Posted on 09/09/2009 2:44:49 PM PDT by Kartographer
Edward and Maria Moller are worried about losing their house — not now, but in 2013.
That is when the suburban San Diego schoolteachers will see their mortgage payments jump, most likely beyond their ability to pay.
Like millions of buyers during the boom, the Mollers leveraged their way into a house they could not otherwise afford by taking out a loan that required them to make only interest payments at first, putting off payments on the principal for several years.
(Excerpt) Read more at nytimes.com ...
Balloon notes are among the stupidest ideas I’ve heard of.
Balloon notes used to be the way it was done ~ then the Great Depression happened.
My late husband and I did the balloon payment thing once.
Here is what happened. As we got closer to the balloon payment deadline we were able to re-finance and get a fixed rate loan.
It’s all about your credit rating. If you are good about any payments you should be able to re-fi.
I have no sympathy for these people. I have waiting years to buy a home in California and only now are prices where they match up with my “CURRENT” income. I refused to buy over the last 10-15 years when people kept telling me about these types of loans because I couldn’t guarantee that my income would go up high enough in the future to cover the mortgage. The promise of ever rising values also didn’t sway me...I’ve seen massive price corrections in the housing market before and I knew better. This even despite assertions from friends that the market will “never go down” (Funny that came from a guy I know who is losing his home because he over bought).
These people are fools and should not be getting my tax dollars to help them out. I waited patiently to buy a home...I refuse to bail out these people out because they have no financial sense.
I’m officially pissed off!
Not any more. The problem now with the large majority of these loans is the house is no longer worth what is owed on it, so people can’t re-fi and are stuck. Sucks to be them.
We let these idiots teach?
So they bought a house they couldn’t afford and want sympathy?! Boo freaking hoo.
How incredibly stupid were these people.Dear God I hope they quit teaching, they are a menace.
I guess those mean ol predatory lenders forced them to make that deal.
They were stupid and greedy. They get what they deserve.
The saddest thing is their greed and stupidity hurt us all
They are excellent for folks who otherwise have enough to buy the house outright with cash on the barrelhead, but want to play on rising home prices, etc. I agree they are stupid for most folks, at least now.
It's an old old story.
Oh, I have no sympathy for them. Hence my “sucks to be them” comment. Anybody that gets an interest only loan, ARM, or one of these balloon types, deserves what they signed on for. I was merely pointing out that it’s not just a matter of doing a re-fi, even if you have good credit.
Not true. You can be as honest and hardworking and true to your agreement as you had planned, but if the market softens, you won’t be able to borrow enough to take out a new loan.
Back in the 50s and 60s, inflation was a reality. The nice thing about that, is that wages floated, that mortgage you took five years earlier that you never thought you’d be able to service, became small in relationship to your new wages.
Today wages are stagnant, jobs are scarce, there’s too many people available for the open jobs there are. People are upside down in their mortgages, and there really isn’t any help in the foreseeable future.
And the government coming in like a sugar-daddy, may look good now, but there will be hell to pay one way or another, most likely rampant destructive inflation.
My sympathy goes to the taxpayer, who was stuck for the bill to bail those folks out. What’s more, there’s a foundation being laid that will ensure we have to do it again, and not only for real estate mortgages. All sorts of bailouts are out there. It’s amazing to me we have any functioning economic system in place with what is going on, and I don’t see how it can last.
Ouch. There's a lot of people like this. And with only a thousand square feet, this was probably their "starter" home that they were going to flip before the payments went up.
Nope. No bank is going to loan you more than your house is worth, unless you have enough cash in the bank to cover the loan. That’s their problem; the house is worth less than the principal balance on the loan. If it was worth that much or more, then re-financing would be as you describe.
According to the article, they paid $460K for a house that's now worth $310K. Barring a major market turnaround by 2013, that kills refinancing.
If you know you’re going to be making more money in five years (one working spouse, one finishing grad school), or if you know you’re going to move before then (young professionals), it’s a rational way to afford more house.
But they are easily abused/misused.
There were all kinds of refinancing opportunities a few years back. These people just though they could beat the odds.
They probably have a second problem they don't even recognize yet.
I bet their first mortgage was a purchase money mortgage and thus was "non-recourse," allowing the lender to take the house but nothing else.
But I'll further speculate that their refi is a recourse loan, meaning the lender can recover any shortfall from any other assets they have or might get.
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