Mortgage Roundup

I've noticed a lot of articles about the current mortgage crisis in the PF community, and there is a lot of finger-pointing going on in the media as well. Here's a few articles I ran into this evening:
The Seattle Times writes It's a Wonderful Mess (great discussion thread on Seattle Bubble):

Nowadays, it's impossible to watch the 1946 holiday movie "It's a Wonderful Life" and not feel a twinge of respect for Henry F. Potter, the villainous banker played by Lionel Barrymore. Potter was not above drawing the last drop of blood, but at least borrowers knew whom to hate. And if they were late paying, they knew where to crawl.

That's not necessarily the case today. Mortgage companies often ship the loans to Wall Street, which repackages them into securities sold around the globe.

So if you're a borrower in trouble, and your loan is diced up into some mortgage-backed security, you'd be hard-pressed to find a lender's ear. How's your Chinese?

Newsweek writes about When Mortgages Made Sense:

Greenstein says loan modifications—whether done on a case-by-case basis or via the standards recently set out by the Bush administration—are the logical starting point. He also wonders if we'll hear more about steps to help people who have invested in securitized mortgages, which are now suffering losses. He hopes the lending process will move back toward stricter underwriting, to a time when people wouldn't be issued a mortgage that would consume 40 percent of their income. The Fed's reforms will help, but Greenstein says he'd also like to see the loan documents borrowers sign become more comprehensible.

The Wall Street Journal had an article entitled If Homes Cost Too Much, Is It Okay To Rent Forever? (more discussion at BostonGalsOpenWallet):

As a renter in an up-and-coming neighborhood in Manhattan, I’m particularly interested in this subject. I pay an admittedly low rent — for New York City — of under $2,300 for a large two-bedroom apartment. When I run the numbers on any mortgage calculator, it looks like we’d be spending more than $3,500 per month on a $400,000 mortgage (including taxes, but not including all the unknown expenses that come with home ownership). I know there is an upside: tax breaks, an appreciating asset, a home to call our own and shelter from the shock of rent increases. But, increasing our outlay on housing by 50% or more sounds like asking to be house poor. We’re still going to save up and sure, we’ll likely get raises along the way, but we’ve resigned ourselves to being renters for up to another decade.

There's even a movie in the works, called Maxed Out:

Maxed Out begins as Beth Naef, one of the most successful real estate brokers in the country's hottest real estate market, Las Vegas, gives us a tour of a $5.5 million spec house. What's important to her clients, she says, are elevators, massive kitchens and wine cellars. Beth is building a ten-thousand square foot McMansion of her own, a home she admits she won't be able to afford if interest rates go up. But, as she concludes, "if you look like you make money, I guess eventually you will."

Single Ma has something to say about this whole mess:

I don't even know what to say about the current mortgage industry. I don't want to pass judgment on the borrowers and I don't want to place all the blame on the lenders. But there's one thing I do know for sure - it is affecting the entire US economy. Ruthless scammers are trying to take advantage of the uninformed, savvy investors will profit from their misfortune, the government is making futile attempts to help, tax dollars will be wasted, home values are rapidly declining, and responsible borrowers are pissed...and rightfully so.

In my opinion, it's just a hot butterball mess!

Here's an interesting piece from Millionaire Mommy Next Door:

Good friends of ours built their home in Phoenix before the prices skyrocketed. They plunked a lot of cash into their home and accelerated their mortgage payoff. They now own their home free and clear. A couple years ago, they shared the exciting news that their home's value was evaluated at over $850,000 and they expected the price to appreciate to $1,000,000 very soon.

You can guess how this story ends.

Here's another one from Millionaire Mommy:

"All current living generations in America have been force-fed the idea that home ownership is absolutely essential to financial freedom. It is an article of faith in the national religion. Question this and you are branded a heretic. Somehow, through an Orwellian twisting of the language and a corruption of the educational system, debt became wealth. The last two generations that would have disputed this have passed on."

Dear readers, don't just take my word on this topic. Ask questions, do some research and come to your own conclusion. The purpose of my site is not to tell you what to do. My intention is to educate.

There's a lot of information out there. As for us, we wanted to sell our house in 2005 and start renting; it would have made us debt-free. My instincts were good, but a serious illness kept us from making that happen. Now, oh, how I wish we had done it! Regardless, we will pay our debt the slow way, and if our house gets to be too much -- we'll rent it out and downsize. Luckily we got an excellent loan and bought a house well within our means; we are the minority today, I guess. Happy reading!