Oh, Marcie,
That is just sickening. There is nothing worse than these horrible people bilking the unsuspecting elderly out of all they have. I'm sure that in an already desperate state your dad wasn't even considering the fact that someone at the bank would lead him down this path. Things have changed so much since they last got a mortgage, I'm sure. I really don't see how we can justify rewarding these people. They should have to pay for their misdeeds. I am not sure what to do in these situations, but my heart truly goes out to you and your family. It is not the way things are supposed to be. It sounds like they were the victims of several societal ills, including the exorbitant cost of health care and prescriptions for the elderly. These thing must change. I hope that with a new administration they will.
J.

I read your blog sometimes, but saw your post and had to respond. This mortgage mess has hit my family hard. My 80 year old parents just lost the home they had since 1958. It is in foreclosure because out of desparation, my dad re-financed with an arm mortgage because he couldnt pay his bills - food, medication for my mom, etc... All were going on credit cards. Long story short - I found out about it when it was too late. Now my parents cant live together - my dad is in assisted living, my mom in a nursing home because she isnt walking well enough to be allowed to live where my dad is. She is traumatized from this sudden change. My dad is guilt stricken.

I picture some greedy mortgage broker who got my dad to sign up for a loan who knew full well it would bankrupt my parents. This person sleeps at night, I'm sure. I dont think my family will ever get over the hurt of this. My dad is a ww II vet. Greatest generation. Nothing to show for it.

I completely understand what you're saying. I bought my house almost two years ago and the amount of money the bank approved me for was ridiculous. Luckily my realtor told me to make a budget up to make sure I could handle the payments even if they changed slightly. I have an 7/1 ARM because I didn't think I would live in this house pass 5 years. But selling a house right now is not easy. I'm scared to death that the reset is going to be crazy because I don't think I understand how my interest rate could change. And mortgage companies don't want to refi when there's not enough equity. I'm concerned that all the "bailout" proposals from the senate only support the banks and not the borrowers.

Hi Rebecca,

You made me laugh. If that is a quick question, I have no idea what constitutes a slow(?) long(?) question. I'd suggest fessing up to your friend that it isn't easy and you haven't learned how to do it yet. But if it's still something you want to learn I'd try reading Sweater Design in Plain English by Maggie Righetti, and anything else on design you can find at your local library. I'd also stick to a top-down raglan or drop-shoulder design the first time. Good luck and have fun!

J

Hi Julia,

A quick question completely unrelated to your post....how on earth do I design my own pattern? A friend of mine wants a fairly basic moss stitch cardigan and I've gone and said I could make it. What I didn't know is I would have to design it first! Any suggestions?
Thanks!

Totally agree. Even though I live in England, we have penny pinched our hearts out trying to save and the property prices have TRIPLED in 10 years. All these people living a life style out of their "increased" equity now crying foul.

Seedless,

Well said. That is what I understand the situation to be, given the knowledge that I have so far. Housing prices will fall simply because they are so out of whack with salaries as well. You need new homeowners flowing into the market to buy these houses in order for them to continue to sell, and at the current prices, many are either priced out or unable to borrow even if they could repay the loans. It is very probable that everyone who buys a house in the bubble areas before 2012 is going to lose value from what I can tell - the question is only how much. Prolonging the correction process will just make things worse. I emphasized that the bailout bothers me as an ethical issue in my post partly due to time constraints and partly because the ethical aspect of it is important to me. But I also agree that the bailouts proposed just will not work, even if your goal is to prop up housing prices.

I feel like our country has gone severely downhill because of a confluence of greed and utter lack of foresight. This perpetual living on borrowed money cannot lead to any good and will likely make things much, much worse. If the bailout was going to help the people who made mistakes I would be for it whether it accomplished anything else or not. I believe in second chances, and where else are my tax dollars going to be sent? (Please don’t answer that - I’m sure I don’t want to know.) But rewarding the greed and abhorrent behavior of the brokers, banks, developers, and speculators is not just an ethically infuriating solution - it's an unsound one. There have been times in my life when I thought that I needed to bite the bullet and sweep aside my ethics for what appeared to be the greater good. I no longer believe it is possible to justify the end with the means, if for no other reason than that you cannot achieve the end you are looking for by taking the wrong path.

The question still remains, though. What the hell do we do about this mess? If anyone has some thoughts, please post! I think the one thing we all have in common is that we want out of the current situation.

