March 23, 2007

The Mortgage Crisis (Updated and Bumped!)

I feel sympathy for those folks who are starting to lose their homes because they took out adjustable mortgages. That's a bad situation to be in. I just didn't realize that they were all stupid. I figured that they had gambled that rates would stay low, and lost that bet. Or maybe they miscalculated just how much rates would rise and how it would affect their ability to pay.

Today I heard a news report that actually told me that these poor people were in the position they are because they didn't understand how an adjustable mortgage worked.

So these unfortunate borrowers - who, by the way, initiated contact with these evil lending institutions - were forced to sign enormous documents in multiple places in the presence of lawyers without anyone making an effort to explain what the conditions were in order to borrow tens or even hundreds of thousands of dollars.

See what I mean? These folks were stupid! They didn't know enough to ask questions. They didn't *understand*! They're victims.

Like I said, I feel sorry for them because it's a lousy situation to be in. But not sorry enough to think we (as in the taxpayers) should bail them out. And if their credit is ruined for a while, then maybe it's better that way because they're obviously not ready to play with the adults in the real financial world.

Update: Over at Wizbang!, new contributor Jayson Javitz provides an insider's look at the looming "Mortgage Tsunami". It's worth checking out.

Posted by: Ted at 04:57 AM | category: Square Pegs
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1 It is just plain common sense that if you take on an adjustable mortgage when interest rated are basically as low as it is possible for them to go, there is really only one way they are going to adjust.

Most adjustable mortgages have limits on how much they can adjust over time and even a max they can adjust to. If you can't afford the mortgage at that rate - you shouldn't be signing.

As little sympathy as I can muster for those who made poor personal financial decisions, I have even less for the institutions who made high risk loans. No one forced them to lend the money anymore than the individual was forced to borrow it.

I say let them all suffer the consequences of their decisions, then perhaps they wont repeat the mistakes they made.

Of course given that I am trying to sell my house and re-locate the timing of this really couldn't suck more.

Posted by: Stephen Macklin at March 20, 2007 11:52 AM (UquFN)

2 "were forced to sign enormous documents in multiple places in the presence of lawyers without anyone making an effort to explain what the conditions were"

Yep, they had big guns pointed at their heads! It just goes to show how financially uneducated and undisciplined we are as a country.

Anyway, I stopped by to share this article with you. I read it and thought of you. I also wanted to add you to my Sage list 'cause I couldn't find you in feedster.

Posted by: michele at March 21, 2007 10:28 AM (cV7Xy)

3 Sorry, here's the link:
http://news.bbc.co.uk/2/hi/science/nature/6474021.stm

Posted by: michele at March 21, 2007 10:29 AM (y9UuV)

4 I don't understand. I bought a house over a year ago and got a 30 year fixed rate of 5.5% for 80% of a $380K house, plus a 10% loan for 30 years fixed at 7% with no pre-payment penalty.

I'm guessing these idiots took the adjustable so they could buy more house than they really could afford.

No sympathy here. We should not bail them out.

Posted by: BillyBob at March 21, 2007 03:03 PM (G6+/S)

5 I seem to recall that, by law, borrowers are also given explanatory sheets of "HEY! Here's What You're Agreein' To, In Plain Ole Language, Buster: Yer Rate COULD & Probably WILL Go Up!"

Posted by: dogette at March 23, 2007 08:52 AM (q/UVc)

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