Today we have a loan owner's sobering tale of recovering from kool aid intoxication. The hangover is not pleasant.
Irvine Home Address … 46 OAKDALE Irvine, CA 92604
Resale Home Price …… $675,000
Somewhere, somehow, somebody must have kicked you around some
Tell me why you want to lay there, revel in your abandon
Honey, it don't make no difference to me baby
Everybody's had to fight to be free, you see
You don't have to live like a refugee
(Don't have to live like a refugee)
No baby you don't have to live like a refugee
(Dont have to live like a refugee)
Tom Petty and the Heartbreakers — Refugee
Foreclosure sob stories always seem to lack a few pertinent details explaining exactly how the unfortunate circumstances came to pass. Today's featured article is written by a renting former owner who works at the newspaper. She tries to portray herself as a victim, but in reality, she is only a victim of her own poor decisions.
No refuge from the mortgage crisis
A homeowner tries to work with bankers to hold on to her modest but beloved house, but her pleas mean little to the number crunchers.
By Kathy Gosnell Seiler — July 24, 2011
From the front door of the house to the back is a straight shot unbroken by walls, handy for pacing, 24 steps each way.
It is a small house on a small lot in Highland Park, a Los Angeles neighborhood that was on its way up until the recession. The house has not always been well tended: It's old and a bit shabby, but it stands pretty much foursquare.
I bought it in 2005 for $503,000, most of it borrowed,
When she pleaded with the number crunchers back in 2005, she was thrilled when they approved her loan. Now that they want her to make the payments and won't alter the terms to her favor, she considers them heartless. If she borrowed most of the money, the only thing she really invested in the house was her own emotions.
and lived there six years, longer than I'd lived anywhere since childhood. The house was meant to be my refuge, a place where I could plant perennials and know I'd see them flower year after year, an investment for my daughter and me after many years of renting.
The sellers had trashed the house before leaving for Colorado, and perhaps I should have walked away when I discovered the devastation. Instead, friends helped me clear away rotten food and broken furniture and repair gouged walls. I rescued a dog. I made improvements: bolting and bracing the foundation, removing one tree and planting others, installing a security system and attic insulation.
To help pay for the work, I refinanced in 2007 at $511,000 with a five-year fixed-interest first lien and a variable-rate equity loan.
She tried to emphasize her “investment” of sweat equity, but she went to the housing ATM to do the real heavy lifting.
With the real estate market continuing to rise, a Wells Fargo Bank loan officer assured me, it would be easy to refinance to a fixed-rate loan before my rate went up in 2012.
She's claiming her Wells Fargo representative assured her she could serial refinance? Doesn't anyone recognize serial refinancing as a Ponzi scheme? Did she not realize the assurances she was receiving mean nothing and that she was taking on a huge risk? She was buying a house she couldn't afford, but she thought everything would be okay. Foolish.
With little money for extras after fixing the foundation, I scaled back to projects I could do myself: painting and planting. I tore out the frontyard grass and filled the garden with roses, irises, bougainvillea, jasmine, trumpet vines, gardenias, callas and cannas, hibiscus. Springs were glorious.
If she were to keep making her payments, she could continue to enjoy her glorious springs. Since she was relying on Ponzi borrowing, she is going to lose her home. She and everyone else who relied on serial refinancing should lose their homes so they and others can learn the foolishness of that form of financial planning.
By mid-2008, some neighbors on my short hillside street had started defaulting on their loans. One eventually negotiated a short sale; two others went into foreclosure. Worried, I called Wells Fargo in March 2009 to see about refinancing in advance of my adjustable-rate mortgage payments rising significantly. The house was already underwater, the banker told me. My equity was gone, so there was no way I could refinance. He suggested that I wait it out and hope things improved before the rate rise in 2012.
How many other debt zombies are waiting and hoping for future events not to be?
By October 2009, it was clear that the real estate market was only getting worse. I sent Wells Fargo my first application for a mortgage modification, beginning a months-long slog through dead-end phone calls, faxes, lost documents and conflicting information from the bank.
