Do you feel sorry for people who buy a house they couldn't afford?

1) The bank gave them the loan
2) It was a variable rate, so after 3 yrs or so they KNEW it would go up.
3) Shouldn't a person have enough common sense to know it was too much to afford (even if the bank approved the loan).

I don't feel sorry for them at all... They made a choice, and had access to all necessary information. If they made a bad decision, it's their problem.

On a related note, my neighbor asked me for a loan the other day because they said they were on the verge of losing their house. I told them I would be willing to buy their 2007 BMW or their 56 inch plasma TV at a discount to help them out. I got called an A******. The foreclosure couldn't come soon enough.

No, I do not feel sorry for anybody who goes to a shark, and then gets bit!!! ( I am referring to the subprime lenders)

There is a point of going above what you can afford, IF you are in a stable job...because of pay raises, and longevity,
but that does not cover A.R.M.s

A lot of people were told they could afford it by some shady broker or loan officer. Then that loan officer went and commited a bunch of fraud(fake tax returns, paystubs, etc) in order to get the file approved with a bank. Unfortunatly, many people don't read their documents, instead they believe what the loan officer says and end up in option arms, with pre payment penalties and adjustable loans.

I feel sorry for people with financial problems.

No, especially when they never invited me over in the first place, they got what they deserve for being greedy and uppity.

Yes, they should have. And so should have the lenders. But greed prevailed.

Yes, it's too bad when a people loose things that they have invested in.

No. Only adults over the age of 18 (US) can enter into a contract. As adults our actions and decisions are our own and undertsatnding the future consequences of those actions or decisions is solely our responsibility. Compassion on the other hand, I can extend as I have been there done that.

I blame it all on those home make over shows on HGtv. Buy for $150,000 improve for $47,000 and list for $569,000

A recession is a good thing for the economy every now and then, in the same way a forest fire is good for the forest. It's painful, people get burned, but it cleans out a lot of the deadwood.

People knew their rates would go up, but they also "knew" their house price (and equity) would go up as well.

Frankly, I think this bubble has a lot further to deflate. An average income of $45,000 in a state with 6% income tax brings home about $2700/month take home pay.

A $2700/mo takehome pay means you shouldn't be spending more than $675/mo on a mortgage.

A 15 year, 6% fixed with payments of $675/mo is a $80,000 mortgage, a $100,000 house, and a $20,000 down payment.

$100,000 SHOULD BE THE AVERAGE PRICE FOR A HOUSE IN THE US TODAY.
That's what the average household can realistically afford.

---------------

Since the banks wanted to make more money, they invented the 30 year mortgage, and prices went up, as people could now "afford" more.

The banks wanted even more, so they convinced people to use their before-tax, not after-tax income, and raised the threshold to 28%, not 25%. Now, that $675 payment is $1050/mo.

But the banks weren't satisfied with that, so they came up with the "interest-only" loan. Now, you could pay $1050/mo for ever, but your equity would increase as real estate rose.

But the banks weren't satisfied with that, so they came up with the "adjustible rate mortgage", where you would pay $1050/mo for the first 5 years, and then the rates would go up, but you wouldn't have to worry about that, because you'll be selling your home in 3-5 years anyway.

Well guess what, they're selling their homes after 3-5 years, but they didn't expect it to be a foreclosure sale.

Plus, you have people that are now stuck in their house, because they can't sell the house for what it's worth, and they can't come up with $40,000 cash to cover the short sale.

The cure:
1) These loans need to blow up in the bank's face.
2) They need to blow up in people's faces, as a lesson for the future.
3) There needs to be reform in the real-estate appraisal business.

"Some people learn by reading.
Some people learn by watching other's mistakes.
And some people just have to pee on the electric fence themselves before they learn their lesson."

Luke 14:28-30
"For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it, lest, after he has laid the foundation and is not able to finish it, all who see it begin to mock him, saying 'This man began to build and was not able to finish'."

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