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I Hate The News... - Bore Yourself to Beers [entries|archive|friends|userinfo]
Steven

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I Hate The News... [Jun. 8th, 2008|08:36 am]
Steven
Especially that on BBC America.  They're just like ABC, CBS, NBC, and CNN.  They ran a segment called <i>Foreclosure: Credit Victims</i>.  Credit Victims?  Well, I thought this was a company kidnapping people in extreme low-income neighborhoods and forcing them at gunpoint to buy a house.  Or, I was thinking that some company breached the terms of the contracts and charged adjustable rate mortgages instead of fixed rate.  Turns out neither was the case.  There was a woman in the story who bought a house with a value of 12 times her annual income.  Single with two kids.  12 times her annual income!  And they're calling her a victim???  This is crazy!  She bought the house in 2005.  We are in the 21st century now!  More information is available than ever before!  People can send emails on their cell phones!  We have GPS available in cars!  You can find virtually anything you need to know on this thing called the internet!  A little due diligence on your part before making the biggest investment of your life couldn't have been a bad thing!  There is no victim here; you didn't do your homework.  And now the rest of us have to pay to bail your ass out.  If she had done a little research she would have found...

Real estate people always say the rule of thumb is to never buy a house more than three times your annual income.  Or household income if you're married or if your SO is going to be on the title.  If you're going in it alone and you make what she made, 39,000 per year, the most house you can afford is $117,000.  And in NYC, you aren't going to find anything near that.  Nor will you in much of the country.

This is why houses aren't selling right now.  The prices are higher than the market can reasonably handle.  And it's going to be a long time before they get down to where the market can handle it.  It's when 3x the average household income meets or exceeds the average home cost.  Right now, Florida is about 5 times.  So, unless you live in certain areas that are exempt from this market swing (Detroit or St. Louis, for example), don't buy a house, especially if you're breaking the 3 times rule!  Wait a few years. 
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Comments:
From: 1smart1
2008-06-08 03:00 pm (UTC)
Don't forget the fact that this woman probably pays for top of the line phone service, has a large flat-screen TV, purchased a car well beyond her means and pays for premium satellite channels.

Yeah, it's our fault that she's so damned irresponsible.
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[User Picture]From: stevis78
2008-06-08 04:02 pm (UTC)
People seem to think that 100% of their income should be disposable. All the things like shelter, health insurance, *dependable* transportation, food, electricity, and water should be provided by the government.

If some people want to live like that, go to Cuba where you get food rations, free health care, almost enough electricity to run a toaster, brown water (that you have to boil), just enough gas to boil your water, and can spend your remaining 90 cents per month to dance the night away and screw off.

I used to be irresponsible, too, but at some point you have to learn that's not the way to go.
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From: 1smart1
2008-06-08 04:11 pm (UTC)
I used to be irresponsible, too, but at some point you have to learn that's not the way to go.


I wish more Americans had had that epiphany.
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[User Picture]From: nighthawkal
2008-06-08 03:43 pm (UTC)
She's definitely someone who should have done her homework. I thought everyone knew that 3 or 4 times your income rule. If the bank changed the terms on her or did shady things, I could understand complaining, but she shouldn't have bought a house worth 12 times what she makes. Of course, why did the bank give her the loan? Aren't they supposed to make sure the person can afford the loan before they give it? Any research they would've done would've probably shown that she couldn't afford the house.

I think one thing really hurting people through this housing crisis is that a lot of people in this country haven't had a good financial education. They don't know anything about budgeting money or about credit. I had economics in high school, but I don't think it was that helpful for the real world. They need to have a personal finance course in the schools that will be helpful for the real world. I think I heard on Clark Howard's show that only 12% of the population can read a contract and know what they're signing. That means that 88% of the country is signing these contracts and don't know what they mean.
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[User Picture]From: stevis78
2008-06-08 04:10 pm (UTC)
I thought everyone knew that too.

These lenders I think were a little irresponsible themselves, but the thing to remember is that they're in business to make loans. Just like Circuit City, for example, is in business to sell electronics, many of which I can't afford, but are still on display anyway. It's up to me to determine, $1,200 for a TV, no way. Just like it should have set off bells in that woman's head, "Hey, $485,000 house, I make $39,000 a year. How can I afford this? I can't."

