How Many Licks Does It Take?

[Misty_Morning]

I have very recently gotten into the habit of reading the news after more than a year of blissful ignorance.

I have seen that foreclosures have jumped 30% in the last quarter, oil prices are up (surprise, surprise), and the wars are still raging.


What captured my attention...the foreclosures.

I remember back a few years when I had to get a new car cuz I totalled mine out (yep, it was my fault).

I went to the bank with perfect credit to see about a loan. They wanted to give me a loan for 6%. WTF!?!?

But what was so amusing is the loan officer looking at my credit report and looking at me..."You have no debt! How do you do that?"

I told the loan chick that I have this habit of not buying something unless I can afford it.


Needless to say I passed on the loan and got my car financed for 1.9% for three years and paid it off well before the three years.

But see about that same time I was thinking bout buying a house. But I just couldn't do it, I mean I could financially but I just couldn't. I couldn't see myself buying less of a house for more money.

I was approached by numerous folks trying to sell me on alternative financing....both loan foks and folks I worked with. I tried to tell them it won't work. I tried to tell them that a person shouldn't spend more than 30% of their income on housing. They tried to convince me that I was living in the past.


So, I see where all the folks who couldn't afford a house or more house than they could are now in a pickle. And the government is coming to their rescue.


Well, what about my reward?


What do I get for not getting myself into a hole for other taxpayers to bail me out?



Don't get me wrong...I understand about some folks losing jobs and potentially losing their homes....BUT GIVE ME A FUCKING BREAK!!! Most of these foreclosures are cuz folks overextended themselves.




If you can't afford it...don't buy it....


Now I'm gonna havta pay for those folks to keep their houses.





Where's MY assistance for being financially responsible????

 

[cloudy]

I feel your pain.

The only debt we have:

3 payments left on my car
the motorcycle loan

That's it.

No credit cards, no other loans, not a damn penny is owed other than those two things. People wonder how we do it. Its easy: we don't spend what we don't have.

 

[SeaCat]

I owe money on one thing, my car. That's it.

All of my debts have been paid off. I have been working hard to rebuild my credit. I have no interest in owing people money.

I now have more junk mail than ever before. I have offers of Credit Cards, I have offers to finance a new house. I get offers to sell me a new car on credit.

Everyone wants my money, more importantly they want me to owe them money while paying them interest on the money owed.

I absolutely refuse their offers. If I can't pay for it outright then I'm not going to buy it.

I know I'm going to end up paying for this attitude.

Cat

 

[Misty_Morning]

I know I'm going to end up paying for this attitude.

Cat

Why?


Being financially mature should not be penalized.









I don't mind helping folks that are in a bind, if they lose their job and can't make ends meet.


But I remember when my Dad came to visit me and we were driving around. He couldn't get over all the "big" houses.....

Where I lived a crack house couldn't be had for less than $250,000. And then you see folks driving all these high dollar SUVs.


I have a good income, in fact I made more than most of the folks living in half a million dollar houses and driving the lasest cars....but it just does not compute.....


Was I the only one taking Economics 101?

 

[Stella_Omega]

I own no home.

I carry about 7,000 in credit card debt (scissored the cards).

And I have responsibility for around $300,000 in investor's loans for my startup corporation. Scary as fuckall.

 

[Misty_Morning]

I own no home.

I carry about 7,000 in credit card debt (scissored the cards).

And I have responsibility for around $300,000 in investor's loans for my startup corporation. Scary as fuckall.

I have alot of freinds that think that I am wealthy cuz I have no debt and have a little money.....I try to explain to them that they are wealthy....they have not overextended themselves and while they don't have a large amount of cash...they posses realty. Their reply....but if I get sick or sompthin...in 6 months I lose everything.


But see, these folks have not gone out and mortaged themselves to the hilt. They are financially responsible....to a certain extent. Plus most have short term and long term disability...so if they get sick...it shouldn't knock em out of their house.



There's a difference between those that chase the dream with empty pockets and those that come prepared to do battle.

 

[Huckleman2000]

A couple things:
1. If anything, the government is bailing out the financial industry, not consumers. It's more difficult than ever to declare bankruptcy.
2. If you think it's just 'getting overextended', you've never been through it. First you lose your job, or have unexpected bills, so suddenly the mortgage you could afford becomes the anvil around your neck. You use credit cards, thinking a new job is just around the corner. Then you miss a payment, and they bump up the interest rate, and tack on late payment fees. In no time, your minimum payment barely covers the monthly finance charges. Then you get a job, but it doesn't pay as well. They initiate foreclosure, which adds more huge fees to your mortgage. The whole thing becomes a maelstrom of debt and ever larger fees.

