New Haven Independent

Posted by: New Haven Tea Party | November 12, 2007 3:41 PM

As a general comment, I agree. However, most of those with subprime loans, don't even know they're subprime. The mortgage broker and real estate seller didn't say, hey, you're a sucky credit risk. They just found them a boutique loan that fit their individual circumstance. You also have a fact error: You say these sub-prime mortgagees have been paying next to nothing. You're getting your keyboard ahead of your brain. The so-called teaser rates - are not teaser rates. They were and are market rates - usually 6% or better. But their loans also have a re-set clause, usually to the LIBOR which escalates faster than any of the other indexes. When the borrower closes, the attorney mentions the LIBOR, but doesn't explain what that means as a practical matter in terms of rapid rate resets.

Posted by: THREEFIFTHS | November 12, 2007 10:12 PM

Steve Kalb
You Said Rent Look At How Rents In This State Have Gone Up In The Past Ten Years.Some People Who Pay High Rents Are Paying The owners Mortgage!! What Should Be Done In This State Is Like New York Rent Control Rent Stabilized Mitchell Lama Housing Programs. Also Get The Dvd
Movie Max-Out And It Shows How The Mortgage Vampires Prey On The People. P.S. Do Not Forget The Student Loan Rip Off That Is Next In Line Behind The Sub Prime Loans!!

Posted by: Maria | November 13, 2007 4:10 PM

The subprime industry made irresponsible, reckless loans to people who lacked the knowledge, education and preparation to know they were being swindled. A lot of these borrowers are armed with a high school education. For you to demean these working families, kicking them when they're down, is unreasonable. It also makes you sound incredibly self-righteous. I'm sure you did not intend that -- but you go from making a valid point to alienating your readers. We're not blinded by sympathy. Many low-income borrowers had far less knowledge about mortgage obligations than their lenders did. Most high schools do not even offer courses on financial literacy.
You've had a very privileged life. Don't stomp on people just because they haven't had the benefits of your education and background. It makes you look small.

Posted by: Mortgage Truth | November 13, 2007 9:26 PM

Subprime is a great philosophy. If you've made mistakes in the past, you'll get stuck with a higher monthly payment in the future.

So essentially, if you couldn't make timely payments in the past, a higher rate and monthly payment in the future should set you straight.

Hmm...

Posted by: Ned | November 14, 2007 8:20 AM

I wonder how many people who took subprime loans are driving new cars, watching plasma tv's, bought lots of overpriced junk for themselves and never bothered to save a dime. Unless someone was actively swindled, if they want to know where the blame lies for their financial mess - just look in the mirror. You get a subprime loan because you have bad credit, in other words, you can't or don't pay your bills and nor do you save. Also, please don't drag out "the struggling family" or "the children". Kids cost (a lot) of money, if you can't afford to feed and house them, don't have them! Education, job, savings then a family - in that order; it's simple. "If you can't afford cash, you can't afford credit".

Posted by: Maria | November 14, 2007 10:24 AM

Ned,
Two problems with your argument:
First, the problem the mortgage industry faces is that a lot of people were swindled. In other words, the people giving them the paper work did not tell them the mortgage rate would go up. They were told they had a fixed rate and did not. I know a someone from Hamden who just found out -- after two years -- that the mortgage was not when a bank called and told her the mortgage would go up by $500 a month. (Clearly legal action is required in this case). Furthermore, this woman is not out maxxing her credit cards. She doesn't use any because she doesn't believe in them. This is a single mother who turned off her phone service to pay her mortgage. Her television happens to be a gift from a friend who upgraded. So why generalize about borrowers -- does it really buttress your point? People caught in the variable mortgage trap have many different backgrounds and reasons.
Second, ARM reports more people are using credit cards to pay for basic needs, ie groceries. Perhaps you know some people with bad credit who buy plasma televisions and new cars, but the majority of people tend to be more responsible and use their cards to pay doctors, dentists, urgent home repairs, etc.
You should check out some collection industry reports... They have a really good handle on the market.

Posted by: Barry | November 14, 2007 12:46 PM

What does it mean to loose a house that you had 100% financing on? If the house has gone down in value, just walk away. You have nothing but your credit rating on the line, and more than likely that wasn't so hot before the loan. In fact, chances are you are better off walking away from the loan even if you can afford it. If you bought at the height of the market and your rate is high, you could probably walk away from the note, wait for the house to be foreclosed on, then rent it for far less than your previous payment. Over the long term walking away would be a better financial decision than making the payments. Fact is, the lenders under priced the risk of the loan. Renting the same house for $1200 a month makes more sense than buying at $2000 a month, unless the house is appreciating at 20% per year, but those days are over.