Over a period of five months, Wells Fargo denied three mortgage modification applications.
Loan modifications are not an entitlement, banks don’t want to make them one. She was likely denied because she could afford her payments and didn't deserve the break.
The last denial was based on a bank error suggesting that I had a spending deficit of more than $1,600 a month, despite my having exemplary credit. When I wrote a detailed explanation, the banker with whom I next spoke said, unapologetically, “We read numbers, not words.”
Why should a bank care about her circumstances? The numbers say she could afford the payment, so she is obligated to make them if she wants to keep her home. She isn't the only person in America with a sob story, and quite honestly, hers isn't that compelling.
In November 2009, the Los Angeles County assessor's office informed me that the assessed valuation of my home had dropped $129,060 since the 2006-07 tax year. As I grew more anxious about money, my health declined. Problems that had been in abeyance for more than 20 years returned, and my medical bills began to climb as a result.
She should let go of her attachments which are causing her grief. Further she should probably strategically default on her loan because either the payments will wipe her out, or the stress will. If we can expect reduced housing costs due to stress, I want my landlord to give me a break as well.
In January 2010, one of the telephone bankers at Wells Fargo suggested a short sale. It felt like a gut blow. Sell my home? My refuge? My garden full of flowers and fruit trees?
Her reaction only underscores her need to let go of her attachments.
In February, Zillow.com said the house on which I owed $511,000 was worth $381,500. A comparable house a block away sold for $260,000. I clearly needed a bailout.
WTF? She clearly needed to bail on her mortgage and get out of her house. Perhaps she felt she needed a bailout, but who is supposed to pay for that? The bank? Me as a taxpayer? Screw her.
I made my last desperate bid for help from the bank, offering to pay the full mortgage at a lower interest rate if only I could keep my home. I also wrote to regulatory agencies and to my elected federal, state and local politicians to ask for ideas. Some responded; most didn't; none could offer an idea I hadn't tried.
I have an idea: strategically default on the mortgage and walk away from the house. Once it's over, she will be able to grieve the loss and get on with her life.
In April, I consulted a credit counselor; he said that I was doing all the right things and that my credit score was “fabulous.” His only suggestion was the one I'd already rejected: Consider a short sale.
In May, a senior vice president at Wells Fargo Home Mortgage suggested a short sale.
On June 1, 2010, I acknowledged defeat. I declined to make my mortgage payment and two weeks later hired a short-sale expert and listed the house.
She declined to make her mortgage payment? She means to say that she strategically defaulted. Have you ever noticed that people come up with unusual evasions when confronted with their own guilt? Bill Clinton said, “I did not have sexual relations with that woman.” Sexual relations? This woman's evasion is just as odd. Why doesn't she just admit she told the bank to take their loan and shove it?
That decision brought no relief. Instead, I endured months of daily dunning phone calls from Wells Fargo, which then rejected an offer from a buyer. The bank set a date for a foreclosure sale, then postponed it. Finally, in April, it agreed to an offer of $325,000 for the house. The sale closed less than 48 hours before the bank's scheduled foreclosure sale.
By that time I'd moved. My rental house is three times as far from work as the old one and about half its size.
If her rental is further from work and smaller than her old house, she must have drastically reduced her housing cost because the house she owned would have cost twice as much as a comparable rental. She is attempting to make is sound like she took a big step down in lifestyle, but I call bullshit on that notion.
The new neighborhood is quieter and less friendly, but the air is cleaner. Gardening, once a joy, is a chore I'd rather skip.
I noticed the same thing when I sold my house. The housing bubble and crash is causing great psychological harm. I get no joy out of maintaining plants in a rental. It's hard to feel rooted in a rental, and tending a garden is all about being rooted to your surroundings.
Once in a while I return to Highland Park, but I cannot drive past my house. I fear the changes I might see.
