And I'm rather surprised you put yourself in that category.

And if you are able to take advantage of a federal bailout of individual mortgage holders, I don't imagine you'll sell out for a large pile of money.

Which means you are not the people I was thinking about when I wrote that post.

However, I'm not in charge of regulating the economy or regulating mortgage backed securities, or informing you about the consequences of your mortgage, so there's there's no way I'm responsible for your financial decisions, and I didn't allow any of them to happen.

But when I read your post, I wonder if you realize that yourself. In two short paragraphs you blame, "experts" that you trusted "judgers" who allow this to happen and a "crap economy".

Where does your responsibility enter into the picture?

At what point do you say, "I made a bad decision." or "I didn't make sure I understood all the terms of my loan" or " I thought my house values would keep rising forever, and I could just keep refinancing."

There are approximately 12 trillion dollars in the US mortgage market, and about 9 percent of mortgages are 'at risk.'

If the 9 percent are all victims, what does that make the remaining 91 percent? Lucky? I don't buy it, and you can't expect me to be happy that my tax revenue is going to fix this problem

But as angry as I am about the whole rotten mess, I'm not angry at you, personally. If you ever make it to CT, the drinks are on me.

Atom Smasher said...

[i]I[/i] was raised to believe you don't welsh on a bet and you don't run from your responsibilities. I have absolutely zero sympathy or empathy for those who live their lives otherwise.

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