90

My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad.

Here is the thing – I do not own a house. I do not have a mortgage. Why? I cannot afford one here where I live. My rent is $1,949 a month, and a house equivalent in size to my apartment would be about $1 million dollars. This would mean I would have to carry a mortgage of about $5,400 a month, give or take a few bucks. Who in their right mind would give me a loan that big on our salaries?

The bank, that’s who.

However, I am not going to blame the banks for this crisis like so many people are doing. I am going to blame the people who took out the mortgages in the first place that they could not afford. That’s not fair, you say? I say it is, and here is why – every single person is responsible for their own actions. If a person decides to use drugs, it’s their fault if they get hooked. If a person decides to drag race in their car, it’s their fault if they get in an accident. If a person decides to spend themselves into credit card debt, it’s their fault. So why should this be any different? Buying a home is the single biggest purchase anyone will ever make in life, and it should not be taken lightly. Did you really think a $500,000 mortgage was a good idea on your $11 an hour job? Just because the friendly banker guy said it was does not make it so…the borrower is solely responsible for signing the paperwork and no one can make them do it. It is up to the individual to get a second opinion if they think someone is trying to pull something over on them.

Death Pledge. Did you know the the word Mortgage is actually a combination of two French words: the word Mort which means “death”, and the word Gage which means “pledge”? Me neither, till just the other day.

I know I will probably get a lot of flack for my opinion on this, but that’s how I see it. I would not buy a car without doing my homework, I would not invest in a company without doing my homework, and I surely would not buy a house without knowing what I was getting myself into. And no banker could ever convince me that I could afford a million dollar home, even if he promised to keep the payments at $1500 a month for the first 5 years of interest only payments. I know that come 5 years, I will probably not be making enough to pay the $5,400 a month for the mortgage – so I would not take the offer. Banks can be evil, I understand that…and that is why borrowers need to know what they are doing. But as evil as they are, they cannot force a mortgage on anyone.

And just to show you that I am not heartless, I feel for people who lose their homes due to unemployment for a long time (like someone I know who is out of work due to the writer’s strike here in L.A.), or someone who has some kind of medical issue that hampers their ability to pay for their house, or any of the other legitimate reasons why people get foreclosed on. But losing a house due to taking out too much of a mortgage is a different story. The American Dream has turned into just that – A Dream. People think they deserve more than they can afford, and now the government is swooping in to save them from their self-created problem. I did the responsible thing and did not buy a house – I don’t think the government is going to give me a cookie. Sure, the economy might collapse if they don’t save some of these homes, but maybe that is what we need to make people plan a little bit better the next time around. But the economic problems this country is facing is not just due to the mortgage crisis – we overspend, we misuse funds, we think we deserve whatever we want at whatever price it may come at. This goes for the government all the way down to your next door neighbor. We need some fiscal responsibility here, not more handouts. Recession here we come, and I don’t think it is necessarily a bad thing.

Here is the complete list of participants in the series “Home Finance: Mortgages and the Real Cost of Home Ownership”:

Be Sociable, Share!


Like this article? Please consider subscribing to my full feed RSS. Or, if you would prefer, you can subscribe by Email and have new posts sent directly to your inbox by entering your email address in the box below. Your email will only be used to deliver a daily email and you can unsubscribe at any time.

Comments (90)

Trackback URL | Comments RSS Feed

  1. Donna says:

    I agree with you 100%. People need to start taking resposibility for there decision, and if that means they loose there home and have to start over, so be it. They will probably turn out better for it in the end. A lesson will be learned. And yes, there is a difference from someone who purposely puts themselves in a financial bind compared to those who had financial stability and lost it due to medical or job loss after years of working. But all should put away to help ease the situation if possible.

  2. NoDebtPlan says:

    I completely agree. I feel the same way toward credit cards. No one forced you to charge $20,000 in plasma TVs on your card. I really hate that for you, but it is your fault. Take some personal responsibility.

  3. Mrs. Micah says:

    I think the group of people who can’t afford it that I feel sorriest for are immigrants. They’re not necessarily familiar with the American ways of doing things and may have to trust bankers and the like to help teach them new systems.

    Most of the rest of the people, as you say, had eyes too big for their stomachs. I’m sure this is the case with some immigrants as well, but it seems like it’d be a much harder territory to successfully navigate if you were new.

  4. Death Pledge? Yikes!

    I’m not too hopeful that people in our society will begin to take responsibility for their actions. We have too many politicians willing to bail anyone out for votes. On a large scale, they get re-elected, on an individual scale, they would be arrested.

  5. Jeremy says:

    I agree as well, and the mortgage problem is just taking the brunt of the flack simply because it is typically the largest monthly payment people have. Let’s not forget that most of these people are paying for two brand new, or at least still expensive used vehicles. They probably go out to eat more than they can realistically afford to, maybe send their kids to expensive private schools, etc. And let’s not forget how much people spend to furnish a new home. Furniture, electronics, gadgets, you name it.