A couple of months before moving, I applied for a small credit union loan, just to see if I could get one. I could not. My credit, once exemplary, is shot. My lack of financial security is disconcerting, and I expect it will dog me for years.
No. It won't. Strategic default consequences minor and likely to decrease. She is succumbing to the lies perpetrated by the lending industry to deter strategic default. It just isn't true.
I can't find a life's lesson here;
Open your eyes: you were irresponsible with the debt you took on. Perhaps this will help:
Further, it is not wise to form such strong attachments to anything in life.
no insight into why this has happened to so many people.
This happened because many people stopped making their loan payments. Duh. Many were just as foolish as this author.
The banks could help us, but they don't.
I will recover, but it's unlikely I will ever own another house.
Kathy Gosnell Seiler is a copy editor at The Times.
If she saves some money, Fannie Mae will let her buy another one in two years.
Are there really no lessons to be learned here? Is this woman so vacuous that she does not see the mistakes she made? If she isn't bright enough to figure it out, I don't hold out much hope for the rest of the clueless masses.
My HELOC is bigger than yours 
The owners of today's featured property paid $675,000 on 7/29/2003. They used a $463,920 first mortgage, a $57,990 second mortgage, a $57,990 HELOC, and a $0 down payment. It is possible they put 10% down and didn't use the HELOC, and it is possible they didn't use the $196,700 HELOC they got on 12/2/2004 and the $322,000 HELOC they got on 4/12/2007, but they obviously used some if it, or this wouldn't be a short sale.
If they maxed out their HELOCs, they obtained $264,010 in mortgage equity withdrawal. How much HELOC booty do you think they escaped with?
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599
sales@idealhomebrokers.com
Irvine House Address … 46 OAKDALE Irvine, CA 92604
Resale House Price …… $675,000
Beds: 4
Baths: 2
Sq. Ft.: 2260
$299/SF
Property Type: Residential, Single Family
Style: Two Level, Contemporary
Year Built: 1977
Community: Woodbridge
County: Orange
MLS#: S665753
Source: SoCalMLS
Status: Active
On Redfin: 19 days
—————————————————————————–
This is a Great house! It is a fixer but it has good floor plan and is in a great location! This is one to see! Worth the short sale wait.
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis 
If this house is a fixer, that rules out home improvement as the recipient of their HELOC spending.
Resale Home Price …… $675,000
House Purchase Price … $579,000
House Purchase Date …. 7/23/2003
Net Gain (Loss) ………. $55,500
Percent Change ………. 9.6%
Annual Appreciation … 1.9%
Cost of Home Ownership
————————————————-
$675,000 ………. Asking Price
$135,000 ………. 20% Down Conventional
4.53% …………… Mortgage Interest Rate
$540,000 ………. 30-Year Mortgage
$137,549 ………. Income Requirement
$2,746 ………. Monthly Mortgage Payment
$585 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$141 ………. Homeowners Insurance (@ 0.25%)
$0 ………. Private Mortgage Insurance
$82 ………. Homeowners Association Fees
============================================
$3,553 ………. Monthly Cash Outlays
-$656 ………. Tax Savings (% of Interest and Property Tax)
-$707 ………. Equity Hidden in Payment (Amortization)
$227 ………. Lost Income to Down Payment (net of taxes)
$104 ………. Maintenance and Replacement Reserves
============================================
$2,522 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,750 ………. Furnishing and Move In @1%
$6,750 ………. Closing Costs @1%
$5,400 ………… Interest Points @1% of Loan
$135,000 ………. Down Payment
============================================
$153,900 ………. Total Cash Costs
$38,600 ………… Emergency Cash Reserves
============================================
$192,500 ………. Total Savings Needed
——————————————————————————————————————————————————-
oh what a tangled web
i think the problem is she paid 500 g’s (2 years BEFORE the peak) for a home 5 miles from dodger stadium where they beat u 2 death if u root for the visiting team
I read this story over the weekend and had the same reaction as the comments here. Blah, blah, blah. Get over the entitlement.
