Mind-Boggling True Story
Like Mother, Like Daughter
Deborah Beatty has no job but took a mortgage for a new New Jersey 3-story home with a view of the Manhattan skyline and Statue of Liberty and then did not pay the payments. Her daughter makes less than $20k/yr as a graduate student but took a $600k mortgage split into 8.75% and 12.5% interest rates and then did not pay the $5k/mo payments—maybe because the payments were more than 3 times (300%) her entire gross income.
“Beatty acknowledged the mortgage was probably too good to be true” (Union-Tribune of SD).
On what planet is $600k debt @ up to 12.5% and payments 3x gross income “good”?
(The quote might only refer to the mother’s unspecified loan but I suspect that she approved of her daughter’s loan and that the mother's loan was little better.)
Take the quiz: Do you find these loan offers attractive or repulsive? Answer in comments.
Tuesday, May 8, 2007
Savers Are from Mars. Debtors Are from Venus. Episode 2
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2 comments:
It is quite bizarre that people would be accepting these mortgages. There was mention of possible 'tenant' income to help with the payments, so it seems that these people are taking these mortgages on as a business. I don't know if they really recognized that, or whether they just thought they could pull in some extra cash to help pay for their extravagant home.
One thing that got me about the article was that it mentioned a few times about consumers rebuilding credit to afford mortgages. GOOD. If they have bad credit, there is likely a darn good reason for it, and maybe they shouldn't be buying a home until they fix the other problems in their finances that they obviously have.
"because their timing coincided with a shakeout in the mortgage market earlier this year, their credit now isn't good enough to get a loan to purchase the house they wanted with no money down"
...from the article. Wait a minute, how does a mortgage fallout hurt their credit? Or could it be that these 'mortgages' weren't really acceptable in the first place?
Build your credit and handle it properly, pay your bills, buy a house you can afford (with FIXED payments that fit well in your monthly budget). Otherwise, rent. Period.
Hello. I think that the article meant that lenders raised credit requirements after the shake-out, so your credit score is the same but what loans you can get with that score has changed.
Of course, whenever banks turn people down, activists and politicians demand looser credit to "help" "struggling families" into risky loans and the cycle starts again.
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