Government assistance isn't categorically some free handout to reward the irresponsible behavior of individuals. That doesn't happen unless they are very wealthy and well-connected.

 

[Misty_Morning]

A couple things:
1. If anything, the government is bailing out the financial industry, not consumers. It's more difficult than ever to declare bankruptcy.
2. If you think it's just 'getting overextended', you've never been through it. First you lose your job, or have unexpected bills, so suddenly the mortgage you could afford becomes the anvil around your neck. You use credit cards, thinking a new job is just around the corner. Then you miss a payment, and they bump up the interest rate, and tack on late payment fees. In no time, your minimum payment barely covers the monthly finance charges. Then you get a job, but it doesn't pay as well. They initiate foreclosure, which adds more huge fees to your mortgage. The whole thing becomes a maelstrom of debt and ever larger fees.

Government assistance isn't categorically some free handout to reward the irresponsible behavior of individuals. That doesn't happen unless they are very wealthy and well-connected.

Just from personal experience of listening to my friends and coworkers....

most seem to be living in "very" nice dwellings and juggling bills. They live month to month on very good salaries.

I was raised with the 3 to 6 month rule. If something should happen and you lose ALL income you should be able to pay all your debts for 3 to 6 months unassisted.

I live on a modified rule...if I lose my job (which has happened to me last year) I have made plans to be able to pay all my expenses for 6 to 12 months.

I didn't get to this place cuz I want to keep up with the Jones'....I worked long and hard and suffered so that I wouldn't have to suffer....

 

[slyc_willie]

The majority of the folks I work with live in a month-by-month frame of mind. Some of them own homes, and if they were to suddenly become infirm, they would be screwed. They'd lose it all within a month.

Now, I've got no soap box to stand on. I live in a cheap apartment, and have no bills other than rent, energy, and my AT&T bill. Still, sometimes I overextend myself and end up having to play catch-up. But that's very rare, and for the most part, I could support myself on my savings for at least three months.

One of my best friends and her husband have a house. They pay $1300 a month for their mortgage and another $700 or so in bills. They party three or four nights a week and buy DVDs as soon as they come out. She's always complaining that they're broke and he's always wondering where the money is. Christ, she can't even buy cigarettes every day, and ends up bumming off of me!

I keep thinking, if they had been smart, and kept to an apartment, and not purchased that second car they really didn't need . . . they'd have more money. They'd be able to build up a real nest-egg.

I asked her, once, why they even got a house in the first place. her response was deploringly simplistic: "Duh! We're married! We're supposed to have a house."

I love her like a sister. And, like an older brother, I really wanted to smack some sense into her.

 

[Somme]

http://patrick.net/housing/crash.html

 

[CorsetLvr]

A couple things:
1. If anything, the government is bailing out the financial industry, not consumers. It's more difficult than ever to declare bankruptcy.

If you are referring to the recent interest rate reductions by the Fed I would argue that they are bailnging out the economy, not the financial industry. There have been 50,000 lay-offs in the financial industry in the last 2-3 months and over 100,000 this year. How long do you think that can go on? Have you took note of what has gone on in the stock markets lately? Have you checked to see what has happened to your 401K, IRA, or other equity backed assets?

Yes, the mortgage situation is bad. However, if Barney Frank and the Democrats in the House Financial Services committee have their way, their going to "fix" the problem by putting all mortgage brokers out of business. We really need another 125,000 unemployed people on the job market. If you don't believe me, check out HR 3915 that was approved by the committee on Tuesday. I think the big banks are really behind this bill. It has nothing to do with consumer protection and everything to do with market share in the mortgage industry. Brokers originate 50% of the mortgages in this country. Surely you don't think all of them are "risky" loan do you? Who is the winner from such a legislative move? The banks of course that have lost this market to brokers.

