Cogs Posted July 12, 2009 Share Posted July 12, 2009 http://www.newyorker.com/talk/financial/20...talk_surowiecki Short piece on American regulation of mortgage propducts. Many of the problems in consumer finance stem from consumers’ financial illiteracy. Studies find that a sizable percentage of consumers can’t answer simple questions about compound interest and inflation, let alone questions dealing with mutual funds and bonds. The economists Victor Stango and Jonathan Zinman found that people often underestimated how much interest a stream of loan payments would amount to. Brian Bucks and Karen Pence, economists at the Federal Reserve, have shown that many people with adjustable-rate mortgages, or ARMs, simply don’t know how much their interest rates could change, which generally means that they’ve taken on more risk than they realize. But the problem isn’t just ignorance: even quite savvy consumers have trouble negotiating the thicket of options they face when trying to buy a house. The economist Susan Woodward has shown that the mortgage industry’s reliance on abstruse and complex pricing schemes makes it difficult to comparison-shop effectively. That may be one reason a Freddie Mac study found that ten per cent of the people who ended up with subprime loans could have qualified for prime ones. I've long suspected this since I heard someone loudly say in a pub that even if IRs went up a few percent he'd be fine. He was paying 500 a month, he could manage 520 or 530... Quote Link to comment Share on other sites More sharing options...
Authoritarian Posted July 12, 2009 Share Posted July 12, 2009 (edited) Its a bit rich for the Federal Reserve to be taking pot shots at the little people when they don't even know where the $bns they're spending are going. For anyone that hasn't seen it yet...... http://renegadeeconomist.com/blog/fed-insp...ws-nothing.html That aside it is quite breathtaking how ignorant people can be when it comes to the issue of interest. Someone I know recently assured me that student loans have always been interest free and despite my claims otherwise were adamant I was wrong. And then somebody else I knew how took out an INTEREST ONLY mortgage for a maximum term of 10 years thought that by the end of that time their mortgage would be paid off!!! Un-effing-believable. Edited July 12, 2009 by chefdave Quote Link to comment Share on other sites More sharing options...
Executive Sadman Posted July 12, 2009 Share Posted July 12, 2009 If people cant see that 10 years of average wages is required to buy a wee terrace is wacky, then theyve got bigger problems than not understanding mortgage products. Most people cant be arsed to do 30 secs of research on where house prices have been and where theyre going, i highly doubt they spend even 30 secs reading mortgage T&Cs. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted July 12, 2009 Share Posted July 12, 2009 Brian Bucks and Karen Pence, economists at the Federal Reserve, have shown that many people with adjustable-rate mortgages, or ARMs, simply don’t know how much their interest rates could change, which generally means that they’ve taken on more risk than they realize. Im sure thats 100% true of anyone with variable rate mortgage. the clue is in the name. Quote Link to comment Share on other sites More sharing options...
Cogs Posted July 12, 2009 Author Share Posted July 12, 2009 (edited) Im sure thats 100% true of anyone with variable rate mortgage. the clue is in the name. Fair play to you there. Still, as to what he really meant, it does sort of make sense to me. The housing market was like a poker game and you had people going madly all in which meant many of us took one look at what was going on on the table, made our excuses and left. Thing is they didn't know thats what they were doing. Hence my favourite mild putdown to Bulls, "Gosh thats really brave of you", "Er, thank you". Edited July 12, 2009 by Cogs Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted July 12, 2009 Share Posted July 12, 2009 (edited) Greenspan and FED manipulated market interest rates. At the height of the bubble(ish) Greenspan told the US public to take on ARM mortgages. This is driver for high multiple loans, many of those that took them did so because they thought they had no option. They were being told by all and sundry that they would be locked out of homes altogether. This is just blame divergence by a thoroughly corrupt FED. Edited July 12, 2009 by OnlyMe Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted July 12, 2009 Share Posted July 12, 2009 And then somebody else I knew how took out an INTEREST ONLY mortgage for a maximum term of 10 years thought that by the end of that time their mortgage would be paid off!!!Un-effing-believable. Not really, never underestimate human stupidity. Two things are infinite: the universe and human stupidity; and I'm not sure about the the universe. -Albert Einstein Quote Link to comment Share on other sites More sharing options...
arthurwasright Posted July 12, 2009 Share Posted July 12, 2009 If people cant see that 10 years of average wages is required to buy a wee terrace is wacky, then theyve got bigger problems than not understanding mortgage products.Most people cant be arsed to do 30 secs of research on where house prices have been and where theyre going, i highly doubt they spend even 30 secs reading mortgage T&Cs. Even when they are told the truth they don't believe it. They only believe what fits into their dream scenario and cherry pick good news stories to fit their mistaken view. I know I do Quote Link to comment Share on other sites More sharing options...
arthurwasright Posted July 12, 2009 Share Posted July 12, 2009 Not really, never underestimate human stupidity.Two things are infinite: the universe and human stupidity; and I'm not sure about the the universe. -Albert Einstein Chav: "Yeah...and he was a clever geezer...right?.............Didn't he have a part in Eastenders or summink?" Quote Link to comment Share on other sites More sharing options...
