How to Stop the Borrowing Craze?

From an article by Matt Taibbi in The Rolling Stone kindly shared with us by reader Stringer Bell:

Anyway, there’s is a massive gap between making a bad decision with one’s personal finances and committing criminal fraud in billion-dollar amounts. Morally, the two acts are not even in the same universe.

Homeowners who took on those bad loans did so for a variety of reasons. Some were coaxed into adjustable-rate loans when they qualified for fixed-rate loans, for the simple reason that the ARM loan garnered a bigger commission for the seller. Others were told by their brokers that if interest rates went up, or they couldn’t make their payments, they could just sell their homes, or come back to the same broker for a refinance.

This is precisely the part of the Liberal argument that I can’t get behind. “They were coaxed, they were told, oh, poor little victims”. I find this idea that if a broker tells one something, one simply can’t exercise any judgment and resist to be absolutely insulting.

If at least this whole borrowing craze were in the past, then I’d say “who cares about apportioning blame? Let’s just make sure bank regulations are put back in place and move on.” But the problem is that it isn’t nearly over. The insanity continues and it’s as strong as ever. Zero-downpayment mortgages are being handed out next door right this moment. And the only way I’m seeing that the borrowing obsession can be curbed is by making heavy borrowing socially unacceptable. When it becomes shameful to be in debt (rather than NOT to be in debt, as it is right now), we will have a hope of changing things.

For now, people don’t even think of mortgages as debt. They talk about a house on which they haven’t paid a dime as “their house.” I have now stopped discussing my living arrangements with people altogether because I’m sick and tired of being treated like an idiot because I don’t want to take out a huge loan to pretend that I “bought” a house and prefer to rent. Even a manicurist I visited recently (a complete stranger, mind you) literally scoffed in my face when in answer to her question I responded that I rent.

I’ve now repeated the sentence “I’m not imposing this on anybody, I’m not criticizing anybody, I just don’t believe in borrowing” so many times that my jaw hurts. I’ve even considered lying to people and telling them that it’s some sort of a cultural thing not to borrow huge amounts from banks because I’m so tired of being labeled an idiot for simply wanting to live a debt-free life.

Mind you, I’m not being pressured to go into an insanely huge debt by brokers or bankers. I don’t meet any brokers and bankers and I have no idea where all those folks Taibbi says were bamboozled by them managed to encounter them socially. (Might they have gone to visit the brokers and the bankers of their own free will? Hmm…) I’m being hounded (sometimes to the point of feeling bullied) about not wanting to borrow by friends, relatives, and colleagues. And if you think it’s easy to be pressured about this on a regular basis by your boss and by people who will be on your tenure committee, think again. I can repeat until I’m blue in the face that I’m committed to my university. People don’t believe me, though, because I haven’t offered them the ultimate proof of “being serious about this job” by getting into a huge debt to “buy” a house in the area.

How is it normal that a person who takes out a loan that is 10 times bigger than their yearly income is considered more reliable and stable than a person who doesn’t want to be in debt? Such people don’t get grilled on their choices by everybody they know the way I get grilled on mine. A high-ranking administrator does not ask a happy borrower, “But you are planning to pay down this debt soon, right?”, while he does ask me, “But you are planning to buy (obviously meaning “take on a huge mortgage”) soon, right? Maybe next year?”

Say what you will, folks, this is just wrong. The idea that the only normal response to getting a good job and a respectable, more or less stable income is immediately to go into debt is hugely mistaken and extremely dangerous. And until this mentality changes, I don’t think that even the best bank regulations in the universe will put our economy on the right track.

55 thoughts on “How to Stop the Borrowing Craze?

  1. I wrote a post once about how it benefits your employer to have you tied into a mortgage and having children because then you are much less flexible when it comes to leaving that job for a better offer.

    My roommate bought our house, and is incredibly proud of the fact that she’s 23 and “owns” her home. But in reality she owns maybe 4% of it??

    Then again, I’m one who has bought into the fallacy that I should borrow the money to buy a house instead of renting, but my boyfriend is working hard on pushing the continuing to rent angle.

