My family purchased its first home a year ago last December. Before then we lived in apartments, university and church-supplied housing and some duplexes (duplices?). We're both fairly competent and educated. My wife has a business degree. But the world of mortgages is just plain crazy, especially for the last several years.
We belong to a credit union that always gives us good rates and doesn't seem to be very interested in screwing us over, for which I'm grateful. But before signing on the dotted line with them I shopped around. Even as a person who was firm in his decision to look for a 30-year fixed rate
loan, some of the bullshit coming out of the loan
officers was surprisingly compelling. Who doesn't want a bigger house, or a lower payment?
Even with all the common sense that we brought to the table, we bought too much house. Not way too much, and we did stay out of some of the trendier neighborhoods, but we don't need as much house as we have. The real danger is when realtors and mortgage brokers, acting in partnership, manipulate people's desires and dreams and then hammer them with confusing language and vague-enough-to-not-be-actionable promises (even if interest rates go up, it'll probably be just half a point! Well, you're going to get raises, aren't you? Houses this nice don't need as much maintenance, so you'll just be shifting money!) to get them to sign up for all the ridiculous mortgage schemes that have just been invented.
The fact that the most dangerous mortgages are also the newest, we're suffering from a decrease in the most effective form or protection from bad home-buying choices: our parents and friends that already own homes. My mom last bought a home in 1988, and she paid cash. My dad bought his around the same time (I think. Maybe it was a couple years later). Before that they bought a home together in the late 1960's. They woudn't have been a lot of help in navigating the complexities of loan schemes they'd never heard of.
As a moonbat liberal, my first instinct is to of course see the federal government help individuals retain their homes, preferably by raiding the profits of the corporations that have been preying on them with these despicable practices. However, people work for these companies and not all of them are evil. Most of them have just been swept along by the promises of unending low interest rates coupled with record-breaking real estate appreciation. But something needs to be done, and sooner rather than later.
I was in South Korea during the Asian financial crisis of the late 1990's, and it wasn't pretty. That crisis was also precipitated by massive amounts of truly stupid loans, money that was issued based upon nothing. The difference between South Korea then and the USA now is that Kim Dae Jung (one of my political heroes), the president at the time, called the CEOs of South Korea's largest corporations and banks into a meeting and told them exactly what they were going to do in order to get the country out of its mess. Most of what he said came from the IMF which, though it is rightfully disparaged for its practices, turned out to be fairly good in its advice to South Korea. Kim Dae Jung had no actual power to dictate terms to these CEOs, and it was suggested that what he did was threaten them with completely illegal political payback if they didn't play ball. I strongly suspect that this is exactly what he did. However, South Korea's banks and corporations did as they were told, and South Korea was the first country to start to climb out of the financial crisis, and is still doing well.
Here in the USA, our president has shown that he will look out for the interests of corporations and wealthy citizens all the time, in every situation. Unless the Democratic Congress can sneak something by him, what we're going to see is a massive corporate bailout while hundreds of thousands of ordinary Americans will lose their homes, their credit, their savings - while paying for the corporate bailout.
I'm not alone in this thinking, see Atrios
and especially click through his link to Nouriel Roubini