Why does the Times insist on publishing these sob stories of people who are clearly screwing up? I’m not saying they are bad people for making bad choices, but I’m not going to cry for them.
Surely there are more compelling stories out there, given that a whole generation of potential homeowners has been destroyed by this bubble.
Besides the bad taste of the Christ cartoon, this story does have a serious point. People are trying to do what they think is the right thing. But it isn’t the right thing if you lose your health. And by the way, the churn of easy money drove the prices up. That means it was a ponzi, and you have a moral right to walk away from a ponzi.
IrvineRenter, you sure know how to tug on a man’s heart-strings! This is quite the heart-wrenching tale of motherhood, banker-deception, and medical bills to produce the perfect trifecta of housedebtor hell!
“and lived there six years, longer than I’d lived anywhere since childhood. The house was meant to be my refuge, a place where I could plant perennials and know I’d see them flower year after year, an investment for my daughter and me after many years of renting.”
I can’t stop crying! I can’t go on reading another word!
“I bought it in 2005 for $503,000, most of it borrowed,”
Half a million dollars! HALF A MILLION DOLLARS! FOR AN OLD-ASS HOUSE! WTF?!
“a Wells Fargo Bank loan officer assured me, it would be easy to refinance to a fixed-rate loan ”
Blah blah blah and the “r”ealtor also assured her that prices always go up. Everyone else’s fault!
“With little money for extras after fixing the foundation, I scaled back to projects I could do myself”
Seriously, whose fault is this that there was little money “for extras”? You spent HALF A MILLION DOLLARS for an old-ass “shabby” house which made you house-poor and live paycheck to paycheck. Oh how glorious indeed!
“He suggested that I wait it out and hope things improved before the rate rise in 2012″
Yes, the old hope-strategy. In other words, the banker told you to say your prayers and rather than ditch the house when you had your chance – you stuck your head in the sand.
The last denial was based on a bank error
Blah Blah Blah, everyone else’s fault but mine. I wrote a detailed explanation full of hot and steamy bullsh_t and the evil satanic banker threw it out without even reading it.
“As I grew more anxious about money, my health declined. Problems that had been in abeyance for more than 20 years returned, and my medical bills began to climb as a result.”
Out come the medical bills! Right on schedule! I was unhealthy for 20 years and then buying the house made me healthy! Then I became unhealthy when I lost my house! These houses must have some amazing healing power! HEAL!!!!!
I clearly needed a bailout
Oh, well clearly! I mean the taxpayer saved the bankers! Where is your piece of that entitlement? You were just being a good little monkey living beyond your means like the bankers wanted you to! You did everything right!
I declined to make my mortgage payment
Ohhh, breaking out the Corporate America-speak! Yeah baby, Yeah! I love it when you talk corporate to me. It’s a business decision now! You are a businesswoman! Not some deadbeat scorned housedebtor trying to strongarm a principal reduction from the bank!
My rental house is three times as far from work as the old one and about half its size.
And most of all – it is within your means! GASP!
Gardening, once a joy, is a chore I’d rather skip. I can’t find a life’s lesson here.
Go step on a rake, lady. Watch out for those medical bills though!
That’s hilarious. Thanks.
Part of the problem is that in the era of $1.4 Trillion deficits, $14.3 Trillion national debts, people have lost perspective on how much money a half million dollars is. The biggest mortgage I have ever had was a tad > $100K (obvioulsy not in Socal)and that seemed like an enormous amount of money, and in fact it still does.
love it!!
Everything I was thinking as I read this was summed up well by AZDave… lol
David, you owe me for the cleaning bill on the shirt I just F’ed up when my lunch shot out of my nose after reading your post. LOL
Well played sir.
This lady is a doofus, to be sure, but I’m always amazed how this level of snot is reserved primarily for the onesy twosy takers like her while nary a trace of backlash has surfaced from the public toward the banks themselves. For example, how many people actually stopped keeping their money in bank accounts?
