It's more of a left-handed pitch to sell his book. I, for one, am not buying. See #21

If people like that are financial advisers, no wonder so many people are in serious financial troubles.

His experience is from what education?

Beware a man who claims 20 years experience.... for it may only be one year repeated 20 times.

Absolutely just a ploy to sell his book. He wasn't practicing what he was teaching. As a result, he had no choice to move...he no longer had any credibility in Las Vegas. Once a financial adviser looses their credibility it is all over.

Most of our country's financial problems were caused by greed and uneducated and uninformed individuals who drank the kool aid from the NAR and others who told them that you had to own a home to be successful.

This guy has a nice article but he should have known better..and he did, but he went against his gut and instincts and fell to greed like most others.

I can't really feel sorry for most of these people because I was on the other side...I was the guy warning everyone about exactly what was going on and I was told I was stupid, I didn't understand the financial markets, I was a moron and so on...obviously we know the exact opposite was true.

If people like that are financial advisers, no wonder so many people are in serious financial troubles.

His experience is from what education?

Agreed...this isn't some Black Swan event that occurred...this is easily seen coming years and years ago...even back in 2002-2003. His exact wording was EXACTLY what I said..."How are all these young people making all this money"...I said the same thing and had friends that were in no way shape or form qualified for a 300K loan and they got one like walking into 7-11 and getting a Slurpee. At that exact moment, I knew the facade was on.

You know, it'll be a book you should read if he's selling it.

Really.

People want honesty, and then when they get it, they decide they'd rather get a lie. This guy is being honest, and the number one lesson I think he is saying is to never underestimate the power of your emotion. At least that is what I got from it.

I work in finance and I never had this situation. But I watched it happen all around me. And instead of acting like indignant know-it-alls, it would go a long way if people instead considered themselves fairly lucky if this didn't happen to them. Your training in managing your own finances was able to carry you through the storm if you were successfull. Don't be such an a-hole as to think everyone was in your situation.

You should also know this from simple common sense. If you didn't have a financial disaster, you'll be aware that you are in the minority. And it is to your credit. But people don't have financial training in public school. Their families tend to teach them very little because there's a good chance they don't know themselves. And then they end up having to trust corporations and their government, which have obvioulsy not worked in their interest. You have needed a serious dose of someone teaching you right to get through this and if you had, you are fortunate. Don't act like an a-hole because you are fortunate. Understand most people aren't so lucky. If they were, we wouldn't be in the screwed up mess we are in.

In the story he asks "How did this happen? What am I going to do?" You wanna get your balls back, heres how in a great cartoon. http://www.youtube.com/watch?v=uM5RqbmdYX4&feature=channel_video_title

The Obama administration's efforts to fix the housing crisis may have fallen well short of helping millions of distressed mortgage holders, but they have led to seven-figure paydays for some top executives at troubled mortgage giants Fannie Mae and Freddie Mac.

The Federal Housing Finance Agency, the government regulator for Fannie and Freddie, approved $12.79 million in bonus pay after 10 executives from the two government-sponsored corporations last year met modest performance targets tied to modifying mortgages in jeopardy of foreclosure.

Fannie Mae needs 7.8 billion more taxpayer money, and Freddie Mac needs 6 billion more. I see we're still rewarding the same idiots that got us in this mess. I like the bumper sticker honk if I'm paying your mortgage.

"A financial pro" - He thought "securities" meant security guard... and within 5 years he was a Financial Adviser?

The guy seems to be a good B.S. artist and little else. The only good thing is that he acknowledges it was his own greed and ignorance that got him into trouble... much better than another "victim" whining about how much money they borrowed and spent.

So my question to this dude Carl Richards in this feel good story is:

What makes you a " financial-pro "?

6 months training in a boiler room 3000M away from Wall Street watching Merril Lynch videos?

Making 100 calls a day at a Merril Lynch call center basically asking people for their money every single day for a year?

Or parroting Stock options you " Learned in Training " at Merryl Lynch Securities from the High priests of Money @ Wall Street?

Or, financial advise to Un-suspecting clients who work hard for their money, in order to maximize you commission fees every time you move their money, regardless of Portfolio Performance.

Nowhere in this article I see " Formal Education ( College/University )

Regarding this dude" Carl Richards!

And I'm sorry to say, but I will not buy your upcoming book either.

Somehow I have an Erie feeling that it will not provide me with any good

financial information.

The single fact that you blew it just like anyone else who know nothing about money and Finance tells me a lot about your training as a Financial Adviser @ Merryl Lynch, you simply were used by the and manipulated by the High priests of Money at Wall Street thru a Satellite Operation in Utah,Simple as that.

What a Joke of a Story !

He's using that " It was my own greed" to relate to millions of people. He's a salesman trying to sell his book. Go sell crazy someplace else, we're all stocked up here!

Good story for a change. Illustrates that things are not as simple as " It's all Bush/Obama/Greedy Banks" fault. People made bad decisions aided by banks and the government.

It may be a ploy for his book. I have seen worse ploys. At least he learned something and is trying to make a living. I do agree with the posters that question his financial credentials. I will never use a "professional money adviser". They get paid to sell, not to advise. If you really need one, use a fee for service adviser that gives impartial advice.

There is a great book called "The Millionaire Next Door" by Thomas Stanley and William Danko. This book preaches the virtue of living beneath your means, not keeping up with the Jones, paying cash for cars, not taking expensive vacations, etc. The author argues truly wealthy people are not living in the high flying suburbs driving Jaguars and Porsches. They are living in modest homes in modest communities and driving Toyotas and Hondas. There is a large difference between "making a lot of money" and "spending a lot of money". We want to impress others, just like this guy. It is a dangerous trap.

Obviously, the nation did not follow that advice, although I sense a willingness to save that was not there 10 years ago. The media and politicians of both parties are encouraging the public to spend, spend, spend. We should save, save, save.

I have absolutely no sympathy for this man. How can he call himself a financial advisor if he can't live within his own means? It's easy to do. Spend within your means. Don't borrow money or use credit cards unless you can pay the debt in full at the end of the month.

If you want to use a financial advisor, pay one to advise you that has no vested interest in how much you invest. Don't trust Joe Schmo from Merrill Lynch or similar companies. They make a commission every time that you move you money, so of course they are going to advise you to sell, buy, sell, etc.

I own 2 million I just owe 4 million on it.

I agree - how can he say "but my story is a bit different from most"? His story is exactly the same as most. Just because of his job?

Gary 420, you're putting the blame in the wong places. The real estate bubble popped before Obama took office. And even though Bush was president, it wasn't his fault either. You can blame Wall Street for creating CDO's and peddling them, thus creating a demand for more mortgages, which the mortgage companies were willing to supply - using deceptive techniques, liar loans, etc. Then of course, the banks were providing the funding for the mortgage companies. But there were millions of naive and plainly stupid people, like "Mr. Financial Pro", who should have known better, but went along just like the other lemmings. Yes, there's lots of blame to go around.

Economan posted above: "Multiply this story by 20 million and you have just described the root of our country's financial problems" Yes, there were that many people who should have known better, but they let themselves get seduced. And now they're in bad shape. Sorry, but I have little sympathy.

My wife and I bought a house back in '98, and even then there were signs that things weren't quite right. Our saleslady was trying to get us to but more house than we wanted - just because we could "qualify" for twice as much house as we ended up getting didn't make it right. Turns out we made the right choice. But like everyone else, we got burned - lost value in our investments and 13 years later ended up selling our house for not much more than what we paid for. And we consider ourselves lucky. But at least we were aided by exercising some commonsense...

I answered an ad in 1995 that I thought was for a job related to “security” (as in security guard) but was in fact related to “securities.” That’s how little I knew about the stock market. A few months later I found myself working a phone at a Fidelity Investments call center.

I stopped after reading this part. The blind leading the blind.

This is an article about a parthetic self indulgent Gen X'er who's narcissism, ignorance, and foolishness caused him to rationalize his own risky behavior. When his children ask him why they had to move, maybe he can tell them about the Parable of the Ant and the Grasshopper.

It would be nice to know how a guy answering an ad for "securities" who thought he was applying for a Security Guard position ended up "working a phone at a Fidelity Investments call center" and four years later he's a "Financial Adviser". I suppose those details wouldn't paint such a sympathetic portrait of this guy.

The only valid thing mentioned is this article is this:

The solution was always making more money, not cutting back.

Something our Government should learn... CUT SPENDING, DON'T RAISE TAXES!

Re: Contractual vs. Moral - I've worked for several electronics companies that purchase components from suppliers with a 90 day payment plan (essentially credit). When the business slumps, payments get delayed but the supplier continues to sell us parts and the debt grows. Finally, the supplier cuts us off and no more parts arive. Then the owner goes bankrupt. Corporate America uses bankruptcy (ie the contractual solution) to avoid the moral complications that arise from failing to pay its obligations. Homeowners are simply taking advantage of the same option.

