Posted on 10/28/2012 10:40:31 AM PDT by SeekAndFind
Its widely accepted that unscrupulous bankers tricked unknowing consumers into loans they could not afford, leading to the financial crisis. No doubt, plenty of that occurredunderscored Wednesday with a $1 billion federal suit against Bank of Americas mortgage arm Countrywide Financial.
But it turns out the victims were not, by and large, unsophisticated rubes. A new study finds that highly educated Americans were most likely to take on unmanageable debt in the pre-crisis years. Whats more, gross personal financial mismanagement occurred across the population and not just in the mortgage market and not just among the unsophisticated.
The study draws a line at the point where monthly payment on household debt equals 40% of income. Thats where default or bankruptcy becomes most likely should the household experience a decline in income, say researchers led by Sherman Hanna, professor of consumer sciences at Ohio State University.
Overall, the percentage of Americans exceeding this 40% threshold jumped to 27% in 2008, from 17% in 1992. College graduates were more likely to be in this group than those without a degree, according to the study. Those describing themselves as optimistic about the future also were among the most likely to have unmanageable debts, the study found. Says Hanna:
People who piled on debt may have been too optimistic about their economic future, but you cant blame that on a lack of education. People with college educations may have thought they were immune to any economic problems.
Meanwhile, folly in the mortgage markets was only part of the problem. One in three renters had unmanageable debts, versus just one in five homeowners, the study found. The percentage of homeowners who had heavy debt burdens increased to 22% in 2007 from 15% in 1992.
(Excerpt) Read more at business.time.com ...
If we had a country that was financially literate, this election wouldn't even be close.
Most young people today have no aptitude for math. They’re completely innumerate, which makes them impulse-driven morons where money is concerned.
This is a problem I lay at the feet of teachers, not parents. My mom was a teacher, my grandmom was a teacher, aunts were teachers, wife has been to teaching college. My mom saw this day coming, because she was a math teacher and saw the younger teachers becoming dumber and dumber about math.
My wife told me that every other candidate for a teaching credential in her class was “scared of math.”
Not just innumerate, but “scared.” That’s a quote.
My wife said “What is there to be scared of? They’re just numbers? Are you scared of words and spelling too?”
After that, she didn’t have many people talking to her any more in the class.
There are a lot of teachers that should be given an eight grade math, spelling and writing test, and if they don’t pass with at least 75% grades, they should be summarily fired on the spot.
People with a little money tend to feel entitled to live a high life style. Often this translates into living beyond one’s means.
Which degrees, what majors and which colleges?
Dumbest thing I saw over the years.
It seemed like every damned peer of mine had brand new Mercedes, Lexus, BMW’s, took fantastic vacations and lived in nice homes that were sometimes decorated pretty dang’d well.
I could never figure how they could afford their luxuries since they made less than me.
They never sold much(we are in the profession of sales) and consequently were only making salary which by itself was pretty good but not that good.
Then comes the crisis of 2008 and I learn all these big shots have zero down - no documentation loans and they used their homes as piggy banks, taking 2nd and 3rd loans on their homes.
Unbelievable!
Now they find themselves upside down on their loans and the government comes in to consolidate those outrageously irresponsible decisions on our backs!
I know of people who have had their loans revalued from $6,000 down to a “Manageable” $1,800 in one instance and more than $13,000 to $2,200 a month.
The friend who had their loan reduced to $2,200 actually leaves the air conditioner now, where before they never turned that thing on in the previous years.
Who in “F” pays for this? Taxpayers, that’s who!
I actually had a friend who a few years ago said to me with all certainty of himself “I deserve a nice car like you!?”
I told him “You’re gonna need to get a job.
He then said “I’ll just get a loan”.
I just laughed and he actually got insulted by it.
Next thing I know, this guy is driving a brand new car and he doesn’t have a job.
I have no frickin idea how you get a loan without a job.
sfl
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