Home loans: I can't believe folks are so dumb

[OldTrader]

One more aspect of this.

In the state of California, the law says that if the borrower defaults on a purchase money mortgage, all the lender can do is take the house back. He can't sue for a deficiency, if one exists after the property is then resold.

So in essence, in California, the deal the lender made with the borrower goes like this:

Borrow some money from me at a teaser rate. I don't care what your income is. Just lie to me. I'll give you a payment that allows you to buy a house well in excess of what you could normally afford. You can have spotty credit, and you don't need much, if anything in terms of cash to buy.

If the property goes up in value, you can resell and pay me off. No harm, no foul. If the property goes down in value though, just send me back the keys, walk away, and there will be no further consequences.

LOL!

Now ask yourself this...in the state of California, who was the dumb money? Maybe the borrower sat down at the closing table, READ the loan documents, and consciously said to himself...what do I have to lose?

OldTrader

 

[otherside]

Oldtrader,

I wholeheartedly agree with you regarding the lenders. No doubt about that.

Borrowers who did 100% financing made a great risk-free trade because they could walk away if times got tough.

But what about the people WITH equity who refinanced into ARMs who put their home equity at risk? That is dumb.

How about the borrower's I signed as a notary who were paying $12,000 in pre-payment penalties to get $20,000 cash out of their house to buy a pool or a car? That is dumb.

What about the fools who believe there is something 'secure' about doing a SecureAdvantage Option-ARM loan? I am seeing a commercial on TV right now from Quicken Loans. Deferring interest in most cases is dumb.

What about the borrowers who were PLANNING on selling their home in a few years who did a refinance and paid $4 -5,000 in closing costs to lower their payment in the short term? That is dumb.

I am not saying all borrowers are dumb, just that a lot of them are.

 

[blast19]

Old, good point. Plus, almost half of buyers had piggybacks last year and so their interest in the properties is quite small because they can just default on both loans and walk away.

Like I said...the lenders were the dumbest of them and they should be the first ones robbed of all their cash to pay damages....because you have guys like Mozilo who are loading the truck with money getting ready to head for the hills and he was one of the chief architects it seems. These lending companies and their execs should be held accountable.

 

[Ivanovich]

Quote from otherside:

I
I like to consider myself a libertarian, but the endless bounds of human stupidity make me think that a lot of people need to have someone there to save them from their stupid selves.

The shame is that their choices affect us all.

Darwinism. Let them reap what they sow.

 

[TM1]

IMO the majority of US residents are in fact stupid, they can tell you more about the entire life line of some tv show, but have no idea what the rate was on their mortgage, or how much they paid in closing costs and what those costs were for, or if they were legit.

Many people buy cars and houses based on the monthly payment, and lenders of course pray on this. I'm convinced that the percentage of population with triple digit iq's is only in the 10%-15% range. Every time I leave the house I'm reminded of how myopic the general public is, everytime I watch a tv commercial I am reminded of stupid the advertisers know their target audience are.

The only thing that surprises me, is that there are enough smart people left to keep the country going.

 

[blast19]

Quote from TM1:

IMO the majority of US residents are in fact stupid, they can tell you more about the entire life line of some tv show, but have no idea what the rate was on their mortgage, or how much they paid in closing costs and what those costs were for, or if they were legit.

Many people buy cars and houses based on the monthly payment, and lenders of course pray on this. I'm convinced that the percentage of population with triple digit iq's is only in the 10%-15% range. Every time I leave the house I'm reminded of how myopic the general public is, everytime I watch a tv commercial I am reminded of stupid the advertisers know their target audience are.

The only thing that surprises me, is that there are enough smart people left to keep the country going.

All of that is true and that's why we need more immigrants...they're the ones who work hard trying to achieve the level of excess and gluttony that we are afforded just by being here....for the most part anyway.

This is a country that elected Bush president....not exactly a show of confidence to most of the world that Americans are capable of making decisions based on sound reasoning. And yet, in 2004, it happened again.

 

[dandxg]

Quote from TM1:

IMO the majority of US residents are in fact stupid, they can tell you more about the entire life line of some tv show, but have no idea what the rate was on their mortgage, or how much they paid in closing costs and what those costs were for, or if they were legit.

Many people buy cars and houses based on the monthly payment, and lenders of course pray on this. I'm convinced that the percentage of population with triple digit iq's is only in the 10%-15% range. Every time I leave the house I'm reminded of how myopic the general public is, everytime I watch a tv commercial I am reminded of stupid the advertisers know their target audience are.

The only thing that surprises me, is that there are enough smart people left to keep the country going.

Correct. I love watching dumbasses on that show King of Cars just focusing on monthly payment. Last time I bought a new car I brought a finance calculator and the salesman was shocked. Needless to say I caught him twice trying to stick in junk fees. I told after the second time if the deal doesn't look like this, because I had already negotiated it over the phone, me and $7k deposit check are walking. Guess what it came in at that amount.

 

[deviltrader]

Quote from OldTrader:



If the property goes down in value though, just send me back the keys, walk away, and there will be no further consequences.
LOL!

You think walking away from a loan has "no consequences"??? Are you kidding?

 

[deviltrader]

I remember ~1.5 yrs ago, I had seen lots ads for low-down loans, subprime loans, stated income loans, option ARMs, etc. I read an article where a lender was asked whether this practice was risky for lenders. They defended themselves by saying that with computerized underwriting, they could more accurately assess risk so they felt it was safe. I remember telling my friend, who was an underwriter at the time, that I thought lenders were f'ing stupid and the day of reckoning would come someday.

The day has arrived. If a layperson like me saw it coming, how could these lenders not see it? They're dumb!

 

[blast19]

Quote from deviltrader:

I remember ~1.5 yrs ago, I had seen lots ads for low-down loans, subprime loans, stated income loans, option ARMs, etc. I read an article where a lender was asked whether this practice was risky for lenders. They defended themselves by saying that with computerized underwriting, they could more accurately assess risk so they felt it was safe. I remember telling my friend, who was an underwriter at the time, that I thought lenders were f'ing stupid and the day of reckoning would come someday.

The day has arrived. If a layperson like me saw it coming, how could these lenders not see it? They're dumb!

BLINDED BY $$$$$...don't you think? Look at Angelo Mozilo, he saw it, that's why he sold $140 Million in stock in the last 14 months!

The question is does the DOJ catch them before they leave the country?

These lenders are almost all being investigated for insider trading...even though many had automatic sale plans.