LIVING THE AMERICAN NIGHTMARE FORECLOSURES ON THE RISE: As the housing market softens, a combination of consumer naivete and aggressive lending means owners with subprime loans are increasingly getting sucked down a financial black hole
These aggressive lenders knew this was coming. They knew they were setting people up for financial ruin. It makes me angry that they were allowed to mislead people and I really think they should be rotting in jail for it. Sure there was consumer naivete (a lot of it in the Bay Area housing market that looked like it would never fall though you knew it had to), but there were lenders lining up for the chance to take advantage of them. How do these rip off artists live with themselves?
How do you tell someone that they shouldn't buy a house when there is some shyster telling them that they can and is offering the front money to make the dream possible?
They offer an adjustable rate mortgage with a super low starting rate and a monthly payment that is made to appear low, but it turns out that they're paying either interest only or less than that. In a rising housing market this is risky, but ok. In a flat or falling housing market this is financial suicide. If the value of the house drops, you will end up owning more than what you've been paying in as you have no equity in the house. All the while, the adjustable rate keeps adjusting upward towards market interests rates and the homeowner's payment goes up, and surprise the homeowner finds themselves trapped.
If the homeowner can afford the increases ok, but homeowners who can afford such increases are not using subprime lenders and risky loans. The "system" only works if the value of the house goes up (or if the homeowner's income goes up) and they can then refinance it to a better loan. This is the dream that the lenders sell them. And it's for this that I think they should have to walk over well heated coals. They knew this would happen. Grrrrrrrr.