"And i feel the same way about a net loss, the bank bears no responsibility in that either.."

That's a very strange thing to say because, in reality, the bank WILL take a loss, and sometimes a huge loss, if it loans its money to a customer who doesn't have the financial chops to pay back the debt.

Unfortunately, a lot of mortgage lender did exactly that in the past few years. Lending standards were were relaxed to the point of being ridiculous. Borrowers were given mortgages with teaser rates that only lasted a short time and were programmed to be readjusted upward. The banks, like the borrowers, assumed that all would be well because the loans could be refinanced before the rate hikes triggered.

In retrospect, the banks were horribly short-sighted to loan money this way because they didn't seem to consider the possibility that housing prices could actually (gasp!) decline. But that's exactly what has happened, resulting in the borrowers losing their houses and the banks losing their shirts.

That's what happens to lenders who abandon common sense when they loan money to people.

I realize this isn't exactly the OP's situation because she doesn't have an ARM loan. But she's affected by the general drop in prices, as are most people who need or want to sell their house right now. And you better believe that the lenders who hold the mortgages for all these sellers stand a good chance of being affected too because some of these sellers are going to give up and default on their mortgages. And this will happen whether you, personally thing this is morally a wrong thing to do. So even the more responsible lenders will be hurt to some extent by the housing crash. That's just the way the system works.

Basically, one of three things is likely to happen to the OP:

1. She will find a way to borrower the money to cover the shortfall she'll have if and when she sells the house;

2. She won't be able to borrow the money and will default on the mortgage;

3. She will find a way to struggle along and make the payments until she's able to sell the house for enough money to pay off the first mortgage. That will still, of course, leave her with the second mortgage which she probably will have to pay off over time.

All of these scenarios mean that the family will have to rent for at least awhile. But they have a good income and should be able to rebuild their finances with better money management. Unless they choose the default option, they may even be able to become homeowners again in the not-too-distant future. That's assuming they even want to.

FF said:

That's a very strange thing to say because, in reality, the bank WILL take a loss, and sometimes a huge loss, if it loans its money to a customer who doesn't have the financial chops to pay back the debt.

They,the banks, may take a loss, but they won't do so without a fight..And i am of the opinion, the homeowner/purchaser bears most of the responsibilty,even in a lousy rate/term loan..You didn't need an MBA to realize teaser and other unscrupulous loans were a ticking timebomb..You didn't need a PHD to see the housing market bubble was unsustainable...Did anyone live thru the Nasdaq bubble, and not see the correlation?
What happens to the myriads of purchasers who made purchases with "normal" loans(like the OP) ,but aren't in the dire straits ,but their home values have declined as well? Do the banks give them a break? Not going to happen..
So why should those who bail out, get reprieve? (BTW, this is not a rant about the OP)...There has to be some responsibility on the purchaser to make good on their debts..And the thought of a person foreclosing , then within several years buying another home me very angry with the system..

I'm not sure I agree who deserves "most" of the responsibility for this situation.

Loanowners
Lending institutions
Apprasers
Investment Banks
Rating Agencies
Hedge Funds
RE Investors
Realtors
Builders

They all played their part in this mess.

Personally I have a lot more sympathy for this family than I do for someone who was trying to flip their 5th house and is not able to sell it.

I like the idea of banks and the investment system taking some financial responsibility. There is always going to be a new person willing to spend too much on a house but if the Banks lose money they won't be so fast to lend them the money. Maybe we will see things like 20% downpayment requirements again.

Chris, i agree 100% with your post, but still must blame home purchasers, as they have final say in the mortgage product or price they pay...And i second your comment about having more sympathy for the OP then flippers...

I do not want to sound judgemental, I've made financial mistakes myself in my own life.
The recurring problem I see here, and in this country in general, is that borrowing money and running up credit card debt is perceived as the "easy solution", when it's no solution at all.

Borrowing ever more money, and shifting from one form of debt to another is "easy". Living within your means, and even *below* your means, and reducing debt, is HARD. So we stress out, rationalize, and try to find ways to avoid doing the HARD things.

The OP needs to take advantage of reputable financial couselors, lay out every detail of their finances, and simply ask the counselor "where do we go from here". They will receive much better advise than we can give here.