Their idea is put mortgages back in the hands of banks. When was the last time you got good service from your bank on anything? The funny thing is that they were just as much a cause of the problem as the brokers. That's really all a broker provides, the service that a bank can't or won't provide. Banks are fine for people with established credit and money to put down on a home. They are, however, terrible at providing service to people such as first time home buyers who need more help in securing financing. Who do you think underwrote and bought and sold all those sub-prime "risky" loans? The banks were a huge player of course. Look at what is happening to them right now. Their stock is down, they are reporting huge losses, and their CEO's are dropping like flies. The brokers are just the scape goat in this whole situation. Yes, many deserve some of the blame, but do you think the politicos want to piss off the banks? I'd love to see how much campaign money came from the banking industry for Hillary's campaign. They're not going to touch that.

HR 3915 is extremely anti-competitive and is going to have a ripple effect through the housing and real estate industries that are already crippled. That means even more unemployed folks such as realtors, appraisers, construction people, title folks, surveyors, etc. Basically, I think purchases by first time buyers will go way down and we will move closer to being a nation of renters. If HR 3915 is approved, I plan on investing in rental properties.

I'd also love to know how many bank lobbyists played a role in drafting the bill. I'm sure Citi, BoA, Wells, Chase, WAMU, Wachovia and the other national banks all played a role.

 

[Caitano]

HR 3915 is extremely anti-competitive and is going to have a ripple effect through the housing and real estate industries that are already crippled. I'd also love to know how many bank lobbyists played a role in drafting the bill. I'm sure Citi, BoA, Wells, Chase, WAMU, Wachovia and the other national banks all played a role.

I'd like to see Fannie Mae have the lead on rewriting that bill. There's a lot riding on this, and I think the recent rate drop by the Fed has exacerbated it. The bubble is going, lowered rate or not. It not only affects a bunch of speculators and thousands of borrowers who face foreclosures, and banks, but investments using mortgage debt leverage, thus the markets, thus pensions, a lot of private fortunes. Couple that with rising shipping and energy costs, enormous war costs of ten billion a month to the government, and inflation? This is headed for the tank.

 

[Roxanne Appleby]

80 percent of sub-prime borrowers are not behind in their payments. Half of those who are less than 30 days behind.

There were some scummy lending practices when this bubble was expanding, but either we're going to have a free society and free economy, or we're not, and if we are, then individuals must ultimately be responsible for their own actions, including taking loans they can't afford.

 

[Roxanne Appleby]

Why?

Being financially mature should not be penalized.

In times of high inflation, (fixed rate) borrowers are winners and savers are losers. We are in danger of entering such a period right now, due to the Fed allowing too much easy money for too long - witness gold, oil and other commodity prices. We may be between an economic rock and hard place - accept the inflation and the destruction of middle class wealth that accompanies it, or endure a recession as the inflation is wrung out of the economy. 1981-82 was an extreme example, and thankfully the excess today is nowhere near what occurred in the late 1970s to bring that on, but it's still not a pretty picture.

 

[CorsetLvr]

but either we're going to have a free society and free economy, or we're not, and if we are, then individuals must ultimately be responsible for their own actions, including taking loans they can't afford.

Thank You! We live in a nation where we have lost all sense of personal responsibility. It's not like these people didn't know what kind of mortgage they were getting. They signed a Truth in Lending Disclosure, not once, but twice, during the loan process. It clearly shows that they were getting an adjustable or interest only loan. This fact gets lost in the uproar. The media portrays these people of being totally innocent and victims. That's a load of liberal crap IMHO. They wanted to buy a house that was more then they could afford or more then their credit history allowed and the loan officer simply found a loan product that allowed it to happen. When was the last time a car salesman told someone that they couldn't buy a high performance sports car because the buyer's driving skills weren't good enough to handle it? When did it become the seller's obligation to make the decision as to what is ot is not an appropriate product to sell.

In some ways this reminds me of the law suits against gun manufacturers a few years ago. These were based on the fact that they somehow assumed some obligation as to how their product was used, or in this case mis-used.

 

[CorsetLvr]

80 percent of sub-prime borrowers are not behind in their payments. Half of those who are less than 30 days behind.

Actually I think the total foreclosure rate is somewhere around 5-6% of ALL mortgages. That includes prime as well as sub-prime mortgage.

The problem with Fannie or Freddie playing a role in this is that their loans are limited by their underwriting guidelines. First, they never played a role in sub-prime. Their loans are prime only although they were doing loans for some sub-prime quality borrowers back a few years ago. They have already tightened their guidelines to stop this. The other problem is that their guidelines limit loans to less then $417,000. That's not a lot of help to hard hit areas such as California that have high property values.