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      1. Let’s try to be careful with words here, especially since my ancestors were serfs. There is significant hazing that those who want to avoid borrowing experience. However, one can and should resist if that’s what one wants to do. Nobody can actually force me to borrow and nobody has.

        And I also find that this is not as much an institutional thing as it is a very personal desire people have to alleviate their own anxieties about heavy borrowing by nit having any debt-free individuals around them.

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  2. “This is precisely the part of the Liberal argument that I can’t get behind. “They were coaxed, they were told, oh, poor little victims”. I find this idea that if a broker tells one something, one simply can’t exercise any judgment and resist to be absolutely insulting.”

    I disagree. Should I chemically analyse the meat at my local In-n-Out before ordering a cheeseburger? I guess if I get food poisoning I’m the one to blame because I didn’t perform my due diligence.

    You think McDonalds *wants* to tell you that the mcrib contains stuff that’s also used in making shoe soles? That’s why we have regulatory government agencies that (are supposed to) protect the public by making laws that punish corporations that lie to their customers or misrepresent their product. accountable for their products. And that’s a good thing.

    This is what happens when those laws aren’t enforced. One day, we’ll all be knowledgeable enough to have perfect information about everything we consume. Until then, we’ve got to rely on some institution to make this information transparent.

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    1. While the consumer has responsibility to make good decisions, there is an inherent trust in the ‘professional’ (broker, banker) to give sound advice. That’s where my sympathy lies with the people who borrowed beyond their means – those structures that are in place to provide sound judgment, not unmitigated self interest, failed miserably.

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    2. How much knowledge does one need to have to realize that moving into a house on which you haven’t paid a dime is probably not the most brilliant idea in the world?

      How much expertise is needed to realize that taking on a debt you are not even planning to pay out before 30 years from now might involve some risk?

      As for “trusting the professionals” argument, let’s be reasonable here. The neighborhood bank of mine that keeps breaking records with the number of zero-downpayment mortgages it’s handing out is hiring sales reps right now. You know what kind of training they expect the candidates to have in real estate, finance, economics, etc.? Right you are, none. They want experience in sales and provide the training you need to do real estate sales. Some “professionals” are those. And we are in a small town here, so when an elementary school teacher gets a two-weeks-long training and starts pushing those mortgages (a real story), it’s kind of hard not to notice and take her for a “professional” of the same caliber as a doctor or a lawyer.

      And even with REAL professionals who have several degrees in their professions, one still needs to exercise one’s judgment. Should I share the story of my Botox-peddling OB-GYN once again?

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      1. Also on MacDonald’s: as we all know, I did not grow up in a MacDonald’s culture. Behind the Iron Curtain, we had no awareness of its existence. The very first MacD opened in my city in 1993 or 1994, if I’m not mistaken. It was extremely expensive and super chic by our standards. It was a place where you went for a special occasion. And even then, it was self-evident to me that the food was very unhealthy. There were no documentaries, no Internet sources, no articles, no experiences of friends and relatives to inform me about that. It was just common sense.

        This is why I refuse to believe that a regular American is any less capable of seeing how horrible that food is without being protected from it by some far more intelligent authority.

        It’s like those stories about people who did not know that smoking was bad for their health. One really has to be a non-smoker to believe that mythology.

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      2. I don’t know this country’s history but I imagine people have been ‘buying’ houses in this fashion (by taking a loan from a bank) for a long time now. Probably decades. In other countries, too, I think. If this was such a bad idea we would’ve seen these recessions/depressions every year in every country where people take out loans. Which leads me to believe that this fuckup was not because the very act of taking out a loan is fundamentally flawed.

        I’m no financial expert (how dare I!) but maybe, just maybe, there could be some other reason. Maybe the laws changed, or the existing ones are not reinforced, or the loan itself can been morphed into a complex financial instrument (in the form of CDOs, etc.) by investment banks that can fuck up the economy. As for your examples, they are describing *incompetent* professionals. I’m talking about Goldman Sachs recommending their client a particular stock, *knowing* that it is going to lose money (in fact betting against it). Or a bank telling you that an ARM mortgage is better for you when you qualify for a fixed rate mortgage when it *knows* it is not true.

