In the past several years, I have driven by (or otherwise seen) new housing additions spreading like wild-fire. Housing additions that only hosted the $200,000, $300,000 or maybe even $450,000 houses. I looked at others and asked, "Where are all these people working that they can afford these homes?"
We looked at each other in wonder. None of us had a clue.
Then I began reading about the new loans where one only makes payments on the interest. The bait. The enticement. The making it easy for people to get what they want NOW with little thought of the consequences likely to follow. The suggestion that it all makes sense and will work out all right, except what happens when it doesn't?
I was reading "Wall Street banks walloped by mortgage worries" by By Tim McLaughlin, (Reuters - March 13, 2007) and can't agree with the concept that is implied (through his sources) that the fault of all problems in this mess rests with loans being given to those with poor credit histories etc.
No, I certainly can't agree.
I know of a family that doesn't have a perfect credit history due to unexpected hardships, medical issues and some inaccurate allegations that the credit bureaus, and others, don't seem interested in correcting. This family wanted to get a home loan for $20,000. They weren't even considered because the loan wasn't enough. However, if they would apply for a mortgage on a more expensive house, their application would be considered and was suggested to be likely to be approved (when any financial information was provided & considered). Several companies were contacted and the minimum for most was $50,000 or $60,000.
The couple didn't want a $50,000 home or the payments that went with it -- they wanted the house for $20,000 and the ability to readily pay it off. No one would help.
How odd that common sense and financial planning was so disregarded.
Poor credit rating is not necessarily a poor risk indicator. Not all reporting on people is being done so with truth and honesty. Nor does a rating give a true picture of what has transpired. Anyone can fall into hard times. Anyone.
So, the answer is to charge a higher interest rate for those less able to pay it? If they can't pay it, who benefits? Does the short term collection of high rates make any of it worth while, when it is actually those "high rates" , in and of themselves, that have set many people up for the likelihood of failure and a repossession in the making? And this makes sense because "why"? I would think that successful completion of any financial agreement would reap better benefits for all concerned, than a setup to fail for any in the legitiment field of finances.
What about the people that merely want a safe, healthy and affordable house that would actually have payments less than rent, but no one will consider them because the focus is on financing the high dollar houses for those who can't actually afford them, but are perhaps "told" they can?
With all the foreclosurers we are hearing about -- will we have housing additions that are like the ghost towns of the past? Ghost additions and a sad memory of the promises that someone once presented as a possibility that really wasn't as easy as suggested?
It's good to look rich, I suppose, but what about all the families that merely want an affordable home that meets their family's needs and is safe and economical to boot? That doesn't take a $450,000 house to do that no matter what many may think.
So "who" was pushing these high priced homes and the suggestion that so many could afford them by paying interest only payments without truly discussing that at some point there would be a requirement to pay beyond the interest and the consequences that might bring?
(And how come low amount mortgages weren't also considered in the scenario of it all of paying interest only for a time by many, if not all, lenders?)
Who becomes most responsible about any of this? The customer that got sold a bill of goods, the salesperson that was selling the bill of goods, or the financial instituation that made it all happen?
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Tuesday, March 13, 2007
Who Is Most Responsible for the Mortgage Woes?
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