12% is a pretty scary statistic. But not totally surprising, as it takes effort to learn that stuff. More effort than most people are willing to make.
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[User Picture]From: nighthawkal
2008-06-08 04:29 pm (UTC)
Its true that banks are in a business to make loans but they're supposed to examine these people first before they give away loans like candy. YOu want to give loans to responsible people who will pay back not people who have no business receiving these loans.

There's a difference between buying electronics and getting a loan. If you buy a TV from Circuit City, they've made their money once you've bought it and that's it. They need nothing more from you. How you bought it doesn't matter to them. But if you get a loan from a bank, they have to examine if you can afford that loan first and if you have a history of being responsible in the past, because they need you to pay in the future to get their money back. A lot of people think they can do a lot of things. People think they can sing. But if they try out for American Idol and they suck, Simon stops them. THe bank needs to do the same thing when it comes to people who make $39K/yr who want $485K houses. They should either just approve them for a lower amount that they can afford or say "no".

I think that the fact that only 12% of the population can read a contract means that there is something wrong with the education system. Its not teaching things that are relevant to peoples' lives. I'm not surprised that only 12% of the population can read contracts. I think when I see a lot of people sign contracts for a cell phone or whatever, most of them don't even read the thing, they just sign it.
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[User Picture]From: stevis78
2008-06-08 10:33 pm (UTC)
"Its true that banks are in a business to make loans but they're supposed to examine these people first before they give away loans like candy. YOu want to give loans to responsible people who will pay back not people who have no business receiving these loans."

Absolutely. My point is that both parties have to take preventative measures, and neither did so. The mortgage company didn't screw her, they screwed themselves because they made a deal that would have (and did) screwed them had it gone south. The chances were just too great, and, well here we are. It is in the bank's best interest to not make these deals, I agree.

" I think that the fact that only 12% of the population can read a contract means that there is something wrong with the education system. Its not teaching things that are relevant to peoples' lives. I'm not surprised that only 12% of the population can read contracts. I think when I see a lot of people sign contracts for a cell phone or whatever, most of them don't even read the thing, they just sign it."

Yeah, I never learned how to do this while I was in school. I learned from experience and from my parents on how to do this. Especially my stepmother. She's notorious for getting all the details down. Nothing gets past her. Both educators and parents need to take more of an interest in teaching their children as much as they can about the real world. That way they have a chance.

I work at a storage facility on Saturdays, that's my side job. I started out doing this as a favor to the owner once in a while, and it blossomed into a weekly thing. Anywho, I run into people all the time who are surprised , even shocked by circumstances that arise. Late fees because they're late, authorized access, stuff like that. And they were shocked because they didn't bother to absorb the conditions in the contract. And all of this stuff is clearly stated in the lease. I always want to say, "It's all in the lease that you do diligently signed and agreed upon." But, the customer's always right...
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[User Picture]From: nighthawkal
2008-06-09 06:35 am (UTC)
In this case, from what you describe in this story, I think both of them were equally stupid. She's stupid for getting a house that she definitely can't afford and the bank is stupid for giving her the loan. What kind of standards are they using if someone like her is getting a home loan for that much? Of course, you would expect and hope that the bank is smarter than the loan applicant and that the bank uses some sort of standard for giving out loans. Some people who know nothing about economics and about getting loans from a bank, may think they can actually get that loan. Its up to the bank to be smart and not give that loan to that person. I saw stories similar to the one you mentioned on CNN and a lot of these people in these situations really are stupid.

Its great that you have parents that have that knowledge but there are a lot of people out there that have parents that are clueless about economics and credit. How many people in this country have excessive amounts of credit card debt because they just use their card for everything and buy things they don't need. There are people out there that don't have money for basics but then they'll get a 50 inch TV or something excessive like that.
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[User Picture]From: banjobraids
2008-06-08 06:29 pm (UTC)
Totally agree! I don't feel sorry for those people at all, and it only makes me angrier to have to listen to their crap when I'm in a house that cost less than our yearly income, yet has dropped 20K more in value because of all the other dumbasses and their inflated houseloans crashing this market. We are learning a valuable lesson about living within our means, on a smaller scale and I welcome it.
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[User Picture]From: stevis78
2008-06-08 10:37 pm (UTC)
"We are learning a valuable lesson about living within our means, on a smaller scale and I welcome it."

Indeed we are. That's exactly what it is. Living within your means.
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