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        1. “I don’t know this country’s history but I imagine people have been ‘buying’ houses in this fashion (by taking a loan from a bank) for a long time now. Probably decades. In other countries, too, I think. If this was such a bad idea we would’ve seen these recessions/depressions every year in every country where people take out loans. Which leads me to believe that this fuckup was not because the very act of taking out a loan is fundamentally flawed.”

          – So you are one of those people who actually think that a zero-downpayment 30-year mortgage is not a horrible idea? You really think that?

          ” I’m talking about Goldman Sachs recommending their client a particular stock”

          – Do you know what kind of assets you need to have to be Goldman’s client? We are now sitting here worrying about that kind of folks?

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      3. 1. Most people start smoking and become addicted as teenagers.

        2. Credit is not new (seriously? You are going to save 100-500K and then buy a house?) What is new is easy credit. I think that is why people were caught off guard; traditionally it was tough to qualify and lenders made sure that the borrower would be able to repay the loan.

        3. Obviously, since it is their business, crooked lenders have an advantage.

        4. The demographics are skewed toward recent immigrants and low earners as far as who gets screwed nowadays- are you saying they are disproportionally stupid??

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      4. I wasn’t implying that the homeowners should be absolved of responsibility. Just that I have sympathy for them.

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        1. “I wasn’t implying that the homeowners should be absolved of responsibility. Just that I have sympathy for them.”

          – Their borrowing crashed the economy. Let’s have sympathy for those who did not get in debt, made huge sacrifices to be solvent at all time and then suffered the economy’s crash together with those who wanted to buy a dream on credit.

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  3. “This is why I refuse to believe that a regular American is any less capable of seeing how horrible that food is without being protected from it by some far more intelligent authority.”

    McDonalds was just an example. How about a regular restaurant cutting corners by not maintaining hygienic conditions in their kitchen? Would knowledge about it be ‘just common sense’ too? Would you just ‘feel’ it the same way you just knew Mcdonalds was bad? What if a car dealer sells you a lemon? i guess intimate knowledge about all working parts of a car now be considered as ‘standard’ for anyone wanting to drive. Are you suggesting ‘Buyer Beware’ should replace all existing consumer protection or anti-fraud laws?

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    1. “Are you suggesting ‘Buyer Beware’ should replace all existing consumer protection or anti-fraud laws”

      – No, I’m not. As I said maybe 50 times, I believe that the responsibility should be shared.

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  4. At Clarissa’s comment #5. I agree with you that people should know that McDonald’s food is unhealthy. But they should also be able to assume it’s safe (or as safe as unhealthy food can be!). In other words, the average consumer should be able to buy a hamburger and assume that the purveyors have done their due dilligence in order to make sure that the meat is untained and won’t contain ecoli or salmonella viruses. And by and large, in the U.S, consumers can assume this because federal regulations are in place in order to force large scale cooprations (like McDonald’s) to undertake the pricey and time consuming task of checking their food. Similarly with the housing market: the average person should be able to assume that they are getting decent advice from the lending institution. And one reason why bad advice ran so rampant is because of federal deregulation. Now that Obama began a consumer protection agency, hopefully those large scale catastrophes can be avoided in the future. At basis I do agree with you though. People are WAY too focused on home ownership. Like you, I am a happy renter. And also like you, people have said some surprisingly rude things about my renting status. So I do agree that we need a shift in cultural mindset here. As long as people believe that home ownership is the most imprtant symbol of personal success, they will continue to engage in risky practices in order to achieve that goal.

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    1. The thing is that if a person has $200 in savings and a lending institution still wants to discuss $300K mortgages with him or her, that is a very clear sign that this is not a legitimate lending institution. The initial decision to show up at a lending institution is always one’s own, isn’t it? And when that decision is made, there is often a huge failure of judgment by the people making it. I can understand when a person says, “OK, a house in my area costs about $300K. I have amassed $150 K. Now let me see whether I can borrow the rest.” But how does one justify making the same decision when the amount one has amassed is 1-2% of the actual price? On what planet does this make sense?