Wanna here the funny part? Sub-prime loans for the most part no longer exist. HR-3915 is also intended to eliminate a market that no longer exists. Wanna guess where those folks that we used to call sub-prime are getting their loans now? The US government. We've gone full circle and FHA loans are now the product of choice for folks with low credit scores.

 

[Roxanne Appleby]

In some ways this reminds me of the law suits against gun manufacturers a few years ago. These were based on the fact that they somehow assumed some obligation as to how their product was used, or in this case mis-used.

Warning! Eating nothing but mass quantities of Big Macs, fries, shakes, etc. may make you fat.


(But don't worry - there are vandalous lawyers who will help you reach into McDonald's deep pockets anyway.)

 

[RedHairedandFriendly]

The spouse and I were completely out of debt and then we suffered a serious set back because of a work-related accident he had in April and then my surgeries in May and June. He got paid 20% of what he normally made through workman's comp for the two months he could not return to his normal job. He lost all the bonus pay and overtime he normally would have made had he not been hurt.

Then in May, I had my surgeries. He had to take the Family Medical Leave that is offered, because we had no one that could take care of the kids 24/7 and me too. You don't get paid for that. So we had to sell our stock and our stock options, to make ends meet.

Our debt piled back up because of the decrease in his paycheck and then the fact he wasn't getting paid at all during the month of May and a couple weeks in June. Now we are waiting for the check that proclaimed him having lost 4% of his body's use because of the accident. This check will pay for those debts we incurred, payments on things we could afford, until we had an emergency.

He's great at financing and we'll get back on budget. He's now setting things up so that we should be 3 mths ahead of things, so if we do have an unexpected emergency we have a cushion to fall back on.

 

[Stella_Omega]

By coincidence, one of my investors called me yesterday, to see if he could get his money back RIGHT NOW.

He's a housing lender at a very large bank, and one of the top producers. His take-home, when I met him three years ago, was $6,000k per month, more or less-- often more. He told me that last month's income was more like nine hundred dollars.
And that he's closed ONE loan since this month started.

I'd love to buy him out. It's not going to happen any time soon that I can see.

 

[Huckleman2000]

Why?
Being financially mature should not be penalized. [snip]

I just fail to see where you're being 'penalized' in this. So some of your taxes are going to help someone else who needs a hand in a rough spot - that's how it works. God forbid, you might be in a rough spot one day.

You should be proud that you've kept your finances in good order, but don't begrudge those getting some help. You're closer to needing it than you'll ever imagine, if you're lucky. Your rewards are lower rates when you do decide to borrow, not worrying that credit problems will cost you a job or something, and a generally better night's sleep, at the very least.

After 9/11, I lost a job that paid close to $100K. I had a pretty good fixed mortgage rate, I had paid 25% down on my home in a good housing market, and a small home equity LOC that paid off my car and credit cards. Like many, I had savings for 3-4 months, and I got unemployment (about 15% of my former income). I thought I would be fine as soon as I got another job.

I was unemployed for over 14 months, and had medical bills as well as COBRA payments to make during that time. (Yes, your base expenses actually go UP when you get laid off.) In the next six years, I would have one or the other bank with my mortgages initiate foreclosure on me four times, adding thousands of dollars to my balance each time. Shit happens, but banks still make money no matter what.

 

[CorsetLvr]

I went to the bank with perfect credit to see about a loan. They wanted to give me a loan for 6%. WTF!?!?

Needless to say I passed on the loan and got my car financed for 1.9% for three years and paid it off well before the three years.

+++++++++++++++++++++++++++++

So, I see where all the folks who couldn't afford a house or more house than they could are now in a pickle. And the government is coming to their rescue.

What do I get for not getting myself into a hole for other taxpayers to bail me out?


Now I'm gonna havta pay for those folks to keep their houses.

First let me explain something to you. There is no such thing as a free lunch. Did you ever think that you could have probably negotiated a better deal on the car if you hadn't taken the 1.9% loan with the auto company? They're borrowing the money they are loaning you at 5% and turning it around to you at 1.9%. Where do you think that money comes from? The price you paid, of course. They're going to make their money back one way of the other. They are simply subsidizing your interest rate with the higher profit margin on the car.

