The Social Marginal

I think this is going to be my only post on this topic, and though I wanted to avoid it in the first place, I figure it might give some a bit more perspective.  I could go on about this for pages, but I’ll do my best to keep it brief and summarized as possible, hopefully it isn’t too condensed to express the viewpoint.

For the past five years I’ve worked in positions with Residential Development companies that required me to be knowledgeable and exposed to information for pretty much every facet of the industry for said companies as they owned their own Mortgage, Resale, and even Lending fronts.  I’ve been fortunate enough to work for privately owned companies that were owned and ran by responsible individuals that actually cared about quality and customer service, even as they grew larger.  Still, since 2003 I’ve seen so many things that has made me wince that I’ve become a bit desensitized to the whole situation.

In 2003, it was a seller’s market where I was located, big time.  Prices were skyrocketing, projects were pre-sold before they were even finished (A bank’s dream), and buyers weren’t picky.  Of course, with this came the advent of the widespread usage of interest only loans, irresponsible ARMs, and people buying and just assuming that their house would increase in value and that they could use it as an equity piggy bank consequence free.  I often met with homeowners prior to them purchasing the homes, knowing what loan package they were going into (and them often bragging about it), and always asked them (in a caring way, not sarcastically) if they understood what would happen if the market took a dip; this was usually greeted with a laugh of disbelief that it would ever happened and shrugging off the notion that it even could.  The 115% LTV tricks and such, well, they were frequent and it just made me shake my head in disbelief.

Knowing our mortgage brokers and seeing the loans, meeting with the individuals buying the homes since 2003, I can confidently say that in over 1,000 homes sold, a single home buyer was never ‘pushed’ into a irresponsible mortgage package by them, though I have seen many, many insist on them.  I know there are some deadbeat brokers out there, but it is certainly not the ‘norm’, however, overconfident buyers at many times in the market trend certainly were.  And that’s the nature of the beast when you take a gamble like that, you take a chance at getting bitten, and many did.  I recently drove through a development in an area that ‘we’ sold in late 2003 as a developer and saw nearly 30% of the homes in foreclosure.  The thing is, these homes are still worth more than they were bought for, which leaves three likely options: The first, that the buyer was irresponsible in what they could really afford in the first place and insisted on a stated income loan to squeeze into the development; the second, the home has been resold since, likely at the peak of the market, and the again the new owners were irresponsible in what they could really afford; and the third, the most likely in this particular development given the doubling of price in a one year period after sale by developer, that the individuals used their newly found equity in their homes as credit cards and lived like millionaires until they realized that their piggy bank broke.

The biggest problem during the whole housing boom, in my opinion, were individuals using their rising equity as a piggy bank.  The constant refis, HELOCs, the initial 115% LTVs - they were just absurd.  While there were some people that were mildly ‘victimized’ in this whole debacle, individuals who were trying hard at the American dream and got hit by medical problems followed by a loan reset or individuals who truly were uneducated and really were lied to by their broker and such, the majority of home buyers were not, they were just bad investors trying to get rich quick without working for it or individuals spending way more than they could afford because they felt they ‘deserved’ it.  A lot of people seem to be ignoring this aspect these days and just focusing on the irresponsible mortgages, not that many of these mortgages were actually refis to cash out all that new equity for people that could have originally afforded their mortgage before they decided to do so.

And now the Fed wants to bail many of these individuals out.  Maybe I’m just too desensitized to it all, but I say let them lie in the bed they made and deal with the consequences.  This market, just as it has many times in the past when it took a steep dip, will again stabilize and uptick, and hopefully this time around people will have learned from past mistakes of themselves and others and be a bit more responsible with their home purchasing…

I doubt it, though.

While I have a couple posts in the pipeline (regarding retirement without social security and a couple other topics), I’d like to hear, given what you’ve seen me write about thus far, what you’d like me to write about in the future.  While I’m no real ‘expert’, whether it’s a question concerning a situation that you’d like my advice on in a Q&A format or just a topic you’d like to see me research and write about, send it on in.  Anything I use will be properly credited to the source, and don’t be ashamed to share your own web site or blog and I’ll be happy to plug it for providing the ideas or questions to answer.

You can reach me at cinder@socialmarginal.com.  Thanks in advance.

So I’m busy forming a new company or two and transitioning some contracts at the moment, so don’t have a lot of spare time to write, but I’ve been keeping up my normal sporadic reading throughout the day though, so here are some posts I’ve found interesting in the financial blogging spectrum…

MasterYourCard writes about recession-proofing your savings - Good layman readable overview on what is and isn’t insured in case your bank fails.

Get Rich or Die Trying writes about donating your plasma for extra money - OK, I admit, I’d never do it (they won’t take my blood anyways, not that I had any nasty diseases or anything), but I guess if you’re really scraping by some honorable extra minimal income for yourself to pick up.

Saving Savvy by a Future Millionaire writes about his learning about Passive Income - Definite lesson that all should learn and something everyone should strive to achieve.  Financial freedom is a wonderful thing.

Pinching Copper writes about how there are no victims in the housing bust - I couldn’t agree more.  I get tired of hearing everyone whine about getting suckered into something based on their own ignorance and greed.

No Debt Plan talked about his toothpaste paying him seventeen cents - There are some very frugal people out there, not that it’s a bad thing…

That’s about all that piqued my interest for one reason or another in the past couple days.  Until I’m able to dedicate time to writing again, I’ll update everyone on what’s keeping my interest at least.  Listening to the Fed hearings this morning/afternoon was interesting as well.

I’m not one of those Ron Paul zealots (though he does have a lot of great ideas, I just don’t believe he’d ever be a viable President), nor am I a Bernanke “hater”, but in this address to the Fed Chairman, Ron Paul really summed up what’s been bugging me about his current actions.  Sorry for the YouTube link, I’m not a big fan of video links in blogs either.

I try to keep everything here on a lighter and more personal mood (though this is very personal and directly affects your finances), but I am known to be a closet economist at times. So ok, I’m done now, I’ll go back to my normal blogging topics, heh. Well, at least once I can think of something to write about that are ON topic.