Monthly Archives: June 2008

The Mortgage Crisis–whose fault?

The short answer: Everyone.

Several weeks ago I listened to an episode of “This American Life” while Ira Glass explored every level of the mortgage crisis. First off, the amount of money worldwide that people want to invest has doubled in only a few years, creating more demand for investment products. They seemed to like mortgage-backed securities and lenders scrambled to meet the demands. At the same time, mortgage brokers were (and still are) getting paid 1% origination fees on loans they had no stake in–if the buyer defaulted, it didn’t affect them at all. For brokers, the bigger the loan they could sell, the bigger their cut. Then there were the buyers. The buyers had a variety of problems. They were uneducated about loan products, they didn’t have a realistic view of their budgets and what they could afford, maybe they were simply greedy.

Suze Orman, Michelle Singletary, and probably many more lesser-known personal finance advisors say that one of the most common dangers surrounding debt is a person’s overestimation of their future earnings. People take take out loans or use financing counting on future raises, promotions, or advantageous job changes. They don’t count on layoffs, medical emergencies, or divorce.

We also know that WAMU had appraisers who were overvaluing houses, which led to buyers getting big loans and when they tried to sell, the house would be revalued at an amount less than what they still owed.

A few days ago on “Weekday,” Steve Scher’s guests offered further insight to the breakdown of the mortgage system. Not all states require licensing for brokers. The market boom made mortgage brokering a lucrative business and it attracted lots of new brokers. These brokers weren’t all necessarily greedy, some were just grossly undereducated and working without much oversight, if any. Some didn’t know what they were offering any more than the buyers understood what was being offered to them. Banks couldn’t even keep up with the onslaught of loans. Thousands of mortgage were were signed off on and approved with no review by a loan officer.

So up to this point, you’re probably thinking I am blaming the mortgage crisis on everyone in the lending/real estate industry and the buyers. But it goes even further. I really mean society as a whole. Home ownership is “The American Dream.” Renting is for the young and low-income. Our government gives tax deductions for mortgage interest and real estate taxes. Get-rich-quick schemes and cable TV shows revolve around the wealth to be had in real estate investing and flipping. I know there’s more but that’s all I feel like for tonight, maybe I will add more later.

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Yesterday I heard that Countrywide Home Mortgages told people incorrect information about the terms of their loans. If you’ve ever gotten a mortgage before, you know that it’s practically a 2″ stack of papers and I can bet that–no matter how responsible a buyer you think you are–you didn’t read that entire thing. Before all this news about what a mess the industry is, if your broker told you that you were getting a fixed rate loan, would you even fathom that he was lying to you? And that is exactly what they did to some buyers.

I also wanted to to add a little to that “American Dream” concept. I personally bought into that. I seized upon the idea that “paying rent will never build equity.” Well paying closing costs doesn’t build equity either, and the amount of closing costs my ex and I spent on our condo could pay my current rent for two and a half years. Another problem I had was that I am from central Illinois. Out there, a mortgage payment is about the same as rent (without the landlord). It’s totally worth it, and I just applied that way of thinking to Seattle, which is an entirely different market. When we got that condo, I considered myself a pretty financially savvy person: I’ve always had a good credit score, I was putting 10% of my gross income into an IRA when I was 20, at 24 I’d never carried a balance on a credit card, the only debt I’d ever had was $350 to Carle Hospital that my insurance didn’t cover (I could have paid it off faster but I didn’t want to stop putting money in my IRA). What I’m trying to say is that I’d always been smart with money but was still irrationally drawn into homeownership. I can totally understand how people could be swept in by the ideal of owning their own home along with the deception of brokers & appraisers and real estate agents’ assurances that housing would keep appreciating at 20% a year.—added 7/3/08

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Oh, CraigsList…

Caucasion Man desiring to make love to a Japanese Woman – m4w – 42 (So King)


Reply to: pers-733805416@craigslist.org
Date: 2008-06-26, 2:45PM PDT

I am 1/4 Japanese and want to make love to a Japanese woman or girl. Safe and sane. LOL

  • Location: So King
  • it’s NOT ok to contact this poster with services or other commercial interests

PostingID: 733805416

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one more reason to love my scooter

So I already loved my scooter because:

it gets 90-100 miles per gallon

I managed to pay for it in less than a year

I don’t have to depend on the buses

it’s adorable!

But now:

I don’t have to get another oil change for 5,000 miles, even though that’s over a year away!!

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Progress? example #2

I have been thinking about this idea for a while, but then I heard author Paul Roberts (The End of Food) on KOUW and he said exactly what I’ve been thinking. Is our industrialized food system really progress?

On one hand, we have to be happy that not everyone has to participate in subsistence-agriculture to survive, so that people can follow other pursuits in their lives. But do we really have to go so far that an E. coli outbreak on lettuce produces a nationwide recall? Almost 400 have gotten salmonella from tomatoes and the FDA still doesn’t know where they came from.

Crop rotation probably started in Roman times and has been refined through the centuries, until the Green Revolution of the 1940s-60s. Many farmers left crop rotation behind for monoculture, which led to higher yields but also an increase in the use of chemical fertilizers and pesticides and a loss of biodiversity, among other problems.
In the U.S., cheap grains have led to obesity and sensitivities to soy and gluten due to overexposure. I could go on and on about this… I haven’t even mentioned the factory farming of animals.

I’m not an expert but I can think of a few ideas to solve these problems. If the government is going to give farming subsidies, maybe they should be for making healthier foods like fruits and vegetables more affordable rather than grains. Buying locally is an obvious way to cut down on the carbon footprint of eating, and also a way to be able to more quickly identify the origins of tainted foods. Animals raised for food on grass rather than grain live in more humane conditions and their meat is leaner.

There’s more problems and more solutions, but I’m done for now.

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Oops I disappeared for a while…

So tax season got too busy, then I went out of town, then I came back and didn’t have any good blogging ideas, then I felt awkward going back the blog I had so long abandoned (which only got worse the longer I waited), then the icing on the cake was my computer dying just when I was getting up the guts/interest/brilliance to post again.  So here I am, like two and a half months later, back at my blog from a shiny new MacBook.

Earlier I posted that this would mostly be about taxes and NPR stories.  Well I am still dedicated to public radio, but taxes have been replaced by running.  I joined SeattleFit with the goal of running the Seattle Marathon Thanksgiving weekend.  Group runs are every Saturday; today was the second one.  My pace group went three miles.  Afterward, I saw these piles of training logs.  I thought of taking one, but realized it would be like my efforts at keeping a diary or (in this modern age) blogging.  I’d start off strong, then fall behind.  Then mostly instead of being proud of my running, I’d be upset by my failure to keep up with the log.  So I passed up on the log.  Besides, who really wants a record of the weather and their mood on four runs per week for five and half months?

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