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Thread: More homeowners using credit cards to pay mortgages

  1. #19

    Default Re: More homeowners using credit cards to pay mortgages

    I like Ugly's analogy. One that may be more agreeable to others would be you buying something (let's say a TV) at a high price. You could have gotten a better deal elsewhere, but you took this deal and are now paying more than you otherwise could have. The salesman is not responsible for your decision, since you could have gone anywhere to buy that TV. The responsibility for paying the high price falls on the purchaser.

    Similarly, the responsibility for taking an expensive mortgage falls on the purchaser. That person could have gone anywhere else to find a less expensive mortgage, or he could have gone without one at all (continue renting).

    If you'll read the article that Matclone began the thread with, you will see this quote:

    "We're not just talking to people with subprime loans but also people who bought homes almost out of their range struggling with a higher mortgage rate," said Cate Williams at Money Management International, a nonprofit group.

    One of the problems is that people bought things they couldn't afford, then couldn't make the payments. Some may say that they were greedy because they purchased expensive homes (more expensive than they could afford) and hoped to pay as little on the mortgage as possible, including the woman in the beginning of the story who bought a $214,000 home with no money down.

    Was it the fault of the lender that she decided to buy a $214,000 home when that was out of her price range? Was it the fault of the lender that she chose to buy with no money down?

    Absolutely not. She made these decisions and will now have to live with them.

  2. #20
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    Default Re: More homeowners using credit cards to pay mortgages

    Clone I only have a problem with a loan shark if he/she is making someone take money from them at outrageous interest and making them pay it back or else.

    That's essentially what happens.

    If the person who needs money makes the decision goes to the loan shark and agrees to the terms set before them to take his money then I have no problem with it.

    And if the man is desparate? Again, I remind you usury has been a sin for hundreds of years. (See, e.g., The Merchant of Venice). Do you disagree with my assessment of history? If not, why was this practice forbidden or frowned upon? What has changed in your view to make it okay today?

    Its called being a man and taking responsibility for the choices you make. As I have said before if someone is of sound mind and maturity then they are responsible for what they do.

    What you're doing is eliminating context from the picture. By your logic, if I'm desparately short of money, and can't feed my family, I can sell my daughter.

    Ask yourself this if a person get busted for soliciting prostitution because a hooker offered him a good deal on her goods, does a judge hold the person accountable for his actions. Or does he say since her advertising was so great you have no culpability in this matter. Its the same with drug dealers/users or whatever you want.

    Let's be clear, I didn't propose any solutions to the problem (such as eliminating culpability--for one party), I only pointed to the problem--the existence of which you essentially deny. Using your scenario and argument, I ask you then, would you say it's fair for drug dealers and prostitutes to set up shop on every corner in every low income neighborhood in America (where you currently find payday lenders)? Would it be fair, in your view, for drug dealers and prostitutes to advertise on TV and through the mail because the irresponsible who fall for their sales pitch deserve what they get? Would it be fair, in your view, for prostitutes to come to your door, or your neighbor's, offering free samples of her wares in the hope that you'll come again (no pun intended) and pay the regular rate?

  3. #21

    Default Re: More homeowners using credit cards to pay mortgages

    And if the man is desparate? Again, I remind you usury has been a sin for hundreds of years. (See, e.g., The Merchant of Venice). Do you disagree with my assessment of history? If not, why was this practice forbidden or frowned upon? What has changed in your view to make it okay today?

    Does that man's desperation allow him to do anything and not be responsible? At what point is he responsible for his own actions?

    The fact that usury has been a sin in times past has nothing to do with this situation. 'Eye-for-an-eye" was also the way of life in the past, but people may not enjoy that now. Even so, sins are still subjective -- some muslims think that killing those not of their own faith is OK, but you and I would call that a sin.

    If we are going to discuss and understand each other, we need to make them as objective as possible. People can disagree on the subjective, but the objective leaves no room for disagreement.

  4. #22
    Super Moderator UGLY's Avatar
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    Default Re: More homeowners using credit cards to pay mortgages

    Clone Whetther it is right or wrong is of no consequence to me. All that I am debating here is the liability that falls on the person making the decisions to act. Nobody an make you do anything no matter how appealing they make their offer. I agree with Skipster that desperation does not negate resonsibity for your actions. You know I am curretly in a interest only ARM that has matured and raised my mortgage payment 1,000 dollars a month. I knowingly took that loan option because we wanted our house and we knew the risk. We are currently re-financing to a standard fixed at a good rate but we know if we could not re-fi we might ave to get rid of the house in the next year when the payment goes up again.

