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Stock Ideas Top Headlines Excuse Me Mr. Bush, But You Owe Me $1200
Stock Ideas Top Headlines Excuse Me Mr. Bush, But You Owe Me $1200 
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'Stimulating' session to end a very ugly week. - GE, IBM prevent early selloff, but cannot turn the tide. - Leading indicators remains weak while consumer sentiment bumps higher. - Stimulus proposal stimulating the usual debate. - Hard to stay long this market outside the relief moves as even defensive sectors come under pressure. - Earnings start in earnest and may trigger the rebound, either by good news or bad. |
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| Excuse Me Mr. Bush, But You Owe Me $1200 |
| Monday, 01 October 2007 | ||||||||
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Dear Reader, Three weeks ago, I wrote an article about President Bush’s plans for assisting those having trouble paying their mortgage. Apparently it struck a chord with readers, because I received 59 emails about the article. This is by far the most email I have received about one article. Of the 59, 52 were either positive feedback or at least in agreement with my position. Of the seven negative emails I received, most pointed to the lenders and called me out for not placing more blame on them. There was one reader who lost their house, and this reader has my sympathy. Getting back to those who called me out, these readers are right in that I failed to place any blame on the lenders. Just because I didn’t call them out in the article doesn’t mean I don’t blame them. I still don’t excuse the consumers for being taken in with these gimmick loans, as no one forced them to sign the documents. Yes, the lenders were certainly aggressive with their products and now many of them are either going out of business or at the very least having to cut way back on their budgets. In what could become a great irony to this whole story, let me give you an example of a personal observation. One of my former neighbors built a new home just a mile down the road in the sister neighborhood to mine. He had a very nice home in our neighborhood that at 3,000 square feet was certainly big enough for only him, his wife, and their six-year old son. So why did he need a new home that was more than 4,000 square feet? The answer in my eyes is that it was a status symbol. And it would not be the only status symbol they indulged in. The husband drives a Lincoln Navigator and the wife drives a Lexus. The wife is a stay-at-home mother, so the husband is the only one employed. Now I will let you know their current situation. After having trouble selling the house down the street from me, they decided to rent the house out. So now they have the mortgage on the old house, and in talking with them, the rent they are receiving isn’t as much as the mortgage payment, so it is a net negative to their cash flow. Now they also have the mortgage on the new house. Plus they took out a home equity loan on the old house for their down payment on the new one. What does the husband do for a living? He is a mortgage loan originator. The company he had been working for went out of business back in July, but he was able to land another job rather quickly. Unfortunately, the new company closed its doors three weeks later and he is now out of a job. So now they have no income coming in and they have three mortgages, two on the old house and one on the new house. And from where I sit, they don’t have anyone to blame for their situation except themselves. I hope everything works out for them because they are nice people, but they brought this on themselves. I was in a similar situation back in the ‘90s when I was in the mortgage business. I went from making very good money one year, to making very little the next, and finally losing my job. But I was in a far better position because I hadn’t gone out and bought a new car. My wife and I did buy a house, but it was a very modest house and we were expecting our first child. But because we were adamant about buying a house we could truly afford (regardless of what we qualified for), we were still able to make our payments on time. This also allowed me to take a job that paid less than I had been making, but it was more stable and it allowed me to go back to school and finish my degree. Here is the ironic part. My former neighbor made a lot of money over the last five years by putting people into mortgages that they really couldn’t afford. And he lived high on the hog for a while. But now he is without a job and looking at huge debt payments each month. I don’t know if they have money saved or not, but under President Bush’s mortgage bailout plan, this guy could be someone that actually gets help on his mortgage.
How ironic is that? I agree with the readers who said that I should have included the mortgage lenders on the list of people to blame. But I go back to my own situation. Even though I qualified for a much more expensive house, I wasn’t comfortable getting in over my head. Nobody forced me and my wife into a loan, just like nobody forced anyone to take a loan for more than they could afford during the recent mortgage boom. But those who preyed on unsuspecting consumers are now getting their due as well. Good luck and good trading, Rick P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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