The ridiculous housing inflation and subsequent worthless mortgages were a Ponzi scheme from the word go. That was apparent to even a layman like myself several years before the bubble burst. What made it far, far worse as housing prices continued to climb was typical of all Ponzi schemes: they only work if you can tap into the greed of the "investors". This is typical of so many con games, you play it long enough, even the perpetrators start believing the B.S. Even the big banks were buying back the exact same worthless mortgage "investment packages" they had gladly gotten rid of as junk just a few years prior. The con men and women ended up even conning themselves.

I saw this coming years ahead of the collapse and know that today as well as then homes are not priced in line with wages. They should come down in price and the longer we drag this out the harder and more dififcult it's going to be.

This guy probably made/makes, twice what I do, worked in the industry, and couldn't see it coming. Can I be a financial planner and have people trust me with their money too?

Wall Street is a sham.

Conservatives like to blame the people who bought homes they couldn't afford. Here's an example of someone whose job is finance who made the same mistake.

The banks were telling people they could afford the moon. People without a financial background and those with a financial background all fell for the same lies.

@Derek-381097

It won't happen to me. I can afford much much more house than I have right now. I don't need to live an extravagant lifestyle and certainly know better that everything is temporary.

If I lost my job, and I am the primary bread winner, we would be able to pay our mortgage.

That's not luck, that's planning and consideration for multiple outcomes.

The banks were telling people they could afford the moon. People without a financial background and those with a financial background all fell for the same lies.

Do you believe everything that is told to you? Even from experts, I make sure I get other opinions...and usually many at that. You don't need a degree in finance or anything else to understand the basics of what was going on. I mean if you were stupid enough to believe housing would always appreciate then I have a bridge to sell you.

Common sense was lacking here by everyone. Those that used it, they are much better off then everyone else.

I think Carl Richards is posting as Derek.

I appreciate his willingness to admit his mistakes.

It seems like few people would. Even on this vine, there are people who pretend to be superior. They never make mistakes, and are always in a better financial and moral position than everybody else.

I guess it's easier to act that way when you're anonymous.

I think Carl Richards is posting as Derek.

LOL! Now that is funny.

When you borrow more money then you have, you really need to stop and consider the possibilities. It is really simple common sense, but to be honest I came close to falling for it until I saw the numbers on paper. Everyone makes mistakes because we are all human and too often do what everyone else is doing. That is the normal thing to do, right?

I was told by many of my co-workers even my director when house prices were going up that I needed to get rid of my home and buy something bigger and better in the area. After being prodded about it I looked into it.

As a happily divorced single mom with 2 kids I was preapproved to buy homes between 600k-800k...I immediately declined and decided it was a completely foolish move if I accepted something that insane. I couldn't fathom how they could approve me for so much when the only income I had was the paycheck I earned from work. Sure I had great credit, but only because I lived well below my means. I had kids to think about after all. The houses were nice...but I wasn't going to put myself or my kids through the stress of trying to make payments if I ever lost my job. It just wasn't possible.

I had no intentions of buying something that could possibly diminish in value once the bubble burst. My co-workers and director laughed at me when I told them this and they called me ignorant. They made fun of me because I had no idea what a normal persons debt was like...or what it was like to have really nice things. They criticized me for my total debt (including my little house) because apparently my total debt was what their normal debt minus the huge house payment looked like. Even with all of the criticism I was not ashamed...I was actually proud of myself because I knew I would come out of this on top. I really feel sorry for them, but they did it to themselves.

The funny thing is...even though I haven't worked there in a few years I have had a couple of them call me over the last year and a half for financial advice.

Bart, you posted above: "The banks were telling people they could afford the moon." That was the problem - people abdicating their responsibility to someone else - who had a vested interest it closing the deal. Who cares if the salesperson, or the lender say that you can "buy more house"; the onus is on the buyer to determine what his/her financial situation is and make an intelligent decision. But too many people, like this clown who called himself a "financial adviser", got caught up in greed and the "keeping up with the Jones" mentality.

The author of the article admitted that he did not apply any principles he learned and in fact ignored his gut when she suspected something "wasn't right" - like so many twenty-somethings lining up to buy half million dollar homes. You're right though - I have no sympathy.

Bart....hmmmm....all I know is that simple elementary school math could have solved his problem before it started - that's the nature part. The nurture part is the fact that people in our society have been raised to think they need to acquire things to be a success....not so nurturing really...

So, back to the basics everyone 1+1=2 and if you don't have 2 don't buy it. Pay off your debt to your best ability. Don't give anyone else control over your life it at all possible...keep trying...you can do it.

It was Wall Streets crooks that caused this Recession along with the loss of millions of jobs for the populace. So I have no sympathy for this financial planner losing everything. Now they know what it is like on the other side of the fence. More of the elite need to experience what they have done to their country rather than catering to all their tax breaks.

To quote pitmanlaw (post #1.19):

" Corporate America uses bankruptcy (ie the contractual solution) to avoid the moral complications that arise from failing to pay its obligations. Homeowners are simply taking advantage of the same option."

Speak for yourself; but not for all the homeowners experiencing mortgage problems !! For example, let's look at many elite, who bought homes with fake shell company benefits (called LLCs). Then, they walked away when their home when it went under water without ever receiving any negative damaging credit reporting to their name. The LLCs benefits still exist. It's just one more special treatment for the corrupt elite, while millions of Americans are bearing the brunt for their corruption. The above quoted comment made by pitmanlaw is at it's best: a manipulated, arrogant and ignorant statement that is so often done nowadays by the Republicans and wealthy elite!! Stop blaming the homeowners for the corruption on Corporate Wall Street !! The hard working Americans (many who had a back up savings plan for emergencies and lacked the numerous credit card debts) did not ask to loose their jobs for 2 or more years. Plus, a good number of the them were small contractors, who had no unemployment compensation to fall back on even though they paid into it. Corporate America and the Big Banks (too big too fail) were given a "Bail Out" at the expense of those laid off. So stop the Rethuglican spewing blaming the corporate actions on those less fortunate in this Recession that was clearly brought about by the greedy, corrupt, corporate elite. It is the working class people, who are being punished for the corruption done by the elite, greedy, corporate capitalist America. Since the problem began, there have been no salary cut backs or loss of benefits among CEOs on the corporate ladders as-well-as other upper echelon levels of bosses in the Government, State, and local offices. There are upper Government officials, who are still currently triple dipping, especially after they personally cut the benefits of lower ranking employees. Then they so willingly take credit for their promoted cutback program to help the economy. In fact many of the corrupt, corrupt corporate elite received bonuses after the "Bail-Outs" even though their business were run into the ground. It should be obvious that no bonuses are given to anyone during economic hard times (in spite of the built in law to shield the Banks that was encouraged and signed with Bush's knowledge of what was coming, and even lied about the stable economy ). So now the Republicans and corporate elite want to protect themselves permanently by forcing unethical and undemocratic laws (just as they did with Eugenics in 31 States) for their super power control over the populace, to protect their Party System, to take away all social programs or entitlement benefits paid into, to worm their way out of paying for health benefits while selling their health insurance packages with inflated rates, and to force lower salaries on the remaining workers in order to line their own pockets even more. Now that is the real moral issue of this society when the forced preservation of a elite is accomplished at the expense of and the ignoring of the masses needs (i.e. The dream to have a job that is suitable their skills, experience, and education with a realistic wages to survive the inflation).

Oh, woe is he. He knowingly bought more than he could afford, and then he used the house as a piggy bank and shook money out of it to finance an unaffordable lifestyle. Yes, I am paying his mortgage--at least the part that was lost to a "short sale." The banks were complicit in this, but this guy was guided by greed, an overinflated ego, and a willingness to get everything he could out of the madness while it lasted. Then he exited without paying his full bill. His story is ordinary, his greed is ordinary, and his ability to learn seems to have come after the fall.

All of you people who sit in judgment are laughable. People feel that if they didn't get in now, they would never get a house. I felt the same way, but we didn't go crazy, but that doesn't mean I sit in judgment of others who did.

I think back now, I should have gotten that 125% loan, I should have bought 20 houses and flipped them, the Jet Ski's, Cadillac Escalade, etc. , at least we've have more memories, more vacations, more parties, etc!

Sorry, Kurt. I had the same opportunities you did, but I stayed in my modest house. It is now paid off, and I am debt-free, including our cars. No jet skis, no Escalades, but no regrets, no shame, no losses, and fewer worries. Hard to feel sorry for my neighbor across the street who is driving yet another Mercedes and vacationing as I write this while she is not paying her house payment.

Sherrie, my sentiments exactly. And I'm in the same situation. My wife and I bought less house too, and while we were both working, we paid down the mortgage, eventually paying it off. Now, we too are debt free - no mortgage, no car payments. We're not exactly living a luxurious lifestyle, but we sleep at night. The sad thing is, a lot of others could have done the same thing too - it didn't take a genius to see that something wasn't right back in '06...

Gary 40

Good story for a change. Illustrates that things are not as simple as " It's all Bush/Obama/Greedy Banks" fault. People made bad decisions aided by banks and the government.

Good Post!

Many people did make bad decisions, hoping that their homes would increase in equity and somehow they would come out on top. Early in the game people did make money on their homes, especially when homes purchased for $50,000 were selling for $200,000. As Americans (not all) we are always looking for ways to make money quickly.

