Sorry but that doesn't even make sense. If someone has a $500k mortgage on $900/wk salary how do you think they're gong to pay it off?

It's also pretty flippant to say that the majority of people are idiots. Some people got in over their heads for different reasons and part of those people were less than wise. But remember it was the geniuses at the mortgage companies that gave them the money. And every loan that has gone bad wasn't because the borrower was an idiot. A lot were unsophisticated borrowers and didn't understand what they were doing (your so-called idiots), some were pulled in by the rapidly escalating real estate values and wanted a piece of the pie which the mortgage company was happy to give them. No one expected to be the last buyer at the top of the market like the last kid standing in a game of musical chairs. And then lost jobs or other catastrophic situations occurred in some cases. I think it's pretty hard to blame all the mess on the borrowers and let them lose everything while we're spending our great-grandchildren's future by bailing out the idiots that made the loans in the first place.

 

[QUOTE=martha,Mar 8 2009, 10:56 PM] Sorry but that doesn't even make sense.

 

Martha there were cases of people getting no-doc mortgages.
Did they understand that they'd never be able to make payments, maybe.
were there lots of cases of fraud, surely, on both partied the applicant and the originator.

on house of cards they talked about a landscaper in so. cal. buying a 560K house, on crap for income.

 

Seems to me a person would not need much income to buy a house that low.

 

My landscaper probably makes more money than I do. I got a no doc mortgage loan, both Countrywide and B of A pre-approved me for $450,000 with no income verification whatsoever. Of course my realtor, broker, lender, all tried to convince me that I "needed" way more house than I actually wanted (I was looking at the sub 200K market).. "The higher end houses gain value faster-bigger-better than lower end,.. the more you spend the more you'll make.." I must have heard that 100 times. commissions commissions commissions.

I pretty much stuck to my guns and bought a house for a little over 200K (in 2006 at the FL market peak) which has only lost about 40K in value, vs. the 200K I would have lost had I stretched to the high end of my reach.

Fortunately my 30 yr fixed at 5.75% only requires a payment of around 10% of my avg. monthly income. I am SO glad I failed to take everyones advice and didn't buy a huge house at the top of the market. I feel sorry for all the folks who did. I currently pay an extra $500 a month on top of principle to pay the mortgage down early, but I still like the deduction. I may pay it off once I get my cash reserves where I want them, but I think inflation is coming, so I'm fence sitting right now.

 

[QUOTE=dlq04,Mar 8 2009, 11:24 PM] Seems to me a person would not need much income to buy a house that low.

 

My landscaper told me a couple of years ago that he bought his house for $850k...

 

It seems to me that the proliferation of interest-only mortgages is symptomatic of the real culprit that got so many people underwater: the unbridled optimism that housing prices would continue to escalate, an optimism fueled by the real estate industry (see Mike's post), all of whom made lots of money as a result.

People who are in trouble from all this -- whether they classify as "idiots" or not -- were sucked into this optimism. The ones who over-reported income were complicit; the ones who didn't bother to read and understand the fine print were, at the least, negligent.

And people who refinanced to invest their equity in the stock market (which, of course, was also going to keep climbing forever, according to its boosters with financial interests) really got crapped on -- on top of whatever other fault they bear, they were plain greedy.

I, for one, would like to get my small mortgage paid off and rely on future lines of equity-based credit (or maybe even a reverse mortgage) for major repairs. The old-time business of "burning the mortgage" (even if only symbolic) just feels right. HPH

 

Excellent point, Mike. People were being told how much money they would make on a house they could not really afford, and they bought the story, hook, line and sinker.

We bought our home in 1985. I'm sure we would have qualified for a bigger house along with a bigger mortgage. Thanks, but no thanks. We didn't want to live for a house. We've made a nice profit on it, even in today's market, but we never bought the house thinking it would make us rich.


I heard of folks doing this and I was

 

The difference is, you're calling the majority of the people who borrowed the money idiots. In my opinion, the loan officers, underwriters, processors and the rest of the "trained intelligent" people at the mortgage companies and banks are the idiots. They were supposed to be doing due diligence to make sure these people could afford to pay back the money they were borrowing.