Careful Consumers

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Careful Consumers

Postby bluewing77 » Fri Oct 03, 2008 9:01 am

we bought our home in 2003, (3BR, 2B, ~1350 heated sq.ft. on 3 acres) with 6% fixed rate 30 yr mortgage with a monthly payment that we could afford AT THAT TIME, not 5 years down the road. we were extremely careful with all the fine print, and got lots of good advice buying our first home since i was only 25, wife was 23 yrs old and it was scary as hell.

i have ONE credit card that i pay off within a month of making a large purchase.
i paid off my 2004 Tacoma 34 months after purchasing it in November 2003. i car pool to work at least half the time.
i do not live outside my means.

so: would careful consumer habits have helped the current economic situation, how much blame falls on the government?
Last edited by bluewing77 on Fri Oct 03, 2008 3:33 pm, edited 1 time in total.
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Postby SpinnerMan » Fri Oct 03, 2008 10:07 am

The problem was the feel-good politicians (Dems & Reps) wanted to get people into houses that had a proven track record of bad consumer habits. They weren't going to tell the would-be homeowners to shape up then and they won't now.

It's always easier to use the power of government to influence businesses to be irresponsible then it is to influence a bunch of irresponsible voters to be responsible. That requires sacrifice and hardwork.

There was a reason the businesses did not want to loan this money in the first place. It couldn't be that they weren't confidence it would ever come back? Once they figured out how to loan money to irresponsible people and then get other irresponsible people to buy the loans, we were off to the races. So what if we were going full speed ahead down a dead end road?


For every career politician, there is one and only one criteria of success for a piece of legislation. Will it get me reelected? Look at this 400+ page disaster before the house today. Term limits is the only way to get rid of the career politicians. We just have to figure out how to make it happen in spite of the career politicians.
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Postby Rat Creek » Tue Oct 07, 2008 1:07 pm

There are simply two groups to blame.

First and foremost, the people who took out mortgages that they could only pay by the skin of their teeth and until the rates reset higher. There used to be this thing called personal responsibility, but that has been removed by the second group.

The politicians who use their power to bully banks into making these bad loans, so that people will think they care and pay them back with reelection.

The beauty of the free market is that if it makes good business sense to loan someone money, a capitalist will do so without regard to skin color, religion or anything else. Good business is good business.

When politicians start telling business what to do, nothing good will happen from that point forward.

I also live well within my means, as I always have. When I moved back to the KC area about ten years ago, my real estate agent asked me if I was pre-qualified. I said that “No, I was not prequalified.” She acted upset and didn’t think we should look at homes until “we” knew what I could afford.

My response was that I planned to put over $100K down on a $225K house, and that I made $X amount of income, so please show me some $225K houses.

Her reaction was astonishment and confusion, and explained how she could qualify me for houses at three times that amount. :huh:

I said thanks, but no thanks, and away we went to buy a $225K house.
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Postby dudejcb » Tue Oct 07, 2008 3:56 pm

where do you come up with blaming the politicians for bullying banks? It was the other way around.

The banks whined and cajoled until banking regs were changed "so the free market could work." Credit card and other rules were watered way down.

The sub-prime mess was caused by a mixture of greed, lack of regulation, and inordinatley low interest rates (to make business interests happy).

So those writing up the mortgages made money for doing the paperwork (so they got paid), but they were planning on selling the paper anyway so there was no worry that they might get stuck for non credit worthy loans... and then they sold 'em and the next remixed and re-packaged and on it went.

blame the gov if you want... and they do get some blame for loosening the rules too much and giving Greenspan too much leeway... but for the largest part this was greed driven form the grass roots mortgage writers all the way up to the big banks.
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Postby rmh » Tue Oct 07, 2008 4:10 pm

Dude, you and I are about the same age (I think). I'm thinking back to about 1992 or so when we heard the same things about ARMs and sub-prime. The meltdown wasn't as large but it took down a bunch of S&Ls. Just wondering if you remembered that. What's being lost in all this is that a lot of these mortgages were bundled into investment packages and then sold as bond like instruments-they ceased being traditional mortgages. That was done because everyone "knew" real estate would never go down so when it came time to re-finance the previously marginal buyer would be ok. I mentioned the early 90's because property values here where I am, which was one of the centers of funny mortgages then, lost about 30% or so in value and didn't come back up until around 2000. Then things got really crazy. According to the state of MD Department of Assessments my ninety year old, mostly original house is now worth eight times what spouse and I paid in 1987. That's nuts.
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Postby dudejcb » Tue Oct 07, 2008 4:19 pm

I remember when they were doing ARMs inthe 80's. I agree with you; then and now there was a lot of speculation.

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Postby rmh » Tue Oct 07, 2008 5:02 pm

I've got you by a year. Wife made me get rid of the mirrors.
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Postby Rat Creek » Wed Oct 08, 2008 6:58 pm

Honestly Dude, you know exactly what I am talking about. You are all over this site and I assume others, so this whole mortgage thing can’t be new to you. Unless of course, you really are getting old and having a senior moment.

The majority of lending institutions don’t hold their own paper, but sell them to others. Fannie and Freddy had strict loan guidelines that had to be met for them to accept the loans. Mortgage companies knew what they were and would not make a loan if their underwriters didn’t tell them they were good to go, because they didn’t want to hold the paper.

Starting with Clinton and continuing with Bush, our government officials passed laws that “loosened up” requirements so that everyone could have the pleasure of owning a house. This included low credit scores, little or no down payment and no income verification. In fact, if a person had a decent income, they could qualify for a loan in excess of the value of the house, up to 120%!!!. This is all bad business.

I have a friend who was a mortgage banker (glorified loan officer) who always did pretty well. Beginning in the mid 90’s and up until about a year ago, he made a lot of money and I can’t say I fault him for it. I would guess his income doubled or tripled for the past ten years. When the feds changed the game, he couldn’t keep people away with a stick.

Mortgage companies popped up all over the place to meet the demand.

Then the guys running these pseudo companies (Freddy and Fanny) added to the disaster by cooking the books, and here we are in a mess.

As for bullying the banks, this is where some of the selling of paper comes from. One of our local banks where my friend worked, a bank that always held and serviced their own paper, received “encouragement” from political figures to make these high risk loans. When politicians encourage you, you have to know that if you don’t go along, you will probably have a long line of bank examiners making your life miserable everyday, even if you are perfectly clean. Their solution was to play along, make these terrible loans, but not to hold them. They packaged them based upon the new federal guidelines and dump them on Fannie Mae. This is what everyone decided to do.

Yep. I am sure they made lots of money on the practice. It isn’t like they had a real choice. Make money on stupid loans at no risk or feel the heat of the activist politicians. The End.
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Postby wackemstackem » Thu Oct 09, 2008 9:49 am

We can blame the government and we can also blame the banks,personally I blame all the stupid people that applied for and got an a.r.m.
Prime example.True story 4yrs ago
Black woman single mom(surprise) mid 40s lives in an apartment.
Good job as a nurse,55 to 60k a yr
400.000$$ plus home, swimming pool,Driveway and patio is all pavers new kitchen..ect
Gets a no money down arm and includes closing costs taxes ect all wraped up in a pretty 450.000$ mortage @ 3% for 3 yrs.As you know this of course adjusted to the prime rate.
So who really is responsible here.....??
ME and YOU
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Postby GroundSwatter » Thu Oct 09, 2008 10:05 am

wackemstackem wrote:So who really is responsible here.....??
ME and YOU


It does seem like it is each individuals responsibility to live within their own means. If you decide to live outside of you budget, then point the finger at the person in the mirror.
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