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      1. Well, Mrs Potter, don’t you realize how long it takes an average working person to scrimp and save 150K? They do the living and working and dying in the community, is it too much to ask that they live and work and die in decent room and bath?

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        1. I rent and my place is extremely decent. You are trying to criticize me for not “buying” something I cannot possibly afford? Seriously?

          This is exactly what I’m talking about in this post.

          “is it too much to ask that they live and work and die in decent room and bath”

          – Ask who? Who is the entity you are going to address this request to? Please provide me with its address because I want to start asking for stuff to be given to me, too.

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      2. Sorry – I couldn’t resist paraphrasing George Baily’s speech to Mr Potter from “It’s a Wonderful Life”. Obviously, you missed the reference, which makes the comment appear insulting rather than just geeky.

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  5. Unfortunately, I doubt that many will agree with your thesis, at least at the micro level. Home mortgages have become part of the “American dream,” encouraged along by income tax deductions for interest paid on home mortgages. For many years after taking out a mortgage, interest payments constitute the major part of one’s mortgage payment. With mortgage interest deductions, having a high mortgage makes some sense.

    Henry Ford would probably agree with you. According to his autobiography, he was opposed to borrowing even to start a business. He started what became the Ford Motor Company with savings from what he had earned as someone’s employee and, as he made profits from his own business, reinvested them.

    On a macro scale, it seems unlikely that the highly educated and sophisticated folks who govern us will take kindly to the no debt idea, at least insofar as it impacts the ability of the nation and the states to borrow to pay even current obligations. I understand that the national debt limit is about to be increased by $1,200,000,000,000 to $16,394,000,000,000. Assuming a national population of 330,000,000, the increase amounts to $3,636.36 per person and the new debt limit to $49,678.79 per person. These numbers take no account of state and local debt. Scary, but most of the talk about reducing debt increases involves the use of accounting fictions.

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    1. “Home mortgages have become part of the “American dream,” encouraged along by income tax deductions for interest paid on home mortgages. ”

      – I think that the way things are right now, the dream of being completely debt-free definitely deserves to become part of the “New American dream.”

      As for people starting businesses, my sister started her own business a while ago. She resisted all attempts to seduce her into a credit line or a loan, did not get even a dime into debt, and the business is flourishing (knock on wood.)

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  6. “The very first MacD opened in my city in 1993 or 1994, if I’m not mistaken. It was extremely expensive and super chic by our standards. It was a place where you went for a special occasion.”

    Ha, 1998 in our city. People used to dress up to go there. I had to see what the fuss was about, so I went with my friends, quite intimidated. As broke college kids, we couldn’t justify spending this kind of money on a burger, so split one overpriced coke among the three of us.

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  7. So you are one of those people who actually think that a zero-downpayment 30-year mortgage is not a horrible idea? You really think that?

    I’m talking about the way loans were done for the last however many decades. Zero-downpayment is obviously a new thing. Did the homeowners force the banks to accept zero downpayment? Also, I thought you hated the idea of loans in general. If you’re against the idea of just zero-downpayment loans, I’m with you all the way!

    – Do you know what kind of assets you need to have to be Goldman’s client? We are now sitting here worrying about that kind of folks?

    Fuck no. I mentioned this as an example of willful deception vs incompetent advice.

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  8. It’s probably going to end with my generation; we’ve seen what home ownership (didn’t) bring our parents, and suburban living is considerably unpopular with us, since it’s so isolated, requires a car to get just about everywhere, and is bloody dull, so we gravitate towards living in rented spaces in cities, and most of my friends express distrust of ever owning a house, comparing it to a ball and chain.
    The exceptions to this are my friends who are planning on having children/have a kid on the way. They acknowledge the traps of home ownership, but express a desire for their kid to have a backyard to play in. I think I might just take my kids to the park if I ever have them, thank goodness Canada has no shortage of public green spaces.

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    1. “It’s probably going to end with my generation; we’ve seen what home ownership (didn’t) bring our parents, and suburban living is considerably unpopular with us, since it’s so isolated, requires a car to get just about everywhere, and is bloody dull, so we gravitate towards living in rented spaces in cities, and most of my friends express distrust of ever owning a house, comparing it to a ball and chain.”