Partly in response to Laura, up above: my understanding, partly informed by a good friend who runs a small mutual fund, is that there simply is no cure. A bail-out or otherwise increased regulation/intervention by the government will not actually prevent the market correction looming on the horizon; it will only extend how long the correction lasts. I understand that people's houses are losing value and I sympathize as much as a non-homeowner can. Objectively, though, housing prices are hugely overvalued across the entire nation. It currently costs less to rent than to own, and the fact many homeowners can't rent their houses out for enough to cover the mortgage payment means, frankly, that those homes are overvalued. This is not a long-term sustainable situation. Eventually, the prices have to fall--and financial institutions that have fingers deep in the mortgage markets like Bear Stearns will have to go belly-up or write down billions of dollars in bad loans. The only question is whether this will happen faster or slower.

This is such a great post! I'd love to grab a button for my page, but I'm not sure how?

I second that Hurray - it's so heartening to see someone get media attention for a worthy cause. I'm in southern California and can't see buying a house in my future any time soon, unless I move. Which is sad!

Well said. I am living the 2nd home I have purchased. Both times the mortgage broker approved me/us for much more than I/we could afford unless I wanted to spend 80% of my take home pay on my mortgage! I had the good sense to know better. I feel like I am being punished for it because due to this mess caused by greedy bankers and irresponsible home owners, my home's value is decreasing. Meanwhile there are 2 homes on my street in foreclosure and people are still living there. Are they living there for free or at a reduced rate while my husband and I work hard to pay our mortage every month. Sheesh.

The idea behind a free market is that the government and bankers are not allowed to manipulate it for their own gain. Unfortunately, greed is one of the constants in the world. JP Morgan, who bailed out Bear-Sterns, is one of the major stockholders in the Federal Reserve. The Federal Reserve gave JP Morgan money to buy out Bear-Sterns. The bankers of the Federal Reserve are greedy, evil people. I highly recommend the book "The Creature from Jekyll Island" by G. Edward Griffin as a real eye-opener on the truth about the Federal Reserve and the greedy, power-hungry bankers. :-)

go M!

I was listening to some BBC program recently where they were discussing the possible global economic implications of the US mortgage crisis. Its scary and tempting to bail everyone one. However, IMHO if the problem is not addressed head on, then it will never be fixed. A "bail-out" is only a band-aid solution.

ps: i'm now an auntie! :)
pps: whatcha doing April 26th, wanna hang out? (my life is getting back to normal...)

No flames from me. I lived through the horrible interest rates of the eighties and subsequent housing slumps. We had tough times but were able to hold on to our house and I thank God for that. All I can say to those who are living this nightmare is to hold on. Things will get better, hopefully a different kind of better, not one that just affects only one side of the situation.

I must say that I was so infuriated several weeks ago to read about the Bear-Stearns bailout, it just makes me furious to know that irresponsible banks playing the long odds can conduct themselves in an irresponsible manner and get bailed out.
It also saddens me to see entire neighborhoods in rust belt cities like Cleavland and Detroit go down the tubes because of predatory lending practices. My husband likens those bank to crack dealers and he is right.
All this has given me more reason to hate McCain as he believes that the market will just correct itself blah blah blah...we are ready for a change, dammit!

Well said! I can't even begin to express how angry I am about the housing situation and the bailout plans that do not even begin to address the issues that created this mess in the first place. My husband & I are in the unfortunate situation of having to sell our house right now due to career changes & relocation, and it is so frustrating, particularly since we saved for a long time to have a 20% down payment (which we don't expect to see much of after closing, if we can even sell the house - there is 11 months of inventory in our area currently). I have a feeling that we're going to end up with a mortgage payment for a house we can't sell, as well as rent for a place to live in the city where we are moving. Thankfully we can afford both, but it would sure be nice if the housing market wasn't such a disaster so we could move on with our lives.

Thanks for the info, Hoolia. My husband and I were just talking about this issue the other night, and we both think your friend is right on. I have added his blog to my "favorites" list, right up there with yours.

Add me to the list of the financially responsible people who are furious at the proposed bailout. We, too, scrimped and saved and bought the house we could afford instead of the dream house. We worked hard and paid our bills on time and made sure our credit credit rating was good and we got a conventional mortgage for an amount that reflected the true value of our house. I understand that there are a small number of cases where otherwise qualified borrowers were steered into the subprime market by unscrupulous mortgage brokers but the fact remains that the majority of these loans were made (1) by investors looking to make huge returns in the crazy housing market and (2) people who knew very well that they were borrowing far in excess of what they could afford and were gambling on values continuing to rise. If you take your money to Vegas and lose it all, don't ask me to bail you out. Same goes for your house. If you have bad credit, it indicates that you are a poor risk and you should not have been given a loan. If you can't document your income, you shouldn't have been given a loan. If you're a developer/speculator...well, you lost. Better luck next time.

I'm glad someone is finally doing something about this. I can't tell you how frustrating it has been to hear about the administration's ideas about fixing this. This is not a game of monopoly with friends where someone will always bail you out. I feel sorry for the people who didn't read or understand the mortgage contracts they signed, but if we are going to continue the guise of a capitalist free market, we should let the companies who chose to take big risks suck it up and deal.

