The Wall Street Journal reports that a growing number of people are opting for 15 year mortgages rather than the more conventional 30 year term. During all of 2009, almost twenty percent of all borrowers chose the shorter term. www.wsj.com/article/SB100014 While this is driven by historically low interest rates, and is obviously a strategy that can only be utilized by someone with a few extra bucks each month and equity built into their home, perhaps there is more to it than meets the eye. According to Bob Walters, the chief economist of Quicken loans, this is an indication of a different psychology about debt. In recent decades, a common strategy was to take on the largest mortgage one could handle and use some of that money for other investments. The trend nowadays is to get rid of the personal debt as quickly as possible. After the past two year’s events, it’s one of those things that sound so logical, it’s hard to remember the counter-argument.
By Myron Gushlak
Showing posts with label mortgages. Show all posts
Showing posts with label mortgages. Show all posts
Monday, September 20, 2010
Wednesday, June 30, 2010
Mortgages
I remain fascinated by the Fannie Mae/Freddie Mac train that is continuing at break neck pace to God knows where. These quasi government agencies took over a foreclosed property about every ninety seconds over the past three months. www.nytimes.com/2010/06/20/business/20foreclose.htm
They now own 163,828 homes across the United States. Most of the properties are being “bought” from bankrupted owners and are being resold at bargain prices. The American taxpayer at some point, will make up the difference. While there is little to be gained from the old “what if?” game, it is hard not to wonder what the current landscape might be if FDR didn’t initiate this “tool” to help Americans buy their own homes in the first place, or if it wasn’t dolled up by the Eisenhower or Lyndon Johnson administrations. It remains responsible for the vast majority of home ownership in the US because it essentially “guaranteed” local banks that their local mortgage loans would be made whole in the event of foreclosure.
We accept home mortgages as a necessary part of the modern landscape, and we forget that mortgages are not accepted as readily around the world. Is Syria, for example, mortgages are unheard of, yet home ownership is possible for the average contractor or business owner. My intention is not to hold Syria up as a model country by any means, but just to illustrate how deeply entrenched the idea of government backed mortgages is in the US. Americans accept the notion of a mortgage as though the idea came directly from the mouth of God. I just wonder what life might be like if the government never got into the business to begin with.
By Myron Gushlak
They now own 163,828 homes across the United States. Most of the properties are being “bought” from bankrupted owners and are being resold at bargain prices. The American taxpayer at some point, will make up the difference. While there is little to be gained from the old “what if?” game, it is hard not to wonder what the current landscape might be if FDR didn’t initiate this “tool” to help Americans buy their own homes in the first place, or if it wasn’t dolled up by the Eisenhower or Lyndon Johnson administrations. It remains responsible for the vast majority of home ownership in the US because it essentially “guaranteed” local banks that their local mortgage loans would be made whole in the event of foreclosure.
We accept home mortgages as a necessary part of the modern landscape, and we forget that mortgages are not accepted as readily around the world. Is Syria, for example, mortgages are unheard of, yet home ownership is possible for the average contractor or business owner. My intention is not to hold Syria up as a model country by any means, but just to illustrate how deeply entrenched the idea of government backed mortgages is in the US. Americans accept the notion of a mortgage as though the idea came directly from the mouth of God. I just wonder what life might be like if the government never got into the business to begin with.
By Myron Gushlak
Monday, March 9, 2009
Legal Scams
With all the talk about scams and frauds and new government regulations, it is disturbing to me that there are still “credit counselors” and mortgage lenders out there preying on the desperate. Many of, if not most of, the credit counselors who offer to get people out of credit card debt are predatory lenders. Some are affiliated with the credit card companies and operate to discourage consumers to declare bankruptcy, even when that financial option might be the best available. Some of these “counselors” often do nothing more than take a fifteen year debt and convert it to a thirty year debt. Yes, the result is “lower monthly costs”, but the overall cost is criminal, and do nothing for the borrower except offer a band-aid for a gunshot wound.
The credit card companies are just as bad. Their slick advertising campaigns mask usurious rates that would have been illegal a few years ago, and quite frankly, I don’t know why they’re not illegal now. They can change rates “at any time, for any reason” provided they notify the card holder of the change. There is a bill pending, the so called “Credit Card Reform Act of 2008” that may attempt to address some of these ills, but there is no mention of limiting rates credit card companies can charge. There is an attempt to end the ubiquitous “double cycle” billing method which averages out the balance from two previous bills, so the consumer gets billed for retroactive interest even if they paid off the balance. (www.money.cnn.com/2008/07/21/pf/consumer) Even though the banking industry is opposed to the changes that this act will attempt to address, most consumer advocates complain that the proposed changes barely scratch the surface of what is needed.
There are still mortgage companies offering 97% mortgages and other financial options that got us into this mess to begin with. It is probably wishful thinking to believe that government can cure these ills. As long as there are people desperate enough, or uneducated enough to borrow money under punitive conditions, there will be lenders available to them. I want to, in the very least, add my voice against such practices. To me, the practices that are currently the norm in the credit card industry are nothing more than a legal scam, as wrong and as damaging as the illegal scams that grab the headlines.
By Myron Gushlak
The credit card companies are just as bad. Their slick advertising campaigns mask usurious rates that would have been illegal a few years ago, and quite frankly, I don’t know why they’re not illegal now. They can change rates “at any time, for any reason” provided they notify the card holder of the change. There is a bill pending, the so called “Credit Card Reform Act of 2008” that may attempt to address some of these ills, but there is no mention of limiting rates credit card companies can charge. There is an attempt to end the ubiquitous “double cycle” billing method which averages out the balance from two previous bills, so the consumer gets billed for retroactive interest even if they paid off the balance. (www.money.cnn.com/2008/07/21/pf/consumer) Even though the banking industry is opposed to the changes that this act will attempt to address, most consumer advocates complain that the proposed changes barely scratch the surface of what is needed.
There are still mortgage companies offering 97% mortgages and other financial options that got us into this mess to begin with. It is probably wishful thinking to believe that government can cure these ills. As long as there are people desperate enough, or uneducated enough to borrow money under punitive conditions, there will be lenders available to them. I want to, in the very least, add my voice against such practices. To me, the practices that are currently the norm in the credit card industry are nothing more than a legal scam, as wrong and as damaging as the illegal scams that grab the headlines.
By Myron Gushlak
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