Posted by: THREEFIFTHS | November 14, 2007 4:53 PM

Hey Ned Anyone Can Be Rip Off, How About The Dutch
Who Rip Off The Native Americans When They Con Them Out Of Manhattan Island For 24 Dollars!!!

Posted by: winfield | November 14, 2007 9:34 PM

I would rather see the mortgage borrowers get bailed out than the bankers! Joe lunchpail is being hung out to dry while Ben Bernanke has let the dollar drop like a brick out of a helicopter to save the investment banks from having to eat their worthless CDOs.

Posted by: Ned | November 15, 2007 9:49 AM

Unfortunately, it seems, that economics, history and logic/skepticism are not taught in schools - quite the opposite; people are taught to not question, to believe in questionable ideas and to trust people who have power over them. A little Latin would go a long way: cui bono, and caveat emptor. Wall Street = Las Vegas, only not as honest.

Posted by: Jon Dranoff | November 15, 2007 10:08 AM

This used to be a two-sided issue, but is rapidly becoming a consumer disaster. There is no question that lenders must force people who are weak credit risks to pay higher rates - otherwise the math doesn't work. If that happened, poorer individuals might never receive credit, which would prevent them from the ability to purchase homes (as was the case before the '70s.

However, it is clear that subprime lenders now see these loans as easy money. They prefer to sell subprime loans, because they are in a win-win-win situation. Either the loan recipients pay the exorbitant interest, they default after some time, providing assets to the lenders, or they end up refinancing at time, providing more fees for the lenders in the future.

Sure, consumers should understand this. But while it may sound paternalistic, they often do not. Tell a college kid that he can have a top-notch stereo set-up just by signing up for a credit card, and you have an easy sale. Tell someone whose family has never had the ability to own a home that home ownership is within reach and the details of the loan may be ignored. Couple that with inadequate (or no) legal representation and bad counsel from family and default seems to be an inevitable consequence.

A good (if biased) documentary on this subject is "Maxed Out".

Posted by: andy ross | November 16, 2007 8:47 PM

Unfortunately there are so many people ahead of me on this particular blog that I do not think many people will read what I have to say, which is the truth and reality. Sub- prime mortgages are not to blame for our current economic condition. People are not losing their homes because they cannot afford an increase in their mortgage payments. The fact is that, most mortgages have not even been adjusted as of this moment in time. They will be adjusting next year. People are losing their homes because they can not afford them to begin with. People are losing their homes because they have lost incomes or family members incomes that they depended on for additional income. People are losing their homes because insurance rates have tripled in the last two years, and taxes have increased by 50% in some cases.

Now, who is to blame? For Gods sake, when are we going to make people take reasonability for their own actions? Some say it is Wall Street for making so much money available to the banks, which pushed it on the brokers. What about the person who signed on the dotted line. Where were they during all of this? Let me remind every one that the borrowing public must have an attorney represent their interest in a real estate closing transaction. To date, I have not heard one morsel of blame being fired at the attorneys, who made millions of dollars in fees and title insurance on the so called unsuspecting borrower. There is literally heaps of disclosure paperwork that goes to a borrower, and their attorney, well before a closing, and in most cases the borrower has another 3 full business days to check through the papers, consult with any one they want too and decide to cancel the transaction if it does not seem fair.

I am sorry, but boo hoo for the general borrowing public. Were they duped? No. Are there decadent mortgage bankers, brokers and banks out there, that are better sales people then they are advisors? Yes. Howeve,r that is the same for every profession in the world, including journalist, attorneys, accountants, doctors and even clergy, that persuade people to do something in their own best interest for self gain.

When will there be an out cry and law suits against Dunkin Donuts for forcing so much caffeine down our throats?

Stop the crying and start taking reasonability for yourself!

Posted by: Brian Brady | November 24, 2007 4:53 AM

I have a balanced approach to the discussion, here. I'm a 15 year mortgage veteran and never have I seen a time as despondent as this.

Bad actors infiltrated my industry. They teamed up with unscrupulous REALTORs who neglected their fiduciary duty to the client. Finally, the cliets stuck there head in the sand and ignored 4th grade math...all to worship at the Church of the Property.

Market forces will shake out this problem, rid our industries of the marginally committed, and right this ship.

Now, some admonishment for this yellow journalism. You're attempting the old trick of "blaming the money lenders" for economic problems. It's been done throughout history. It's easier to blame the money lender rather than to suggest financial education to "Joe Lunchbucket".

C'mon! My industry did some dumb things but there is PLENTY of blame to go around.

Posted by: Mortgage Maniac | December 7, 2007 10:54 AM

Interesting post. Thanks for your view. I look forward to your future work.