Harry Monk Posted July 12, 2009 Share Posted July 12, 2009 The Sheeple are so stupid that the massive majority think that if they take out a mortgage on a house, then they become a home owner from the moment they sign the contract. Quote Link to comment Share on other sites More sharing options...
bazzer Posted July 12, 2009 Share Posted July 12, 2009 Brian Bucks and Karen Pence, economists at the Federal Reserve Seriously? Quote Link to comment Share on other sites More sharing options...
Laura Posted July 12, 2009 Share Posted July 12, 2009 I can remember the time when people bragged that they had a secured loan 'cos it was much safer than an unsecured one. Quote Link to comment Share on other sites More sharing options...
Laura Posted July 13, 2009 Share Posted July 13, 2009 Now how did that kill the thread? Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted July 13, 2009 Share Posted July 13, 2009 Now how did that kill the thread? Laura thread killer? Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted July 13, 2009 Share Posted July 13, 2009 (edited) Laura thread killer? Ive put her on Ignore. There is just so much a poster should put up with. Edited July 13, 2009 by Bloo Loo Quote Link to comment Share on other sites More sharing options...
Laura Posted July 13, 2009 Share Posted July 13, 2009 Ive put her on Ignore. There is just so much a poster should put up with. One hears BL has been reported for 'font fondling' on the scrap Scotland thread Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted July 13, 2009 Share Posted July 13, 2009 One hears BL has been reported for 'font fondling' on the scrap Scotland thread I am under caution for that conduct, its true. although it was the more serious offence of sending around a certain posters image photoshopped onto a bar-room stripper for just $10INJ thats really got me in trouble. apparently the price should have included VAT at 15%. Quote Link to comment Share on other sites More sharing options...
abharrisson Posted July 13, 2009 Share Posted July 13, 2009 http://www.newyorker.com/talk/financial/20...talk_surowieckiShort piece on American regulation of mortgage propducts. I've long suspected this since I heard someone loudly say in a pub that even if IRs went up a few percent he'd be fine. He was paying 500 a month, he could manage 520 or 530... I'd argue that faced with a borrower on a tight household budget who could afford a tracker costing say £500 P/m and who could afford a fixed rate costing £560 p/m but couldn't afford his payments if they went to say £650 p/m.... many would choose the tracker simply becasue they want the savings NOW... these are guys who shouldn't be trying to "make a turn" on their choice of product, but they do and I fear you won't be able to legislate that out of the market. Quote Link to comment Share on other sites More sharing options...
Laura Posted July 13, 2009 Share Posted July 13, 2009 I am under caution for that conduct, its true. although it was the more serious offence of sending around a certain posters image photoshopped onto a bar-room stripper for just $10INJ thats really got me in trouble. apparently the price should have included VAT at 15%. Look on the bright side, when Skinty has dealt with you to her satisfaction, a C&E investigation should be a breeze. I wonder which implements she intends applying Quote Link to comment Share on other sites More sharing options...
thecrashingisles Posted July 13, 2009 Share Posted July 13, 2009 Look on the bright side, when Skinty has dealt with you to her satisfaction, a C&E investigation should be a breeze. The CofE investigation might be another matter... Quote Link to comment Share on other sites More sharing options...
Laura Posted July 13, 2009 Share Posted July 13, 2009 The CofE investigation might be another matter... Coefficient of Expansion? A Church of England Inquisition? ..... truly no-one expects that! Quote Link to comment Share on other sites More sharing options...
Guest X-QUORK Posted July 13, 2009 Share Posted July 13, 2009 A Church of England Inquisition? ..... truly no-one expects that! Noooo, not the tea and scones vicar!! Anything but the tea and scones...pass me the written confession! Quote Link to comment Share on other sites More sharing options...
Caveat Mortgagor Posted July 13, 2009 Share Posted July 13, 2009 (edited) I am really disappointed. I thought this thread had one of the best titles I have seen for a long time. I was expecting a discussion of the lax attitude buyers had in the feeding frenzy that was the housing market up until 2007/8. I further expected warnings to take great care when signing up to a 25 year commitment and perhaps a few cautionary tales of people who jumped in hastily with both feet and are now regretting their actions. I expected to see prophecies of 2009 buyers complaining in 2012 that their 30% deposits have eroded and they will effectively have near 100% mortgages at very uncompetitive rates. And the sadist in me expected to see posters sneering at people on MSE forum or somewhere similar who are struggling to sell their overpriced slave box at 2007 prices cos they cannot sell for less than outstanding mortgage. The title alone deserves a better thread than this drivel. I think the phrase 'Caveat Mortgagor' deserves to catch on. It certainly deserves a better thread than the one currently bearing such a catchy, punchy and instantly understandable phrase. Edited July 13, 2009 by Nick Dastardly Quote Link to comment Share on other sites More sharing options...
Laura Posted July 13, 2009 Share Posted July 13, 2009 Drivel is it? - Damn cheek Nick, had you considered that we might have been there, done that?? - ; & oh so often Though agreed, great title. Quote Link to comment Share on other sites More sharing options...
Guest X-QUORK Posted July 13, 2009 Share Posted July 13, 2009 Somebody needs a hug. Quote Link to comment Share on other sites More sharing options...
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