This guy's problems were a result of his own bad decisions... One after the other. He should have known better, but his greed to have more got the best of him. Seems like now he's counting on his book to get his life back... If some people are helped by it, I guess it's okay. But I suspect most people who could have been helped by it are pretty much in the same place he is (and it's too late).

I'm glad Carl Richards saw the light, and is selling/spreading the good word now. I sorta understand the urge to get a ticket before the train leaves the station behind, but I always know that it's a snake-oil sales pitch at the same time. And the idea that this financial adviser also got roped in by the Ponzi pitchmen is yet another testament to the persuasive power of both the sales pitch and the madness of crowds. Be afraid.

Personally, I'm still inclined to own my own home (or pay a reasonable mortgage on it), even as property tax approaches the monthly cost of a 75% mortgage. I've been looking around suburban Chicago for the last two years, but prices (relative to, say, wages) started off and remain too high, and taxes are not going anywhere but up.

Another aspect of the bubble-home that doesn't get much notice is that rising prices also drive up the entry cost of a decent neighborhood, and tend to degrade marginal neighborhoods as jingle-mail vacancies, job losses, rentals, and family fallbacks seem to concentrate here rather than in aspirational McMansion 'hoods. I imagine that most big cities & 'burbs have reasonably-priced homes in neighborhoods that sensible folks wouldn't voluntarily drive through. That urban crime-fear also drives up the demand and prices for "nice" 'hoods. Likewise, I imagine that even a single cartel beheading really drops demand for that neighborhood.

So true. Just plain greed.

I have to chuckle at the headline, "financial pro"? Sure. Like I am an astronaut.

I don't understand your argument. Banks have our money and if they lend the money to people who can hardly pay it back (and the banks knew full well they were making loans to people who could hardly pay it back) then I'd much rather get upset at my bank than the person who requested the loan.

Another thing to keep in mind is that people felt they had to buy houses because their wages were stagnant and thought investing in real estate will help them make some extra money. I've a friend who hasn't received a raise in 6 freaking years. The worst part is when the corporate guys show up and make fun of him because he's a bit odd.

I'm glad for the Occupy movement and how they're telling the corporate world to stop laughing at the rest of the country.

lets play a game; its called "pretend you are a bank". I, on my 50k a year salry will attempt to borrow 500K for a 100% loan.

I am stupid, yes indeed. I am setting myself up for misery beyond misery. I am basically borrowing fail.

You are a bank. You allegedly make money because you know how basic finance works. So you loan me the money, then sell the loan.

How are you not a fault?

Other than my house, I have no debt, and I did the the cost/benefit analysis of renting/buying so i know in the long term, in my market, it will pay off to own, even if my house drops in value a modest amount. I have nothing but contempt for the modern American "live in debt" style of finance, and the people on BOTH SIDES of the aisle, who make it happen.

That said, if you are a bank and allegedly your job is to make sound financial decisions, and you have the power to approve or deny loans, you kind of have the responsibility of approving the loans you suspect will get you something.

Every tax-payer chipped in to save our nation from collapse, and we aren't out yet. What did the banks who were as culpable as the ignoramus's they lent the money give?

Nothing new. Just one man's story. What's your's care to share?

Well, the truth is, no bank loaned $500K on a $50K salary....somebody lied on the app and said they made $150K/yr to support that loan...then, nobody checked to see if that was a true salary...and, you got the loan. The lender collected the 'origination' fees, and sold the loan to a bigger bank or investment house. They packaged it up with a bunch of other loans (some good, some bad like yours) and sold those bundled mortgages as "securities" to other banks or pension funds or whoever beause they we're going to bring an income stream. Just in case there were some problems, the investors covered themselves by buying insurance (remember AIG?)...and proceeded to buy up as much of these mort-backed securities as they could. Then, when the income stream failed to materialize (cuz some folks couldn't pay their mortgage), the value of the "security" was in question...and when the "losses" started to materialize, they filed claims with AIG to recoup the losses....only AIG couldn't pay the claims cuz they had written trillions of insurance on these "good as gold" securities and nobody expected them to drop in value. And you pretty much know how all that has played out over the last 3 years.....

Olias, you unknowingly made a good point. Why is it I hear every day that all these businesses have so many trillions of dollars of cash on hand? I run a small company, and sure we save some money back for a rainy day or two, but we plow the rest back into the company, increasing salaries for our workers, buying equipment to expand out business, and hiring new workers to support the extra business or increase our capabilities. When an employee works at a place for six years with no raise, especially when it seems they can afford it, the entire economy suffers. Think how much economic power would be generated if those businesses poured all of that cash on hand into raises. The problem in this country is consumer demand. For three decades the middle class spending power has diminished to the point that the lack of demand had ground the economy to a halt.

This nonsense of "uncertainty" being the reason for businesses to save has to be erased. The very nature of business is uncertainty, unless we live in a communist state. At my company, we are uncertain if our largest client is solid, so we try to diversify our business. Health care reform doesn't affect us. In fact, we would prefer a national health care system as it would help ensure healthier employees and reduce arbitrary insurance company decision and premium increases.

Hopefully, intelligence and logic will soon rear its ugly head in the national political and economic debate.

The article doesn't say he went to a bank to get the original $575,000 home. In fact, it doesn't say who the original holder in due course of the mortgage was. Many times, you will find that a mortgage brokerage firm like Ameriquest, Countrywide, etc... originated the bad, toxic, (whatever you want to call them) loans, sold to Fannies and Freddie, then purchased by banks. These originating companies played an extremely profitable game of duck goose.

Banks were left holding the bag in the mortgage crisis. Many banks (yes, even the too big too fail banks) denied these loans and people got funding elsewhere.

Where are these employees of Ameriquest? Countrywide? And all the rest of the companies like them? At your local loan modification companies and existing loan brokerage firms (not in jail for predatory lending like they should be).

The problem is THE RICH ARE TOO RICH.

This bubble we driven by the DEMAND FOR CDO's. More CDO's were needed to meed demand so more mortgages were written to cover the demand and the requirements for those mortgages were dropped. After all - you were securitizing and selling the bad loans to willing buyers. Where was the harm?

But it was ONLY BECAUSE THE RICH GOT SO RICH AND DIDN'T HAVE ANY PLACE ELSE TO PUT THEIR MONEY.

Keep the rich within 1000x the income of the poor and this won't happen. You can do that two ways; make the poor richer or the rich poorer - take your pick!

"The problem is THE RICH ARE TOO RICH."

The problem is, what is RICH? To a lot of folks, anyone who owns their home (however modest), has saved a little, and doesn't owe anything, is TOO RICH!

patsfan - "predatory lending"

Is it also "predatory cooking" when McDonalds serves you the 3 Big Macs, Super size fries, drink, shake and 2 cherry pies YOU ordered?

People who give people what they ask for are not "predators", people who ask for more than they can handle only victimize themselves with their greed and gluttony.

Income redistribution does not work. People will always be envious of something. If you get half my income because I am what you consider rich, who is to say you wont envy my wife or my children or my physical health or my decision making. Are you going to take everything I have in order to make it what you consider even?

You are driving down a VERY dangerous road here. What is RICH? People who make more than 1 million? 100k? 10k more than you? Stop before this just gets stupid and someone gets hurt.

Many ordinary people also bought CDOs because they needed a decent return on their nest eggs to live on, in part because Alan Greenspan kept interest rates artificially low to help a Republican administration roll up good economic numbers.

By the Way, Fannie and Freddie did NOT buy the loans that went into CDOs. The banks bought them directly. Subprime loans were by definition loans that F&F would not buy.

Many people who could have qualified for prime loans were pushed into subprime because the originators made more money from them -- took advantage of lack of financial sophistication.

For three decades we have redistibuted wealth upward. We will soon be a third-world banana republic if this doesn't change.

Patsfan4life (so am I - this defense is killing me): Wasn't just mortgage companies. Bank of America was the first (that I heard of) coming out with the stated income /stated asset as did Wells Fargo and Chase. The middle size banks - Sovereign Bank and Citizens (while they are big they are not amongst the giants) and the community savings banks stuck to their guns and only would take a more conservative approach to lending. Back then all you heard about was how both of these banks were in trouble. but they were the ones who whethered the storm. Bottom line is wasn't just the mortgage brokers and lenders.

It's predatory lending when you, an inexperienced buyer, ask for something you can afford, but are pushed and cajoled in to buying something much more expensive, something that provides the seller/agent a bigger profit. Then he is gone and you are left holding the bag. It is really a confidence game and should be a crime.

I don't see it mentioned here about how the Clinton Administration in the 90s forced banks to start lending mortgages to unqualified buyers - that is what started this mess. Government needs to get out of the mortgage business entirely. Pay off Fannie Mae's debts and close it up, forever.

What is RICH? People who make more than 1 million? 100k? 10k more than you?

Riley, SRS answered your question :

Keep the rich within 1000x the income of the poor

It sounds to me like SRS was saying people earning about 10 million would qualify as rich.