    So in many cases, if you look at their stated income, sure it can actually seem somewhat affordable. But unfortunately, the rest of their lifestyle is doing just as much harm as the large mortgage. A lot of people who are in the situation of possibly losing their home because of a large mortgage payment could avoid it if they examined the rest of their life and see how much money they are blowing.

    For many, it is a simple issue with greed. Everyone wants a really nice home, everyone wants shiny new cars, everyone wants, wants, and wants. It all adds up, but since the mortgage takes the largest chunk each month, let’s blame lenders! Of course having $1,000/month in car payments and another $400 for insurance on them each month has nothing to do with their inability to pay the mortgage.

    Oh well, not much we can do about it. People will never learn if they get bailed out of their mistakes.

  6. I’m with you. This whole “crisis” hurts any of us who were trying to do the right thing and wait until we had enough for a down payment. All this free money made homes too expensive and now in order to calm everyone’s nerves rates have dropped again so the money I’m saving to buy a house won’t earn as much interest because other people went out and bought too much house.

    You’re not being cold-hearted. I’m sure a lot of people may have been lied to and truly didn’t understand what they were getting into but ignorance doesn’t take the blame off your shoulders.

  7. pidgeon92 says:

    Amen. Yesterday I watched the 60 minutes clip on the mortgage fiasco, and I was appalled at what people are saying. If you haven’t seen it, it is on the web here:

    http://www.cbsnews.com/sections/i_video/main500251.shtml?id=3756665n

    The interviewer asks the first homeowner: “You knew this was a big decision…. borrowing hundreds of thousands of dollars…”
    Homeowner: “Didn’t really look at it like that.”

    Different homeowner: “Why pay a $3200 payment on a 1200 sq ft home? It makes no sense.”
    Interviewer: “But that’s what you agreed to.”
    Homeowner: “Fine, if the value is going up.”

    Oy.

  8. Lise says:

    Generally, I agree with you. The responsibility rests solely with the person who took out the mortgage. (And good on you for recognizing the French origin of that word).

    But as someone who is paying a mortgage that is more of her income than she would like it to be–and who lives in a very expensive housing market, like you do–I have some sympathy for these people. I know that before I bought a house I faced a *tremendous* amount of pressure from friends and family to buy. Numerous times was I fed the “you’re just throwing your money away by renting” line. I was pretty happy renting–I was still paying $1600 a month, but that was quite reasonable in the Boston suburbs where I lived–but I very much lived in a culture where owning the home was the ultimate in Being an Adult. And where I live–where a one-bedroom condo will cost you 350K–it is almost impossible attain that without spending too much.

    By the time I opened my eyes to the fact that hey, there’s this entire movement out here that says that renting ain’t so bad, it was June 2006 and I was about to close on not one, but two mortgages totallng 375K–I needed the second because I didn’t have a down payment, of course. It was a stupid way to buy a house, and it was too much house to buy, but I was very much lulled into “having a house is an investment! You can’t go wrong!” that preceded the housing market crash.

    I’m in no risk of going bankrupt, of course, barring major disaster. We have an emergency fund and pay $500 on our mortgage each month. My first mortgage is at a prime, fixed rate and the second mortgage, while a higher rate, and a balloon, will be paid off long before that.

    But I still feel chained to this house which is more than I wanted and which now, I can’t even sell, because its price has dropped and my street is littered with For Sale signs. I feel trapped in a job I don’t like because I need it to make the payments. Because I had to buy so far out in the suburbs for the house to be affordable, I’m about an hour away from all my friends, too. This house has limited my freedom in so many ways, and now I just want to go back to my little apartment in Watertown and try simplifying my life instead of buying what is essentially a giant storeroom for the stuff I can no longer use because I’m so busy paying for the damn storeroom.

    So yeah, I sympathize with these people, but I very much agree with you.

  9. cybergal says:

    I agree 100%. People who can’t do the basic math to see they obviously can’t afford a house don’t deserve it to begin with.

  10. Patrick says:

    I feel the same way. Too many people have an attitude of entitlement. That’s too bad, because it only hurts them in the long run.

  11. oaidtwice says:

    This is not an excuse, but merely an explanation:

    People are trained from birth to believe what other people in positions they perceive as authority tell them.

    Why would a banker tell me I can afford a mortgage if I clearly cannot? Please don’t actually answer, I know the answer, but honestly, I didn’t for a long time. Banks, financial people, they are “authorities” and they should know what they’re talking about, right? ;)

    I’m going to make up some numbers but the gist is the same. When we bought our house, we qualified for a mortgage of $160K. We did the math and felt we couldn’t afford a mortgage over $120K. When we looked at houses, talked to our mortgage people about different monthly payments, we constantly got subtle but continual pressure to buy more than we wanted to, because we “could”, because we were “approved” for more.

    Yes – people need to take responsibility, and in some cases, the *publicized* cases, people took HUGE mortgages that the payments were equal to their monthly income, and really, come on, who are those people.

    But in a lot of cases, it’s just “$100 more” a month or “$150 more” and the bank makes it seem reasonable, and – it comes back to the idea that by and large we are raised in a society where we are taught to blindly trust people in authority.