Then there’s this:
You are a businesswoman! Not some deadbeat scorned housedebtor trying to strongarm a principal reduction from the bank!
Trying to strongarm the bank??? AYFK?!!! The banks are the great Satan and the more culpable deadbeat in all of this housing bubble BS. I don’t blame anyone for trying to enjoy a share of the massive (and ongoing — Google sourcewatch bailout chart) bailout subsidy they’ve provided for the banks.
What a lame misuse of perfectly good hatred.
I am not impressed with people who laugh at these situations. The truth of the matter is the underwriting is a bank function, but with easy money and securitization, underwriting was abandoned by the banks. No one had any business getting too much house if the fraudulent banksters had been doing their jobs. It was fraud, a ponzi, and after mid 2003 it wasn’t ACORN, it was the investment banksters and the hedge funds that did this. And it had been planned at Basel 2 in 1998 to hide bad loans off balance. If the banks wanted to hide bad loans, it was pretty evident that this was a fraud. Good loans don’t have to be hidden.
It’s too easy to pile on here… she’s looking for sympathy and this is the first step in her catharsis… in time she won’t see herself as a victim and will realize the hard truth of the dumb decision she made… not sure if she is getting child support from her baby daddy, but her sense of entitlement is certaintly skewed and needs a major tweak… non-wealthy single moms should not be buying half million dollar homes…
No sense of entitlement here! It’s for the children can’t you see? She’s now working overtime to pay those medical bills now that the house debtor elixir is gone!
I feel bad for the author, but here’s where I call BS. The home she bought (easily found with some internet RE skills, and it being in LA), sold for $249k in 2002. So she paid more than double 2.5 years later. That is 32% annual appreciation. If you believe that rate of appreciation makes sense, then the purchase made sense. I didn’t, and that is a big reason my wife and I did not move back to FL in 2007. The other thing is that a $500k home is a massive luxury. Sure, it’s LA and all that, but go to most of America and see what $500k buys you. It’s 2X the median national price.
When we were temporarily in a rental, it was in a worse location, 1/2 the size, no yard, and significantly lower quality…at the same price as the home we previously owned. We were paying for a short-term lease and unlimited sized pets (think about the dogs AZDP).
The idea of telling borrowers about serial refinancing should be securities fraud. What if she wanted to borrow $500k to invest in stocks. Could a broker tell her she could easily roll that loan over? Their securities dealer license would get pulled instantly. Housing is a huge financial industry and should be regulated accordingly. I would also like to see mandatory counseling, paid for by the gov (or FDIC through taxing banks), for all borrowers. An independent 3rd party to say, ‘have you thought about this?’. 2-3 hours at $50/hr is 0.03% of the purchase price. People would not notice that tacked onto their points at origination.
I am sure that the “r”ealtor assured her that 503,000 was quite the fair price based upon in-depth scientific computer models that analyzed billions of market dimenions and projected a doubling time of 5 years.
So, how much do you want to bet that she put up the 3K and the taxpayers get to go ahead and make good on the rest?
The realtor and mortgage broker were both interested parties to the transaction – they didn’t make money unless the deal went through. The advisor would get paid no matter what. Would an independent person saying, ‘you can’t afford this 50% DTI’, ‘don’t believe the broker when they say refinancing will be easy’, ‘did you know that there was a prepayment penalty’, or ‘the going rate for loans like this is really 6% not 10%’ would have made a difference to anyone? Think of the cost of the housing bubble. $250/transaction cost of consultation, 25M transactions per year, 4 years of bubble is a total cost of $24B. The losses of the bubble swamp that by probably 100X.
With the upcoming legislation that will make House-foreclosure a Civil Rights violation in California, we should probably start rounding up some lawyers to file some lawsuits on behalf of people such as today’s subject.
Civil Rights violations make good money. Wells Fargo had better see the writing on the wall and give the house back.
