Borrowing 101

Nice work - too many people went into massive amount of debt with less thought than they put into buying the pair of shoes they were wearing.

Reminded me of an article featured in Harper's Magazine in May 2006 by Michael Hudson titled, "The New Road to Serfdom". This article featured the following paragraph, which on this historic day bears repeating:

"Never before have so many Americans gone so deeply into debt so
willingly. Housing prices have swollen to the point that we’ve taken
to calling a mortgage—by far the largest debt most of us will
ever incur—an 'investment.' Sure, the thinking goes, $100,000 borrowed
today will cost more than $200,000 to pay back over the next thirty
years, but land, which they are not making any more of, will appreciate
even faster. In the odd logic of the real estate bubble, debt has come
to equal wealth. And not only wealth but freedom—an even stranger paradox.
After all, debt throughout most of history has been little more than a slight variation
on slavery. Debtors were medieval peons or Indians bonded to Spanish
plantations or the sharecropping children of slaves in the postbellum South.
Few Americans today would volunteer for such an arrangement, and therefore
would-be lords and barons have been forced to develop more sophisticated
enticements."

The mortgage broker receives a sizeable commission from the lender. I was amazed at the size when we refinanced a few years ago. There are quite a few people who directly or indirectly derive income from the sale, or the refinance, of a property.

As a Certified Residential Real Estate Appraiser, as well as a homeowner with a mortgage, I appreciate your efforts to inform and educate the public, however, being in the field, each and every day, I have to say that you are late in delivering this piece of information................

Your informative articles should guide people on how to survive and clean up the aftermath of the collapse of the mortgage mayhem...............

It is hard to believe but there are many residential "Mortgage Brokers" who made over $1,000,000 per year for the five years leading up to the real estate bust of 2007 according to the Wall Street Journal. These 'brokers" are no more talented than used car salesmen, but due to a lack of transparency in the industry, they got away with little talent, lots of pushiness and few scruples. Their "kids have to eat after all". They are no less revolting than the greedy "Wizzards of Wall Street" who failed our trust in managing the nations financial assets. The fact that many are being RIFED gives me no comfort. I want to see some money paid back.

Peter A

Peter A,

As one of the "Mortgage Brokers" you compared to the used car salesman, i thank you for your ignorance. What do you do for a living? You probably represent the greedy, non loyal client who turned his nose up at the 30 yr fixed rate of 5.25 we offered you several years ago, only to take the 3 year ARM at 4.5 and then cried foul when the Adjustable (The A in ARM) went higher than you could afford. I guess that is my fault. You sound sour and I hope you can get over it. There are very few of us Mortgage Brokers left here in Massachusetts as the state is very strict on our guidelines and licensure compared to the rest of the country. We disclose to you what we make, a bank or direct lender does not. I would go on, but you clearly have your mind made up. I appreciate this article and I am all for informed consumers.

Being one who is investigating and studying the feasibility of being a homeowner, I appreciate all information offered.
I am finding that the process is complex and confusing. I suspect that in the final analysis, the choice is one of whether I am willling to take the GAMBLE of ownership or not.
I think I would benefit most from a guide as to how to choose a lender. It begins to look like the choices are a matter of determining "the lesser of all evils". Has the term "honest lender" become an oxymoron as it seems to have done?

A few good resources for finding an honest broker, who will listen to you, educate you, and place you in the proper mortgage, is the UMBA -Upfront Mortgage Broker Association (www.upfrontmortgagebrokers.org) and the CMPS -Certified Mortgage Planning Specialist (www.cmpsinstitute.org).

It is the job of the loan originator to educate the borrower and prepare the documents. It is the job of the borrower to learn this process and make educated choices. It is the job of the Wall Street and lenders to offer quality (less-risky) mortgage products to the consumers.