Crazy like a...
Lifetime Supporting Member
- Jan 16, 2006
- Reaction score
Yes, because that is exactly how risk is evaluated.So are you saying that you feel someone who could pay cash outright for the home, should get a lower rate, by virtue of that wealth?
Again, and believe me, subtle I am NOT, this is why you aren't in the financial business. Risk evaluation is based on income, assets, debts, and credit score, if you disagree with that, hooray for you, but that is how the system works.I simply disagree with that position.
That's fine, but, the people who do this for a living, prefer to give good rates to good risks and less good rates to poor risks...Lots of people are in between. They can make the 20%, or maybe a bit less or a bit more, but are far from being able to pay cash for the whole purchase. They have good credit, they have ponied up the down payment, they have shown a history of financial responsibility. In my opinion, give 'em the same rate.
Yes, because that is exactly how risk is evaluated.Again, and believe me, subtle I am NOT, this is why you aren't in the financial business. Risk evaluation is based on income, assets, debts, and credit score, if you disagree with that, hooray for you, but that is how the system works.
That's fine, but, the people who do this for a living, prefer to give good rates to good risks and less good rates to poor risks...
Really? Because your assertion that those with fewer assets should get the same low intrest rates as those with lots of assets doesn't sit well with reality, it's nice, it just isn't how the world works.There were what they called NINJA loans, no income, job or assets those didn't turn out too well for the lenders or the country... Dishonest people made out pretty well...I actually am in the financial business.
So in preparation for buying my own home....I paid off all my credit cards and got out of debt (aside from my car payment). When I went to apply for a mortgage last year, the brokers were telling me that I would have been better off if I hadn't paid my cards off and instead had the extra cash. Isn't not being in debt supposed to be a GOOD thing? Even in today's mortgage climate...the decision makers say it isn't.The lesson which consumers—and also many over-sanguine economists—have to learn is that spending cannot outpace income for ever. House prices have saved America and the world from a deep downturn, but they do not remove the need for consumers to take care over their balance sheets. Homes are only as sound as their foundations.
Really? Because your assertion that those with fewer assets should get the same low intrest rates as those with lots of assets doesn't sit well with reality, it's nice, it just isn't how the world works.There were what they called NINJA loans, no income, job or assets those didn't turn out too well for the lenders or the country... Dishonest people made out pretty well...
Honest people have a harder time all around...
More on Ninja Loans:
A NINJA loan is a description of mortgage loan that originated without the important documentation to prove that the applicant can reasonably adhere to the loan terms. It stands for No Income, No Job or Assets.
Many of these loans were based on unsubstantiated lies from either the applicant, the mortgage broker or both. The lender that ultimately approved the loan did so without exercising due diligence to ensure that the applicant could afford the mortgage.
Additionally, many of these loans were packaged and sold to other lenders. Fannie Mae and Freddie Mac may have bought some of these loans. Additionally, many of these loans packages ended up in investors hands as Collateralized Debt Obligations (CDOs).
CDOs were previously viewed as relatively safe investments, since they were secured by real property. However, with many of these properties now worth less than the loan balance and record numbers of homeowners losing their homes to foreclosure, many CDOs were subject to heavy losses that would be incurred by investors.
Those people don't tend to treat money as a game the way the wealthy do. If they are otherwise credit worthy, give them the same rate as the wealthy.
umm no the wealthy are wealthy because the vast majority of them do not treat money as a game.
btw I get your "idealism?" in regards to how you want it to be, but let me ask you..
if someone came and asked you to borrow 500,000 dollars and they did not have it in the bank or in investments, and they can make payments on a 30 year schedule but they dont have alot of wiggle room if there is a problem..
and then someone asks you to borrow 500,000 dollars and they have more then that in investments and bank accounts tied up, and can make the payments in 15 years and have alot of wiggle room who are you going to be more likely to feel safe in loaning your money to?
the one's who caused the housing bubble did. They set it up for the crash that came next. If they hadn't set it up in the first place, that crash may not have come or may have been less severe.
It's not idealism. It's real, I've lived it and I'm in the middle of it right now. I'm not wealthy, I built a great credit record, and I got a good rate for it. If I had not gotten that rate based simply on my otherwise lack of wealth, I would not have been able to afford the mortgage and would not have been able to buy a house. Or, I might have THOUGHT I could afford the mortgage, gone in with a higher rate, and ultimately failed and defaulted because the rate itself pushed me over the edge.
I'm not against lenders doing proper due dilligence. I'm not against lenders denying someone a loan who is a poor risk. I think that both lenders and borrowers need to exercise common sense and make sound judgements, and there was certainly a shocking lack of that on both sides that contributed to the crash.
But a credit worthy person who simply is not wealthy should not be penalized with his interest rate. That just adds fuel to the fire and makes it more likely that he will default. In some cases I would not be surprised if the lenders do that on purpose, engineer the default thru higher rates. That way they have collected the down payment and a couple years of monthly payments, then the buyer defaults and the lender takes the house and sells it again. And again. And again. I think it might actually be deliberate, in some cases.
The wealthy, those who can afford to pay cash for the house? Why are they taking a mortgage? If they can pay cash, why not pay cash? Why pay any interest at all? Maybe it's because they are hoping to flip the house for a profit. They don't want to own the house, they make the smallest down that is allowed, and if the market doesn't look favorable in a year they can walk away from it and minimize their loss. The wealthy who could pay cash and choose to take a mortgage? That is a danger sign, in my opinion.
I have news for you, it was Congress that set up the housing bubble.. it was not a choice of wealthy people as you put it, it was congress messing around where it should not have been messing around.
the rest of your comments really solidify that, like was already mentioned, you should not be a banker. First you can not base your judgement on all other people by what you have done, for every person like you there is another and most likely more then one more that has messed it up and gotten in over their head and had their home repossessed. So no you can not base it on what one person alone did you have to look at everyone in a certain group.
btw let me give you a lesson about money.. If you have money and its sitting somewhere where you can pull it all out in a day then its not really working for you. Granny stuffing 50,000 dollars in her mattress is not wealthy, when if she had invested that money smartly she could probably have hundreds of thousands in wealth. Truely wealthy people have their money constantly working for them, constantly in play, in all kinds of things. It is often much easier, and smarter with tax breaks, to take a loan that fits certain parameters then to go pull out all kinds of money and pay cash for something, who cares if they are flipping a house as you put it? thats irrelevant to the loan situation. Who cares if they want to buy out a block and tear all the houses down and build a football stadium? It doesnt matter, at least for the loan, what matters is that that loan can be repaid with as little risk as possible. Higher interest is charged to groups that fall into higher risk categories. that higher interest is part of what covers the gap when a certaiin percentage default on their loans. This is basic stuff Michael, I am not sure why we are having this conversation here to be honest.
ok, clearly you know best. obviously i've not changed your mind, and that's really ok by me.