People who are not even close to this definition of rich are terrified they will somehow lose something. I am pretty sure SRS wasn't talking about your income!

Atl east he didn't blame the banks for his problem.

Someone had to loan him the money. Aren't they just as guilty.

I don't see it mentioned here about how the Clinton Administration in the 90s forced banks to start lending mortgages to unqualified buyers - that is what started this mess.

No Truth, not one bank, not one underwriter, was forced to make a loan by anyone or anything.

Get the facts before you slander someone.

pjam09,

Is it also "predatory cooking" when McDonalds serves you the 3 Big Macs, Super size fries, drink, shake and 2 cherry pies YOU ordered? No, it is "predatory cooking" when you hire lobbyists not too disclose the nuturition values and ingredients because you don't want people to know what you are feeding them. It is funny, how they increased the quality of the "beef" when forced to disclose. When I cook an Angus burger at Gillette Stadium at home games...it still tastes far better than McDonald's highest "quality Angus burger"; so I am told.

It was predatory advertising for Camel cigarettes and Newports to advertise to kids using cartoon kids and questionable campaigns...is it not the same with McDonalds attracting kids to their non-nutritional valued foods by having playgrounds and cartoon characters( Grimus, Ronald, etc...) and toys in Happy Meals???? Sure, it is the parents fault for feeding them the food, but it is still predatory advertising.

You stated, "People who give people what they ask for are not "predators", people who ask for more than they can handle only victimize themselves with their greed and gluttony."

So when I ask to see $100,000 homes and I am taken to $250,000 homes because my mortgage broker signed a piece of paper saying I can afford a $375,000 home (because they don't care...they are selling the loan to the government and then the banks)...that is really giving me what I want?

I asked to for a $100,00 home and was sold on a dream that the broker full well knew I couldn't afford and the realtor and my wife were intentionally deceived into thinking we could afford it. I luckily knew better and showed the both of them our budget that clearly expressed we could not afford the house we were looking at regardless of what the mortgage broker said.

H25,

The banks you described frequently purchase loans and securities from the government. The smaller banks you describe Sovereign Bank and Citizens do as well. Small community banks and the such sell their loans to the federal government and less frequently purchase from the government.

BofA, Chase, Wells Fargo, Wachovia, etc...were forced to purchase these bad loans/securities by the government. The banks that were closed were leveraged too much and could not recover.

However, BofA would only purchase Countrywide assets if they first came out publicly to state they committed at least $2 Billion in Mortgage Fraud.

The official definition of "predatory lending" is when a loan is made on the basis of the value of the property even though the lender knows, or should know, that the borrower cannot afford to repay the loan; in other words, if the lender does not care whether the borrower can repay it because he counts on being able to foreclose on the home and resell it at a profit.

By the way, the Community Reinvestment Act did not force banks to make bad loans; it said that banks that would not lend to QUALIFIED borrowers in communities where they took deposits would have it counted against them next time they wanted a favor from the government.

Oh, and no bank was "forced" to purchase bad loans by the government. They bought them of their own free will, avidly, because they made boatloads of money repackaging them into CDOs. In fact, they could never get nearly as many as they wanted, which is why they created the "synthetic CDO" which did not contain actual securities but simply allowed investors to wager on the value of securities owned by others.

nhpeakbagger,

the key term in your definition is "lender". Many of the lenders were not banks...they were mortgage brokers.

In fact a very large portion of the bad loans were made by mortgage brokers (Ameriquest, Countrywide, etc.) not by banks. But this is still predatory lending, no matter who does it. And the banks facilitated and encouraged the practice by lending money to the brokers so they could make the loans and then buying their toxic products. Mortgage brokers, not being banks, were not regulated even to the extent banks were.

These people were paid for their expertise. Mortgage brokers were paid for their expertise. If they were paid only for pushing papers then they shouldn’t have received thousands of dollars for each loan. If I had to use my expertise, then they shouldn’t have charge my thousands of dollars.

When you go to a doctor and he tells you he needs to remove your appendix you kind of trust him and it costs you a lot of money. That’s because you are paying not just for the labor to remove appendix, but for his expertise as well. So, here are a lot of people who are pushed by so called experts not just to remove appendix, but install heart valve as well. The doctor would be in jail for such a practice. Mortgage brokers? Oh, you are saying buyer should have used their own head before signing the loan! Then why do people have to pay thousands of dollars for mortgage broker expertise and knowledge?

I remember the day when I was applying for my first loan. I just needed $100K. They were pushing for $750K ARM. They were pushing very hard for days and were very surprised that I did not want to use such a great opportunity. I was no mortgage expert. I just needed $100K. Thanks God I did not listen to them.

Later I was buying another house, and was putting down 50%. These so called experts were surprised again. 50%? Why? No one does it. 5%, maybe 10%. Keep the rest investing. Well, sorry, I don’t gamble and don’t really care for Atlantic City, Las Vegas or Wall Street.

So, everyone who says “they did not put a gun to your head”… sometimes sociological pressure can do more than a gun.

nhpeakbagger wrote:

official definition of "predatory lending"

This is an Orwellian term invented in recent years to shift culpability away from oneself. Look it up in the Newspeak dictionary.

Banks share some of the fault here, certainly. Let them fail. No bailouts.

Darn,

Banks always have the duty to not lend their money frivlously. That is primary and cannot be overridden. That is traditionally suppose to be depositor money, and they are a steward of that money. Now we all know it's actually fake fiat money from the FED but still the same standard applies.

When they are not good stewards they put their depositor's money at risk. After doing this it is then unacceptable to go to the taxpayer and demand that the government through force of arms (That's all governments can use is force) take our money to protect them from their bad decisions, bets, and insane gambles.

Yes people who could not afford things should not have signed the note, however, that does not excuse, even in the slightest, the fact that the bank should not have issued them the money if no lying occurred on behalf of the individual. It boggles my mind people who want to blame their neighbors in total for this mess while allowing other individuals working through an imaginary legal construct called a 'corporation' are given a free pass. I can only surmise it's because they hope to be the ones screwing everyone one day themselves, if they are not already.

It is correctly called "predatory" when a party which has a great advantage in sophistication and information uses that advantage to persuade a financially illiterate person (and how many people -- even college-educated -- are financially literate?) to make a deal which is very lucrative for the first party but almost certainly ruinous for the other. You sully the name of the great Orwell.

Average people regarded banks and other lenders with fear and awe, and assumed that such folks knew more than they did and could be trusted to guide them correctly. They were right about the knowledge but dead wrong about the trust.

It boggles my mind people who want to blame their neighbors in total for this mess while allowing other individuals working through an imaginary legal construct called a 'corporation' are given a free pass.

+1

Certainly people should only borrow what they can afford. However, when the so-called financial experts (banks and other financial institutions) are telling people they can afford it, how can you blame the people for believing the experts?

When A doctor tells me I have cancer, I might get a second opinion. When two tell me I have cancer, I believe them. How can you blame me if they take out the cancer and it's found not to be cancer?

Ameriquest & Countrywide were not BROKERS these were direct lenders.

Correction accepted.

Well, the truth is, no bank loaned $500K on a $50K salary....somebody lied on the app and said they made $150K/yr to support that loan...

Not true. Up to 2007 all they had to do is to find underwriter who would approve it. Yes, the software in which they had to punch your numbers would throw big red flag. But there was always big red “Easy” button next to each computer that they could press to overwrite Artificial Intelligence and approve your unqualified request.

@ StoptheCannibals-2908428,

Perhaps you need to brush up on some history before you accuse the absolute truth of slander.

The National Homeownership Strategy began in 1994 when Clinton directed HUD Secretary Henry Cisneros to come up with a plan, and Cisneros convened what HUD called a "historic meeting" of private and public housing-industry organizations in August 1994. The group eventually produced a plan.

Here's an excerpt. Read it closely and you can see the seeds of disaster being planted:

For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership.

Note the praise for "creativity." That kind of creativity in stretching boundaries we could use less of.

Bart, let me know when you're in the market for a car - I'd love to sell you one! Don't mind your finances, just believe me when I tell you that you can afford it!

Gumps

Bart, let me know when you're in the market for a car - I'd love to sell you one! Don't mind your finances, just believe me when I tell you that you can afford it!

What you are saying is that you are one of those, dishonest people, without any morals, who is ready to jump on every opportunity to take advantage of your clients. Thanks for letting us know. Could you tell us address of the dealership you are working for so honest hard working people could steer away from it?

No, what I was trying to do was point out the fallacy of his logic. Bart believes its okay to not think for himself - depend on the "judgement" of mortgage brokers. He is just one of millions who chose to ignore commonsense or do any homework, but instead relied on someone else to tell them how much they could afford. And that's why we got into this mess.

Cn and nh, so.... let the banks fail or not? I couldn't tell from your posts. I say let them fail. They deserve it. It'll be rough but better in the long run.

I'm always suspicious of new terms, created for the occasion. I liked the earlier mention of "predatory cooking".

Regardless, I say let them fail!! You??? Regards....