    Just my 4.2 cents.

  12. Four Pillars says:

    Great post David, I couldn’t agree more. Seems like a lot of people are doing the “I didn’t understand what I was getting into” song.

    Yes, that’s the point.

    Mike

  13. Jeremy says:

    While I don’t disagree with you paidtwice, I don’t think people should consider anyone who’s trying to sell them something an expert. That’s not to say people don’t have that trust, but this goes far beyond buying a home.

    When people go into a car dealership, do they think that the salesman has their best interests at heart? They might go in looking for a 18k sedan, and the salesman is clearly going to tell them they can make payments work for a Cadillac CTS.

    Or if you go into Best Buy looking to buy a new HDTV and you have your eyes set on a set that runs $1,500… before you know it, the salesman has convinced you that you can afford the next model up for only $400 more, which when you break it down into payments is virtually nothing… tack on all the crazy cables and connections and you’ll spend more than double what you could afford.

    Try going to buy a suit at a men’s clothing store. You know you just want a suit, but they will have to trying on an extra sports jacket, show you some great shirts and ties, new socks to go with the shoes that are on sale this week…

    The art of the upsell is everywhere, banking included. Until people come to realize that only they themselves know what is best, people will always get suckered into buying more than they intended or could afford.

    It is a bit of a shame, because a banker is traditionally thought of as someone you should be able to trust, but this isn’t the 1950s any more.

  14. This is not a recent phenomenom. In the spring of 2001, I was pressured to buy more home than I felt comfortable with. Good thing for me I am extremely stubborn and hard-headed and bought what *I* felt comfortable with. I was able to resist the “temptation” of getting the biggest house they claimed I could afford.

    That said, I do not feel sorry for most of these people who are now in trouble who reached out further than their economic grasp. They made their financial beds, but now don’t want to sleep in it.

  15. Mark says:

    People are not provided education about economics at school.

    Most people have no understanding of the system.

    I agree with you that people seem to take on the risk too easily but if there is to be a whole sale failure then I think that the financial institutions should bear the brunt.

    After all aren’t they charged with maintaining the system that provides them a lush lifestyle? Their core business is managing risk. If they get it wrong then why should they expect assistance?

  16. paidtwice says:

    Since I didn’t make it clear in my comment – we got the mortgage we were comfortable with and didn’t let pressure to buy more affect us. I’m not who anyone should/can/could have sympathy for. ;)

    But my basic point was just that people like bankers *are* held up as experts by the average everyday person. That’s eroding every day of course, but they aren’t seen the same way as a “salesman”. Even though they are. ;)

  17. Mark – I think there’s an inherent problem with your argument. Let’s use food as an example: Most people don’t get a good health/nutrition education. Should McDonald’s take the blame for obesity?

    It’s a shame that we’re not better educated in all areas of life but even if we were it may not help. I’m sure all of the foreclosures are not lower middle class. There must be a good portion of well-educated people out there who are having problems now because their eyes were too big when buying a house.

  18. david says:

    “Let’s use food as an example: Most people don’t get a good health/nutrition education. Should McDonald’s take the blame for obesity?”

    Exactly my point!

  19. Lise says:

    “Let’s use food as an example: Most people don’t get a good health/nutrition education. Should McDonald’s take the blame for obesity?”

    This is a bad example because the link between McDonald’s and obesity is more tenuous than the link between subprime lenders and the subprime mortgage fallout.

    I’ve already poured my heart out about my own situation, but let me add that what I mostly dislike about this post is the tone of moral superiority (especially in the comments). Everyone makes money mistakes, and it takes most of us a long time to learn that this is one area where we really can’t trust anybody.

    Also, it’s fallacious to think that this doesn’t affect anybody but the people who borrowed more than they should. Part of the reason this caused stocks to fluctuate is because so mortgages–and subprime mortgages–are traded on the secondary market. Pension funds in particular were heavily invested in this; hell, even banks in England were invested in this. This isn’t the sole reason the dollar is falling, as David points out–but it is systematic of our spending problems as a nation.

    But please don’t act like you’re different or you can just blithely ignore what’s going on here. If the government doesn’t, for example, put a limit on mortgage lending, then your overspent neighbor isn’t the only person who will be affected.

  20. david says:

    You are right – mortgages are a big part of it. So I guess we can all say “thanks for tanking my portfolio” to those who took on more than they could chew and took down that much of the economy?

    The fact is is that everyone is only responsible for themselves – if you blame someone else, you are not taking responsibility for your own actions. You said my situation was like yours Lise, but it is not at all – I did not listen to friends and family pressuring me to buy a house – I thought for myself and I knew I could not afford 1 mortgage, never mind two, same as I know I cannot afford a Ferrari even though I would like one.

  21. Lily says:

    “Gage” is Germanic in origin. ;)

    It’s refreshing to see that a lot of your commenters actually agree with you. I thought you were going to catch a lot of flak for letting mortgage lenders off the hook. For what it’s worth, my views are pretty close to yours. There were some predatory lenders, but for the most part all the information regarding payments, ARM adjustments, etc. were all available to borrowers. Some people just don’t want to put any mental energy into disaster prevention.

