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http://money.cnn.com/2007/03/27/real_es ... 2007032716

We're drawn in with the header: "1 million homeowners out in the cold"

and

"About 2.4 million holders of subprime mortgage loans made between 1998 and 2006 will lose their properties to foreclosure"

Chilling.

Then it gets interesting.

"bulk of these loans actually went to refinance...involved cash back deals ...borrowers owed more on their homes...

...new loans...reset at the higher...rates, many borrowers could no longer make their payments."

Translation: A huge number of people cashed in their equity, raided their house like it was a piggy-bank, in the wake of the huge real estate boom we've been having. The market has turned, their risky loans are doing exactly what they are supposed to do (ARMs adjust, interest-only starts tacking on principle payments, negative amortized loans readjust to pick up the slack of the earlier underpayments). Worse, these borrowers had poor credit to begin with (most likely from other debt and late payments) and should never have been given loans in the first place and...well, I just have a real hard time feeling sorry for them.

Am I a jerk?

Raiding the piggy bank is an excellent analogy. During the real estate boom, people all around me were telling me how great it was to refinance their homes and get a huge chunk of cash to spend on stupid stuff like cars and vacations. These were seemingly rational people who are now waking up and smelling the coffee.

Apparently, the concept that there is no such thing as "free money" is lost on a large percentage of the population. P.T. Barnum was right!

No, you shouldn't feel sorry for them, I definitely don't. Just as a note, I'm an accountant, and some of my views on finance will be extreme compared to the regular joe.

I have no sympathy for these people. It is the responsibility of the consumer to determine if they can afford a mortgage. It is also their responsibility to determine if they can afford the payments when the introductory interest rate expires.

It is their responsibility to use funds freed up in useful activities, and the two that I can think of are 1) upgrade education and 2) start a business. Those two have the potential to increase net income. There might be others, but increasing overall household income should be the litmus test. Some people may add a third but no, dipping into the piggy-bank to buy stocks or bonds is a terrible idea, too risky. Buying anything else with the money is is even worse.

Congress can legislate against predatory loan practices, but it would be detrimental to credit markets as a whole. I heard rumours of this, but I hope it doesn't pass

A proposal was launched in consumer advocacy groups, is a place for the closure of a temporary ban. Testimony before the House Financial Services Committee hearing yesterday, the Federal Deposit Insurance Corporation

Holy zombie thread!

Grown up people need to take responsibilities for their own actions.

CNF2002 wrote:
Translation: A huge number of people cashed in their equity, raided their house like it was a piggy-bank, in the wake of the huge real estate boom we've been having. The market has turned, their risky loans are doing exactly what they are supposed to do (ARMs adjust, interest-only starts tacking on principle payments, negative amortized loans readjust to pick up the slack of the earlier underpayments). Worse, these borrowers had poor credit to begin with (most likely from other debt and late payments) and should never have been given loans in the first place and...well, I just have a real hard time feeling sorry for them.

Am I a jerk?

No I wouldn't be so unkind to call you a jerk, CNF, not really ( ) but on the evidence presented I would say you had bought into the prevailing social insanity and lost touch with your native powers of reasoning. I don't see awful, irresponsible people, here; I see people encouraged and sometimes forced unnecessarily to compete with each other by crazy forms of social organisation; I see bizarre and irrational institutions.

Case in point:

Darth Snootchie wrote: Congress can legislate against predatory loan practices, but it would be detrimental to credit markets as a whole. I heard rumours of this, but I hope it doesn't pass

Weirder and weirder! Only the terminally indoctrinated could take something like this seriously.

Does your lack of sympathy extend to the children of the 1 million families thrown out "into the cold", to their families and friends and to everyone affected by the social dislocation that will result from this. Is one million displaced people a desirable social end? Does sneering at the families who may have made unwise gambles on the money markets when the opportunities presented themselves, solve the problem? I know it's hard (we are not taught to do it and it is rather more difficult than a withdrawal of sympathy) but try thinking systemically instead. Scapegoating individuals is just a tabloid indugence.

I look at a house and see a product of human effort and ingenuity, a simple item which (to the uncluttered mind) appears to have been carefully designed to satisfy a human need - an obvious and rational social undertaking, you might think. Shame then, that there is no room for anything quite so obvious or rational in our world. In the crazy universe of the commodity, real tangible houses designed for living in dissolve themselves into economic categories which then spin off into weird market orbits that have very little to do with human need at all, and everything to do with exploitation and sectional interest.

I suppose, though, that the system makes things sufficiently complex and woolly to justify the livings earned by those arch mystics: economists and accountants . Keeps some people happy!

There is nothing in this whole damn universe more psychotic or sociopathic than capitalism in crisis. If it weren't so destructive, it would be hysterical.

An awful lot of people will suffer in this recession. Most of us will have little concept of what it is all about beyond the government propaganda that gets pumped into our homes via the media. When it is not lying, the media unquestioningly accepts what "is". Unfortunately, what "is" is not necessarily rational or desirable. Cover your ears mate, and start thinking for yourself.

I always wondered why Governments bailed out the institutions that put everyone into such dire straits, instead of bailing out the consumer that is ultimately the one that pays for everything in the end????

If the total bailouts reached the early estimates of $27+ trillion, instead, for a mere $10.6 trillion, mortgage debt in the whole USA could have been wiped out, every bank would have recieved it's money and the whole parade could start all over again...

dr_bar wrote:I always wondered why Governments bailed out the institutions that put everyone into such dire straits, instead of bailing out the consumer that is ultimately the one that pays for everything in the end????

The "consumers" that needs the bailing out are not the ones that pay, it's the consumers that don't need bailing out are the ones that pay in the end.

Note the edit...