  5. #23

    Default Re: More homeowners using credit cards to pay mortgages

    Ugly, you and your family got lucky. You claim you knew the risks. The reality is that you THOUGHT you knew the risks. At the time that you and many other families took interest only mortgages home values were rising. Realtors, lenders, friends, and family were telling people that home values would continue their rise and that they would make out well as many before them had. No one foresaw the meltdown in sub-primes and ARMs. Had the Fed and the government not poured hundreds of billions to stabilize the financial markets you would not be getting a fixed rate mortgage right now. Money would be so tight that millions would have lost their homes, home values would be in a nose dive, and the world?s finical market would be in a freefall. You would be stuck in a home worth much less then you paid for it and no way to pay the mortgage. With the bank taking your property along with millions of others you would owe the difference between what you borrowed and the depressed auction value of your lost home with the real possibility of being so far behind the 8-ball that it could take your many long years to get your family out of the massive debt load that you would be holding.

    You dodged a bullet but yet have no sympathy for those families that didn't. The massive government intervention and the feds lowering of interest rates will cost all of us in the long run. Should I take the position that because people like you speculated and speculated wrong that the Fed and government should have done nothing to protect any of you? Should those of us that have made sound financial decisions in our lives have demanded that no one intervene and let the chips fall where they may?

    I am glad that it worked out for you and I am not upset that things were done to stabilize events so that many were not ruined. If other measures are needed to help others out of this mess then so be it. Turning our collective backs on those that need a little help to make it through these trying times makes us all losers.

  6. #24
    Super Moderator UGLY's Avatar
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    Default Re: More homeowners using credit cards to pay mortgages

    Hardcore I never said that we shouldn't help people who make bad decisions or uniformed decisions. I am simply saying that people need to take responsibility for themselves and their actions. Obviously we need to help people but blaming companies for selling a product isn't helping anyone. I enables people to place the blame somewhere other than where it belongs and that is on themselves. We are creating a country that looks to point the finger instead of look in the mirror.

    There are certain situations that I would place the blame on the companies and I have stated them. If there is an unexpected situation like a loss of job or spuse then I totaly understand that.

    In our case we took that loan option knowing the risk but we also knew what we had to do over the last two years to get out of that loan. We knew that we would receive annual raises for the four years that would offset the rise in payments. We also paid off all debt that we owed and raised our credit scores by 100 each and we never missed a payment. Add that to the renovations that I did to the house (new kitchen, bathroom, floors, two decks it appraised well over what we owed. So we did know the risk and we put ourselves in a position to live up to the decision we made.

  7. #25

    Default Re: More homeowners using credit cards to pay mortgages

    What did the Fed and government do to stabilize the financial markets? The federal government can only put money into financial markets by purchasing things, somthing akin to bailouts. That has not happened. The FOMC can adjust interest rates and has done so, but mostly to deal with inflationary pressures, not something as small as the amounts of home foreclosures that we are currently seeing.

    As for saying that no one foresaw the drop in the housing market, that is simply not true. For the last two years, news stories have focused on the high home prices and been warning about potential price decreases. This was not something that came otu of the blue -- we all knew that prices had the chance of falling. Those who acted like prices weren't going to fall were making a risky bet.

    People like Ugly are a prime example of why those ARMs and interest-only products exist. Those types of financial products allowed him to buy a house. Perhaps he couldn't have gotten that house any other way, but this financial instrument allowed him to buy that house. Perhaps that loan he took out was the most cost-effective at the time. Now that it is not as cost-effective (or maybe personal situations changed) he can refinance his loan. He can keep his house and make lower payments. Those services may very well have allowed him to improve his standard of living.

    I note that hardcore asks: Should those of us that have made sound financial decisions in our lives have demanded that no one intervene and let the chips fall where they may?

    I resoundingly say YES!!! The reason for this is that consequences of our actions act as motivators. If we take away the negative consequences to actions, the improper behavior will persist. If we take away positive consequences, the good behavior will cease to exist. Similarly, if you never tell a child that his bad actions are bad, he will keep doing them.

