Comments on: A Huge Reason For the Subprime Mess http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 25 May 2012 00:18:02 +0000 hourly 1 http://wordpress.org/?v= By: hu http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-193922 hu Fri, 21 Dec 2007 02:28:28 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-193922 hu hu

]]> By: Me Myself And I http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-115213 Me Myself And I Fri, 22 Jun 2007 16:51:57 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-115213 In regards to what Patrick said about the car loans, I have this to offer. Granted, our situation isn't the typical situation, but here's what we did. - Got a 6 year loan for our vehicle (after putting 20% down) - Maxed some of our credit cards at very low rates (highest was 1.99%), BUT PUT THE BORROWED MONEY INTO OUR EMIGRANTDIRECT savings account (at 5.05%) - Use the borrowed money in the savings account to make the minimum payments on the credit card - Use the interest earned in the savings account to help offset the car payment This effectively brought our average monthly car payment down to $95/month or less, even though the "real" car payment is $173/month. So the interest we're earning on the credit cards is more than the interest we're paying for the car loan. And if all goes well, we'll be able to do this for another 4 years, at which point the car note will be paid in full. Whoever said you can't borrow money to make money, wasn't quite right :) In regards to what Patrick said about the car loans, I have this to offer.
Granted, our situation isn’t the typical situation, but here’s what we did.
- Got a 6 year loan for our vehicle (after putting 20% down)
- Maxed some of our credit cards at very low rates (highest was 1.99%), BUT PUT THE BORROWED MONEY INTO OUR EMIGRANTDIRECT savings account (at 5.05%)
- Use the borrowed money in the savings account to make the minimum payments on the credit card
- Use the interest earned in the savings account to help offset the car payment

This effectively brought our average monthly car payment down to $95/month or less, even though the “real” car payment is $173/month. So the interest we’re earning on the credit cards is more than the interest we’re paying for the car loan. And if all goes well, we’ll be able to do this for another 4 years, at which point the car note will be paid in full.
Whoever said you can’t borrow money to make money, wasn’t quite right :)

]]> By: triple-e http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108905 triple-e Fri, 01 Jun 2007 17:34:27 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108905 Doesn't a 1600/mo payment seem like a lot to most people? Especially if your factory job is in jeopardy. 1600/mo is the payment on 275000, with nothing down and 6%. They financed 200K for the same payment. My spouse and I ran the numbers on everything until we got the payment where we wanted it just in case one of us was out of work (or on purpose, so one of us could stay home with children). These financial calculators have been around for decades, and even buying a handheld calculator would have been a sound investment for these two idiots. Doesn’t a 1600/mo payment seem like a lot to most people? Especially if your factory job is in jeopardy. 1600/mo is the payment on 275000, with nothing down and 6%. They financed 200K for the same payment. My spouse and I ran the numbers on everything until we got the payment where we wanted it just in case one of us was out of work (or on purpose, so one of us could stay home with children). These financial calculators have been around for decades, and even buying a handheld calculator would have been a sound investment for these two idiots.

]]> By: KMC http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108744 KMC Fri, 01 Jun 2007 01:15:53 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108744 I especially loved her quote earlier in that article. I don't have it in front of me, but it was something to the effect of "They took away my dignity." Really? Who did that? I pointed the Navigator out to my friend, too, after reading the article. Besides her husband facing fewer hours at his plant, did you catch her job? She's a nursing home aid. Do you know what those people get paid? Like nothing. (Which is ironic since nursing home care costs a fortune). The bottom line is, this was greed all around. The mortgage brokers, CMO purchasers, homeowners - all of them. I especially loved her quote earlier in that article. I don’t have it in front of me, but it was something to the effect of “They took away my dignity.” Really? Who did that?

I pointed the Navigator out to my friend, too, after reading the article.

Besides her husband facing fewer hours at his plant, did you catch her job? She’s a nursing home aid. Do you know what those people get paid? Like nothing. (Which is ironic since nursing home care costs a fortune).

The bottom line is, this was greed all around. The mortgage brokers, CMO purchasers, homeowners – all of them.

]]> By: Patrick http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108718 Patrick Thu, 31 May 2007 23:35:27 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108718 I read the same article and it is distressing that some people get taken for these kind of loans when they could qualify for something better. You have to wonder though, how many of these people did not go into the process with the education to make the right decisions. Some people are not concerned with how much they are paying overall, but how much their PAYMENTS are. It is the same thing with cars. Some people will take out a 6-7 year loan just to have a lower payment. If it is the loan officers telling them they only qualify for a sub-prime loan, then it is wrong on their part. I read the same article and it is distressing that some people get taken for these kind of loans when they could qualify for something better. You have to wonder though, how many of these people did not go into the process with the education to make the right decisions. Some people are not concerned with how much they are paying overall, but how much their PAYMENTS are. It is the same thing with cars. Some people will take out a 6-7 year loan just to have a lower payment.

If it is the loan officers telling them they only qualify for a sub-prime loan, then it is wrong on their part.

