SO upset and frustrated!!

[kamik86]

Then why would a bank give a loan, based on income, knowing that the income is not enough to be able to make the monthly payment?

I never said the bank is your parent.

Maybe the income-to-debt-ratio requirment should be changed?

I'm not sure why you are arguing with me. I think people know how much they can or cannot afford for a monthly payment. If they take on too much, then that is their own fault and they have to deal with it (although sometimes financial situations do change, but it's still the responsibility of the borrower).

Why? Why is it the banks job to decide what you can afford? There is no way without making someone put down everything they spent money on for the last few months (really good exercise to do for yourself and many who get into these messes may have theirs eyes opened but not really the banks business) and that would be really expensive for them to do. Probably not worth the extra cost over the rate of possible defaults (and the privacy concerns and everything else).

For example I spend WAY more on food then I need to. Because I like buying really yummy steaks to grill and then go out to eat often, etc. My parents pay way less for 2 people to eat. However my parents have a boat, camper, and two cars that take WAY more gas then the one car DH and I have.

If they figure out some type of "average" spending per adult and per child that would penalize those that live frugally so they can afford a dream house.

 

[ols386]

And they shouldn't have to, that is the homeowner's responsibilty and also why the banks can never really be blamed for "giving mortgages to people they knew couldn't afford them". The people knew what they could and couldn't afford when they took into account all of their expenses. Its not the bank's job to figure out what is left over for your mortgage after ballet lessons, and groceries, vacations, it's yours and yours alone. If you can't afford a 300,000 mortgage, don't sign on the dotted line. However if you do, remember nobody held a gun to your head.

I agree that the bank should not have to calculate bills, grocery expense, etc. etc. But when they give out a loan based on income alone and know that it's not possible, that is ALSO wrong.

The bottom line is that the borrowerer IS responsible for the monthly mortgage payment because they did sign for it, but I still don't think the banks had any business giving out loans that didn't mathmatically make sense.

 

[luvmy3]

Then why would a bank give a loan, based on income, knowing that the income is not enough to be able to make the monthly payment?

I never said the bank is your parent.

Maybe the income-to-debt-ratio requirment should be changed?

I'm not sure why you are arguing with me. I think people know how much they can or cannot afford for a monthly payment. If they take on too much, then that is their own fault and they have to deal with it (although sometimes financial situations do change, but it's still the responsibility of the borrower). But at the same time, a bank should not give a loan knowing that the individual will not be able to make the payments, and this WAS happening before the housing crash.

And its probably stil happening now, but do you really believe that is/was the rule and not the exception?

 

[tlbwriter]

Then why would a bank give a loan, based on income, knowing that the income is not enough to be able to make the monthly payment?

Because, according to the traditional criteria, you CAN afford that payment. We COULD have afforded the payment on the original amount our bank offered us, but we chose not to because we wanted other things (cars, savings). Some people save in other areas and want to spend more on their house. It's not the bank's place to make that decision for you. When you say the individuals couldn't make the payments, do you mean they couldn't afford food and utilities if they paid their mortgage? Or do you mean that once they added car payments, clothes, vacations, electronics, etc., that there wasn't enough left for the mortgage?

Maybe the income-to-debt-ratio requirment should be changed?

Maybe it should. Or maybe there should be a tiered system (basic, affordable, stretch).

I'm not sure why you are arguing with me. I think people know how much they can or cannot afford for a monthly payment. If they take on too much, then that is their own fault and they have to deal with it (although sometimes financial situations do change, but it's still the responsibility of the borrower). But at the same time, a bank should not give a loan knowing that the individual will not be able to make the payments, and this WAS happening before the housing crash.

I'm arguing with the idea that anyone other than the borrower should be responsible if they borrow more than they can pay back. That's all. If I charged $35K on my credit card, and then said "Hey, they shouldn't have given me that high of a credit limit, they knew I wouldn't be able to pay this back," would you be sympathetic? If I bought a Ferrari and then blamed the bank when I couldn't make the payment, would you agree that they had no business giving me that loan, even if I met the income requirements?

 

[NHdisneylover]

I agree that the bank should not have to calculate bills, grocery expense, etc. etc. But when they give out a loan based on income alone and know that it's not possible, that is ALSO wrong.