  22. Lise says:

    You said my situation was like yours Lise, but it is not at all – I did not listen to friends and family pressuring me to buy a house – I thought for myself and I knew I could not afford 1 mortgage, never mind two, same as I know I cannot afford a Ferrari even though I would like one.

    I meant you lived in a similar area, housing expense-wise–that’s all I meant.

    And… well, I know that now, don’t I? But I didn’t then. As I’ve said, we’ve all made money mistakes–that’s what PF blogging is all about– and I think the *responsibility* rests firmly in the hands of people who made them. But I don’t think this sneering tone of moral superiority gets you anywhere.

    And honestly, you know what the subprime capital of the U.S. is? Cleveland, among poor black families. These aren’t young clueless couples in LA leading the foreclosure boom, I’m afraid. If ignorance were the only factor here, your tone would be less odious. Poverty, lack of education, the nebulous “American dream,” and shady lenders are all to blame–I make a distinction here between blame and responsibility, because, clearly, now that the dust has settled, the responsibility does rest with the borrower. I don’t disagree with you there.

    I think the place you’re speaking from is very white and very wealthy, overall. The fact that you had money invested in the stock market the first place already puts you in the top tier of Americans, income-wise. The lack of sympathy of PF bloggers in regards to this topic, truly disturbs me. Aren’t we supposed to be helping people, instead of gloating at them?

  23. david says:

    “I think the place you’re speaking from is very white and very wealthy, overall.”

    Yes, because everyone that took out one of these mortgages was black, hispanic, asian, or purple, not white. So I am a racist to think people should be responsible for their own actions. It’s a race thing, you nailed it right on the head.

    I am white, but I am far from wealthy – which is the reason I don’t own a house that I cannot afford.

  24. Bitsy says:

    I agree with you 100%, and I believe strongly in “personal responsibility.” However, I have that luxury, as the housing in this area is quite reasonably priced. We purchased our single-family home (6 years old, 3bedroom, 2bath on 1/3 acre) four years ago, and our mortgage payment is about $700 a month. Much cheaper than renting a comparable home in our town. I’ve never really lived in a town where a decent home cost $1 mil, though, and can’t imagine what that might be like.

  25. Jan says:

    I was given some good advise years ago, which I have mostly followed. On big purchases (the amount has changed through the years), I do not make an impulsive decision, but go home, think about it from all perspectives and if it looks like I can manage it, I go back the next day and make the purchase. Never once, has the good deal not been there the next day.

    If more people did that there would be less credit card debt, less stuff that you really don’t need and you will sleep better.

  26. Rob says:

    Sorry to be the one not to ditto this argument. Why are mortgage companies/banks not held the least bit responsible for loans on inflated value property? How about a sharing of the responsibility? Let’s say you buy a $500,000 house and put down $100,000. The bank uses the appraiser they like to be sure the home is worth that amount. (wink, wink)
    As it is now, if 6 months later you have to sell and the home is only worth $400,000, you just lost 100% of your money and the bank loses nothing. (And it is harder to file for bankruptcy because the guys in charge of lending the money have more people buying congress)
    If we require a little forced corporate responsibility we could probably avoid this mess in the future. Lets create a new “conforming loan”: The bank agreed it was worth $500,000 just 6 months ago, how about they lose 20% of what they agreed was the value of the home also? With that type of law, fewer inflated loans would be made. Oh yes, and keep the ability to take a “truly non-conforming” loan in which the individual agrees to take full responsibility, but only after signing away those rights. Like buying junk bonds instead of government bonds. They had to create the SEC in the 1920′s to control corporate greed. Recently the power the SEC had has been diminished to almost nothing, and fleecing of the average Joe has run amok.

  27. Lise says:

    I’m not sure why my whole comment doesn’t show up above, but…

    Yes, because everyone that took out one of these mortgages was black, hispanic, asian, or purple, not white.

    Look at a map of foreclosures in the Cleveland area. Now look at an overlay of predominantly black areas. They match almost exactly. (The link I posted, which seems to have broken my comment, will do just that).

    In a lot of cases, these aren’t people buying more house than they can afford. These are people being tricked into refinancing into sub-prime ARMs, i.e.(quote from aforementioned article) “Mortgage brokers focused their efforts by selling sub-prime mortgages in working class black areas where many people had achieved home ownership.They told them that they could get cash by refinancing their homes, but often neglected to properly explain that the new sub-prime mortgages would “reset” after 2 years at double the interest rate.”

    Are these people fiscally undereducated? Sure. But they’ve also been deceived. Your moral outrage is like beating up elderly people who have been scammed into giving away their life savings.

    I am NOT absolving personal responsibility–I keep trying to make that clear, but you keep ignoring me. I’m just saying that this issue goes deeper than “look at those dummies that can’t do math ha ha ha.”

