Nanny Governments Vs. Stupid Personal Financial Decisions

The morons always lose.

Published on March 26, 2007 By greywar In Current Events

No one forces you to sign things unless they have a gun. You can however be forced by the sheer synergistic power of your own stupidity, laziness, and ignorance though. This is the case with many homebuyers and folks who take out debt consolidation mortgages.

CNN just did a fairly long piece on the folks who have signed up for loans that they haven't got a prayer of paying off ever. Of course CNN's AnchorDweeb fawned over the morons who stupidly signed a contract at signing that they knew had been changed! Of course it wasn't these tools fault... Nanny Government should have somehow stepped in and kept them from beggaring themselves at the altar of their own idiocy.

AnchorDweeb kept this up non-stop until the panel of commentators with her stepped in and roundly condemned the couple for doing something so patently retarded. Anchordweeb looked a bit stunned and hurt that they could possibly be holding people accountable for their own actions but caved to the pressure and reluctantly acquiesced that "Ok, maybe the people had some shame of the blame but shouldn't the Government do something?!?"

Here is the thing... the latest kerfuffle over "sub-prime" lending has confused many people. They way that home loans used to work was that the bank or mortgage company would issue a loan to people they considered to be good credit risks. This meant that they only gave loans to people they were fairly certain would actually be able to pay them back. The bank would then hold the loan and make their profit from the huge interest on a 30 year loan.

All this changed with the advent of real estate funds traded like stocks or bonds. The way this works is that a third party buys a bunch of mortgages from the original loan issuers. They then sell bonds to investors using the payments from the loans to pay the returns on the bonds. This was further refined by gathering these loans into groups by risk called tranches. The loans from high credit risk borrowers were grouped with other high-risk loans and the loans from rock-solid risks with other solid loans. Then an investor would buy a bond from one of the tranches receiving a much higher rate of return from buying a piece of a high-risk tranche (because this tranche was only paid off after the lower risk ones were paid off) while safer investors bought low return bonds from the safe tranches. Complicated I know but stay with me....

Since original lenders no longer held loans for the length of the mortgage they were far more motivated to give loans to people who were much higher credit risks than ever before. These high risk loans were easily sold to companies putting together bundles of loans for high-risk tranches. This is a pretty transparent vicious cycle.

Add to the tranche phenomenon the discovery that people aren't inclined to look at anything before signing it and you get specialty mortgages. These started simply as Adjustable Rate Mortgages or ARM's where the interest rate typically starts at an artificially low teaser rate for a year or two and then adjusts massively upwards based off the prime rate. ARM's are bad enough but they have nothing on "interest only" loans wherein you pay nothing but interest for the first 2/3 or so of the loan. This means that after 20 years of payments on a 30 loan you actually own nothing. Lenders love this type of loan a lot because they can allow lower interest rates since they still own the entire home for the next 20 years. Most borrowers will end up "selling" the home prior to that date which means they effectively rented the property from the mortgage holder but the mortgage holder wasn't responsible for anything as a landlord. Genius.

Tying up the stupidity hat-trick are loan consolidation mortgages. Companies will bend over backwards to convince dupes that rolling non-collateralized debt into a loan anchored by their homes is a good idea. I don't care how much credit card debt you have... no one will ever be able to repo your home or property because of it. Look it up. Home loans though are a different matter. Rolling debt that had no real hold over into a loan that can leave you homeless is a bad idea at any interest rate.

The real tragedy here is that none of these loans are ever "forced" on anyone. Each and everyone is brought into effect only when someone willingly signs a contract spelling it all out in black and white. Of course most people hate reading anything and simply sign whatever is put in front of them. it is only after they start having problems paying the bills for the loan they moronically signed for that they are gifted with bursts of energy. Then they have no problem speding 20 hours a weeks hawking their problem to sympathetic journalists and professional victimists who will sympathize with their "plight". all of this could have been averted by taking an hour or two to either read the mortgage contract yourself or spedning a few hundred dollars to have a lawyer read it for you. After all, what is a few hundred bucks when you are about to go into debt for hundreds of thousands?