  8. #26

    Default Re: More homeowners using credit cards to pay mortgages

    Quote Originally Posted by UGLY View Post
    Hardcore I never said that we shouldn't help people who make bad decisions or uniformed decisions. I am simply saying that people need to take responsibility for themselves and their actions. Obviously we need to help people but blaming companies for selling a product isn't helping anyone. I enables people to place the blame somewhere other than where it belongs and that is on themselves. We are creating a country that looks to point the finger instead of look in the mirror.

    There are certain situations that I would place the blame on the companies and I have stated them. If there is an unexpected situation like a loss of job or spuse then I totaly understand that.

    In our case we took that loan option knowing the risk but we also knew what we had to do over the last two years to get out of that loan. We knew that we would receive annual raises for the four years that would offset the rise in payments. We also paid off all debt that we owed and raised our credit scores by 100 each and we never missed a payment. Add that to the renovations that I did to the house (new kitchen, bathroom, floors, two decks it appraised well over what we owed. So we did know the risk and we put ourselves in a position to live up to the decision we made.
    Intervention stabilized the markets, freed up credit to a point and slowed the decline in housing prices. Without said intervention you might not have had an appraisal higher then what was owed and an affordable fixed rate note would have been a pipedream. Reasonable people making what they believe to be reasonable decisions based off of market conditions at the time can be and are burned on occasion by violitile markets that spring up later unexpecticly.

    Like I stated earlier I am glad that it has worked out for you.

  9. #27

    Default Re: More homeowners using credit cards to pay mortgages

    Quote Originally Posted by skipster View Post
    What did the Fed and government do to stabilize the financial markets? The federal government can only put money into financial markets by purchasing things, somthing akin to bailouts. That has not happened. The FOMC can adjust interest rates and has done so, but mostly to deal with inflationary pressures, not something as small as the amounts of home foreclosures that we are currently seeing.

    As for saying that no one foresaw the drop in the housing market, that is simply not true. For the last two years, news stories have focused on the high home prices and been warning about potential price decreases. This was not something that came otu of the blue -- we all knew that prices had the chance of falling. Those who acted like prices weren't going to fall were making a risky bet.

    People like Ugly are a prime example of why those ARMs and interest-only products exist. Those types of financial products allowed him to buy a house. Perhaps he couldn't have gotten that house any other way, but this financial instrument allowed him to buy that house. Perhaps that loan he took out was the most cost-effective at the time. Now that it is not as cost-effective (or maybe personal situations changed) he can refinance his loan. He can keep his house and make lower payments. Those services may very well have allowed him to improve his standard of living.

    I note that hardcore asks: Should those of us that have made sound financial decisions in our lives have demanded that no one intervene and let the chips fall where they may?

    I resoundingly say YES!!! The reason for this is that consequences of our actions act as motivators. If we take away the negative consequences to actions, the improper behavior will persist. If we take away positive consequences, the good behavior will cease to exist. Similarly, if you never tell a child that his bad actions are bad, he will keep doing them.
    Between Thursday August 9th and Tuesday August 14th of this year the Fed injected over $100 billion into the markets. During the same period the European Central Bank put over $325 billion into European markets. That was over a four day period. They have added much more since then just to keep the markets semi-stabilized. Interest rates have been lowered to ease credit and to put inexpensive mortgage money in the hands of the homeowners holding over $500 billion in ARM's that are up for readjustments over the next 12 months. Inflationary pressures did not warrant these rate cuts. Bernanke knew that the rate cuts in conjunction with all the newly injected funds would cause continued downward pressure on the value of the dollar against other world currencies but felt it was the lesser of two evils. The rising price of crude in dollars is in large part due to speculators believing that the dollar will continue its slide.

    The real estate bubble became a real news item in '06. Many of the people having trouble today were already locked into ARMs and sub-primes by then. Realtors and mortgage brokers continued to push too much house and debt long after they saw the storm clouds looming by continuing to paint overly optimistic pictures of the continued strength of the real estate market.

    If a child chooses to perform a bad action we tell them that they made a bad decision. We do not turn our backs on them and cut them off from any additional guidance or support. To do so is a sure formula for continued failure.

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