It will be HARD. The OP may even have to live in a house that they don't want to live in until they find a way to sell without incurring financial ruin. They're current on all their bills now, and the mortgage is fixed. They just need to cut back so it doesn't take their last dollar at the end of the month to pay the mortgage. And PLEASE talk to a counselor about the insanity of taking on even more debt to "carry you over".

It has already been stated that the market value of the house at any given time is irrelevent, and that is true as long as you don't *have* to sell due to a relocation, job loss, or some *real* reason. No homeowner who has been able to keep their mortgage current should be selling, in panic mode, just because values are declining. As one poster pointed out, that is a "cut and run" strategy and is not called for here. As long as I am financially able to make my mortgage payment, I breath easy knowing I have a roof over my head and my credit rating is still intact. The OP needs to do the same.

And I have to jump into the pool over that $1300 spent on Christmas gifts also. It was short-sighted at best, and serves as an indicator of how easy it is for you to rationalize the way you manage your money (poorly). You rationalize it because you sold existing goods to come up with the money, instead of charging it. The source makes no difference; it should have gone to reduce your debt. It should have gone to the loan balance with the highest interest rate, regardless of the fact that you're "current" on all of your debt. I think the posters jumped on this tidbit not because of any nastiness, but because it demonstrates the OP's thinking about money.

One last point: we as a nation of consumers need to be acutely aware of the difference between *investing* money, and *spending" it. But that's another post.

Reading a lot of the responses I wonder " How idealistic we are when the matter concerns others".
Somebody got into trouble because the value of her house declined, not end of the world. It happens all the time to most of us at some point in our life(dotcom bubble perfect example).
Give her a break and stop telling her how to run her life.

Somebody got into trouble because the value of her house declined, not end of the world.

I'm not sure that the home's declining value really has that much to do with it. The OP has mentioned that her husband didn't get an anticipated raise, and that there are personal issues that relate to the home. The first one relates to the affordability of the house, the second to the desirablity. Reading between the lines, it sounds to me like there are possible issues with the neighborhood that makes this a place where the OP no longer wants to live, and that on top of that they don't have the money coming in that they expected.

In my opinion, if the issue that makes the OP not want to live in the house can be overcome or overlooked then a couple of years of belt tightening would be better than taking a huge loss on this home and the possible hit on their credit. The value will come back, but it will take several years. People who bought at the top of the market need to stop worrying about the value of their home and remember that it is a home, not necessarily an investment.

qdognj

Since you seem to be misunderstanding the point I'm trying to make (which really has to do with good business practices, not moral responsibility), let's try a hypothetical.

Let's say you have a good friend who's not very financially responsible. He doesn't have real good credit. He has a lot of debts. His income isn't all that high. He tends to spend more than he makes and takes on even more debt to bridge the gap.

He asks you to loan him $1000 to tide him over "until payday." You think he'll pay you back because you've loaned him smaller sums in the past and he's always paid you back -- eventually. But you hesitate because you're not sure that he'll be able to pull it off this time. But after thinking about it, you lend him the money because you really don't want to ruin the good relationship you two have always had.

Time goes by and you hear nothing from him. Finally, you confront him about the debt and ask outright to be paid back. He breaks down and admits to you that he just doesn't have the money and probably won't have it any time in the foreseeable future.

You are seriously teed off, but what can you do about it?

Your wife, who keeps the family's accounts, eventually discovers the missing grand and asks you if you know anything about it. You have no choice but to tell her what happened. You can see she's ready to go ballistic, so you say to her, "Don't be mad at me, honey. It's Bill's fault, the jerk! He's the one who didn't pay me back my money."

She says "But you knew he was already in debt up to his eyeballs. So why did you lend it to him in the first place, you idiot?!"

Getting back to the bank, what do you suppose the shareholders would think if they heard the bank president say "It's not the bank's fault we're hemorrhaging money, laying off our employees and facing bankruptcy. It's not our fault the share price is plummeting. It's the fault of those deadbeat, irresponsible borrowers who are defaulting on their loans!"

Maybe the shareholders would say something like "But isn't the bank in the business of loaning money? You, the bank president, are supposed to be able to figure out who's a good risk and who isn't, aren't you? That's your job. So why did you loan them the money in the first place, you idiot?!"

feedingfrenzy: "Maybe the shareholders would say something like "But isn't the bank in the business of loaning money? You, the bank president, are supposed to be able to figure out who's a good risk and who isn't, aren't you? That's your job. So why did you loan them the money in the first place, you idiot?!"

