I've been somewhat keeping up with this lately. It is definitely a problem in my area. I'm afraid this might end up another example of the government rewarding collective stupidity and bailing people out for buying more house than they could reasonably afford. Looks like the democrats are going to take every opportunity they can to play politics with the issue. Ridiculous. Link
This saying has no meaning anymore. I'd like to know how many people with "high interest rates" had a gun held to their head while they were signing the papers. Customer's who receive higher than normal rates usually do so because their credit is shot. They usually hug your neck, shake your hand, and thank you as they're leaving the closing room. They know that if you didn't do the loan for them, no one would. Companies that originate sub-prime loans are doing it as a service to those who could not get a loan anywhere else. Very few customers, maybe 5 percent, could go to the local bank and book the same loan. The rates, and fees, are greater to offset the loss the company takes when these people default...which they do in great numbers. Push out the sub-prime lenders, and take away the only chance some of these people have of financing their dreams. The only action needed by politicians is to regulate the credit grading companies. It makes no sense why a person would have a credit score with equifax at 715, a score with experian at 625, and a score with transunion of 585. Usually mid level scores are used for lending purposes. The "bank" isn't going to lend to a customer with a mid score of 625. Period. So, a customer who may only have one 30 day past due on one minor account in the last 6 months, has no other choice but to go to a sub-prime lender.....and be punished by a higher than average interest rate.
OK, I go into business to make loans to people that are not usually credit worthy. You wanna buy stock in my company? I'm going to loan people money on adjustable rate mortgages, and interest rates are at 40 year lows (fed funds rate at 1% in 2003) because the stock market crashed, and the fed dropped their drawers to keep a big recession from turning into a depression. I can put all kinds of people in homes with rates much lower than historically possible. My stock will soar, I'll cash out and make millions. Then rates will go up, and those folks won't be able to make their payments, they'll default, then the company will default and go bankrupt. But I'll be cashed out and a gazillionaire by then. The subprime mortgages will have been bought by bigger banks or Ginnie Mae, and when they start to hurt, the govt. will bail them out like they did in the S&L crisis 20 years ago, so the taxpayers will pay. Ma and Pa will loose their shirt on my companies stock, but that's ok, I'll be a gazillionaire. This was predictable. Stupid people and a lack of regulatory oversight.
Looks like you are right. These morons should be run out of the country. No more than another attempt to use our tax dollars to buy votes. Now Chuck the schmuck is on board. These idiots make me want to puke. Link
People need to know their budgets and do their homework before getting a mortgage. If your mortgage plus taxes and insurance is more that 25% of ypur gross don't do it. While the government should not subsidize people who jumped into a mortgage half cocked they should do something to prevent another crisis down the line. It may be as simple as including personal budgeting in high school course work. Too many people don't know how to make and stick to a budget or how to save money.
I am in total agreement with this. As sad as it is to say this, I think a refresher on this should also be a requirement in college and vocational training. I'm amazed at the white collar professionals I know who have no concept of basic personal finance. Then again, if the government follows through with this stupid bailout, why should anyone care? Another example of the mentality that is taking over our country...personal actions have no personal consequences. These idiots are going to keep pumping hot air into our economy until we see a total collapse. I hate to say it, but what we need is a good recession to bring things back in line before it is too late.:thumb:
Some mortgage products these days are complicated and the disclosures can't be understood by the average person. There needs to be more transparency so consumers can better understand what they are getting into. Lenders, especially in the sub-prime market, have done a great sell job of getting the consumer to focus on their initial monthly payments and not the big picture. You see this same practice in the car loan business. The only government action I'd like to see is to make the mortgage process easier and require full disclosure in an easy to understand language. But the ultimate responsibility falls on the consumer and I should not have to bail them out.