What’s sad is all she lost is her credit…and she had to move…but she gets her credit back after being a good girl for two years
She didn’t lose any real money, to do that you have to actually have some real money, like I did, and try making it grow by starting a new business in CA, or investing in the market, like I did. I lost real money. No one’s bailing me out. No one writes stories about people like me. At least I put some people to work and tried to grow the economy.
By the way, love the profiled garage I mean house. Working hard for that 6%!
http://www.crackthecode.us/images/Professional_Photography.jpg
You’ll find that many short sales don’t get the “professional photography” treatment.
When this originally listed, there wasn’t even the one picture.
Well, I’m glad that they eventually got around to posting a photograph of this place. Really completes the listing!
I dont understand the hiring of the short sale expert. Wouldnt you want to hire the lousiest agent you can find and hope they never find a good buyer.
The banks rarely foreclose on time and will extend a few times so you can squat for a bit longer while your crappy agent does their best at finding a buyer.
Boohoohoo, cry me a river lady! You made some bad financial decisions and now you need to endure the consequences. With all this carnage, homeownership to many people is STILL the holy grail. When that changes, then we can have a recovery.
Two points that anger me in these types of housing sob stories:
1) It’s not the variable rate feature of your mortgage that’s caused your payment to be unaffordable. Rates have declined dramatically since 2005 and your payment would have declined accordingly. If I’d gone with a simple 3/1 ARM in 2007 rather than a 30Y fixed, I’d have been paying ~$800 less monthly for the last two years!
So just admit it! You got an option-ARM because there was no possible way you could have afforded the monthly payment otherwise! You had to pay less than interest costs hoping someone or thing would save you in a few years!
2) Disclose how much money you saved while not paying your mortgage before the short sale! I demand to know that too. You’re giving me all of the sad “poor me” facts and leaving out the “look how I screwed the system” facts.
Don’t they have a second story about that house?
“I’m so happy that I bought a house in Highland Park for $200,000 less than it cost just a few years ago. Certainly, it has dilapidated because the previous owner, a lady, had no money for repairs and only grew flowers.”
Hah exactly. Better believe the LA Times would never publish that story, but around 2013 there should be plenty of those to go around…
I’d like to start hearing more financial advisors mention that home “owners” are just throwing their mortgage payments – principle as well as interest if it is actually an amortizing loan – down the drain. It’s my reply when I am given an opinion about my rent money. Difference is, the rent money is much less down the drain than the mortgage.
$500k for a trashed house in a dodgy neighborhood that might be improving over time if the bubble would just keep inflating? Even if she would get her bailout, will she and her daughter be able to keep living there? I guess that between the economic devastation and police and fire department cutbacks, the neighborhood may not be getting safer and more attractive any longer.
Why does the women expect the bank to bail her out? Why does the bank expect the federal govt to bail them out? Why is it that the taxpayer is force to bail out the banks and banksters allow to keep all the bonus for running the bank into the ground?
She only asking for what the banksters got. The bailout should of gone to neither.
I’m surprised that the LA Times didn’t play the single mother violin. She doesn’t realize that many seeming nice things can be actually an anchor to bring you to the bottom.
Ha, they would’ve played the single mom violin, except it was tougher since Gardening Mom is 58 and her daughter is 35… 😉
Though I understand the sentiment that people that make bad decisions should not be bailed out, I think we fail to appreciate a couple of things.
1) A lot of people, dare I say most people, are not financially literate. I know it seems pretty simple math when you look at your salary and try to figure what type of home you can afford, but when people see a lender and they assure you that they can make it work and you don’t need to worry about it, then a lot of people would just go with that. It is naive, but most people would trust a lender when they tell you they can make it work. Most people don’t understand credit card debt, APR’s, variable interest rates, the stock market, etc. so they are trusting of others that, they feel, do.
