I’m Broke and Its All Your Fault!

I saw an article in Yahoo news that displayed all the brilliance of America’s media. As I read through the article, I was surprised at the lack of thought, and the use of different phrases to make it look like the borrowers are just people who had bad luck. The borrowers chose to take a great risk when they used “exotic” (reads “you probably can’t afford it”) loans. If they ever read a paper or watched news, they knew that rates were at the bottom, and could not feasibly go lower. Those who sell themselves into slavery and use the proceeds to live high for a day shouldn’t be surprised when the buyer comes. Apparently this writer thinks they should, and states how they are undeserving participants in a massive tragedy over which they had no control.

“I have three borrowers who desperately need to refinance and they aren’t going to be able to do it. They are going to lose their homes,” said Patrick Schwerdtfeger, a Walnut Creek mortgage broker for Windsor Capital.

I will interpret. I have three people who can’t afford their homes and nobody will loan them any money. They need to refinance to a lower rate. They got in at a low teaser rate because they wanted more house than they could afford or because they decided they wanted to spend their money on something else. Now those stinking bankers aren’t going to give loans to people who have a fantastic chance of going bankrupt in the near future. They’ll have to move into a neighborhood they can afford.

The intelligence continues.

Borrowers with blemished credit records and inadequate paperwork to verify their incomes are having the most trouble getting mortgages.

Here is another piece of sage reasoning. The media is all over banks because they made loans that people couldn’t afford to borrowers in the sub prime market. Now, apparently this writer thinks we should do it again. Banks don’t want to lend money to people who haven’t paid their bills on time in the past and those who are not likely to have the resources to pay them in the future (trouble verifying income). Given how many people lied on their loans in the first place, it is hard not to agree with the banks. I have a lot of respect for self employed people, part of it because they are able to work without a regular paycheck. Banks don’t want to assume that risk for free (and that is assuming people are having trouble verifying their income because of paperwork issues instead of the standard lying cheat reason).

The media is sure that the only way out of this mess is for the government to save us. Apparently, the government also has plans to save tourists in Vegas from appalling losses.

Other media stories point toward the trouble that the wealthy have buying a home. If you’re really wealthy, shouldn’t you be able to afford it? People with a $5,000,000 home (and corresponding mortgage) are in the rat race just as much as those with a $100,000 house. The media is claiming that people have learned that people know what they have done wrong, and are all penitent. On the other hand, people are trying to continue to live mortgaged to the hilt.

I read a idiotic article from a “financial adviser” which said you should always have as large a loan as possible out on your house. That is a great idea in the ideal world, where the stock market returns 11.8% a year, no one ever gets laid off or laid up, and real estate appreciates every year. In this world, it is looking like our grandparents aren’t as stupid as we thought they were. Reducing your exposure can help you keep your house during difficult times, and sleep well during all of them. The spring in my step and peace of mind I will get from knowing my house is paid off are worth the few percent a year.

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