  28. I have a hard time with this issue. On the one hand, I think that what the banks did by approving mortgages for people who obviously couldn’t afford them is reprehensible.

    On the other hand, I’m a huge advocate of taking personal responsibility, and people who bit of more than they could chew should be responsible for signing their name on the mortgage papers.

    I feel the same way about credit card debt. I think that credit card companies who prey on college kids need to be held to a higher standard. At the same time, I was one of those naive college kids who ran up some credit card debt, and I don’t hold anyone responsible for my debt but myself. And I don’t expect anyone to bail me out.

    Unfortunately, I don’t think bailing people out of the mortgage crisis is going to solve the problem. It may help in the short term but until we deal with the attitude of entitlement among consumers and the attitude of “make a sale at any cost” among banks and other companies, we’re only going to face this problem again in the future.

  29. Ram says:

    Well said. Just Like you I have been renting for about three years now, not because I could not afford to buy a house but because the prices were too high by any means.

    Unfortunately the government(for sake of votes) seems to be more interested in bailing out the people who made stupid mistakes at the cost of us tax paying citizens who make this economy run on its four wheels with our prudence.

    My gut wrenches every time I think about how I had to resist my temptation to just take a huge loan and a loan and now my hard earned money paid in taxes will be used to bail out these people who had no forethought.

    I never wished to get rich by buying a ton of properties, therefore I am not in default. Why should I pay for people who are greedy/dumb.

  30. I completely agree with you, and it’s why I don’t believe in a bailout. The lenders and borrowers are both to blame, and they should both have to face the consequences. I realize there are larger implications, but I have faith that they will eventually work themselves out. I just can’t believe that absolving the parties at fault is somehow a good thing.

  31. [...] My Thoughts on this Whole Mortgage Crisis and Why I don’t Feel That Bad at My Two Dollars [...]

  32. Carol says:

    I tend to agree with Jan. The deal will be there, and if it’s not, that simply means it wasn’t the deal for you.
    I have to wonder how many people prayed about buying their homes before they took that step.

  33. [...] have some degree of pain associated with them, even my mortgage (which apparently means “death contract” according to David at My Two Dollars).  Second of all, it might be “easy” now, but what happens when there’s a [...]

  34. david says:

    Lise, I fixed your comment.

    Deceived? Who, over the age of 15, of any race, color, economic strata, etc, would think it is a good idea to borrow $500K for a house when they make $30,000 a year? People that are eager to look like and act like they have more than they do, that’s who… And I am sorry, but I just don’t feel bad for them, and I don’t see why I should help bail them out. And obviously the majority of comments say the same thing, so we all must be white racists, right?

    That is a BOLD statement to make Lise, calling anyone that thinks this way white and wealthy. What happens if one of these comments agreeing with me is from a black guy? ;-)

  35. Bitsy says:

    <— not white, not wealthy. ;)

  36. David says:

    Well there you have it….;-)

  37. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don??t Feel That Bad. [...]

  38. [...] Two Dollars posted My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad. This excellent post explains why David is a bit annoyed that people who overbought are getting [...]

  39. [...] Not everyone is worried about the US mortgage crisis. For example the blogger of My Two Dollars feels ok about it. [...]

  40. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  41. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  42. Come on…As personal finance bloggers we know how people are: ignorant. If it wasn’t this way, there would be no market for any of the stuff we write.

    We, more than anyone, know how ignorant the average consumer is about money issues. I don’t mean “ignorant” in a negative way, I mean it in that the definition of the word is “not knowing.”

    Is it people’s faults for signing up for these kinds of mortgages? Of course it is. They could’ve protected themselves by reading the fine print. But what is the realistic solution to this type of thing? Calling them idiots?

    No. The solution lies in regulation so that these kinds of irresponsible products aren’t even offered to the public. There was absolutely no reason why Joe Schmoe should’ve gotten a $500,000 mortgage when he didn’t even prove he had a stable job and couldn’t afford it.

    I’m surprised no one mentioned this earlier.

  43. gasp!

    you mean people who make financially wrong decisions should be held accountable for their mistakes? now thats just un-American!!

  44. david says:

    It’s a strange concept Living Off Dividends, I know!

  45. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad. | My Two Dollars [...]

  46. Sandra says:

    I agree with you. But now they are trying to come up with ways to save these people from their own stupidity to help the economy. Why is it our fault? We bought a house in the fall. If my husband had his way we would be one of the “dummies” struggling to get by. But I stood my ground and told him that I wouldn’t sign papers unless I knew we could eat after we paid the mortgage. The house is about 200 sq ft smaller than he wanted, but, it is only 2 years old, with 4 bd, 2 bath. It is the most house we can afford on one income, which is how it should be.

  47. [...] Not everyone is worried about the US mortgage crisis. For example the blogger of My Two Dollars feels ok about it. [...]