2) A lot of these homeowners are seeing wall street and big CEO’s getting govt taxpayer bailouts when they essentially kicked the world economy in the face. They made bad bets and horrible decisions, but hey they didn’t need to ‘endure the consequences’
3) If we truly do not want to subsidize bad behavior then there shouldn’t be a penny of federal money or any tax payer dollars that goes to treat any issues related to alcohol, tobacco, smoking, gambling, promiscuity etc., since people should face the consequence of these bad decisions. So if someone does drink (maybe not even that heavily) and goes to the ER with some liver issues and can’t fully pay for the treatment, then he should be put out because he needs to face the consequences of his bad decisions.
I don’t drink, smoke, gamble etc., but I’m sure some of my tax money goes to dealing with people that have problems because they do.
Again, I’m not justifying her decisions or siding with her, I’m just saying that people here are being a bit harsh.
We’re being harsh because she’s telling her sob story and lying about certain facts – yes, telling your story and omitting key facts is lying.
So, she’s upset the “banks/broker etc. lied to her when she bought the house, but she feels perfectly fine lying to me about the reality of how she got into the house and how long she lived rent-free.
What, pray tell, is she lying to you about?
I’ve come to appreciate not so much that people are not financially literate – although I do agree with that – but more that people would trust a loan officer when the trust is not justified.
It used to be that the bank officer would be pretty darned certain you could pay the bank back before giving you the money. If you got the loan, you probably could truly afford it.
Now, however, they are just peddlers of another product to sell, and at that time, they didn’t give a hoot if you could afford the loan or not.
Maybe it’s naive, but I think some people may have believed a lender when told they could afford a loan, within reason, and only slowly learned they really couldn’t.
@ Nefron – I do think that is true to a certain extent. It’s extremely sad that in a standard real estate transaction where one is paying 6% + fees galore that none of these people being paid are giving the buyer fair and impartial advice. There seems to be a glaring lack of professionalism in the industry at large. People optimistically hope and want to believe they can afford something nice, and they do rely on the advice they get from there so-called professionals. One almost needs to hire an extra representative or something (a lawyer? Financial Planner? RE Consultant?) before embarking on a house purchase. The people in the industry are hoping the buyers are too naive/dumb to notice the details. I guess many are, and while I *don’t* think they should be allowed to stay in houses they aren’t paying for, I do think it is pathetic how irresponsible and self-serving realtors/lenders have been. They don’t seem to consider providing sound counsel as a part of their professional responsibility. 🙁
it’s all about learning how to do the math. too bad math is not most americans strong suit and we tend to make purchasing decisions based on our emotions rather than the bottom-line.
I was in at my ex-Washington Mutual bank the other day, checking Chase’s refinance rates (moving from our current 30-year to a 15-year fixed). Nice banker lady went over costs, etc., then began riffing about all the people who were in trouble because they had borrowed more than they could afford, etc. etc. (She knew it was safe to say this because I can afford my borrowing).
When I suggested that, notably at WM, there was more than enough blame to go around, she doubled down: No, it was simple, people shouldn’t borrow more than they can afford.
And I wondered: I’m a moderately knowledgeable citizen, financially, with an investment portfolio I pay attention too, substantial savings, etc. Yet I didn’t know much about refinancing, costs, how to estimate by loan capacity, and so forth. How much more true was this for most buyers who took the Washington Mutual option-arm line (remember, it was advertised heavily and promoted as a great smart thing to do)?
This story in the LA Times was indeed an emotional puff piece — and I’d like to see the buyer’s story about a reasonable deal on a house that needs work, but had a nice garden, at a good price. But the outrage directed at buyers alone — even weepy and self-interested ones — is not enough. The problem is, there’s no solution, and the businessman who lost real (not borrowed) money and faces badly-designed regulation (I’m for good regulation, but a lot of it, as any honest person of whatever party should admit, is badly-designed and ineffective) as he tries to rebuild a business, something that if done by honest business owners is good for us all.
The bank managements, however, were and are not honest business owners, and their purchase of the people who write the regulation should scare all of us).