Touché!

FF, i see what you arer saying, BUT....
here is my example

You walk down the street in a questionable neighborhood in NYC..At every street corner there are people trying to sell you drugs..But you are a smart person, realizing that buying and taking drugs is NOT good for you..The dealers keep giving you reasons why it is ok, but you KNOW better..So no matter what they say, you are not buying..You are smart enough to know right from wrong, you don't need the bank,err drug dealer to sell you the mort,err drugs, because you know they don't have your best interest in mind...

qdognj...your analogy is not on point....its not even in the same universe.

Drug dealers are operating illegally and outside the law...once caught, they are prosecuted...and often sent to prison....if they don't get shot or stabbed first. It is common knowledge that drugs and drug dealing are illegal...from education in schoolto public service announcements...to myriads of new articles and reports.
Ask anyone...even the average 6 year old...and they will most assuredly confirm the above.
Now.....prior to the mortgage meltdown...ask anyone about mortgage lenders and bankers...would they have said the same? Hardly.

Why? Because...drum roll please...mortgage lending is a legal business, even when they operate illegally......home ownership is encouraged and praised...the lenders conducted this entire pyramid scheme with the blessing of the fed reserve, with supposed finance guru Greenspan at the helm, Fannie and Freddie, the Bush administration, et al. The biggest names on Wall St were involved in every way possible... big and small...they ALL made millions..if not billions. Then when the bottom fell out...they got bailed out...and some CEO's were sent packing....but with millions in their little hot hands.

And......still, no retribution.and there will probably be none when all is said and donewith the perpetrators free and VERY well financed to concoct another scheme to fleece the unwitting public.

This entire debacle was aided, abetted, enabled, lauded and sanctioned by every single "jurisdictional" entity involved.

Yet.the average Joe (average IQ of 105) was supposed to KNOW better. Please.

Sorry...but apples and oranges does not even begin to describe how far apart your analogy is in terms of reality.

logic, are you saying the average "Joe" can't figure out their mortgages? That they didn't know an adjustable mortgage actually ADJUSTS..They didn't ask(but should have KNOWN) what the rate/payments could/would be if/when the rate adjusts? If yes to any of that, then the purchasers deserve whatever happens to them, foreclosure or bankruptcy..
I have a real problem with people blaming others for their stupidity..

and my post was not intended to be apples to apples..Just the fact people should KNOW what is good for them and what is bad...

ay caramba!!! Blaming the current housing issues on the government and Fed and everyone you mention, then saying it was a pyramid scheme is lunacy...I would think most people with several brain cells realize pyramid schemes don't work..Would you get involved in a pyramid scheme? Doubtful...
yes, monetary policy helped grease the wheels for the bubble, but if people didn't get themselves into lousy mortgages, spent some time understanding basic math to know what the loan/rate could cost them, perhaps some of this would have been avoided..
I have sympathy for those,who do to job loss/illness, can't afford their homes..I have zero sympathy for those who chose not to understand their loans, and continued to spend $$$$, and now can't afford their loans(Mortgage and credit card)

qdognj: "I would think most people with several brain cells realize pyramid schemes don't work.."

Pyramid Scheme:

"Pyramid Schemes
In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.

The fraudsters behind a pyramid scheme may go to great lengths to make the program look like a legitimate program. But despite their claims to have legitimate products or services to sell, these fraudsters simply use money coming in from new recruits to pay off early stage investors. But eventually the pyramid will collapse. At some point the schemes get too big, the promoter cannot raise enough money from new investors to pay earlier investors, and many people lose their money.."

And there you have it...as this is EXACTLY what happened with the mortgage meltdown.

Therefore, THIS particular scheme DID indeed work VERY well for the many of the lenders/banks/investment firms/hedge funds/investors etc involved in creating this debacle...those that made their millions up front...and cut and ran when the bottom of the pyramid collapsed (aka the scammed buyers)....and it worked BECAUSE all those regualtory entities involved looked the other way....BECAUSE there was WAY too much $$$$$$$$$$$$ to be had in doing so...

Those are indeed the facts. Although I am certain that it is far more comforting to believe that it all happened due buyers being too stupid or negligent to recognize that they were being scammed, that does not negate the fact that they WERE scammed...and that it was not only sanctioned by all involved...but those chiefly responsible profited outrageously from their "illegal for all but the lending/finance industry" efforts.

sounds like a conspiracy :)

I guess i never realized how many stupid,uninformed people "fell" for this scam..