  48. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  49. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  50. Correction says:

    The word “Mortgage” literally means “dead hand,” not “death pledge.” The idea is basically this: the mortgage payment, at least temporarily, “deadens the hand” of the owner who otherwise would move to retake the property. Interesting that this entire group appears willing to buy the death pledge story, and even congratulate the author on homework well done. Here’s an even bigger surprise: Did you know that the word “gullible” is not in the dictionary? Look it up!

  51. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  52. David says:

    Randy – so glad you have the time to go around leaving such lovely comments about authors and their readers, thanks so much! :-)

    Oh, and it does mean death pledge. But thanks for sharing your thoughts.

  53. [...] Two Dollars posted My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad. This excellent post explains why David is a bit annoyed that people who overbought are getting [...]

  54. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  55. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  56. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars [...]

  57. [...] My Thoughts On This Whole Mortgage Crisis And Why I Don’t Feel That Bad @ My Two Dollars I am not going to blame the banks for this crisis like so many people are doing. I am going to blame the people who took out the mortgages in the first place that they could not afford. [...]

  58. Frugal Babe says:

    Wow, that’s a lot of comments – obviously a topic that gets people fired up. I have no sympathy for people who wanted more house than they could afford – the keep-up-with-the-jonses folks who also drive a new SUV and are watching the game today on a big screen tv. And I have no desire to bail them out. But I am sympathetic towards the poor and uneducated (in some cases, even mentally disabled) people who were victims of extremely unethical mortgage lenders at the height of the housing boom a few years ago. The whole mortgage industry needs far more legal oversight – in some states there’s virtually no regulation at all. A county in the northern part of my state has crazy high foreclosure rates right now, due in large part to a group of appraisers who were in cahoots with mortgage brokers to inflate home values – and thus the size of the loans – and now people are upside down. It’s sad, and I really feel for the people who were taken advantage of. A large number of them are hispanic immigrants, just getting started in this country, which makes it even sadder.
    BUT – for the people who could have afforded a 1200 sq foot house and decided that they wanted/needed/deserved a 3000 sq foot house instead, I don’t feel sorry for you if your ARM has now reset to a point that you can’t pay your mortgage.

  59. David says:

    Lots, Frugal Babe! And thanks for adding yours in, it is always nice to read people’s feelings about this issue!

  60. Kristin says:

    This is a multi-faceted problem. There were speculators (home flippers), greedy individuals buying more home than they could afford, and predatory lenders that convinced many to re-finance their primary residence with subprime loans.

    Some states are taking action. Last Fall, Texas passed a law that makes Liar Loans a felony. The law targets the individual home buyer that fudges his finances on an application to fool the lenders into giving him a loan.

    The lenders were encouraging this fraud as well, but they are not being held accountable. More at the link:
    http://thefinancialengineer.blogspot.com/2008/01/its-now-felony-to-lie-on-loan.html

  61. [...] My Two Dollars takes a critical look at the “mortgage crisis” in My Thoughts on the Mortgage Crisis and Why I Don’t Feel That Bad. [...]

  62. [...] Two Dollars features a piece on the mortgage crisis, and why he doesn’t feel all that bad about it. While I don’t agree with all of his points, I definitely understand living somewhere [...]

  63. [...] many bloggers have avoided the topic, only offering a few quick thoughts that aren’t necessarily [...]

  64. Jen says:

    Let me tell you my story. 3 years ago, my husband and I decided to refinance our home. The home was appraised by the bank and it was worth more than we thought, so we used the equity to pay off a credit card, a student loan and a car loan. We never doubted the appraiser. Why would the bank lend us more than our house was worth? A year later when we had to relocate and were surprised to find that we owed more than the house was worth. Turns out the banks appraisal was off by about 40,000! The same bank refused to allow us to make a short sale. We had to move. There was no choice but to continue to pay the mortgage on an empty house and pay rent at the new location. After a year and a half every penny of our savings from 10 years of marriage was drained. We still owed more than the house was worth, and they still wouldn’t allow us a short sale. We had to surrender it to the bank. The point is, had we not put those debts into our mortgage based on the bank’s deceitful appraisal, we would have been able to sell our house, and continue to pay our other debts after relocating.

    It certainly wouldn’t be tolerated if a doctor made money by selling people treatments that weren’t right for them. Why is it OK to give people loans that aren’t right for them? THE BANK LIED TO ME. If my mechanic lied about what needed repaired on my car I could sue him! Shouldn’t people be able to trust a lender just like any other professional? I can trust my beautician and my pharmacist. If I had my hair colored and all my hair fell out, was that MY lack or responsibility?

    The bank took a risk by lending me more than the collateral was worth. The risk didn’t pay off. They are responsible for their own loss.

    Just another perspective

    Oh, and by the way, we are white and have college educations.

  65. david says:

    That does suck Jen, but I would never advise anyone taking home equity to pay off debt, when the homeowner is not 110% sure that the house was appraised correctly. I even made my mom get hers appraised again by an independent party before she took their money.

  66. [...] Two Dollars explains why he doesn’t feel bad for those who over-extended themselves and are struggling with their mortgage. I am not always in total agreement with 2 buck’s [...]