      – From your mouth straight to God’s ears, my friend. I so SO so hope that this suburban, car-addicted, picket-fence mentality will start losing ground soon.

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  9. “..and suburban living is considerably unpopular with us, since it’s so isolated, requires a car to get just about everywhere, and is bloody dull, so we gravitate towards living in rented spaces in cities..”

    I don’t think it’s a characteristic unique to this generation. Since about 7900BC young people in the US have hated the fucking suburbs for all the reasons you’ve mentioned. Then they have kids, learn about ‘schooling districts’ and run for the ‘burbs just like their parents. Manhattan when you’re single, Westchester county when you have kids. I hope this model changes.

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    1. One of the main reasons I’m terrified of having children is precisely that I feel extremely guilty at the mere idea of inflicting this horrible suburban existence onto an unsuspecting human being who never did me any harm. This is why this argument about moving to this kind of area to benefit the children is very confusing to me.

      If I were in Montreal right now (or Chicago, or Philadelphia), I’d totally not even wonder whether I should or shouldn’t have kids.

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      1. I don’t understand it either. There’s nothing at all kid friendly about the suburbs, and there’s a greater variety of available schools in cities. If I ever have kids, I plan on moving to Montreal or Toronto to give them an enriching environment where I can take them to museums and art shows on the weekends, not coop them up in a world where the most interesting thing is an afternoon being babysat by Uncle Television.

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      2. Well, when children had freedom to be out all day etc the suburbs were a great place to grow up, especially those adjacent to fields and forests. Nowadays I might agree with you, but that is sad. It is great when kids get to run around, build tree forts, and explore the landscape. It all changes in the teen years of course at that point a city would be desirable in either case.

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      3. Ordinary people have a hard time affording private K-12 schools, and realistically, the urban schools in most cities in this country either suck or suck without accreditation. Do you have any idea what lengths parents, and FUTURE parents, go to to get their offspring into a Manhattan preschool and K-12? Yes, the waiting list starts shortly after the urine dipstick turns color. Of course, WHY do the public schools suck? White flight, and white unwillingness to have their precious kids attend minority-predominant school districts even if the available school is adequate. When you look at most problems in the USA, you will find racism embedded deeply.

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        1. “Do you have any idea what lengths parents, and FUTURE parents, go to to get their offspring into a Manhattan preschool and K-12? Yes, the waiting list starts shortly after the urine dipstick turns color.”

          – Oh, I know. I’ve heard some scary stories.

          “Of course, WHY do the public schools suck? White flight, and white unwillingness to have their precious kids attend minority-predominant school districts even if the available school is adequate. When you look at most problems in the USA, you will find racism embedded deeply.”

          – I’m finding that this is true.

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    2. “When you look at most problems in the USA, you will find racism embedded deeply.”

      You people have racism on the brain disease, is all I can say.

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      1. “Notice” is not the same as an unsubstantiated “deeply embedded in most problems”. And identifying racism first and foremost with the USA is ridiculous. But it makes everyone who says it feel superior and multicultural, so I guess that’s something. 🙂

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  10. @ Nominatissina
    I hope that you’ll be able to do that. I know far too many people who moved to TO so their kids could have the ‘cultural’ experience, but they haven’t seen the inside of an opera, art house or museum in over a decade. Trying to earn enough to live in TO has consumed all their time.

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    1. So very true for people who rent or own a home. Most people’s income is just getting by and eaten up by high rent or mortgage and other associated costs. Heating, electricity, water, etc.–all fees have increased. Where I live people did a great job (or so they say) conserving water during a severe drought, but prices for water continue to escalate as the city needs to make a profit. It’s not free and then one also has to help pay for the people who don’t and also pay for all those employed by the city/state, etc. No time for opera–way too expensive and the museum is a bit less, but can be pricey for newer exhibits and fine dining is not so affordable either. Most people I know allow themselves to get into debt to afford it all.

