
What an exercise in media bias!
Foreclosure crisis looms: South Florida Sun-Sentinel After a few paragraphs about cancer patients losing their homes over medical bills - they aren't as they declared bankruptcy and will keep their homes - and a treasure trove of those horrible evil bankers, we finally get to the meat of the problem.
People who secured adjustable loans found out that they couldn't afford the monthly payments once interest rates rose.
Oh, so you didn't understand the contract you signed. Why did you sign it? Real Estate and the associated lending are two of the most heavily regulated industries in America. I guarantee those mortgage documents spelled out how the rates would change, what index would be used, how much the rate could change in a given year and whether or not negative amortization was possible under the loan. I know because I have had adjustable mortgages.
I have said it before, and I will say it again. If you cannot afford a given home with a 15-year standard mortgage, you can't afford the home and need to look at something more modest. Given that, there are reasons to not take the 15-year loan. It should still remain the yardstick you use. (And I'm not sure you should sign an adjustable rate mortgage when EVERYONE is saying that interest rates have to rise.)
Oh, I realize there are people in homes today that couldn't afford them without going to a 30-year loan. That just means you can't afford your house, not really. You bought the absolutely most expensive house you could qualify for. Why? It means you are probably not saving for you kids' college education, your retirement, a rainy day, etc. You probably have no investments outside of an under-funded 401K plan - heavily weighted toward your employer's stock. I will also guess that you have too much car insurance, and not enough life insurance. (Especially if you have kids.) That describes most Americans today.
If you signed up for loans that you don't understand, that isn't my fault and it isn't the real estate agents fault and it isn't the bankers' fault. It is your fault. NEVER sign a contract you don't understand. If you don't understand that kind of thing, hire a lawyer to explain for you. If you still don't understand don't sign.
But don't claim that the banks cheated you - or got you to sign things you didn't understand. It isn't their job to make you understand. It is YOUR responsibility to understand. Have you ever heard the phrase, "responsible adult?" No, I didn't think so.
I expect to see legislation later this year asking me to bail out these "poor unsuspecting" dolts who signed up for loans that they can't afford. Why else have a crisis, if you aren't going to have a government funded solution?
Here are some other clues. Pay cash for everything except real estate. Yes, you can pay cash for a car. Start today, by paying yourself 350 dollars a month - or whatever you think is reasonable. In 5 years, you will be able to pay cash - this will let you get the car for less money. Continue to make payments to yourself - you might want another car in 5 years time. (Don't even ask me about the insanity of buying new cars... do you really want to pay 5000 bucks for being the first person to drive it off the lot?)
You really want to pay cash for furniture, electronics, (toys in general) etc. Just about everything. These things are not assets. When they are tied to credit they are liabilities (this is true of your house as well). Lose your job, and they will bury you.
The bleeding hearts - like the author of this story - don't believe that anyone except the evil bankers are responsible for this "crisis." Get over it. Banks made bad loans, and they will pay for it. Don't expect me to pay for it.