But the good side to this, is the fact i may pick up some great properties,for investment purposes,then i would have without this debacle..

logic, are you saying the average "Joe" can't figure out their mortgages? That they didn't know an adjustable mortgage actually ADJUSTS..They didn't ask(but should have KNOWN) what the rate/payments could/would be if/when the rate adjusts?

But lenders had a "plan" for what would happen when the rates adjusted - REFINANCING! Which of course would put more money in their pockets. Buyers were told not to worry, since home prices would continue to go up and they would have "instant equity", enabling them to easily refinance to a fixed rate mortgage. The problem with the plan is that the value of the homes has not increased as anticipated. The homes no longer appraise for what the buyers paid for them, therefore they cannot refinance.

terriks, i guess some of the people who took out loans believed the "hype" of refinancing their way out...But did they think their homes would continue to appreciate at rates that were unsustainable? If so, i guess they didn't recall the Nasdaq bubble..As a contrarian, the moment everyone thought buying a home was the easiest way to riches, the end was near,imho...

But did they think their homes would continue to appreciate at rates that were unsustainable?

Yep, I think that many people believed that RE always appreciates.

"But did they think their homes would continue to appreciate at rates that were unsustainable?

Yep, I think that many people believed that RE always appreciates."

RE DOES always appreciate over time. the key is TIME. yes, it may have a depreciation for a few years, but it WILL go back up.

qdognj: "terriks, i guess some of the people who took out loans believed the "hype" of refinancing their way out...But did they think their homes would continue to appreciate at rates that were unsustainable? If so, i guess they didn't recall the Nasdaq bubble..As a contrarian, the moment everyone thought buying a home was the easiest way to riches, the end was near,imho..."

Well...that question should be asked of those who actually lent the money and financed all of these deals....apparently approved by all of the fund managers, analysts, CEO's etc...with MBA's, and years of experience...who get paid millions to know this stuff.

Do you actually really to believe that
they were clueless that the homes that were being financed would continue to appreciate at rates that were unsustainable.....but Joe Average should have known??

If so, I guess the Wall St machine et al didn't recall the Nasdaq bubble either.

Absurd to say the least.

It appears that TIME is the preemptive word..So perhaps the mortgage brokers/lenders weren't lying when they told prospective buyers that their home would appreciate over TIME and they'd be able to refinance..Unfortuneately the TIME to refi those adjustables and other creative loans is NOW but the TIME hasn't come for home price appreciation YET ;)

qdognj: "So perhaps the mortgage brokers/lenders weren't lying when they told prospective buyers that their home would appreciate over TIME and they'd be able to refinance..Unfortuneately the TIME to refi those adjustables and other creative loans is NOW but the TIME hasn't come for home price appreciation YET "

And pigs fly.

logic, can i assume you don't like brokers/lenders/Wall street, et al ? You find them all to blame for this fiasco? I hope you have a little room in your blame bucket for homeowners who purchased these "Instruments of financial destruction", as without them, this is all moot

qdog

The mortgage lenders would not have approved these ARMs for buyers they knew couldn't afford the payment after the rate adjusted upward if they didn't also believe that these buyers would be able to refinance their loans in time to avoid the higher payments. The lenders simply refused to consider the possibility that housing prices would decline generally in the US and that most of these buyers would be stuck in their existing loans because their houses no longer appraised high enough to satisfy the requirements of a refinance.

So they weren't really lying when they assured the borrowers they could refinance before the teaser rate period ran out. They were just stupidly shortsighted because of greed, deliberately blinding themselves (and the borrowers) to the possibility of a housing downturn.

Your scenario is out of the question. If the lenders really thought that the housing market would crash before the ARMs adjusted upward, you can bet your sweet bippie they wouldn't have been giving these ARMa out like candy on Christmas morning to marginal buyers. The LAST thing a mortgage lender wants is for the borrower to default.

Sure borrowers should have been more responsible, but good grief, what about the lenders? They, far more than anyone else, should have known better.

also, most of the problems today were caused by outright fraud. No-Doc loans were allowed for most anything and many buyers eitherin onw their own or by suggestion from an unscrupulous broker/REA/lender rep inflated their earnings. i KNOW for a fact that a certain mortgage company strongly suggested my wife and i list we made almost 25k more than our W-2's showed when we refi'ed our 2nd mort. i refused to do it and only stated our true income since it was more than enough to qualify.

qdognj: "logic, can i assume you don't like brokers/lenders/Wall street, et al ?"

