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SHELLY

SoWal Insider
Jun 13, 2005
5,770
802
No one ever seems to mention that a lot of times these idiot borrowers COULD afford their mortgages when they got them, but then proceeded to go out and buy a new car with a $600 monthly payment, then maybe even a 2nd car after that, because the auto companies will make loans to just about anybody, due to the fact that it's fairly easy to take a car back if the borrower doesn't pay.

However, when times get tough, the idiot borrowers would rather have their sweet ride than pay their mortgage. I don't know how many times I've seen a borrower with large past due balances on their mortgage but those suv payments are right on time.


....but...now they're discovering that these car loans (that were packaged up like mortgages and sold) are going bust as well. While it is true the car, like the home, can be repossessed--the car loan, like the home loan, is also way, way underwater.

Remember when the automobile dealerships were advertising "Do you still owe money on your old car--no problem, we can help you with that!" What they did was roll the unpaid portion of the loan on the old car into the loan for the new car. So the $7,000 the owner owed on the 2003 Honda Civic was rolled into the new loan for the $32,000 2005 Dodge Durango (with leather interior and side stripe). The $39,000 loan was then packaged up with others and sold off to the Teacher's Union Pension Fund.

Now the Durango owner has stopped payment on a $39,000 loan for a truck that is worth (if they're lucky) about $15K. It doesn't make a heck of a lot of sense to keep paying for that loan--better to give the keys to the repo guys and go out and buy a beater, or a $15K used Durango. :dunno:


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Mango

SoWal Insider
Apr 7, 2006
9,709
1,360
New York/ Santa Rosa Beach
Shelly, giving back the keys on the Durango would be the logical solution, but that is not what happens in the real world. Spin is right. I've seen enough credit reports in 20 years to know what he says to be fact and a trend. These behaviours never change with that type of Borrower. They will keep making those car payments and they will find a way to get the latest and greatest rides and tech toys. You won't find many lates on the car payments and the cell phones, but the mortgage and their child support payments will be behind.
 
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kathydwells

Darlene is my middle name, not my nickname
Dec 20, 2004
13,310
418
62
Lacey's Spring, Alabama
I am sooooooo thankful that I am not "House and Car poor". I have made some bad decisions in my life, but I never felt the need to have the bestest, biggest, most expensive house or vehicle. I am really, really thankful for that. When I keep reading all this stuff about the mess these people have gotten themselves into....I keep saying to myself "what were they thinking?". :shock:
 

SHELLY

SoWal Insider
Jun 13, 2005
5,770
802
Shelly, giving back the keys on the Durango would be the logical solution, but that is not what happens in the real world. Spin is right. I've seen enough credit reports in 20 years to know what he says to be fact and a trend. These behaviours never change with that type of Borrower. They will keep making those car payments and they will find a way to get the latest and greatest rides and tech toys. You won't find many lates on the car payments and the cell phones, but the mortgage and their child support payments will be behind.

...Ah-so--but we've never seen credit dry up and blow away like this before either--it's just a matter of time before they come to take away all the toys--and/or write off the loans.




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Mango

SoWal Insider
Apr 7, 2006
9,709
1,360
New York/ Santa Rosa Beach
When I keep reading all this stuff about the mess these people have gotten themselves into....I keep saying to myself "what were they thinking?". :shock:

It became a mass psychology of me, me, look what I can have now that was only available to some before. Credit used to be what high net worth people were offered, but didn't really need. Gradually mortgage loan programs expanded more, then post 9/11 the Feds start dropping rates like bird droppings, 0% on credit cards, low rates on car loans, and furnishings, expand loan programs even more now too. Qualify an adjustable rate mortgage at the start rate vs. the way it was qualified before with the index and margin, fix up your house, buy pools, your house is a credit card also so get an equity line. People who didn't have access before to all this credit before but felt "entitled" to it suddenly had get out jail free cards. No, they weren't thinking, they were swept up in it without thinking about the consequences of tomorrow.
 

spinDrAtl

Beach Fanatic
Jul 11, 2005
367
2
I realize that packaged car loans may be a problem, but my point is that the blame on many of these foreclosures, barring fraud, job loss, illness, lies on the borrowers.