Sign one of these and you have no one to blame but yourself. There are plenty of free resources out there that will explain home loans and amoritization schedules to you on the Web. Go use some.

P.S. Do yourself a favor and also do the free investing lessons over at Morningstar before you start day-trading. Or just be a retard and start losing money.

Comments (Page 2)

greywar

on Mar 27, 2007

predators use deception and lie to achieve their means

And yet the contract that people sign always have the terms right there in black and white.

Sean Conners aka SConn1

on Mar 27, 2007

And yet the contract that people sign always have the terms right there in black and white.

not always. thus the investigations and inquiries. again, this isn't about the aggressiveness. and you don't think some get intimidated and such? maybe you are all big n tough and understand everything you read, but not everyone can be as great as you, i guess. it's jsut their own damn fault for not living up to your measure, right? puhleeaassseeee...

greywar

on Mar 27, 2007

not always. thus the investigations and inquiries.

Beleive me, people only are legally required to pay what they signed up to pay. There is no investigation if there is no contract. The CNN piece had nothing to do with people being asked to pay different rates than were on the contract. the piece was about subprime lenders and specialty loans in which the borrowers simply didn't bother to read the contract.

If you want to argue about people paying for things they never signed for it would have to be in a different thread cuz this article has exactly nothing to do with that.

greywar

on Mar 27, 2007

As I said in the fine article it is nothign to spend a couple of hundred dollars to have a lawyer read it for you. If $200 is too rich for someone they shouldn't be signing up for a freaking home loan for tens or hundreds of thousands of dollars. They get what they deserve.

As a society you have to expect a certain amount of due diligence from a consumer on massive expenditures. If they can't be bothered to read or have another read it for them ten I can't be bohered to spend tax money on their own massive stupidity.

maybe you are all big n tough and understand everything you read, but not everyone can be as great as you, i guess. it's jsut their own damn fault for not living up to your measure, right? puhleeaassseeee...

Apparently you need legislation to protect you from not reading the actual article? Honestly, read the damn thing.

SanChonino

on Mar 27, 2007

As I said in the fine article

Humble, aren't we, greywar?

greywar

on Mar 27, 2007

Humble, aren't we, greywar?

No, but that is actually a reference to a very old response on the internet used when someone asks a question or says something that is explained fully inthe article. Ususlly this is expressed as RTFA or RTFM where M stands for manual. I did modify it for this since I did in fact write said article.

I don't think t is terribly demanding to ask people to actually read the article upon which the discussion is being based. Further it seems reasonable to ask them to read it again when they have patently demonstrated that they missed salient points already explained in the article body. Maybe I am wrong.

Short answer: No, I am not a humble man by nature.

Sean Conners aka SConn1

on Mar 27, 2007

??? whatever...it's the media's fault, right?

greywar

on Mar 27, 2007

??? whatever...it's the media's fault, right?

No, it is your fault that you can't actually read the article.

foreverserenity

on Mar 27, 2007

Short answer: No, I am not a humble man by nature.

Ya think?!!!

! It's the military training, kinda like my big brother is, really. He's to the point and take it or leave it. There's no room for discussion if you can't see things his way. Most times, we, is younger siblings, let him rant and go on and yawn....because we know how he is!

! But I'm not saying you're like that...really! [he's ex military btw - Jamaica]

But to the point of the article Greywar, what we're trying to say is that some people aren't as good at the reading the fine print and yes, that's stupid of them, but when people are over excited and are told that for the first time in their lives they can live the American dream...well...you get the picture. AND there are PREDATORY LENDERS out there that do this to people, that's their jobs and how they make their money! They DO exist!

Dr Guy

on Mar 28, 2007

The problem with this logic is that, you can also make the case that having a gun placed to your head doesn't force you to do anything either. You can choose not to sign and have your brains blown out - it's still YOUR decision, you're forced to do nothing.

One is coersion, the other is high pressure. One is illegal, the other is not. There is a big difference between coersion and high pressure sales.

Sean Conners aka SConn1

on Mar 28, 2007

There is a big difference between coersion and high pressure sales.

again, please stop equating predatory tactics to high pressure or aggresive tactics. you are seriously underestimating just how manipulating that a predatory salesman can be. it is very much like a predator to children or any kind of predator. do you blame the victims there like bill oreilly does?

