money.cnn.com — Part 1) The buyers: The Quams and the too-good-to-be-true mortgage, Part 2) The brokers: Would you get your mortgage from this man?, Part 3) The appraisers: Price estimates made to order... and for the final act: The investors: How to get rich trading "idiot" loans. A great overview of how we got into this housing mess from Money Magazine.
May 3, 2007 View in Crawl 4
aragon127May 4, 2007
Why is this supposed to be sad? A couple of dumbasses bought a horrible loan. They were tricked, they were just stupid. When I bought my house I had several options to buy those ARM's. It was pretty clear only a moron would buy one. Sure the broker was an ass as well, but the homeowners should have known better. I don't feel bad for them at all.
bohicatwentytwoMay 4, 2007
Never heard the term McMansion before, but I bet these are similar to the types of houses that Ty Pennington can throw up in 7 days.
diggdatMay 4, 2007
I get Money Magazine and read this article, it had a very good explanation of how this situation evolved.I do feel bad for some people that may be less than financial in their mindset. For younger people, they have not seen a market in their lifetime retract and some of these decisions are fear based (soon I will not ever be able to get into the market if it keeps going up etc....). For others, people with language barriers that put their trust in their friend for hire (Realtor/mortgage broker) there can be good people taken in.Unfortunately, there are far to many people that believe that a lender would not lend them the money, if it was a bad risk.
blastus7May 4, 2007
I bought the house i was renting during the boom. Bought it for 160,000, it appraised for 185,000. Talked the owner down because it was a rental property for 20 years and needs to be remodeled. 1800 sq ft on half an acre. That's proof that you don't have pay inflated prices just to own a home. Have patience and do your homework.
jack9May 4, 2007
1.Stupid people COME TO YOU with dreams of grandeur.2.Sell them what they want3.Profit4.Repeat.Nothing special. Much like lottery winners living out of dumpsters, there's nothing morally wrong with the process...just defective consumers.
gillianmMay 4, 2007
Well, when most mortgage brokers are comprised of bartenders and waiters who didn't graduate college and basically have no idea about how the actual market works and are just concerned about how to put large chunks of money in their pockets, you can expect the market to come crashing down.
mrswirlMay 4, 2007
@zarex - there are front end points and back end points. Most brokers will get back-end points for directing your loan to a preferred lender where they give back an incentive in order to increase the volume of deals steered their way. It's not always a bad thing since it doesn't always affect the rate you pay but it can influence the decisions of the broker because they might be getting a "kick-back" for giving one particular lender more loans. It may manifest itself in other ways such as pre-payment penalties, bad servicing, extra fees, etc.It's much worse in the sub-prime and second markets where most people do not have the ability to qualify for the lowest interest rates. A broker can make a substantial amount of money by combining a small front-end point increase (say 1% - 2% over prime) with a larger 3%-4% back-end. I once observed a former colleague make a total 15% on one loan by preying on the less-than-perfect credit buyers.
banz23May 4, 2007
@SanTeIf you are expecting high inflation, which I personally am also expecting, it would be wise to not pay down your debt early. With inflation money becomes cheaper, so it then becomes cheaper to pay your debt in the future.
adrianpabloMay 7, 2007
Speculation without the proper knowledge will always result in probable loses in any market. Even flipping houses...<a class="user" href="http://www.1-forex.com">http://www.1-forex.com</a>