I don't like anyone or any entity that commits fraud, engages in decpetive practice, and screws others over while they run off with millions.

Perhaps you do. I suppose that is wehre we differ.

Logis, if fraud was indeed committed, i have no problem with jail time for brokers/lenders,et al...However, i feel you are painting the whole group with the same brush,and for every crooked broker/lender, there are likley 10 times that who are are not..

Now getting back to the blame game,lol..

"you can lead a horse to water, but you can make it drink"

People should have known better, and we can't keep blaming the mortgage industry exclusively...I would bet $$$,you ,Logic, didn't get into one of these products ;)

And let's not forget Countrywide's clever scheme to steer buyers who should have qualified for conventional loans into subprime loans -- programming the computers so all cash assets the borrowers owned were simply ignored.

Of course, we all know what's happened to Countrywide, don't we? Saved from bankruptcy by a buyout from B of A -- at a bargain basement price. Mozilo will be leaving, but I'm sure he's got his hundreds of millions safely stashed away. At least the buyout will keep some of the folks at Countrywide still working.

qdognj: People should have known better.

Alrighty then. So your point is that the real problem in this scheme are those who either lacked the intelligence required or were too gullible to see a scam when it came their way...

But those who purposely committed fraud and deceptive practice are not to blame simply because they found willing victimsand if not for those victims, they would not have been able to perpetrate the act?

You keep focusing on blaming the victims. It makes it appear as if you sanction defrauding those who are not bright or savvy enough to recognize a scam.

Last but not least for the few mortgage brokers here and there who really did not know they were engaging in deceptive practice...well I'll take a page from your book...they should have known better...after all...that is what they get paid for.its their JOB to know.

Nowunless your point is that if people are not bright enough to avoid scams, they deserve what they get.you might wish to clarifyas you as a personpart of the group known as "people" must surely "know better".

YIKES...Logic, i am not casting blame on EVERYONE who took one of this disastrous mortgage products, because some did get scammed...But just the same, you can blame an entire industry for the wrongdoings of some...
That said,if you don't understand what you are getting yourself into, perhaps,just maybe,you should TRY and understand it..
Finally, humbly,i admit "I am part of the group known as "people" who know better...and i don't even have an MBA :)

qdognj: "But just the same, you can blame an entire industry for the wrongdoings of some"

Without the cooperation and participation of the majority of the industry, merely "some" would have never been able to pull it off. If you REALLY believe that Merrill, Bear Stearns, Citigroup, Fannie, Freddie, The Fed, et al had no clue, you are only fooling yourself.

Remember...you knew better ..as did I...as well as many others....so, don't kid yourself for a second that the /finance/hedge fund/Wall St. MBA group didn't...they engineered the whole thing...with the lending/banking industry as their all too willing partners.

Do the research...and, follow the money.

Enough said.

IMO cons can only work on people who are already looking for an edge, and easier, quicker, "smarter" way.

I'm new here, but I can tell you not to do a short sale at all. The credit bureaus and lenders view it the same as a Foreclosure which is worse than a BK.

Let me ask you this. Are you willing to stay on the loan for several years and let someone be 100% responsible for all the payments, maintenance, upkeep, and repairs? Have you had anyone that made an offer but couldn't get financed because of lender guidelines changing? Have you ever thought of selling your home under an Equity Holding Trust Account? Are you open to Creative Financing that doesn't violate the "Due on Sale" clause? Let me know and I will help you with your siutation.

dinaemargaret: "IMO cons can only work on people who are already looking for an edge, and easier, quicker, "smarter" way."

...but they don't work on people who are not bright enough..or are gullible and believe what they are told...especially when those doing the telling are well known..and well respected banks, lending institutions, realtors, appraisers, the federal reserve, Fannie, Freddie, Bear Stearns, Merrill Lynch, Citigroup, Countrywide, JP Morgan Chase etc, etc, etc, etc.?

Interesting point of view...to say the least.

Man I hope the poor OP didn't check that box that sends all responses direct to her email account.

