Are you a victim of the Sub Prime lending fiasco?

by katiekitten 37 Replies latest jw friends

• 

  katiekitten

  Ive been reading some terrible reports about the American mortgage market, and the SubPrime mortgages aimed at people with poor credit ratings and poor ability to pay. (and of course poor ability to understand complicated and deliberately obscure contracts).

  Frankly the whole thing is exploitation in the extreme, IMO. There was one report on the BBC about how poor black areas were targetted, and people were given an introductory offer of 1% and not told that this offer lasted only ONE month before ballooning to 17 or 18%. The article said this will shortly lead to the biggest drain on wealth in the black community EVER.

  Another report said that in some areas 1 in 10 houses have been repossessed or abandoned as a result of SubPrime mortgages, and that whole areas are becoming crime riddled and vandalised, leaving home owners who can still afford their houses trapped in newly created ghettos.

  I just wondered if anyone had been affected at all and how you are coping.

  There has been a financial knock on in the UK, as evidenced by a run on the Northern Rock, where investors got spooked and all rushed to withdraw their savings at once, until the government guaranteed to honour 100% of the money people had saved with this bank.
• 

  avidbiblereader

  I am a real estate agent, I told everyone that I work with over three years ago, that this real estate boom and "easy money" would bring the world economy to its knees, I was laughed at back then. Not so funny now, I read a lot of real estate information, financing, ( way more then most ) where all the money came from, whether imaginary or real.

  The whole world economy is going to feel the effects of this one, it is already happening in Japan, Europe, England and elsewhere, the USA is just now starting to feel the effects. If everyone only knew the whole story, but know one wants to hear the truth. It is going to have a worldwide impact, the economy isn't on it's knees yet but the knees are bending.

  abr
• 

  Mincan

  Do you mean am I a victim of the economic paradigm of unlimited growth?

  Well we all know eventually unlimited growth will hit the wall of finite earth... imagine the earth as a petri dish with a 10% sugar solution, and that we are yeast. We use up the sugar as fast as we can and have exponential growth (a population bloom). We "shit" out alcohol which poisons us and eventually once the sugar is gone and all that is left is alcohol, we have a die-off.

  Am I victim of fractional reserve banking, fiat currency, liquidity, etc? Doubt it, I'm just a minor cog.
• 

  BlackPearl

  As a mortgage lender...I can tell you that not all mortgages are evil. Adjustable mortgages have been around for many years, global economies change, jobs are lost, etc.. However, the majority of the problem IS the adjustments that are occuring in home mortgages. The other issue is, why are banks and mortgage lenders being villified by borrowers who are going into default? Can you honestly say that people just signed their lives away without knowing their loan would adjust? Do borrowers not read the contracts? Would anyone blindly sign an insurance contract not knowing what kind of coverage they were obtaining for their vehicle?

  When it comes right down to it, the borrower is the one at fault. The borrower knows his financial circumstances better than anyone else, how can someone else be responsible for his actions? At what point do you/we want the lending institutions telling us we can't have that house? Would you prefer a lender to tell you, "You can't have that"? It would take you only five minutes to find another bank that would lend to you on that house.

  So you see...it's not the lender's fault. I think the same goes for credit card debt. Why aren't people up in arms about the 27% credit card companies charge people? And allow them to spend more than they can afford? Do they not read the contract and acknowledge the terms?

  Why are the mortgage lenders at fault for simply making loans to people who want them? If you're over 18 and can read a contract and want to enter into a financial agreement, I say, grow some balls and fess up to your obligations!

  And stop blaming everyone else for YOUR BAD DECISIONS!

  BP

  (Disclosure-my comments are not directed anyone in particular, I just get tired of hearing the rehtoric about how "Bad" and "Unscrupulous" mortgage lender are.)
• 

  katiekitten

  I agree that the buyer should beware (caveat emptor) but I think there has been something fundamentally wrong with the SubPrime market.

  Very low educational groups have been deliberately targetted, and Lawyers have said that the contracts have been deliberately made so complicated that even educated people cant work them out. In addition deliberate lies have been told to borrowers - such as they have been told the rate is 1% but not told that this rate would only last for a month. Also some subprime lenders have deliberately altered and inflated the income of borrowers on the application forms without telling the borrowers.

  If everyone only knew the whole story, but know one wants to hear the truth.

  I think this issue is going to have a huge impact on world economics, and there are companies selling SubPrime mortgages on the stock exchange now before going into liquidation. They are able to sell them as good debts because of the inflated incomes stated on mortgage application forms which make potential purchasers think the borrowers will be able to service the debts, when they cant.

  Although I understand people should be money savvy, I think this issue is too big to just blame on borrowers, and its going to impact more than the people who took out bad mortgages.

  There are people who deliberately targetted poor people and stupid people and who are responsible for something that is going to cause a huge amount of repossessions as the ballooning terms kick in.
• 

  juni

  amen! Black Pearl...

  The ARMS (type of loan) can be beneficial in your financial decisions.... BUT know what you are doing!! If you don't know....ask someone who does or research it.

  Mortgage lenders are being vilified for performing a LEGAL service to customers who for various reasons choose to use these various "creative" lending programs. REMEMBER.....the people who are processing and those investors who are BACKING your loan are in business to make money just like everyone else who works a job.

  And most definitely avidbiblereader.... we are only experiencing the BEGINNING.

  The public through the media are being misled about the truth of what has happened. It's not a simple "point your finger" at a few issue.

  Juni ~
• 

  Mincan

  When it comes right down to it, the borrower is the one at fault. The borrower knows his financial circumstances better than anyone else, how can someone else be responsible for his actions?

  Oh, I'm sorry, when did lenders start giving mortgages out to people with no jobs, or people that couldn't ever afford the house in the first place? Why did lenders start giving out down payment free mortgages. I'm sorry, but people will do what you let them do. It's the lenders fault, not people who want a freakin roof over their head moron.

  Oh wait, I know why they did it, because after the dot-com bubble bursted they needed another bubble to keep this economy based on the idea of infinite growth going. Especially a "post-industrial" tertiary based economy that produces nothing of value and essentially has everyone taking out each other's laundry.
• 

  bluesapphire

  I'm interested in "the whole story."

  We got into an "Option ARM" and were not given the full picture.

  Fortunately we have been able to manage because we weren't pressed financially. And our home value has not dropped enough to make us lose money if we have to sell.

  But I can definitely see how people could easily be deceived. The picture the lenders presented was a win/win situation. No one mentioned the risks and I'm not a lawyer or a financial genius.

  I agree with the comment about credit cards and charging 27%. It seems banks can do whatever they darn well please. The fees they charge are beyond reasonable as well.
• 

  BrentR

  When we had our house built I did not have two years of self employment so my income could not be used to get our mortgage. Only my wife's could be used and our only way of getting a mortgage was to go with an ARM that was 1% lower then a fixed. But within six months I had two years of self emp. and in less then a year the interest rates dropped and we switched to a fixed. IMHO we used the the system vs the system exploiting us.

  Too many of my friends bit off way more then they could chew when they bought a house. My wife and I tried multiple times to convince them to be happy with a smaller house or live farther away from the urban area's. Not one of them listened and they all have either sold thier house at a loss or are in foreclosure now. I see an equal amount of blame between the lenders and the borrowers.

  A couple of my friends I would not even loan $10 to and expect to ever get it back. But here comes a bank to lend them $250K secured only by a overvalued house in a spiraling market. A problem this big has to have more then one guilty party involved.
• 

  bluesapphire

  Pushing this back up because I'm interested in:

  If everyone only knew the whole story, but know one wants to hear the truth.

  So, what's the whole story and the truth?