      I briefly worked for the Consumer Credit Counseling….and I once laughed when I saw a sheet which contained over 25 lines for people to fill out listing all of their credit cards and balances. The woman who I worked for told me not to laugh and said very seriously that they had many clients who had not only filled out one page, but two or three. Many had in excess of over 75 credit cards. Oh the stories I could tell. I’m with Clarissa here about her concerns about debt and borrowing. I just always thought that I might as well talk to myself.

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    2. I suppose my personal example is rather unfair, because I have several things other people don’t: I’m going to inherit my mother’s house in Hawaii when she dies (and promptly sell it for as much as I can get) I have a lot of family friends in the Toronto and Vancouver areas who are very wealthy and have promised to help me when I move there, and I have very little student debt compared to most because I got scholarships (My significant other has no debt because her father is a professor at her undergrad university so she got free tuition)
      So, we will be able to carve out a comfortable cultural experience in Toronto or another large, handsome city, but we most likely are the exception, not the rule.

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  11. I live in TO and really enjoy the cultural events but it is expensive. A semi detached 1400 sq. ft. house built in the thirties in my old neighbourhood which sold for $16K in 1965 (one of my uncles lived in an identical home down the street) was sold last spring for $850K and the average cost for a detached home in the area last year was $1.4 million. Great location in the center of the city and close to public transit but most folks can not afford the area. Average family income last year in the neighbourhood is $360K per year which leaves most middle class people out of luck.

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    1. Wow–those prices sound like California, only much better. I grew up along the coast and my parent’s were very hard-working, but neither millionaires or billionaires. I really could not afford a home there–not in the area’s where I grew up and my preference as well. With what is going on there now, I really wouldn’t want to move back either. Some people do desire a home–it’s the American Dream to many, but not really the mortgage part. Who really wants a mortgage for 30 years. There are positives and negatives to home ownership and some people really don’t fully realize that until they purchase a home. The financial responsibility can feel nerve-wracking at times. I think city living is more expensive than the burbs–usually and you tend to get more for your money. I live in the city. I live in an area where real estate people used to dismiss as “starter homes” the inference meaning when are you going to “move up”, etc., and most people desire living in the burbs and tend to go for the bigger mortgages so they can have more home! I got really tired of all the horrific snobs around me and all the ways they would try to talk down to me trying to one-up me with their big, expensive homes, etc. I even had some people suggest that somehow I settled, etc., or my home was tiny and all of that tiresome bullshit. Now I see a lot of big homes empty and all the foreclosures–all these angry, entitled people! Some honest people worked very hard for their homes, even if they are small and those people are suffering now too.

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  12. I don’t think you could get a mortgage for 10 times your annual income. Figures used are twice to 2.5 times your annual income, maximum, and they look at what your monthly disposable income is, what your other bills are, and compare that to the mortgage payment.
    If your lender is anything like reputable, that is.

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      1. Oh, I did: didn’t have a down payment, it would have been $14K, and couldn’t have saved that in any reasonable amount of time while paying rent – and houses in this neighborhood cost twice as much now, so waiting would
        have put me behind. I’d do it today – you just need low price,
        short term like 10 or 15 years, low interest, it works out.

        I’m a lot more concerned about all the unsecured credit
        that’s being offered right now, it looks like a real swindle.

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  13. Stringer: “So you are one of those people who actually think that a zero-downpayment 30-year mortgage is not a horrible idea? You really think that?”

    As I say, I did it in 1998 at what was then low interest; refinanced 2003 to lower interest and 20 years (shortening term by 5), refinanced again 2008 to still lower interest and 10, shortening term by 5 more. So in 2013 it will be 20 years in all, during which time mortgage will have been cheaper than rent. And if I sell, I’m sure to make money.

    So, I can’t figure out what is wrong with not having put down a down payment, really. Sure, 20% down would have started me out that much closer to paying off, might have gotten a still lower interest rate, and wouldn’t have required PMI at first. But still, it was all so inexpensive, and I really don’t see where the risk was. I’ve got money in stocks, for instance, and I think that’s riskier – a lot, really – and I am not sure I approve of it.

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    1. We are not in 1998. We are in 2012 and the housing bubble has burst with a vengeance just 4 years ago. We are discussing people who are creating a second housing bubble this very moment.

