Wednesday, April 29, 2009

I Can't Believe NPR Is Still Doing These Stories

"It was the eeeevil banker's fault. Sure I signed a contract I didn't read or understand, but that isn't my fault." Homeowner faces foreclosure after interest-only loan No kidding. He signed up for a variable-rate, interest-only loan, with a teaser rate. He admits he didn't know it was an interest-only loan because he didn't read the paperwork in advance. He could barely afford the teaser rate. So when the rate adjusted he couldn't pay back the note.

Now, exactly who is responsible for his problems?

This piece of naivete is classic - he isn't the only one who fell into this trap.
I'm a person that, I deal with you on an equal basis. I figured I'm going to be fair with you. You be fair with me. You know. But I found out that ain't the way, that ain't the way they deal.
Caveat Emptor is written in Latin, because the principle is quite old.

If someone is trying to sell you a 500 dollar TV, you view them like they might not have your best interests at heart. If someone is trying to sell you a 5000 dollar used car you think he might be trying to rip you off. But someone comes along who is trying to sell you a 500,000 dollar house or a 500,000 dollar loan, and suddenly they are you best friend. You feel you can trust these people. My advice to you: read the fine print. They are trying make money like the next guy. Sure, there are good bankers and good real estate agents. But most real estate agents will try to up-sell you. ("Don't you want granite in the kitchen?) Why do you ask them what YOU can afford? Shouldn't you know the answer to that before you walk into their office? What exactly is your responsibility as a buyer?

Were there bad bankers? Sure. For the most part, mortgage brokers were commissioned salesman. They are going to try and sell you the loan that makes them the most money. That's how things work. It isn't always pretty. Hence, "Let the Buyer Beware." Some of them are going to try to convince you to take loans you can't afford, and while underwriting should have rejected those loans people couldn't afford, it is still your responsibility to know what is in contracts you sign.

I know, being an adult is a bitch sometimes.

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