The bottom line is that the borrowerer IS responsible for the monthly mortgage payment because they did sign for it, but I still don't think the banks had any business giving out loans that didn't mathmatically make sense.

Can you give a link to examples of loans being given out that were truly NOT POSSIBLE to pay with income (ie--the loan was bigger than the income amount)?

 

[kamik86]

I agree that the bank should not have to calculate bills, grocery expense, etc. etc. But when they give out a loan based on income alone and know that it's not possible, that is ALSO wrong.

The bottom line is that the borrowerer IS responsible for the monthly mortgage payment because they did sign for it, but I still don't think the banks had any business giving out loans that didn't mathmatically make sense.

Maybe we are talking different levels of "not possible" here. The bank yes should know now to give someone who makes $1500 a month a $1200 mortgage because yes there is no way that is going to work.

However if someone makes $3000 a month can they afford $1200 a month? Lets say they have $200 in student loans too but no other debt?

The bank has no way to know because that is reasonable amount for some people but may leave others a few hundred short a month.

 

[mhsjax]

While I have several comments on things being said here, I will make only one. While I agree with only buying what you know that you can afford, I wouldn't feel too sorry for these banks. They sold these loans, knowing full well that they would probably never be repaid, and then they sold them off to other companies by bundling them with good loans. They didn't care one bit, they were just looking to make the money up front and then screw the next bank.

I know in our area, banks are having an extremely hard time filing for foreclosures because on one even knows who hold that mortgage. YOu have banks trying to foreclose on property that isn't even theirs. They are getting into some serious trouble too. These banks are in it up to their elbows and they knew, the crap was going to hit the fan, and they didn't care.

Again, not saying that people should buy what they can't afford, but not everyone falls into this category.

 

[golfgal]

When we applied for mortgages for our various houses, we "qualified" for about 3 TIMES as much as we were comfortable paying. We knew what our finances were and what we wanted to spend on a house. I think the main problem is that you get these young people into a banker's office, they have a rough idea of what they can spend and then the BANKER is telling them they qualify for that much more and since that is their job, they must know what they are talking about. What needs to happen, and is around the country from what I hear, is that first time home owners need to be educated on what to expect from homeownership.

One thing that really caught us off guard was the increase in utility bills from our apartment. They weren't huge and we could handle them easily, it was just surprising.

We have always kept our house payments to 1/4th of DH's TAKE HOME pay. We have never really factored in anything I make into that equation because I was mainly a SAHM but we also knew when we bought our first house that I would stay home with the kids so we bought accordingly. When our friends bought what they could easily afford on two incomes, they were suddenly faced with the fact that they could not have one of them stay home with their kids. It was kind of a rude awakening for them.

 

[ols386]

And its probably stil happening now, but do you really believe that is/was the rule and not the exception?

That could very well be.

Maybe we are talking different levels of "not possible" here. The bank yes should know now to give someone who makes $1500 a month a $1200 mortgage because yes there is no way that is going to work.
However if someone makes $3000 a month can they afford $1200 a month? Lets say they have $200 in student loans too but no other debt?

The bank has no way to know because that is reasonable amount for some people but may leave others a few hundred short a month.

Yes, that's what I'm talking about.

While I have several comments on things being said here, I will make only one. While I agree with only buying what you know that you can afford, I wouldn't feel too sorry for these banks. They sold these loans, knowing full well that they would probably never be repaid, and then they sold them off to other companies by bundling them with good loans. They didn't care one bit, they were just looking to make the money up front and then screw the next bank.
I know in our area, banks are having an extremely hard time filing for foreclosures because on one even knows who hold that mortgage. YOu have banks trying to foreclose on property that isn't even theirs. They are getting into some serious trouble too. These banks are in it up to their elbows and they knew, the crap was going to hit the fan, and they didn't care.

Again, not saying that people should buy what they can't afford, but not everyone falls into this category.

Yes, yes, yes. That's what I'm trying to say. Thank you for saying that. I guess I just couldn't get that expressed in a post.

 

[design_mom]

I would think the individuals who took out those mortgages knew they couldn't afford it, but they did it anyway (which IMO is wrong). But some people don't think and plan for the future (even the short-term future).

But if the bank knows what their income is, and that the monthly payment is going to be more than what they can afford, then they should not give out those loans. And they were indeed doing that before the housing market crash.