I don't think it's stated in the article - maybe it'll be in the book- but I'd really like to know what income Carl Richards showed in order to qualify for his 100%, $575k mortgage. That's a jumbo, and just a few years prior, this guy wanted a security guard job... what sort of devil set him (and the other half of Vegas, Phoenix, and SoCali) up with that kind of loan??

You sound my Husband and I who always lived below our means and saved, saved, saved to get to where we are.

Bravo for the author for telling the truth and Bravo for you for having the foresight to live within your means. It's not being a braggart...it's a lesson in how we all should be living. Simplify, simplify, simplify!

@more2bits - that's rude, they showed an education from the "school of common sense." Now, I will say that many people cannot do the planning they did, but it is because they choose not to learn how to be financially savvy. I cannot describe the number of people I know who have argured that credit card debt is "not that bad" esp since it enables them to pay of school loans. Lamenting that they are not "finance" majors is manifestation of their own denial. When you get right down to it, personal finance is nothing more than basic math - you add, subtract, and apply %. Allocate $15 and buy a calculator, a pen and a pad of paper if you don't have a computer with excel.

Smugness? I call her story "responsible."

more2 - sounds like you are a loser. Make more than a few wrong decisions?

For those who are "responsible" - why aren't you mad? The guy in the article shows how he and his family were able to "take" $200K out of his house when prices were rising - and then sell the house with the overage "forgiven". So he spent $200K (after taxes/at least/probably a lot more) more than he earned.

I was responsible too - but I'm pissed. All of those who were responsible are chumps - watching the reckless live the high life for a few years, rubbing our noses in it.

Kudos for doing the right thing.

Unfortunately, for you, it may have been the "wrong" thing (assuming you live in a non-recourse state or one that is effectively so). In retrospect, perhaps you should have taken all your equity out, paid off your debts and saved/invested the rest. Rinse-and-repeat until housing crashes. Remember, winner is the one with negative equity at the very top of the market!

Also, practice frugality as you did, saving yet more money away.

When the market collapses, stay in home as long as possible w/o making payments (yet more money to save away!). I believe there's no need to even pay property taxes in at least some states because the local government's recourse is a tax lien of highest priority so they will get their money. No need to bother with maintenance except stuff that will really be in your way (gushing broken water pipes - fix; a roof that should be replaced - just pour some tar over the place that's leaking right now).

Use whatever legal maneuvering you can to delay-delay-delay (such as "where's the mortgage paperwork - yes I know I have a mortgage, you know it, the court knows it -- but you can't prove I actually signed anything!). Eventually, a few weeks before the sheriff shows up, rent a nice place and move out.

Extra credit if (1) you strip all the fixtures and copper out of the house and sell them before you leave and (2) as you slam the door on the way out (assuming you didn't sell the door!) the entire structure collapses in a termite infested dry rotted heap (indicating that you spent exactly the right amount on maintenance).

Sad...

George Papandreou & Silvio Berlusconi to resign, Who will resign in the USA for their failure?

@AG

Why be mad? It's not like he has anything to show for it...like most people, they either blew that money into another home or used it on disposable things.

My sanity and health and stress levels were never at the levels of these people...and that's enough for me. No reason to get mad at them...it's more to get mad at the people who enabled it.

We have to remember that in general, the majority of people are stupid or not that gifted with common sense. So we are supposed to have safe-guards in place to protect them and society from bad decision making. Those safe-guards failed or were ignored.

Even though in the end, you have to say everyone is responsible for themselves, the lenders are responsible for not granting them the loan when they are not financially capable of paying it, and the banks are supposed to be responsible for not granting the lenders request and so on. The checks and balances were ignored for the American Dream, which was greed and owning a home.

So if you are going to get mad, get mad at the Federal Government for enabling this with FM & FM along with Wall Street.

I don't think you were smug.

The problem with your story, and some of the smugness that follows, is that it is a fallacy to think that living responsibly guarantees that you will never experience disaster. It is a fallacy to think that success doesn't also have a luck factor to it.

Not wishing it on anyone, but I hope you never find yourselves with the rugs ripped out from under you due to things outside of your control.

..

He doesn't mention it, but after a short sale the amount forgiven is treated as income by the IRS and is taxable at ordinary rates.

To those that just gripe that this was a ploy to sell a book...DUH!? And guess what? It will work too.

The griping comes from being pissed you didn't think of it first.

I likely won't buy his book, but I gotta hand it the guy for making lemonade out of lemons, even if he planted the lemon tree and grew them himself.

@James,

You ask @AG, why be mad?

True, they don't have anything to show for it. But, they had a good time for those years and the rest of the responsible people are paying the price now.

Once again, no punishment for stupidity. Only punishment for the rest of the people having to bail them out. Now we are in a recession. Millions of people without work. I think EVERY ONE of the "responsible" people should be VERY ANGRY with all the others that contributed to this mess.

The author even said about the vacations. There are many RESPONSIBLE people that don't go on vacation because they CANNOT AFFORD IT!!!!

The welfare state continues. We are basically the welfare mechanism for these banks and hence these irresponsible people.

SMUG.. Total BS unless the person is about 23 years old or less and missed the whole bubble before the burst. Let me guess.. in 5 more years after the CDS weapons of mass destruction blow and America files for its 3rd bankruptcy in our history...And everyone whos responsible with thier savings have lost the dough...., this same person will be on here in 5 years from now saying, I was the only one who was responsible and all my savings were invested in low tax agg ground,, I knew better than everyone else who let the government spend us into the bankruptcy.

Sometimes I have to remind myself not to feel smug, but to replace it with thankfulness. Many years ago when we were young, we bought a little six-room home. We would visit friends in their large beautiful homes and think: How do they afford this? And to tell the truth we were just a little envious. However, somewhere along the way we grew up, stayed put, paid it off early, and did some upgrading. Several decades later we are still here. Many of our original neighbors have died and young couples are moving in. And we think: How nice it is to have young people moving in, and aren't they wise to purchase reasonably priced homes. Well, maybe this does sound a little smug, but I think there's a lesson here somewhere.

okie joe-3728210

He doesn't mention it, but after a short sale the amount forgiven is treated as income by the IRS and is taxable at ordinary rates.

Sorry Joe, you are incorrect. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt. Short sales of "primary" residences today mostly fall under this umbrella, so they're not paying taxes on the forgiven debt as "income".

Jim

Hindsight is easy.

The alarming thing, this guy is still trying to give financial advice to people.

To anyone who has been following the news at all for the past few years, everything he says is obvious. He is one of millions -- but most of them were not in the "financial adviser" "profession" so their lack of insight is understandable (they probably know a lot more about whatever their field is, whether it be plumbing or nuclear physics, than this guy knew, or knows, about his field).

His bad judgement in the past does not bode well for his future judgement in this area. He has a "follow the crowd for easy money" mentality and that's likely baked very deep in his psyche. Next time, it will be a different crowd and a different "how can I lose?" movement and he probably won't recognize it. If he has reformed somehow, he's probably become a "take no risk" type (which is just as bad) as he obviously can't smell a pile of dead rotting rats if he's buried deep in the pile.

Warren Buffet made some "stupid" decisions, but he made a lot more good ones which makes it worth listening to his hindsight on his bad ones. This guy appears to have made only bad financial decisions. I'd trust him for financial advice less than a random number generator - at least the latter will be right some of the time.

The dude should get a job where he can't harm others significantly. Perhaps he could handle stocking shelves at a Walmart or something like that. There's a better chance that's his calling than that "financial advising" is.

This is why I always ignore the pleas from my Fidelity (and other brokerage firm's) "financial advisers" to help me manage my money.

Exactly...hindsight is easy.

I want people in charge like Peter Schiff who called this mess years ago before the collapse and everyone ignored him and said he was stupid.

People like Schiff are the people we need in charge of our government and financial sectors.

He didn't say that. he said he had a higher moral obligation to his family.

IT happens every day when thousands of businesses go belly up -- everyday.

What are you not complaining about all those stupid businesses that take our hard earned tax dollars to start a stupid business you know is going to fail and it's lost when it files for liquidation within a year or two?

Stop making excuses for businesses when you won't for the people!

Fool. Businesses arent federally insured loans unless they are SBA. Most mortgages are.

cantcomprehend,

Actually it became debt to the Bank share holders. Though Wells Fargo did get TARP loans, they were paid back.

The bank makes a loan with a home as collateral. IT is the BANK'S responsible for making sure the collateral is enough to pay off the loan in case of default.

The author said he got 100% financing. If that is the case, then he probably was paying mortgage insurance. I am not clear on just what PMI covers, but I thought it was insurance against default. Wouldn't that mean the bank didn't lose anything?