"dinaemargaret: "IMO cons can only work on people who are already looking for an edge, and easier, quicker, "smarter" way."
...but they don't work on people who are not bright enough..or are gullible and believe what they are told...especially when those doing the telling are well known..and well respected banks, lending institutions, realtors, appraisers, the federal reserve, Fannie, Freddie, Bear Stearns, Merrill Lynch, Citigroup, Countrywide, JP Morgan Chase etc, etc, etc, etc.?

Interesting point of view...to say the least."

You're both correct. For a con to work, the mark has to be either really gullible or somewhat corrupt.

While I'll be happy to see fraudulent lenders behind bars (and, no, I have no realistic expectation that such a thing will come to pass), I don't have much sympathy for the corrupt and the stupid either.

Until they find a way to prevent stupid people from buying things with loans they can't afford, there will always be someone trying to make a buck off of them in a capitaist economy. That, or we can switch to communism, which has plenty of ethical abuses too.

mfbenson: "Until they find a way to prevent stupid people from buying things with loans they can't afford"

Perhaps you were not in the home buying market when that was indeed the case..but they DID have a way of preventing people from buying things with loans they could not afford......it was called oversight and accountability... and was the reason why up until about 5 years or so ago, a borrower had to prove 10 ways over that they COULD afford the mortgage.

The point is...all of that was disregarded and tossed to the wind...when securitization and non-regulated hedge funds were created ......and subsequently, with all those non-regulated billions to be had, all that was required to "qualify" for a mortgage was the ability to fog a mirror.

IMO...this topic is now really OT from the original...and is best continued under the new thread titled "Touche Cleveland, Baltimore, et al..."

Is there some rule somewhere that states that if a person is gullible they can't also be greedy? Or that the gullible would never think they are smarter than those who chose the slow and steady course?

No rule. However, in the magnitude of this particular issue, the relevance is minimal... if at all.

Huh? Did you just say that one half of the equation, the borrowers, has little to nothing to do with how big the problem is in order to obfuscate your concession of my point?

uh? Did you just say that one half of the equation, the borrowers, has little to nothing to do with how big the problem is in order to obfuscate your concession of my point?

I read Logic's comment as referring to your post about "gullible" and "greedy". I don't think he meant that borrower actions have nothing to do with the problem. What I see is that borrower action does not take place independently in a vacuum. Borrowers ARE affected by society, experts, in essence their current environment. Over a relatively short period of time, through market devices (e.g., lending instruments and practices), the environment changed. Some people never switched from the old way (e.g., 20% down, 30-year loans) and others did. Maybe borrowers was foolish to adopt the new borrowing practices but I also think nobody (including the experts)understood all the unintended consequences of the new environment.

I know when we bought our first house in 1997, the prevailing advice was to take out an ARM if this was not the "forever" house and the borrower anticipated moving within 7 years. Being fiscally timid, we opted for the 30-year loan anyway. What we also found, and I suspect everyone on this board has as well, was the lending industry's long standing definition of what one can afford is laughable.

"Perhaps you were not in the home buying market when that was indeed the case..but they DID have a way of preventing people from buying things with loans they could not afford......it was called oversight and accountability..."

Yeah and that's why I said "buy things" and not "buy homes" - this issue goes beyond just the housing market. As far as oversight and accountability, those days seem to be long gone, and I really doubt they'll be back. Bankers wouldn't even sell ARMs when interest rates are already low, if they thought they would have to be accountable to the borrower's best interests. If, on the the other hand, the bank doesn't want a borrower to lock in a low interest rate for the next 30 years, they're going to push an ARM pretty hard, probably even put in a low teaser rate for the first few years to entice the gullible/greedy.

jy md, you hit the nail right on the head. Once the lending industry...and those HUGE well "respected" household name entities that finance it.... decided that the billions to be made by using zero criteria by which to issue the loans, the majority if not the entire "blame" for the ultimate outcome became that of those that financed the debacle...and profited HUGELY....not those who were screwed.

This is of course is hardly rocket science...which is why I find it so odd that seemingly intelligent people can't see it for what it is. After all...it is far clearer than any loan doc that I have read.....

Therefore, I can only conclude that perhaps it is those who refuse to see or understand reality who are the first to blame others for that failure as well...

That said, the following article underscores the issue..although the effort is in effect closing the barn door after the horse has left...

U.S. Seeks Curbs on 'Predatory' Lending

But the article was published in June 2000 - in some places (my neighborhood to be specific) BEFORE the huge run-up in prices. I would bet that the lending industry lobbied to kill any new stringent rules.

