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Originally Posted by synaesthetic /img/forum/go_quote.gif
The cause was a bunch of crackpots who had this delusional idea that owning a home was somehow different than buying any other expensive object. That everyone should own a home. That it should be a right.
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It should be within the means of anyone who can keep their life in order well enough to make regular payments.
I have a 100% financed home. Fixed rate 80/20. The 80% portion was financed at prime, the 20% is 1.3% higher.
My total monthly house payments add up to about 1/4 of my monthly take-home.
I have never been even 30 days late, not even when i was unemployed for 6 months straight.
But my 2nd mortgage falls into the "subprime" category, and my home purchase as a whole certainly falls into the new category of "homes for everybody".
Quote:
Originally Posted by synaesthetic /img/forum/go_quote.gif
The sad thing is, with the whole thing tumbling down around their ears, I bet they still feel righteous about it.
I live in an apartment, and I'm not embarrassed about it. Yeah it's a little run-down, it's not in the best neighborhood, it can be loud with the car stereos and whatnot.
But I don't have any problems paying rent--unless, of course, I am distracted by shiny audio gear.
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I greatly prefer paying into equity on my own home to paying into equity on my landlord's houseboat.
The issue at hand is predatory lending and blazing stupidity.
People were convinced that they needed to buy a home sooner rather than later, because the prices were going up. So that drove up the prices.
People were assured that they should take an adjustable rate mortgage - because clearly their credit would get better before the rate adjustment, and the value of their home would always go up, and they could always just refinance before the rate adjustment.
Some people were additionally assured that a mortgage where their payment is entirely interest and no equity at all were perfectly fine for the first five years or so.
Even crazier, tens of thousands of people were convinced to sign up for a mortgage where they not only just pay interest, but they can opt to not even pay all the interest, and just add the unpaid interest to the principal amount up to 125% of the original purchase price. Oh, and that interest rate is of course variable.
No worries - your credit rating will get better strictly because you own a home! Realestate prices only go up! You can just refinance in a few years!
Banks set up mortgages that were designed to fail. And i don't mean "designed to fail" in the sense that our public education system is a complete travesty, I mean that the intention behind the terms of these mortgages was for the borrower to default and the home to go into foreclosure without the 'owner' ever acquiring any significant equity.
The plan was just to collect interest payments for a few years and foreclose, because the value of the home obviously only went up, and they can just flip the house on a really awesome realestate market.
None of this, obviously, really panned out in the long run. Anyone who's vision wasn't completely blocked by dollar signs could have - and frequently did - point out that the inflation of home prices was clearly artificial, and that artificial systems always result in a painful period of adjustment, and that most of these really sketchy loans were going to result in an almost magical disappearance of wealth.