Cotton, WRONG. most loans are NOT federally insured. Lovely, PMI (Private mortgage Insurance) is a premium that is paid by the borrower to an insurance company to insure the INVESTOR, the one who put up the cash for you to borrow. Invenstors and the bank your loan is through are not always one in the same. PMI insures against default to 80% of the the LTV (loan to value) . PMI insurance is required on CONVENTIONAL loans. Which are very different than FHA or VA loans. They are PRIVATE investors. PMI (PRIVATE mortgage insurance) is similar to MIP (Mortgage insurance Premium). MIP is required on FHA loans. Same thing, insurance that protects the investor against default. PMI and MIP insure ONLY the investor yet the borrower is required to pay for the insurance and not the actual investor. NO ONE in the real estate industry or the Mortgage banking business explains this to the borrower. It's slipped in and is paid through your required escrow deposits that are made each month. It's also right there on the HUD1 (the settlemnt charges) in your closing papers.

to answer your question, basically yes, there was default coverage on many many of the houses that defaulted. The problem though was when everything went to hell in a handbasket suddenly that 300K house is no longer worth 300K which takes a big bite out of the VALUE of the property, remember LTV, Loan to VALUE. Another issue, when the insurers who issued the PMI policies began getting claims by the truck load it created a ripple effect and the house of cards began to fall.PMI and MIP are required on all conventional and FHA loans that originaete with an LTV higher 80%

"NO ONE in the real estate industry or the Mortgage banking business explains this to the borrower."

I've always had this explained. It's not a hard concept.

You excuse the same businesses that go under every day by the thousands with complete liquidation. Your a fool for not writing your Congressman to stop this abuse when individuals--your fellow Americans--get no such preservation. Part of the problem of people walking away from homes is that they get no relief in bankruptcy and all the greedy businesses keep fighting to get that law stayed forever so they can stick it to us individuals. To be fair, it needs to be the same for businesses as individuals. No secured credit should be preserved by a bankruptcy.

Get off your soap box, idiot - the article is not about what you keep trying to talk about! You really sound like a guy with a loan he couldn't afford. . .

IT's a lot bigger than that Lord fella. Realtors are at fault as are appraisers who over valued homes to get more business from banks making the loans. Mortgage companies who made NO documentation loans to increase the number of qualified applicants which drove up the home ownership ratio which created the bubble in the first place. Speculaters. And a whole lot more. Narrow minded people who point their fingers at just one or two factors make me sick.

Absolutely more2bits...I it is so true.

There are severe problems with the realtor industry in this country. How can a home be valued by the town at $120,000 sell for $275,000? And $275,000 is considered affordable these days in MA...$275,000 on $40,000 a year (before income taxes). A true financial adviser will tell you that your mortgage payment (principal, interest, and escrow) should NOT exceed 35% of your NET income ("take home" pay).

More and more people are becoming real estate salespersons and brokers (again). They see the signs of being able to make huge profits...for the reason above.

I have seen cases on the Mortgage Fraud websites tales of appraisers, realtors, brokerage houses, title companies, lawyers, etc...all being in collusion to get teh mortgages signed.

I have seen notary public names scribbled out and new names added to the documents.

I have heard tales of the lawyer present at the closing not do their job and advise the client of their rights when they were told by the mortgage broker they cannot get out of the deal at this point because they will lose the money they already invested (down payment).

Title companies offering clear titles when they knew there were issues with the title.

More2bits, Lord was commenting on THIS article. This was a person who really should have known better. He even admits that he felt he could only afford about $350,000 mortgage - but then his eyes got bigger than his pocketbook, and he purchased a home over $500,000 AND then to finance his out-of-control spending habits, he maxed out his credit cards and borrowed another $200,000 dollars! That is irresponsible.

From your angry comments, it sounds like you have been through your own financial crisis. I agree they are all different and maybe yours was truly beyond your control. I know that some people were truly misled by lenders and their appraisers, etc. This man wasn't - he just wanted so badly to believe...

Someone should teach Obama that lesson. And most businesses in America. Most are deeply in hock with bad bottom lines. And yet no one complains about them when they file for liquidation. Invidividuals cannot liquidate. Secured loans are still stuck to your file for life even after bankruptcy. Is that fair a business has more rights than the individuals? Is this America or the USSR?

Why? Reagan, Bush and Bush 2 didn't understand it...we got in hock for wars and tax cuts and you think that is thw way to go?

Of course individuals can liquidate. You file for bankruptcy, give back all the stuff you bought, and the rest of the debt is forgiven--unless it's a student loan. That's pretty darn lenient, if you ask me. Sure, it stays on your credit report for a while, but not for life. More like seven years, or so.

I tend not to blame the consumer as much as the lenders either. Remember for years prior to this banks would deny loans if the debt to income ratio was too high. Then suddenly people would find themselves approved for the home of their dreams. At the time they were still believing their incomes would increase enough to keep pace with their payments (especially if it was an ARM).

Banks knew exactly what they were doing; the consumer however, blindly and naively believed they were both playing on the same side. IMO the banks need to be held accountable much more than they have been and people need to wake up and stop pointing fingers at each other. We need to fight for MORE bank regulations; more help for people that are current on their mortgages but are upside down to be able to stay in their homes; and less big bonuses, or any bonuses(!) for these stupid greedy @sses at the top, middle and in between that helped to create this mess.

Oh and before I forget, unless I missed something, Fannie and Freddy had price limits set by area to guarantee the loan for lending institutions. In my area that meant a modest home, usually what most people would consider a "starter home", but by no means anything on a grand scale.

Well welcome to the real world and what about the BUSINESSES that blow off everything and escape even secured obligations which individuals cannot? A lot of the problem is the evilness in bankruptcy laws that allow bad business ventures to completely escape their obligations while people are screwed (college loans, homes, child support, etc are not able to be written down).

Rick...trust me, you are getting screwed. more2bits...think about what you said, it makes no sense...if you file for bankruptcy you can get out of a home loan; but that would make no sense for child support and, society has determined that it would be too easy for young college grads who are looking for jobs or have their first (entry-level paying) job to get out of repaying loans, and the whole college loan concept would collapse and some number of people couldn't go to college. If you think college should be free and paid for by taxes, that's cool but it's a different idea than what we have now.

Grandfather,

The college loan concept is collapsing. It is the next crisis in this country...the magical date we will all hear about it will be 02/01/2012. It is coming like a freight train...hold on tight.

IF you had the house for that long , how could you lose it?? You must have bought a lot lower price and paid the mortgage on it

Chances are it's the same story as many others. Had house for many years, when the market became bloated a cash out re-finance was done based on the inflated appraisal, then came the collapse, suddenly you owe more than the house is worth on a home you have lived in for 20 years or more.

I am in the process of trying to short sell my home. My husband was killed in an accident 3 years ago leaving me to run our 2 businesses by myself without his income. I had to pay several people to do the work he did and found myself using much of the insurance money to keep the businesses afloat. I finally sold the businesses and paid off as much debt as I could, but due to my mental state and the job market, I couldn't find a job that paid me what I needed. I could no longer afford the mortgage and utilities on a 4 bedroom home for just myself. (Our kids were just starting their own adult lives when we lost him). I owe $30,000 less on the home than the last appraised value (thought we might refi for lower rate shortly before he died, but chose not to pay the additional fees involved). Problem is, the market is so over-saturated with foreclosure homes for sale, I could never get what I owe for it. It needs some work that my husband would have done to it, but I don't have clue about.

I have paid off or am paying off all of my unsecured debt. I feel that leaving a bank with an unpaid balance on an unsecured loan is worse than leaving them a loan balance with collateral that they can sell to get at least some of their investment back.

My point is, don't assume all people in financial trouble right now are irresponsible or that the banks screwed them. It is just a terrible economy and really a bad time to have a financial crisis.

Vicki, I am very sorry to hear about your husband and your current situation. I too am trying to sell my home, and when I have an offer my lender will have to approve the sale price; in other words a short sale. This also is because of a very difficult personal situation. While I am literally fighting for my life, it just became too difficult to fight for my home too. Some people might criticize me for it, but being an ONLY parent, with my parents living out of state, and really just a few friends because I was always working or running around with my kids, (who had time to sit for & chat?!!) I have a very (almost non-existent) support network. BUT I can tell you this...when you read these posts...PLEASE don't take them to heart. There are a lot of very angry mean spirited people here who don't take people like us into consideration. Or if they do, they are sure we are lying, or just feeling sorry for ourselves. Sometimes it is hard not to beat myself up over it...I mean...Steve Jobs and I share(d) the same condition yet he almost worked until the end...whats wrong with me? Other than I don't have someone cooking, cleaning, driving (I'm sure I missed a few things!) for me.

So please worry about yourself. Get the help you need to make it through this trying time, and either don't read the posts with the angry tones, or take them with a grain of salt. I truly hope things work out well for you.

Vicki, sorry to hear about your situation, but your husband obviously didn't have enough life insurance.

And secondly, maybe you should take a cue from the "financial planner" in this article: Pay off your secured loans, so the lenders won't reposess your stuff; let your unsecured loans go into default. Screw the banks. After all, your higher moral obligation is to yourself and your family, right?

The businesses in this nation are far more greedy than your average individual--they continue to use their wealth to influence unfairly our political process as the NEt rate of taxes has fallen from 39% in 1955 to just 17.5% today despite a 35% corporate rate. That difference-is equal to over a half trillion dollars which would have reduced our deficits enormously had congress not been so over generous to banks and big business compared to the people. It's not a nation of for the people it's a nation of for the corporations. We lost our country that's the occupiers want change more than anything else.