Another interesting article...

I chose the article because of the dateas it documents that the deceptive practice was well known long, long ago...

The article that you have cited is more than interesting...it the proverbial nail in the coffin. Here the banks blatantly admit to non-compliance...are now whining about the possibility of having to deal with the mess they've created DUE to their non-compliance...and, still refuse to complyAND they are trying to claim that they did not know enough about the market that they were "investing" in to have done anything differently.....but still they are permitted to operate, issue loans, etc

If this does not provide a clue to those who wish to continue to fool themselves regarding borrower culpability, nothing will.

I'm not sure how my referring to the lenders as con men led you to think I am fooling myself about lender culpability. In fact I was surprised to find myself at odds with you as I am usually nodding in agreement with your posts.

dianemargaret: "I'm not sure how my referring to the lenders as con men led you to think I am fooling myself about lender culpability"

The following statements are written in a manner that seems to indicate that your focus is on the borrower, in terms of culpability.

dianemargaret: "IMO cons can only work on people who are already looking for an edge, and easier, quicker, "smarter" way."

dianemargaret: "Huh? Did you just say that one half of the equation, the borrowers, has little to nothing to do with how big the problem is in order to obfuscate your concession of my point?"

If that was not your intent, it may help if you rephrase.

OK, next time I will make sure to put in a disclaimer. And not just in the little print at the bottom

Quote from logic's article:

"But the plea that the banks never saw it coming does ring true. In this cycle, those who lent the money thought that they had no reason to concern themselves with whether it would be paid back.

Instead, they planned to sell the loans, usually to trusts that would then finance the loans by issuing securities. Such trusts have different accounting rules.

In any case, the banks seem to have shared the general belief that house prices would always go up, so anyone unable to meet mortgage payments could sell the house. If losses are never going to appear, why prepare to deal with them?"

This the exact point I've tried to make on here numerous time. Why do so many on here focus on the credulity, nativity, stupidity and greed of the borrowers and ignore the rampant stupidity and greed of the mortgage industry? Wouldn't you think that the people lending the money would have more reason to be cautious and responsible than those borrowing it? Contrast the expertise and sophistication of those who keep the mortgage industry wheels turning with that of the average borrower. Why wouldn't anyone hold the mortgage experts to a higher level of responsibility than their customers?

Sorry, but I just don't get it. Maybe people like qdognj can explain why they keep turning a blind eye to the gigantic miscalculations and blunders the industry made. And I'm not even talking about the outright fraud, which was rampant enough, but the stupidity and greed with which the normal business of granting mortgages was conducted.

when we bought our house the broker, a LIFELONG friend of the family(her daughter and i were born on the same day in the same hospital just minutes apart), highly recommended that i go with an ARM to keep my payments low. she said research showed that most folks either refi or sell within 5 years anyway, so my rate should never change. i flat out refused this because i had seen my grandmother almost lose her house back inthe early 90's to an ARM adjustment. i don't think SHE was trying to con us, i think she fell for the industry wide hype of this is what is best for MOST people.

i really think that is the problem, too many people wanted to buy big and an ARM was the only way to do it. they figured the house would continue to appreciate and they could either sell or refi before the ARM hit. in many cases they were just glad to get a home and did not even realize that they had an ARM.

yes, a good bit of this was predatory lending. and yes, a larger portion was simply a furtherance of the American way of life, spend money you don't have cause you can pay it back cheap(at least at first)!

i feel sorry for the people who were tricked into ARMs and for people who have had life changes that made a once affordable payment no longer possible. but i do not feel sorry for people who made the largest purchase of their life based on what they pay a month RIGHT NOW, and totally ignore what they WILL pay down the road.

i almost wish that the law required all potential buyers to take AND PASS a financial planner course that specifically educated them on how things can and will change on a mortgage.

BTW, i never have believed in buying a "starter" home. in my region of the country you rent a home for a few years and then buy your home you plan to live out your life in. this is what my wife and i did, we rented for 6-7 years adn then bought. before buying, we did a lot of research and found we could afford more than we thought. we were pre-qualed for over 250k, but bought a 145k house because it suited our current and future needs. that 145k got us ~2400 sq ft on 4 acres. we could have bought a house in town for half that and still been in a good neighborhood, but we wanted outside city limits.