]]> By: Colonel Cash http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108687 Colonel Cash Thu, 31 May 2007 19:27:52 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108687 I recently blogged that the greed, the shameless unabated grab for money by these unscrupulous loan officers is nothing short of a crime. Fraud? Robbery? Both? The people that have created this catastrophe have tarnished the reputations of the professionals in the industry. How long will it take before people trust the true and professional mortgage loan officer again? Check out the interview that NPR had with an Ameriquest loan officer. You can listen to it at www.npr.org ...... I recently blogged that the greed, the shameless unabated grab for money by these unscrupulous loan officers is nothing short of a crime. Fraud? Robbery? Both? The people that have created this catastrophe have tarnished the reputations of the professionals in the industry. How long will it take before people trust the true and professional mortgage loan officer again? Check out the interview that NPR had with an Ameriquest loan officer. You can listen to it at http://www.npr.org ……

]]> By: cami http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108686 cami Thu, 31 May 2007 19:21:58 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108686 I think that a lot of people are subjectively bad at math. You would think that if your mortgage payment was more than your monthly income it would set off alarm bells, but many see what they want to see. This is rampant in our society and not only in financial matters (look at the obesity epidemic). JLP if you're interested in hearing a firsthand account of the mortgage madness you might want to check out SoCalMtgGuy's site (www.housingbubblecasualty.com). He's a (former) mortgage broker who talks about how people were preyed upon, high rates, high prepays, etc. and how much money the brokers stood to gain from each with real inside data. It's a real eye-opener. I think that a lot of people are subjectively bad at math. You would think that if your mortgage payment was more than your monthly income it would set off alarm bells, but many see what they want to see. This is rampant in our society and not only in financial matters (look at the obesity epidemic). JLP if you’re interested in hearing a firsthand account of the mortgage madness you might want to check out SoCalMtgGuy’s site (www.housingbubblecasualty.com). He’s a (former) mortgage broker who talks about how people were preyed upon, high rates, high prepays, etc. and how much money the brokers stood to gain from each with real inside data. It’s a real eye-opener.

]]> By: Chris http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108683 Chris Thu, 31 May 2007 18:59:08 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108683 Is this typical of the subprime problem we're seeing. 2 purchases, 5 refinances. New kitchens, marble floors, department store bills, etc. Ridiculous. Home equity loans are absolutely a bad idea, there is little reason to risk your home for any kind of debt repayment. You may have bad credit because you bought a bunch of furniture you couldn't afford, but Dillard's can't come and take your house. New roof? Roofs don't just explode one day, and any inspector can usually tell you far in advance when you need to replace your roof, and how much it will cost. Didn't any of these people think "gee, I want a new kitchen, I should start saving for it"? One guy had a fixed rate loan of 86k (from 1997) and cashed out to a variable 112k loan. What are people thinking when they buy a house, spend 10 years paying it down, and then borrow AGAIN. Do people just like paying interest? I can only assume they do, if they pay interest not once but TWICE on the same house. I understand the frustration of someone new, buying their first home, being sold inflated loans with complex terms. Mortgages are complicated and can be overwhelming, especially if your lender dances around the negative aspects of such loans. Many people depend on their broker to understand the loan, they can't understand by reading it themselves. But refinancing to cash out and pay for a new kitchen or credit cards? Sorry, you gambled with your most important asset, you lost. Is this typical of the subprime problem we’re seeing. 2 purchases, 5 refinances.

New kitchens, marble floors, department store bills, etc. Ridiculous. Home equity loans are absolutely a bad idea, there is little reason to risk your home for any kind of debt repayment. You may have bad credit because you bought a bunch of furniture you couldn’t afford, but Dillard’s can’t come and take your house.

New roof? Roofs don’t just explode one day, and any inspector can usually tell you far in advance when you need to replace your roof, and how much it will cost. Didn’t any of these people think “gee, I want a new kitchen, I should start saving for it”?

One guy had a fixed rate loan of 86k (from 1997) and cashed out to a variable 112k loan. What are people thinking when they buy a house, spend 10 years paying it down, and then borrow AGAIN. Do people just like paying interest? I can only assume they do, if they pay interest not once but TWICE on the same house.

I understand the frustration of someone new, buying their first home, being sold inflated loans with complex terms. Mortgages are complicated and can be overwhelming, especially if your lender dances around the negative aspects of such loans. Many people depend on their broker to understand the loan, they can’t understand by reading it themselves.

But refinancing to cash out and pay for a new kitchen or credit cards? Sorry, you gambled with your most important asset, you lost.

]]> By: JLP http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108673 JLP Thu, 31 May 2007 17:29:02 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108673 Tired..., You are exactly right. It is hard to feel sorry for these people. I-Gor, I noticed that too. Tired…,

You are exactly right. It is hard to feel sorry for these people.

I-Gor,

I noticed that too.

]]> By: I-Gor http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/comment-page-1/#comment-108672 I-Gor Thu, 31 May 2007 17:20:24 +0000 http://allfinancialmatters.com/2007/05/31/a-huge-reason-for-the-subprime-mess/#comment-108672 Check out the picture of Ms. Williams in front of her house in the WSJ article. She's got a Lincoln Navigator parked in the driveway. If you can't afford the house, the LUXURY appliances and the LUXURY car, then you don't deserve a break when the spending catches up to you. The scary thing is that this is not an isolated incident. The debt funded spending binge the consumers in this country have been on over the last ten years can only foreshadow serious problems as the real estate market slows down and a major source of people's liquidity is turned off. Check out the picture of Ms. Williams in front of her house in the WSJ article. She’s got a Lincoln Navigator parked in the driveway. If you can’t afford the house, the LUXURY appliances and the LUXURY car, then you don’t deserve a break when the spending catches up to you.

The scary thing is that this is not an isolated incident. The debt funded spending binge the consumers in this country have been on over the last ten years can only foreshadow serious problems as the real estate market slows down and a major source of people’s liquidity is turned off.

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