"The businesses in this nation are far more greedy than your average individual"

You keep pushing this, but those businesses are made up of individuals. The reality is that America is now land of the knave and home of the fleeced. We're a greedy and stupid people and it shows in our leaders and our businesses. When too many people have as their business to fleece others of as much as they can, the country can only go to pot. I'll blame the people and the business folk as they are both at fault.

Again, this sounds more like bragging and smugness than actually understanding what happens in real life to a majority of people.

Yep, I did the exact same thing. I lived for years like I made minimum wage even though I make a pretty good income in order to pay off the house. People need to live on what they can afford, not what they can borrow.

That's very much what my husband and I did a long time ago. Now we're looking at the light at the end of the 30-year tunnel.

more2bits

I have a great idea. Since it appears you have no issue about individuals claiming bankruptcy, why don't you give your entire income to others so that they may continue to make these lifestyle decisions?

Yes...there are cases when it is health related and there is no other choice. But, health was not the issue in this article.

I am glad there are people like rollmeaway out there. It proves that at least a few people in this country are responsible.

@more2bits: I simply do not believe that you could have read this story and still can find some way to excuse this sort of bad decision-making! Your multiple comments about how "this is more complicated that it appears," etc. etc. etc. aren't flying. Are you, perhaps, in this man's shoes and can't quite find the moral courage to admit that you screwed the pooch?

This guy didn't lose his job because his company left the U.S. He wasn't laid off due to decreased production. He isn't disabled due to an illness or injury. He simply made horrible, irresponsible decisions involving spending more money than he had. He bounced a check on the rest of us because he wanted to keep up with his stupid friends.

Apart from the very obvious - and simple, basic - financial lesson here, there's another important lesson: If all you friends decide to jump off a cliff, don't go along with them. Have the sense to realize that your friends are idiots.

Well, don't be too smug. If Obama, Harry Reid, Barney Frank, etc get their way, you'll end up paying for your friends' extravagant lifestyle yet.

Sounds more like smugness in that you made one right choice and others didn't.

I take it 2 bits you spent more that you could afford and that is why you call all these people who spent within their means, braggers.

more2bits:

You make a good point here and there, but your proclamations of "smugness" and "bragging" are ridiculous.

If someone wants to point out they made the "right" decision when all around them people were making the "wrong" decision, let them. Maybe it will snap a few people into better decisions in the future.

Living beyond ones means is a gamble and never a good idea - being reminded of that by people that had enough head on their shoulders to not get sucked into this mess is not a bad thing.

more2bits- Please stop hating on the smart intelligent people who did the right thing and were not tricked or forced into shady big bad banks forcing them to take on more than they could handle and now have the right to share their experience just as the "financial expert" did in this article!!

Sounds like more2bits wants to be able to make the stupid or greedy choices without being called stupid or greedy for it. That more than anything else indicates to me that more2bits likely DID do as the author of the article did.

I did the same thing.

I remember sitting in my kitchen, looking at the assessment on my first-ever (small, affordable) house, thinking: this is wrong, and something really bad is going to happen soon.

It did.

Those who luckily escaped the carnage are so smug in their opinions and won't even read between the lines or try to understand others situations.

Darrel -

He's not asking you to feel sorry for him - he's just telling his story. I see it as a cautionary tale that people can learn from. Seems like he learned from his experience, so good on him.

moretobits -

There you go again. And let's be clear - "luck" had nothing to do with escaping the carnage - good long term thinking and living within ones means even when heavily tempted to do otherwise had everything to do with having "escaped the carnage."

Escaped the carnage? Folks such as myself are and have been the carnage for decades. No one gave a rats ass even five years ago that we lived on the fringe. Now that people who were middle and upper-middle class are feeling the same pinch we learned to live with long ago, we're smug? Perhaps so. But at least these folks can look back at the "good years." For some of us, there haven't ever been any "good years" where we bought our children new cars, dressed them in the latest fashions or bought them whatever gadgets were the latest rage. Damn us for being self-reliant.

Maybe not, but then it's also clear you're a little bitter about not having those 'good years' too. The thing about all this is that it's a gradual thing. You don't realize it's happening because it's normal. You have more disposable income than ever before and suddenly you can get this and that and still meet your obligations and bills, so there's no problem....

And then there is a problem and everything falls apart. I think the lesson here is to learn to be conservative in your personal finances and watch the bellwethers. IN his particular case, the bellwethers were giving false indications so it all went hooey.

Hate to tell you. Nobody escaped the carnage !!

The entire nation will pay for the reckless gambling that Wall Street did with our banking system.

We are all just sheep. And millions got enticed and convinced by these shrewd schyster brokers that everything would be just fine. After all, who had access to all the data? The banks of course. So when they said everything would be just fine, well, most buyers took that as gospel.

The banks are what caused this whole mess and yet not one CEO has gone to prison. Maybe we'll just have to drag them out into the street and create our own justice.

.

USA1776,

You're forgetting that while they were analyzing the data and pushing all this they were also betting against all of it out the back door with their default swaps. They made a killing on both ends and left our country, tax payers, and citizens left holding the empty bag.

THEN, when they get more taxpayer money to get themselves out of their financial debacle they paid themselves hefty bonuses. Prison.. All of them should be in prison. This is little more than the S&L scandal from the 80s.

B.Roy: That's called "hedging your bets." Nothing wrong with that as long as you aren't in a position to cause one outcome or the other. Securities investors do this all the time.

The only reason anyone got hurt is because, like the guy in this story, they bit off more than they could chew.

By the same token, I agree that we shouldn't have bailed them out. If I make a bad investment, my "bail out" consists of maybe being able to write off my loss against my income on taxes. So, I might pay less tax that year. Hardly the same as being handed a refundable credit and definitely nothing like being handed a few million to stay afloat after the smoke clears.

I know folks who played by the rules as well. They bought homes they could totally afford. Then the market tanked. The value of their home plummeted. The company where they worked had its own problems and they wound up getting laid off, and then had trouble finding another job. Meanwhile, the mortgage payment was still due. They couldn't afford to pay the mortgage. And the value of the home was less than what they owed on it. You see, this stuff is also happening to very responsible people.

Rick: I don't think anyone is denying that some responsible, sober folks have run into trouble. When people lose their jobs it's always tragic. But, that issue is totally separate from home prices. Were the people you know who played by the rules planning to sell their homes? If not, the fact that their home values have plummeted is sort of irrelevant. If they lost their jobs and can't make payments, the declining value of their home just means they will take a hit if they sell now. But, it seems likely they might have lost the home anyway if they couldn't find a job within a reasonable amount of time.

Nobody is badmouthing people in that situation. If you read the article, you can pretty plainly see that the guy in this story was not in that situation. He was simply stupid and greedy. People (myself included) have a problem with that. We aren't very sympathetic to people who take out mortgages without even bothering to consider the monthly PITI payment or whether they can afford that payment.

Adding on to my comment, one of these responsible friends I was referring to, who lost his job, then couldn't pay the mortgage on his home, which had dropped dramatically in value (he's in Florida), because of this situation wound up unable to afford health insurance. So he went from having a good job and living in a home he could well afford, and health insurance, to having no job (and no chance of finding a new one), unable to pay the mortgage on a house that was worth less than when he bought it, and no health insurance. Then if that wasn't enough misery, he got seriously ill and nearly died (thanks to the lack of health insurance, which costs a whole lot more for unemployed people than those who are employed).

@Miker, no the friends I was referring to were NOT planning to sell their homes. But when they ended up without a job and could no longer afford the mortgage, then everything changed and YES, they had to sell their homes. The problem was, the homes were worth less than what they owed. My friend who got suddenly ill had unanticipated doctor bills. Fortunately for him, he's a French national and his family got him on a plane back to France where they have universal healthcare and he was able to be treated. That's why he's alive now. Some folks aren't that fortunate and would have wound up dead. Of course, we've heard from some folks attending recent Republican debates who would be applauding their deaths.

Why in #1.1 did you refer us to #21 when it says nothing extraordinary that any person with a brain should know?

Yes, that's true. On the other hand, I have a difficult time believing he's a financial pro. He made all of the mistakes by the numbers. Financial pros would not do that, I would think. And he relied on someone else to tell him what he could afford while acting as a financial adviser to others? REALLY?

Maybe he learned a lot from the school of hard knocks. It would seem there might be some credibility there. But I'm not a financial pro, I did not make those mistakes, and I have a hard time taking advice from someone who did.

I'll give you that - the guy at least owns up to his mistakes. He doesn't blame the bank for "predatory lending" (although he comes dangerously close). That's quite a bit more than all the OWS whiner-types are willing to do.

Can't quite come to grips with his decision to simply walk away from his obligation to pay off his house, but I can certainly understand the logic behind his decision. Still, if he were all that worried about doing the right thing from the start, he wouldn't have been faced with this moral quandry in the end.

I did feel like the "financial pro" designation was a little misleading...my understanding of the training most financial advisors get is that they learn the conventional wisdom of investing and personal money management.

When something digresses from that conventional wisdom for a period of several years, and "everybody's doing it," you wonder if it's possible the rules have changed and start making decisions based on emotion, wishful thinking, or even panic that being too conservative is dangerous.