  67. Jody says:

    In a lot of cases, these aren’t people buying more house than they can afford. These are people being tricked into refinancing into sub-prime ARMs, i.e.(quote from aforementioned article)

    Are you serious ? Another example of the white man keeping the brother down? Dear Lord when does this load of bull end? No one “tricked” anyone. You can cloak these poor decsions in racism or in chocolate, either way your wrong.
    People; white, black, purple or yellow have always lived beyond thier means. This is not a phenomena of ethnicity.

  68. tom says:

    Never, ever use a bank appraiser. Banks will accept an appraisal by licensed, independant appraisers. Do your homework before you have your house appraised. Don’t accept an appraisal by the bank. Find another bank if they insist you use their appraiser. It’s your own fault if you buy a house appraised by the bank at $500,000 and come to find out it’s only worth $400,000.

    Again, it all comes down to doing your homework and taking responsibility for your actions/mistakes.

  69. christel says:

    The truth hurts! It used to be that people paid cash for things, hence they bought what they could afford. They would save and scrimp. After all that they really knew how badly they wanted something, because it came with sacrifice. Today, it’s I deserve it! This false since of entitlement is now as American as apple pie. We buy homes that we can’t afford, cars that we can’t afford, and the list goes on and on. After it’s all said and done we expect the government to save us from our own stupidity, and greed. However, we don’t what them telling us how to live our lives. Wake-up America!

  70. christel says:

    I neglected to mention in my earlier posting that I’m a black female who owns her own home, and bought my home 4 years ago, for considerably less than what the bank said I qualified for.

  71. david says:

    I am with you christel, we all need to wake up. Thanks for the comment!

  72. Mike says:

    I can see your point and I appreciate it but I can’t help feeling that a lot of people facing foreclosure now were somehow duped into the mortgages. I think it was a herd mentality – if Bob next door can do it why can’t I? The point is people just thought that the housing boom would last forever and that house prices only ever went up.

  73. Author says:

    Christel, what does you being a Black Female have anything to do with how much you pay for a mortgage?

    Though, I applaud you for doing the right thing-taking out a mortgage for less than you are qualified for.

  74. [...] there are people doing something about this ridiculous mortgage crisis and bailout plan that I have discussed before. From CNN: “We are both working professionals [...]

  75. Rachel says:

    Your lack of sympathy is hard to swallow. You say it’s the “too many people who buy too much” who are at fault for this crisis. But you dismiss the lenders/collectors role in this. Banks love loaning money to people who cannot pay them back. That’s how they make the bulk of their money and they use everything including bald faced lies to get people to sign papers. Why do you think it’s OK for them to be so aggressive to someone who may not be as savvy?

    It’s great that you don’t own real estate and aren’t suffering because of it, but have a heart.

  76. david says:

    I do have a heart – for people who legitimately are having an issue. However, banks cannot force anyone to sign papers, and unfortunately, most who are having troubles got greedy – and borrowed too much money or took out multiple mortgages/loans against their house. No one should be buying a home if they do not understand how mortgages work, sorry. If you make $35K a year, you cannot afford a $500K house. It’s simple math, really.

    Neither myself nor my friends have bought houses in the last couple of years, because we could not afford them in our neighborhoods. I could have easily qualified for way more mortgage then I could have paid for, but I did the responsible thing and waited. Where is my bailout/reward for thinking before signing papers?

  77. Rachel says:

    “Where is my bailout/reward for thinking before signing papers?” Your reward is you don’t have to file bankruptcy, move, feel so ashamed that you consider suicide as a way out. That’s not enough?

    One comment sticks out from one of your cohorts: “As personal finance bloggers we know how people are: ignorant. If it wasn’t this way, there would be no market for any of the stuff we write.”
    Wow. This post and this comment are blithe. If you don’t respect your readers, you certainly cannot have a reader in me.

    Yet the same writer states: “The solution lies in regulation so that these kinds of irresponsible products aren’t even offered to the public”

    I just figured you could provide less of a narrow view by realizing that some people are not as savvy as yourself because they believed what creditors said. Were the Banks/Creditors not greedy too? I agree people should be accountable for their actions–but on both sides.

  78. FFB says:

    I agree that there is responsibility/blame on both buyers and banks that lent out too much. But the fact remains that those who didn’t jump into housing will be paying for this. I think this is what David is getting at when he mentions the bailout/reward. There are many of us who did the right thing and didn’t buy a house because we knew we couldn’t afford one yet. So why do we have to pay for people who didn’t do the responsible thing? The bailouts/economic changes help those who made the wrong decision and hurt those who made the right decision. Why does my savings rate have to drop? Why are housing prices being kept higher with economic incentives?

    They are people who were genuinely swindled and that’s a horrible thing. The gov’t needs to find a way to make banks responsible in these cases. But for the others their mistake of buying too much shouldn’t come out of my pocket.

  79. David says:

    Thank you FFB. I am tired of paying for other people’s mistakes with my tax dollars. :-)

  80. [...] my opinion, the individuals, not the banks, are at fault for creating this so-called crisis.  The banks didn’t hold a gun to anyone’s head [...]

