Foreclosures for you

There have been a series of serious articles in the New York Times over the past week or so on a small town in Southern California that is drastically changing because of the drop in real estate values and the increasing number of foreclosures.

What is often written about is how people got in over the heads in the go-go days of the early 2000's. There are stories galore about how stupid we all were, not just as individuals, but certainly at bankers and mortgage loan experts. I have often come down on the side of the average person in this battle of who is really responsible. First off, I will continue to argue that there remain a large number of stupid bankers in charge of the nations banking system. These inbred Yale and Harvard grads yield enormous power over a system they not only designed, but one they also ruined.

That said, who in their right mind would turn down a loan for half a million dollars if you were earning 30 grand a year? I know I wouldn't and my guess is there are very few who did or would. It will be almost impossible to describe to our children how this happened. No where in history has there been a time when the money changers were so stupid. You can never underestimate a greedy persons motivations. This is why I know at least 3 close friends who have fallen for con men scams.

You take an average street con, some three card monty trick, and you give that same sense of free money thinking to people walking into their local bank, and what you get is average American people buying homes, or taking out home equity lines, that they could never afford to pay back, nor could their home handle the burden of such astronomical new debt.

In the Times series there are a number of people who purchased these regular homes in a section of Southern California that was not that great. The prices were reasonable, 150 thousand or so, and people bought their homes and led their lives. Then, as banks could not give money away fast enough, these same people could apply for loans, and shady home appraisers (in on the game from day one) would estimate the value of these simple homes at twice or three times real value. Again, who could turn down a low interest rate loan for a home they purchased at 150,000? You buy the home for 150,000, maybe put down 10 percent, so you own 140,000 on a 30 year mortgage. Then you find out your home is magically worth 300,000. That means, you could walk into a large, stupid bank, and pull out 150,000 in cash. Withonly 10, grand down that you pulled together to purchase the home.

Step back from how retarded this all is and imagine yourself in the same situation. We can all use more money at our disposal. This scam offered that, in piles of clean cash for anyone who basically knew how to sign their name.

So what happens when reality knocks on your door? You find yourself using your home equity line of credit to pay a mortgage you can't even come close to affording, knowing in the back of your mind though, that if the worst happens, you could still probably sell your home for a profit, because you see the prices of homes just continue to increase.

Then the prices stop increasing. Then they begin to decrease, and employers start to lay off workers. And banks, still run but some of the stupidest people ever to wear a suit, start closing off the home equity money. Then that mortgage payment, that went from an affordable 1000 dollars a month is now 2800 and you are broke. Goodbye house, goodbye job, goodbye.