Dr Guy

on Mar 28, 2007

it is very much like a predator to children or any kind of predator. do you blame the victims there like bill oreilly does?

No, again, you miss the point. As I said, one is illegal, one is not. And it is not like child predators. Unless you have bought into the idea that we are all children incapable of caring for ourselves. Nanny government.

The only reason they are called predatory is so a lawyer can make a quick buck. The simple fact is that one is controlled by a criminal - the other is controlled by the person. And it goes directly to the point of this article. I have made stupid decisions in the past, and have only myself to blame. I do not want the government sheltering me in a nerf room so I do not hurt myself.

lifehappens

on Mar 28, 2007

what we're trying to say is that some people aren't as good at the reading the fine print and yes, that's stupid of them, but when people are over excited and are told that for the first time in their lives they can live the American dream...well...you get the picture. AND there are PREDATORY LENDERS out there that do this to people, that's their jobs and how they make their money! They DO exist!

BULLSHIT. If you are too dumb to read the fine print on a credit card, should we have hearings to absolve you of your personal responsibility? Should my overeagarness to actually own a overpriced car remove the responsibility that I have to actually make the payments? When I applied for a car loan, they wanted to give me $60,000....?!?! I know darn well that I can't afford that payment, EVEN if the bank is willing to loan it to me. The amount that I can afford is MY responsibility. It doesn't matter what shady scheme they put forth, I should choose to THINK. IF someone can't think....then see greywar's latest article.

Sean Conners aka SConn1

on Mar 28, 2007

As I said, one is illegal, one is not

predatory sales tactics can be as illegal as anything.

Washington Attorney General Christine Gregoire today sued members of an Eastern Washington vacuum cleaner sales ring for using unfair and high-pressure sales tactics on vulnerable elderly citizens.

"These defendants preyed on vulnerable people and in some cases held them virtual hostages in their own homes," Gregoire said. "This is one of the most disturbing examples of illegal sales tactics that my office has seen."

WWW Link

David Franklin, the drug company whistle-blower who has sparked federal and state investigations into the marketing of the top-selling drug Neurontin, said yesterday that he and his former colleagues engaged in a series of inappropriate tactics, including misleading doctors to persuade them to prescribe the drug for unapproved uses.

''I was trained to do things and did things that were blatantly illegal,'' Franklin, 41, said during an interview
WWW Link

Car-dealer fraud is plaguing our country. Auto buyers are being taken to the bank to fill the pockets of unscrupulous dealers. The tactics used are so sly that even informed consumers who did their homework are being taken for hundreds, and often thousands, of dollars. Evidence from recent litigation and an industry insiders shows that it is very likely that this rot is not restricted to a few areas or dealerships. Customers have been robbed on both coasts and everywhere in between: Dateline recently reported that an investigation revealed that car dealerships have been charged with fraud and deception in 39 states.

WWW Link

In ruling on this case, the judge affirmed the allegations made by the Attorney General's Office that Poughkeepsie Ford and C & G Motor Works engaged in the following illegal acts:

repeated false and misleading advertising;
failure to return deposits;
failure to return a customer's own vehicle;
misrepresentations of a consumer's right not to go forward with a purchase;
increasing the price of a vehicle or the finance rate without advising the consumer;
adding unwanted options, such as rustproofing and extended service contracts;
failing to include the odometer reading on documents and misrepresenting odometer readings on other vehicles;
removing federally-required manufacturer's suggested retail price labels and charging more than such stated price; and
failure to honor repair claims and warranties.

WWW Link

I do not want the government sheltering me in a nerf room so I do not hurt myself.

i have not said anything about the government sheltering anyone in a nerf room or anything absurd like that. i am just pointing out how bogus this blame the victim crap is. and that is exactly what you are doing.

Dr Guy

on Mar 28, 2007

predatory sales tactics can be as illegal as anything.

Then there are already legal recourses if they are illegal. Again you are defeating your own argument by first stating that it is like child predators - which means we must be children and must have a nanny state (see title of the article), and then saying some are illegal - which is already against the law and does not need further protection.

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