      After the collapse of 2008, nobody seems to have learned anything and I find that absolutely terrifying. Because when the housing market crashes again, there will simply not be any public money to patch up the resulting damage.

      I don’t understand how anybody can defend this out-of-control borrowing today. What else needs to happen for people to see that it’s not the way?

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  14. Many brokers targeted their victims…er, clients by flattering and possibly paying off…er, donating to pastors of conservative Protestant churches. The pastors then would act as references if the congregant asked , “Is broker “x” in our congregation (or in a friendly church) on the up and up?” What made this scam…, er, approach particularly effective is the fact that many of the churches preached the “Prosperity Gospel”, also called “Name It and Claim It” theology. Believers are encouraged to just itemize their material desires in prayer and expect that God will give the believer the item. Now, these “Prosperity Gospel” believers were culpably stupid, and I don’t feel sorry for them.

    There are some instances when truly vulnerable people were scammed by mortgage brokers – the elderly, somewhat demented or “slow”, homeowner promised the moon, sun, and stars if he or she took out a second mortgage. I happen to think that there should be some regulations in place to allow time-limited reversal of such mortgages and prosecution of the brokers for fraud. At the very least, there should be a week or more waiting period during which the contract can be voided, for instance, if the adult child stops by on the weekend and says, Dad, you did WHAT!!!

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    1. The elderly were absolutely targeted. Other folks were in a bad situation and desperate. My maternal grandparents, for instance–their home was paid off. But my grandmother had Alzheimer’s, and my grandfather had medical bills from prostate cancer. Both had diabetes. We didn’t find out until after my Pepa passed away, in 2008, that he’d taken a second mortgage out on their home to pay medical bills. We had to sell it, and put my grandmother in a nursing home. They were in a bad financial situation, and we never knew–Pepa was a very proud man. I don’t even know if my uncles would have helped it he’d asked.

      I have a feeling that that’s part of what’s going on now–with so many un- and underemployed, people are having to take out second mortgages to make it.

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      1. …and it was paid off, so he probably could have taken out a reverse mortgage, and used that to pay the bills by installments, and kept the house another 30 years. But yes,
        this is the sort of reason people get into these situations –
        not “greed.”

        (I still do not know what bank would lend 10X one’s annual
        salary.)

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  15. In general, there are a lot of advantages to renting, and it is underrated in US.
    There are big advantages to owning free and clear, too – especially when it doesn’t mean the property is your only asset.
    Because of what the tax structure is and so on, there are also advantages to having a mortgage, as long as it isn’t too large in comparison to income.

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  16. “I happen to think that there should be some regulations in place to allow time-limited reversal of such mortgages and prosecution of the brokers for fraud. At the very least, there should be a week or more waiting period during which the contract can be voided, for instance, if the adult child stops by on the weekend and says, Dad, you did WHAT!!!”

    – I agree completely. I’m in favor of very tight regulations on the banking industry. I think that the Glass-Steagall should be reinstated this moment and that should be just the beginning.

    What are the chances that any political force in the country will choose that road?

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  17. I can repeat until I’m blue in the face that I’m committed to my university. People don’t believe me, though, because I haven’t offered them the ultimate proof of “being serious about this job” by getting into a huge debt to “buy” a house in the area.

    Obscene. Reminiscent of On the Waterfront.

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  18. It’s partly just a remnant of patriarchal ideology. 40 years ago you’d be expected to be a married man with kids + mortgage. Now it’s OK to be a woman and not to have kids, but being married really does give respectability and having a mortgage would prove you were tied to the place. They really like to see what you’re tied to: who you’re sleeping with, that you’re tied to them and that that is where your sexuality is harnessed (they imagine) so it won’t go elsewhere – and where your money is going. It reassures them.

    Like

  19. Patrick :

    Sorry – I couldn’t resist paraphrasing George Baily’s speech to Mr Potter from “It’s a Wonderful Life”. Obviously, you missed the reference, which makes the comment appear insulting rather than just geeky.

    Yes, I have no idea who these people are.

    Like

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