I think banks have always been willing to lend an obscene amount of money. My DH and I bought our first house in the mid-1990s... prior to the housing market crash. DH and I were married just out of college and bought the house within the year. We were approved for a CRAZY amount of money that there was really no way we could have afforded while still living a comfortable lifestyle in other areas.

My dad gave me some good advice before we even met with the financial company. He said "The mortgage company makes money when you borrow money, so it's in their best interest for you to borrow as much as possible. They don't care if you can eat, fill your car up with gas, or go to a movie. They only care if you pay your mortgage. Figure out how much you can afford *before* you go."

I do believe that some banks/mortgage companies engaged in some unethical practices and talked inexperienced people into some weird, non-traditional loans (balloon payments, "interest only" mortgages, crazy adjustable rates, etc.). That wasn't right... but ultimately, the responsibility lies with the people who accepted the loan -- either because they signed something they didn't understand or because they decided to take the risk and it backfired.

 

[Magic Mom]

Does it really matter if banckruptcy is right or wrong? The OP is upset over her DH's unemployment and a lost job opportunity. Can't we just be sympathetic? They cant "un-bankrupt" themselves, they can only learn from the past and move on. Of course that is difficult when you don't have a job.

I'm sorrry it didn't pan out for you OP. Hopefully something even better will pop up soon for him.

 

[mhsjax]

That could very well be.



Yes, that's what I'm talking about.



Yes, yes, yes. That's what I'm trying to say. Thank you for saying that. I guess I just couldn't get that expressed in a post.

YOur welcome, It comes form my DH he watches this stuff because our area is so hard hit. He loves to spout off all the goings on with this type of thing, also listening to Clark Howard, Love that guy.

 

[tlbwriter]

Yes, that's what I'm talking about.

So you're saying you know of people with a $1500 monthly income who got a $1200 mortgage (or other equally disproportionate amounts)? If so, there's no way they would have qualified under standard income guidelines, so something is off. But even so, how stupid do you have to be to accept such a loan?

 

[LIDisneyFan]

I agree that the bank should not have to calculate bills, grocery expense, etc. etc. But when they give out a loan based on income alone and know that it's not possible, that is ALSO wrong.

The bottom line is that the borrowerer IS responsible for the monthly mortgage payment because they did sign for it, but I still don't think the banks had any business giving out loans that didn't mathmatically make sense.

They CAN mathmatically make sense if you live a certain lifesytle which most of us (including me) are not willing to live. and THE BANKS WERE ALSO STRONGLY ENCOURAGED by the same government that is now blaming them to make loans which are very high loan to income. With the TARP money, then banks that said they didn't want the $$ were chastised for not making more lonas (as in loosen your qualifications)

In fact, if you listen carefully even NOW, the government is trying to get bnks to 'loosen up' lending.

Be a "grown-up" and decide how much you can afford. And if you can't afford it, don't epect someone to pay it for you or blame someone else.

 

[divabydisney]

While I have several comments on things being said here, I will make only one. While I agree with only buying what you know that you can afford, I wouldn't feel too sorry for these banks. They sold these loans, knowing full well that they would probably never be repaid, and then they sold them off to other companies by bundling them with good loans. They didn't care one bit, they were just looking to make the money up front and then screw the next bank.

I know in our area, banks are having an extremely hard time filing for foreclosures because on one even knows who hold that mortgage. YOu have banks trying to foreclose on property that isn't even theirs. They are getting into some serious trouble too. These banks are in it up to their elbows and they knew, the crap was going to hit the fan, and they didn't care.

Again, not saying that people should buy what they can't afford, but not everyone falls into this category.