Typical scenario:
Borrower: I want to refinance my home, I can't afford the payments anymore.
Loan Officer: How is your credit? Do you know your score?
Borrower: It's good, I'm sure. I got a new car loan a few months ago, no problem.

Loan Officer pulls credit, which shows a mortgage taken out in 2004 that now has a 60 day late on it and a past due balance of 2 full payments. There is a $450 car payment that began in 2006. There is another car payment of around $550 taken out 4 months earlier. Credit score is around 540.
 

SHELLY

SoWal Insider
Jun 13, 2005
5,770
802
I realize that packaged car loans may be a problem, but my point is that the blame on many of these foreclosures, barring fraud, job loss, illness, lies on the borrowers.

Typical scenario:
Borrower: I want to refinance my home, I can't afford the payments anymore.
Loan Officer: How is your credit? Do you know your score?
Borrower: It's good, I'm sure. I got a new car loan a few months ago, no problem.

Loan Officer pulls credit, which shows a mortgage taken out in 2004 that now has a 60 day late on it and a past due balance of 2 full payments. There is a $450 car payment that began in 2006. There is another car payment of around $550 taken out 4 months earlier. Credit score is around 540.

You forgot to finish the story:

.....Loan Officer pulls credit, which shows a mortgage taken out in 2004 that now has a 60 day late on it and a past due balance of 2 full payments. There is a $450 car payment that began in 2006. There is another car payment of around $550 taken out 4 months earlier. Credit score is around 540.

Loan Officer: Congratulations, sign here, here, here and here, initial here and here....here's your check.

(Afterall, how else did these "deadbeats" get their hands on the money in the first place?)


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spinDrAtl

Beach Fanatic
Jul 11, 2005
367
2
You forgot to finish the story:

.....Loan Officer pulls credit, which shows a mortgage taken out in 2004 that now has a 60 day late on it and a past due balance of 2 full payments. There is a $450 car payment that began in 2006. There is another car payment of around $550 taken out 4 months earlier. Credit score is around 540.

Loan Officer: Congratulations, sign here, here, here and here, initial here and here....here's your check.

(Afterall, how else did these "deadbeats" get their hands on the money in the first place?)


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Typical know-it-all response that has nothing to do with what I said. These 'deadbeats' are making their own decisions on what to buy and how far to extend themselves with consumer goods purchases. Just because someone says 'Sure, you can have this $30,000 truck for $600 a month' doesn't mean they have to buy it.

This scenario is what's happening now based on borrower's irresponsible behavior and decision making. Borrower gets a loan they can afford while their credit is good. They bought a house they could afford monthly payment wise but never gave a thought to keeping their current furnishings. They buy new furniture with 24 month no interest financing. Then they try to keep up with Jones's across the street because they have the 'I want it now' attitude with flashy vehicles and plasma tv's. Then they discover that those suv's have put a burden on them. However, foreclosure takes many months so they keep paying for the sweet rides that the neighbors see driving up every day while not paying their mortgage.

Here is the real finish of the story:

Loan Officer: "Sorry, I can't help you at this point unless you get your mortgage caught up and your credit score up. Did you ever think of selling one of those cars in order to save your house?".

Personal responsibility is a real b*tch.
 

SHELLY

SoWal Insider
Jun 13, 2005
5,770
802
Just because someone says 'Sure, you can have this $30,000 truck for $600 a month' doesn't mean they have to buy it.

....but if a fat commission check rests on the $30,000, getting the response "Great! Where do I sign?" it is like manna from heaven. Everyone wins and the transaction couldn't have happened without participation of BOTH parties.

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