  81. TommyO says:

    You are so correct it’s amazing! You can tie not having a mortgage and not using credit cards into you list of ways to save money!

  82. Vladimir says:

    Its the americans fault. They purchase something that are beyond their means. Very greedy.

  83. savage says:

    So basically what you are saying is that the government bail out of the banks is a good thing, because people cant afford a mortgage that was given to them in the first place? alot of people forget that the banks were making HUGE amounts of money on all of these loans… now, My only question is… What happened to all that money and why should we bail the banks out when they have all of this money in reserve? it doesnt occur to anyone that the housing boom was planned? or that the bail out was planned? how can you possibly blame people for being dumb enough to spend 1,000,000. dollars on a home when the bank is the one telling them that it is worth 1m dollars? (for their own greed) I know this post will probably be deleted… but, I dont care! you have to deal with your own concious!

  84. david says:

    Nowhere did I say any bailout was good. They are all bad and none of them should be taking place.

  85. [...] What You Can AffordThis is not the amount of mortgage for which you can qualify. More than likely you can qualify for more than you can afford. You need to sit down with your spouse and make a reasonable budget. Live on that budget for a [...]

  86. Diane Gary says:

    The way I see it. The mortgage crisis is as plain as the nose on my face:
    I’m going to use simple numbers here. Mortgages use to be held by the local banks. If you needed money you could use the equity in your home, but it was only at the price that the bank knew it would be. For instance, in times past, if you purchased a home at $30,000.00 and in 20 years you wanted to borrow some money, you could re-finance your house, because in that 10 years, your principal went down. The reality at that time was that your house was still worth $30,000.00, maybe even $32,000.00, but you had already paid down the principal to $20,000.00 so you could get an equity load to fix things that deteriorated with time. It was a good system.

    You want to really know what happened? The mortgages went from the local bank to the stock market. The stock market took the price of a mortgage and because of the way they “predict” prices, they “predicted” that a $100,000 mortgage would be $300,000. That was the price that someone would have paid for it in the course of the 30-year loan. That actual price was real. If you purchased a $100,000 mortgage you would pay back $300,000 in the course of the loan, when you add in the interest.

    What the stock market did, was state, this WAS the price of the mortgage, so then you had a mortgage that was now $300,000 instead of $100,000. They had to make it “˜easy’ for people to get mortgages because they KNEW that the average income of the American working family was $35,000.00 a year. They made the interest rates lower so that when people were paying on this $300,000 house, they knew that the actual price people would be paying for this house in a 30-year loan would only be $500,000. But then they started “˜predicting’ houses were worth $500,000, and the cost of the housing went to $500,000. and so on. It was based on “˜prediction’ and NOT what the house was worth when you look at what the average American was making for income. They screwed the American People and should be punished for it. Anyone in the financial institution that NEW this is what they were doing, should be punished.

    The question now is what are the homes “REALLY” worth? What should that principal be? I think EVERYONE should re-evaluate their homes, at the “˜real’ worth in the “˜real’ world. But they can’t do it at “˜today’s’ prices, because they were inflated to begin with.

    As an example: 3 houses on a street. 2 houses are in foreclosure, because of unemployment or whatever. All houses where purchased at $300,000, when they should have been $150,000. In fact, the reality is that the banks KNOW it is only worth $150,000, so they sell it in foreclosure at that price! Does that mean that the 3rd house on the street is only worth $150,000? YES!!! That is the price the banks are NOW saying the houses are worth. So, should that one house have their property re-evaluated at the “˜real’ price? YES!!!!!!! Everything should go back down to a level it SHOULD HAVE BEEN in the first place. This would never have happened if the “financial institutions” didn’t “˜play’ the mortgages in the stock market. Also, notice that the stock market can’t even figure out what a “Bank” is and a “Financial Institution” is. Those words have been interchanged in the past 10 or 20 years!

    That would FIX the mortgage crisis and punish the stock market for playing it in the stock market and punish these “financial institutions” that played this game. Mortgages should go back to the local banks where they should have been in the first place!

  87. [...] have written before (and got a ton of comments) about my thoughts on people who knowingly took on more than they could pay for, and I hope the government has something in place to help only those who made the right decisions [...]

  88. andrew says:

    thanks for sharing this :)

  89. Samuel Baker says:

    Hello,

    I am a financial writer. I write on several finance related topics like debt, loans, insurance, investment and so on. I came across your domain(mytwodollars.com) while surfing through the Internet to find a suitable financial domain for writing articles. It is highly resourceful with rich and nice contents and has a vivid presentation. I must appreciate your hard work and wish you good luck.

    I was wondering if you can allow me to write for your domain. I assure you to provide absolutely unique but relevant article so that it proves to be useful to your readers. I wish you consider this proposal and will wait for a reply from you.

    If you are displeased with my email, I cordially regret in advance.

    Thanks & Regards,
    Samuel Baker

Leave a Reply




If you want a picture to show with your comment, go get a Gravatar.

css.php