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American media on subprime crisis

  • Category :
  • politics
  • January 3rd, 2008

    A while ago I was watching some news magazine program on TV.  They were exploring subprime “victims” where they borrowed beyond their means to pay back.  The 60 year old “victim” bought a townhouse in Brooklyn for $30K some 20 or 30 years ago.  The property is now valued at $750K.  He should have made a fortune.  He took out a balloon mortgage of $300K last year from a lender; and when the Adjustable Rate Mortgage resets, this retired man would be facing a $2500  monthly payment he can’t afford.  He will be evicted from the house he has been living in for 30 years, a place which he intended to pass on to his son.

    So basically it’s the bank’s fault.  The banks were pushing all these deals to the consumer at low initial rate.  They care less if the customer can afford it or not.  Wait a minute.  First take a look at what happened.  The “victim” had $300K sitting somewhere.  Whether he spent it or hid them under his mattress, he took out $300K.  He borrowed more than what he initially paid for the townhouse, with the town house as the collateral.  From the bank’s point of view, they are lending $300K to someone who put down a collateral valued at 200% of the loan as a lien.  Why should they care if the guy can pay or not?  They are going to make the loan whole by liquidating the lien.  If he can make the payment, it’s a bonus.  If he can’t, the bottom line is protected.  It’s a sound business decision.

    What is this “victim” complaining about anyway?  He walked away with $300K!!, $270K more than what he had paid for the place.  Of course a 60 year old man tricked by the evil banks that toold his house sells more paper.

    Entry Filed under: politics

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