Go M! Very well said, my friend. We are in much the same boat, demographically-speaking, and I share your sentiments. I do feel for the home buyers who were duped into the shady loans in the first place and now find themselves in a really bad position because of it. But I also agree with you that there has got to be another way- rewarding bad behavior is not something I'm in support of in general, including this situation. Okay, I will stop here before I get all riled up. ;) Suffice it to say, kudos to you and M and this post. xo-S.

Liz C.,

That is yet another facet of this problem. As a result of all this irresponsibility in lending, loans are much harder to get for some people who could make the payments, and that may only get worse. We're all affected by it in different ways. I truly feel for you, because it was not too long ago that my foolish 20's had me in a less stellar position. Definitely read up, because there are things that may affect your credit report in ways that you might not anticipate. For instance, one would think that closing credit card accounts would be a good thing, but in a lot of cases that can make your score go down. I got my score back up to a good level in a surprisingly short amount of time, and now it's insanely high. When we went to buy a car last year (the first in 14 years!) the dealer came back and said, "Do you know how high this score is? I keep looking for the mortgage. I can't believe that you don't have one." It was a great reward after years of hard work. You will get there; I'm sure of it. These are just trying times.

xox,
J

I sit on the other side: I have a 3-year old mortgage (not at subprime rates), and I'm facing the possibility of negative equity as housing values drop. I will not face foreclosure, because I did not borrow more than I can afford, but my largest investment/asset has lost a lot of value. If housing prices continue to drop, my loss continues to increase. Therefore, I'm less likely to spend money on furniture, yarn, clothes and vacations -- not because I don't have the money, but because now I have to make up for the loss of value in my house by increasing my savings rate. If enough similar, responsible people are in the same boat as me and behave the same way, we have a full-blown old-school depression on our hands. More jobs are eliminated as spending levels fall, companies other than subprime lenders fail, and a really vicious downward cycle begins. Morally, I despise that we are in this position, but I think allowing the current situation to play out without regulation is extremely hazardous. Do I agree with all the proposals in the bailout? No. But I do believe that we are only at the edge of the cliff, and that intervention is necessary to prevent a real crisis. I'd be very interested to hear an alternative proposal from your friend -- if there's a cure-all, I haven't yet read about it.

Laura (the other best friend) :-)

This is an issue that has been a huge sore for my husband and myself. My husband was married before, and we have custody of his two teenagers as well as our four year old daughter. In order to be living in a reasonably good school district, we're completely unable to save any money towards purchasing a home -- every cent of our combined six-figure salary goes to rent, child care, and our kids. (okay, fine, and also yarn.)

The issue in OUR case isn't that we can't ~afford~ a home, it's that the credit ratings system in this country prevents us from purchasing one. We have access to funds for a down payment and aren't looking for crazy loans for more than we can afford. Our credit report does not reflect outstanding debt other than student loans, but it does still reflect issues from my husband's previous marriage and my stupidity in my 20's. It will continue to reflect all those things for another 3 to 5 years, no matter how clean and good we retain our credit between now and then.

I just would like to see a federal program to enable anyone who can actually afford a home -- as proved by income and debt-to-income ratio ONLY, and NOT the credit score system -- to be able to get a standard (15 or 30 year standard terms) mortgage. I think that would do more to improve the economy in this country than any number of other possible steps Congress could take, but I also know from working on the hill for my day job that chances of ANYTHING happening to benefit non-corporate/banking constituents are very slim to non-existent. (and also that the majority of Congress are in a holding pattern on any major issues until after the November election. Much sound and fury going on, but ultimately signifying nothing.)

I agree that it would fantastic if we could make the voices of individuals actually heard, instead of brushed-away background noise. I'll be clicking over to your friend's site in a moment. Thanks for posting about this.

May I just say "hell ya!" :)

There's nothing I can say that you haven't already said better.

I am constantly struck by the great divide between rich and poor that seems only to grow. We are in a recession, but I look around and see dramatic signs of wealth (even honestly obtained) at the same time. Not enough well-off people think to share their good fortune and luck with those less favored. It's all so very wrong -- and hard to combat. I wish your friend lots of success.

I read your blog regularly but it took this post for me to comment! I say HURRAY!!! Fantastic work. You and your friend voice my sentiments entirely. I live in California too. My husband and I worked and saved for years to buy a house (prior to this past housing upswing). This affects EVERYONE to some degree.

I read your blog regularly but it took this post for me to comment! I say HURRAY!!! Fantastic work. You and your friend voice my sentiments entirely. I live in California too. My husband and I worked and saved for years to buy a house (prior to this past housing upswing). This affects EVERYONE to some degree.