Tuesday, December 11, 2007

House? Debt? Interest? No Christmas?

"In the past, when times were tough, she would borrow against her home's equity -- that's no longer possible."

Ah... (insert bleeding heart strings here) This Christmas, she can't borrow any more money because she owes more on her house than it's worth.

No, I'm not that cold hearted, but how much sense does it take to know that you can't keep borrowing against a house without having to pay for it?

This was a story from CNN this morning, "Have yourself a subprime little Christmas". Yep, they're blaming it on the interest. Doesn't have a thing to do with poor money management. Nope, nosireee.... it's "them" out to get us.

I know. I know. The housing thing along with the interest thing and a few other things are hurting some people. Most of the hurt I see is brought on by over borrowing - by too much debt, by not enough financial maturity.

It may be time for some people to grow up the hard way.


  1. I agree 100% Pat. Quite frankly, I think the reset in the housing market has been a long time coming. And here's the tell-tale part:

    "Castleberry, a former casino buffet supervisor who now makes $11 an hour, 30 hours a week, supervising children before and after school..."

    11 (dollars/hour) * 30 (hours/wk) * 51 (week/year minus one for vacation) = 16,830. So this woman makes less than $17K a year pre-tax, and lives in a $220K house. My household income is over $100K a year, yet I live in a house that is close in value. What's wrong with this picture?

    Furthermore, this is yet another example of how our society not only encourages overspending, but depends on it, turning a holiday centered on the birth of Christ into a revenue-generating venture. Sick!

  2. I couldn't agree more on all that you said, deepforge. Some people still somehow think they deserve anything they want and our culture feeds that.
    Sooner or late, we all have to pay.

  3. AYmen to it all. The worst part about it all is that there are STILL ads everywhere (and then some) with these "wonderful" offers of a $500k mortgage for $20 a month - well, not quite that bad, but y'all know what I mean.

    It scares me how many people won't learn from this either...just like the ones who file bankruptcy, are absolved of their debts, and owe the same amount in six months again anyway. Oh but wait - there's no magic ticket out of there then. ;-)

  4. I agree with ya, Pat! I think that for the longest time it was next to impossible to get a mortgage. Then lenders made it TOO easy to get one. While I agree that there are some snakes out there in business, what ever happened to consumer RESPONSIBILITY? Why are folks signing documents that they do not understand? I think ARMs are lousy to begin with (note the word "ADJUSTABLE" in there). But if you truly feel you need one, how about calculating out what the MAX payment can be? Can you afford the payment? If not, you shouldn't be in the house!

    Wake up, America!

  5. That's true, melonie. You'd think that people would know by now. It's not like there are any great secrets. Just don't borrow more than you can pay. It's that simple.

  6. You know, annie, I think the real problem was in the marketing of mortgages to people who up to now hadn't had a chance to buy a house of their own. It irritates that people are gullible and they do make their own beds, and I do my share of griping about it, but a lot of the blame goes to those who are so eager to make money they'll take it from anyone.

    Either way you look at it, it's a mess.

  7. It sounds like the lead story in the article, Jackie Castleberry, has had a huge cut in income. I ran the numbers through a Bankrate calculator, and it said she could afford a $60K house. Since she has 3x that in mortgage and home equity loan debt, I assume that she's now making 1/3 of what she used to. Ouch. I wonder if the pay is really 3x as good as a buffet manager, or if her husband passed away, or ???

    Either way, I have no idea how to help the lady now that she can no longer afford her situation.

  8. Amy, if she can't afford the situation, the best thing to do is to change it. I know that's easier said than done, and I know the story doesn't give all the details. Easier than changing the situation is to plan ahead and make financial decisions with your eyes open so that you don't find yourself in a situation like this. Again, it all boils down to debt.

  9. She probably bought the house a few years ago when it cost a lot less. Houses in the Vegas area 'doubled' and some even 'tripled' in value in just a year or two and now that the speculation-fueled bubble has burst, the same houses are depreciating in value. Her 'problem' as I read it, is that she kept borrowing against the artificially inflated equity, and now that her personal circumstances have changed, she is 'paying' the price.

  10. Don't just blame the victims. Blame Alan Greenspan, who in 2002, decided that interest rates should be extremely low. Blame the radio commentators who pushed buying your own home. Blame the mortgage sellers who made huge amounts of money and the developers, who destroyed huge amounts of land. Blame the Wall Street types who invented derivatives and blame Congress, esp. Sen. Charles Schumer (NY, Dem) who made sure that hedge fund operators don't pay more than 15% income tax. Lots of blame to go around.

  11. It's a complicated problem, I agree. But the problem remains squarely on the consumer. How can it not? No one forced anyone to buy anything they couldn't afford. No one put a gun to anyone's head and told them to sign on the dotted line, borrowing against equity. Others may have made it easier, but in the end, we're responsible for our own decisions, like it or not.