I do feel that he should have known better...he would know how banks operate, and that they aren't doing you a favor when they give you a loan, they are looking to make money--and they don't need you to ever pay off your debt to turn a profit. I can see, however, how one could get caught up in the hype and ignore their better judgment--especially in the suburbs of Las Vegas which, at the time, were absolutely exploding.

Excuse? Hardly. He knew better. But I've had my share of moments where I realized how severely dumb a decision was and my stomach falls through the floor because there is no good way to fix it.

You can't undo these things once they are done...having experienced that feeling in different contexts, when someone is willing to honestly acknowledge they ****ed up, my inclination is to wish them well and hope they've learned their lesson.

As for walking out on the debt...at least he worked with the bank to minimize the damage. Not a perfect solution, but IMO better than the cowardly slinking away so many have done.

I wouldn't waste my money on this guy's book or my time reading it. It may well have some sound advice based on his mistakes, but his credibility is suspect.

My advice would be to use the money you save by not buying this guy's book to take the Dave Ramsey Financial Peace course.

Miker, you say that the author has no credibility because of his mistakes, but then recommend Dave Ramsey's course. The irony to your statement is that Dave's message is so strong precisely because he (Dave) has "done stupid". Dave went bankrupt after thinking the sun would shine brighter instead of preparing for rainy days. Miker, please don't believe that only people who have done the right thing all along can provide the best advice. There is a behavior gap with even the most informed and educated of professionals. The lesson here is how easily emotions can override prudence if one let's it.

KT: You're right. I should have added that the only reason I recommend Dave Ramsey is because I already knew and believed everything he teaches before I'd ever heard of the man. Since I haven't written any books or created any pre-packaged courses on the subject, I simply recommend Dave's materials. I'd be glad to sell you a book; I haven't been bankrupt, but I haven't written a book yet, either!

I didn't exactly say that this guy's book is crap or that you can't believe anything he says - just that his credibility is suspect. I can't judge his book because I haven't read it, but I didn't get the impression that it included much in the way of lessons learned from the experience addressed in this article. I probably could have worded that part a bit better, too. If the book is like this article, I might buy it. But, if it was his advice on managing money written based on his "Las Vegas thinking," I'd recommend giving it a miss.

My bottom line is that Dave Ramsey offers good, solid, time-tested advice that my grandmother taught me (some directly and some through my parents). I know what Dave's course teaches, I know it (generally) works, and I don't feel any need to recommend much beyond that.

I don't think Dave's advice is 100% right about everything. For example, his savings plan is based on an assumed 8% ROR which I simply don't think anyone is likely to achieve right now or for the next few or even several years. So, if you're my age and just getting around to seriously socking away money, Dave's recommendations aren't going to get the results he states. Nonetheless, I'm teaching my kids to get started NOW so that they can conceivably achieve at least 8% over their lifetimes. Also, Dave's course is aimed heavily at people with a lot of personal debt -which I don't have and never did have.

What I got out of FPU was the motivation to set up and stick to a budget. I had gotten away from that habit for years and got tired of frequently wondering "where did my whole freaking paycheck go?" FPU gave me some tools to get back on track, and - probably more importantly - the motivation ("gazelle intensity" he calls it) to be more disciplined about my spending. That and a copy of Quicken has made a HUGE difference in my savings!

@Miker, I agree with you on the value of FPU. It was great!!! I don't agree with everything Dave says....but heck, I don't agree with everything I've ever said either (the whole getting wiser thing).

I don't agree with everything I've ever said either

LOL! Too right!

What I'd really like Dave to reveal is how he managed to climb back up to millionaire status so quickly! (Although I suspect much of that has to do with selling books. . . )

I actually think he got off pretty easy. I mean, he only lost, what, $30K or so on the house? And since his downpayment was zero, it was the bank that took the loss, not him. He was basically just paying "rent" for the time that he lived in it. He seems to feel that it was such a traumatic experience, and maybe it was. But financially, he came out of it in pretty good shape.

I think you got started.

It's a lot more complex than you make it out to be. Every situation is different. There are factors beyond everyone's control or comfort level that changes drastically and throws everything out of whack. Smugness is an evil too in that it makes people seem self righteous like religious leaders.

Great points. Totally agree with you.

@Brian: Right on, man! You have nailed it. It is NOT more complex than you make it out to be. It is very simple. If you don't have the money, you cannot afford it. Period. If you have $xxxx.00 coming in, you simply cannot spend one penny more than $xxxx.00. End of story. Nothing complex or complicated or nuanced about it. The flexibility is within that $xxxx.00 amount; you can choose to spend half of it on vacations, but then you have to do everything else - pay bills, eat, put gas in the car, etc. - on the remaining half. If you cannot do that, the vacations have to go or at least wait. People fail to see this because they refuse to see this. They want their damn vacations and new SUVs and big houses regardless of the fact that they simply don't have the income to support those expenditures. I have ZERO sympathy for them when they end up broke and homeless with a bad credit rating.

My hat is off to you, sir, for standing your ground in the face of your wife's whining and for teaching your kids better than your in-laws taught your wife. I am blessed with a wife who "gets" it, so my heart goes out to you!

I am a single parent of 4 kids. I have done it both ways, gone on a great vacation with 75% of it on credit then years later saved all year pre bought plane tickets when they were cheap, pre-paid hotel 6 months in advanced, bought Disney tickets 3 months in advanced - It took almost 10 years to pay off the first vacation. It took one year of planning and saving to afford the second.

My new rule, if you don't have at least 2/3 of what you want saved, don't bother using credit. That goes for cars and all major purchases. Should have implemented that rule for buying a house too!

It sounds like yo need to trade in your wife and find a woman who isn't just one of those people who want to take America down the drain?

How can you possibly live with someone like that let alone perhaps breed with her?

Ah, the philosophy of happiness. The villager that owns 12 goats may die a happy man, unless his neighbor manages to obtain 36 goats. He then realizes that 36 goats would make him much happier,even though he was perfectly content the day before. Magnify that to tv's, cars, and homes.

Brian, I would absolutely love to have a beer with you! Great post!

@Jazz: Too right! I'm guilty of that myself. I'm doing the best I've ever done. Got a nice house. Decent (but older) cars. Etc. But, every now and then I see that Maserati or Lotus on my way to work, or I make the mistake of looking through the local Homes & Land magazine while waiting for an appointment, and I almost literally get depressed. It just doesn't seem possible that so many people can afford $1 million palaces and I can't help wondering where I've gone wrong. . .

Still, I know my monthly take-home and I'm not going to spend more than that trying to convince my neighbors that I'm doing better than I am.

Brian, get a marriage counselor or a divorce. Thumping your chest on line about your perfection over your evil wife is a clear sign that you probably shouldn't be married. of course airing your dirty laundry I guess is appropriate in a thread discussing stupid decisions.

@Sally: Hit a nerve, did he?

Sally, while I agree with you that perhaps Brian has issues with his wife, I totally disagree with you comment that "you probably shouldn't be married". Why is that? do you think he was being unreasonable? Like Miker above, I suspect that he hit a nerve - perhaps a little self-examination is in order.

Sally,

Brian should be married, but to someone much better and less demanding. His wife is the one who shouldn't be married. 5 years and three different countries is pretty darn fantastic. She should appreciate the things and memories she has gotten in that short of time more. It sounds to me like she is a spoiled brat.

You're right on the money, Miker. He's as much a predator as anyone else who helped create this crisis by leading his unknowing victims toward the same precipice he found himself on. He made his bed and padded it with manure, so he deserved whatever ills came upon him. His family didn't, though.

In an interest based economy coupled with fractional reserve banking, all borrowers cannot earn enough money to pay their debt with interest. This is because banks create money when we borrow:

www.tradingstocks.net/html/banks_create_money.html

Our entire money supply is borrowed like this and it is interest bearing debt. In other words, entire money supply is less than the total debt.

What does this mean? This means that when borrowing stops (when money creation stops) everybody cannot possibly earn enough dollars to pay their debt with interest.

After sub-prime, which was intentional, we ran out of borrowers. Deflationary crash has started. Weakest borrowers are guaranteed to go bankrupt. These are some home owners as well as countries like Greece.

www.tradingstocks.net/html/prepare_for_market_crash.html

@wintsongh: Your comment just further convinces me that the mainstream "economy" is nothing more than an elaborate pyramid scheme.

everybody makes mistakes, and deserves a second, he didn't set out to hurt his family, he genuinely thought that what he was doing was in the best interest of his family, so why be so harsh. I can't wait to hear the dum mistakes that you and i have made in our lives, it's just that we aren't telling. I am less than perfect.

The difference in most cases, Wahdea, is that we didn't expect the government (i.e. our neighbors) to pay for our mistakes and we didn't try to blame everyone except ourselves for those mistakes.

I give this guy credit for at least not trying to claim that he was a "victim" of "predatory lending." Not that he'd be able to pull that one off. Pretty hard for a "fnancial adviser" to claim that he was unable to understand a basic mortgage and how it worked.