Next, please explain to me how the tax payers are subsizing a bail out on mortgages. The last time I checked there was not such subsidy. Bush made a big splash with his FHA Secure program a few weeks ago and it turns out that almost no one will qualify for it, by the way. Its a program that no one can use. Let's see, people that are almost in foreclosure BUT also have good credit? How does that work George? Good credit with mortgage lates on your credit report is an impossibility. So where exactly is this bail out you refer to come from? Besides, FHA loans are self supporting for the most part. If they do go into foreclosure there is mortgage insurance to cover the loss. So again, how does the tax payer lose out? BTW, FHA doesn't actually make FHA loans, banks do. FHA just guarantees them the same way that Fannie Mae or Freddie Mac does. FHA requires 1.5% of the loan amount at closing and .5% per year in mortgage insurance payments. That's a lot of money collected to help pay for the FHA foreclosures.

 

[CorsetLvr]

In times of high inflation, (fixed rate) borrowers are winners and savers are losers. We are in danger of entering such a period right now, due to the Fed allowing too much easy money for too long - witness gold, oil and other commodity prices. We may be between an economic rock and hard place - accept the inflation and the destruction of middle class wealth that accompanies it, or endure a recession as the inflation is wrung out of the economy. 1981-82 was an extreme example, and thankfully the excess today is nowhere near what occurred in the late 1970s to bring that on, but it's still not a pretty picture.

I think another piece of the puzzle is the dollar's exchange rate. Oil is priced internationally in US $. That means when the value of the dollar goes down, the price of oil goes up. The same applies to other commodities like gold which hit $800/oz. last week. The $ is at almost record lows against several curriencies right now.

A weak dollar helps exporters but really hurts us on imports such as oil. One of my suppliers for a hobby of mine actually started quoting prices based on NZ dollars because of this issue. It looks like I'm not going to be buying anything from him this Xmas.

 

[sr71plt]

I have very recently gotten into the habit of reading the news after more than a year of blissful ignorance.

I have seen that foreclosures have jumped 30% in the last quarter, oil prices are up (surprise, surprise), and the wars are still raging.


What captured my attention...the foreclosures.

I remember back a few years when I had to get a new car cuz I totalled mine out (yep, it was my fault).

I went to the bank with perfect credit to see about a loan. They wanted to give me a loan for 6%. WTF!?!?

But what was so amusing is the loan officer looking at my credit report and looking at me..."You have no debt! How do you do that?"

I told the loan chick that I have this habit of not buying something unless I can afford it.


Needless to say I passed on the loan and got my car financed for 1.9% for three years and paid it off well before the three years.

But see about that same time I was thinking bout buying a house. But I just couldn't do it, I mean I could financially but I just couldn't. I couldn't see myself buying less of a house for more money.

I was approached by numerous folks trying to sell me on alternative financing....both loan foks and folks I worked with. I tried to tell them it won't work. I tried to tell them that a person shouldn't spend more than 30% of their income on housing. They tried to convince me that I was living in the past.


So, I see where all the folks who couldn't afford a house or more house than they could are now in a pickle. And the government is coming to their rescue.


Well, what about my reward?


What do I get for not getting myself into a hole for other taxpayers to bail me out?



Don't get me wrong...I understand about some folks losing jobs and potentially losing their homes....BUT GIVE ME A FUCKING BREAK!!! Most of these foreclosures are cuz folks overextended themselves.




If you can't afford it...don't buy it....


Now I'm gonna havta pay for those folks to keep their houses.





Where's MY assistance for being financially responsible????

Although I also am debtless (including two houses but no mortgages), I think it's a little extreme not to buy a house as soon as you can swing a reasonable mortgage. This is a solid asset that almost always will go up in value even taking the interest into account (and the interest is tax deductable)--and you've got to have a roof over your head anyway. The alternative is to wash rent money down the drain with nothing of value to show for it.

What's happening now is the result of people living well beyond their means and not gathering value.

It's a balancing act, not an either totally this or totally that thing.

(And compared to when I started buying cars, that 6% auto loan interest was a steal.)

 

[Vermilion]

How many licks? Guess you'd best ask Fieryjen, I think she has some personal experience judging by her AV...

x
V

ps- sorry for threadjack, couldn;t help meself

 

[CorsetLvr]

Bernanke Says US Economy Likely to Slow
Thursday November 8, 3:53 pm ET
By Martin Crutsinger, AP Economics Writer
Federal Reserve Chairman Bernanke Says Growth Will Slow Significantly in Coming Months

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke said Thursday that economic growth will slow noticeably in coming months while surging oil costs will raise inflation pressures. But he said the economy is nowhere close to the stagflation nightmare of the 1970s and he predicted an economic rebound by mid-2008.