This is an area that can be debated for days. However, working in foreclosure at the bank, I can attest that the media has done a fine job of twisting words and procedures. It is true that banks sell loans. All of them do it. However, we sell loans to the folks who insure them. AKA Fannie Mae, Freddie Mac, Private investors. Example: when you buy a loan, FNMA decides if you get approved, they are "guaranteeing" that they will buy the loan and approve it. NO ONE knows who will default or not. Of course every loan has a risk to it. It is the banks job to try and minimize any default risk. However, again you wouldn't believe the falsified docs that passed my desk. Of course they were submitted and loan not approved. Technology is great and it is EXTREMELY difficult to tell some of these docs have been altered. And now that I'm back in foreclosures cannot count the number of people who can pay their bills and walk away without a blink of an eye. Their #1 excuse? We don't feel like paying since our value dropped. I have some that flat out say, we knew we couldn't afford it when we bought it but wanted it anyways. The banks have taken the brunt of it all. FHLMC/FNMA= The gov't. They were ultimately the ones approving/buying the loans. You now have the gov't blaming the banks. Think about it, the media sends the messsage that the gov't wants to step in and fix the mess that the banks caused, but no one wants to really tell the public that the gov't had just as much an equal role in it too. I think everyone needs to share the blame and now the responsibility to rectify the situation. As a side note for anyone who hears that the banks won't help them when they are facing a hardship? It's not the bank then either that approves or denies them, it's the folks who own the loans, FHLMC and FNMA. Yet the gov't again. Do some research. When you default, file bk, whatever, you are really shorting the entire public. This post is just informational only-- not trying to argue. I think it's only fair that everyone who is not in this business can try to understand how it works and why we have a blame game going on.

 

[kamik86]

I think some of the really bad loans were done with stated income too. I know many banks were just asking you how much you make and taking your word for it. It could have been a made up number, counted the money someone made selling drugs, or anything really. The bank didn't bother to check. In these cases yeah the banks were really stupid too.

Then there are grey areas. Should child support count as income? I mean it is income right and it is for caring for a child which includes housing. But then what happens when the payments stop coming? Either because the parent stops paying or it is 8 years down the line and 10 year old Johnny is not 18 just aged out.

 

[mhsjax]

So you're saying you know of people with a $1500 monthly income who got a $1200 mortgage (or other equally disproportionate amounts)? If so, there's no way they would have qualified under standard income guidelines, so something is off. But even so, how stupid do you have to be to accept such a loan?

THis isn't my statement, but I think what this pp and I are talking about, is that the govt' pushed these banks to loan. Pushed hard. Appraisers were told to inflate the values for the banks. People should have realized what was going on but they didn't. The lending institutions knew that the housing market was on its way to a crash long before the public did, yet they where still encouraging people to purchase out of their comfort zone and all the while John Q Public was expecting the market to rise as it had been doing. WEll it didn't. and those banks just clumped all the crap with the good and sold it off for someone else to worry about, Basically doing the same the thing that the homeowner did. Screw someone. Only I bet most homeowners never intended to, where as a lot of these banks did.

 

[sparklynails23]

I know dsd was going through training for major insurance company then did a credit check...she was escorted out the door.
I think it has something to do with the insurance industry and so much fraud. Not fair, much or what is happening toward unemployed is discriminatory toward hiring or receiving benefits.

We lost $2,010 a month in UC because dh had worked one day a week. Used the new benefit amount when reopening the claim.can;t even collect the $60 because he earns $68 a week.

SUCKS.....

He should talk to someone at the UC commission. He should be able to make about $180 a week and maintain his UC benefits, unless he turned down more hours.

 

[NHdisneylover]

While I have several comments on things being said here, I will make only one. While I agree with only buying what you know that you can afford, I wouldn't feel too sorry for these banks. They sold these loans, knowing full well that they would probably never be repaid, and then they sold them off to other companies by bundling them with good loans. They didn't care one bit, they were just looking to make the money up front and then screw the next bank.

I know in our area, banks are having an extremely hard time filing for foreclosures because on one even knows who hold that mortgage. YOu have banks trying to foreclose on property that isn't even theirs. They are getting into some serious trouble too. These banks are in it up to their elbows and they knew, the crap was going to hit the fan, and they didn't care.

Again, not saying that people should buy what they can't afford, but not everyone falls into this category.

I am not feeling overly sorry for the banks. I AM saying that people who made these poor decisions have to live with the consequences (including losing some job possibilities if they went the bankruptcy route) and that i do not feel sorry for people who bit off more than they could chew either.
The banks took a losing gamble lending money to poor risks or lending more than they should have. They went in with their eyes wide open and lost out.
The borrowers who over extended and bought "more than they could afford" did not even gamble--and went in with their eyes wide open too.

 

[ols386]

So you're saying you know of people with a $1500 monthly income who got a $1200 mortgage (or other equally disproportionate amounts)? If so, there's no way they would have qualified under standard income guidelines, so something is off. But even so, how stupid do you have to be to accept such a loan?

No, another poster was just using those numbers as an example.