7 ms·

I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the bo

I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/community ties dissolving. Hell, I went to business school and read 10Ks for a living, and can still barely manage to figure out all the terms and conditions on my credit cards. I just want to point out that alternatives (usually uncomfortable, but often necessary) do exist to taking on opaque loans. How does someone get into a situation where they are "leveraged to their eyeballs with rents"? Sometimes it's purely out of necessity (need to be close to sick family, within commuting distance of work, keeping a rent controlled unit) but otherwise most people in the US generally have a choice of where to live and how much to pay in rent. I could live in the city and pay 1.5x what I'm paying now to live in the suburbs in an unorthodox situation, but I don't because then my rent would be >30% of my annual income. Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Also, if a homeowner considers their home an "investment" that means they should be willing to liquidate that investment at some point when it makes financial sense to do so. People get sentimentally attached to their homes, which is not true of most "good" (read: fungible/liquid) investments. We're definitely both against fraud, but unfortunately these government programs that make life better for some by subsidizing mortgages, home renovations, tuitions, etc. can and will always be gamed by unscrupulous individuals. Question is - is the payoff to society (higher homeownership, literacy, energy efficiency) worth it?

intrasight 10y ago
I think you've hit the nail on the head when it comes to houses - people form irrational sentimental attachments to their real estate.
- Retric 10y ago
  It's not necessarily irrational to want to stay in the same home after 40 years. Money is only indirectly beneficial. If you enjoy where you live that can be worth quite a bit.
- sdenton4 10y ago
  Human irrationality around shelter is a market inefficiency which the banks are happy to take advantage of. They're also happy to write documents that are incomprehensible to the buyer, providing terms in their favor, as they know they are not working with experts, 99 percent of the time. When individuals are put in opposition to large institutions, the individuals are going to lose. No amount of financial education is going to change that. Regulation and good governance are your best bets, though competition sometimes works as well; place another institution in the mix to take the burden off the individuals.
  - intrasight 10y ago
    Yes, yes, and yes. I was not trying to shift the blame to the consumer. Information asymmetry is why we need strong consumer financial regulations.
- aswanson 10y ago
  Buying a home is a massive bet on the local employment market (in your niche) staying fungible over decades. At the rate of creative destruction happening in business these days and the associated deterioration of the employee/employer (implied) social contract since at least the 80s...this just doesn't make sense.
  - dvtv75 10y ago
    > Buying a home is a massive bet on the local employment market (in your niche) staying fungible over decades. I've seen "fungible" used to indicate flexibility, and I've seen it used to indicate growth and decay. Are you using it to indicate either of these, or are you attempting to indicate a long-term steady state? When trying to communicate an idea, you may wish to use a word that has a fixed meaning and a reasonable chance of being understood, because to be brutally honest, I haven't any idea what you're actually intending.
- deleted 10y ago
  [deleted]
John23832 10y ago
> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes. You have the option of mobility because you're young and employable. Probably just because you're employable. The average person has horrible job prospects where they are. Moving into uncertainty of even worse job prospects probably isn't a realistic option. I think most people would try to make it work with the job they have (and get stuck with rents because of it), than leave their job and possibly not be able to find one where they move (and to have spent money moving). > Also, if a homeowner considers their home an "investment" that means they should be willing to liquidate that investment at some point when it makes financial sense to do so. People get sentimentally attached to their homes, which is not true of most "good" (read: fungible/liquid) investments. I'll go ahead and say this. Your home is NEVER an investment. A house that you own, maybe. But, I repeat, your home is never an investment. > We're definitely both against fraud, but unfortunately these government programs that make life better for some by subsidizing mortgages, home renovations, tuitions, etc. can and will always be gamed by unscrupulous individuals. Question is - is the payoff to society (higher homeownership, literacy, energy efficiency) worth it? I agree here, but I think the better question is, "When the unscrupulous individuals form a large, easily identifiable group, why sit idle and do nothing?"
- roymurdock 10y ago
  Yeah I think we're in agreement in general, just coming at this issue from different perspectives. I'd like to see things changing on the consumer side as well as the gov/regulation side described in the article: Riverside County, Calif., has opened an investigation into marketing practices for PACE loans, and California Gov. Jerry Brown signed into law in September new requirements establishing uniform disclosures for PACE loans, an effort to make lending terms closer to those for mortgages. Homeowners who get a PACE loan now have three days to back out. The largest PACE lender, Renovate America Inc., is accused in three lawsuits filed in November by borrowers of double-charging interest and administrative fees and failing to immediately credit loan payments. The suits seek class-action status. The company denies the allegations and says it will “defend PACE, our company and the program vigorously.” In November, the Energy Department urged administrators of the loan programs to clearly explain loan costs and other terms, allow borrowers to cancel their loan during a short period and deter kickbacks to contractors. It would be nice to be able to trust financial institutions/loan originators, have them explain things to consumers in easy-to-understand and fair ways, and have some type of more personal relationship than we have now with those who provide us with places to save/borrow money.
cc439 10y ago
>If a homeowner considers their home an "investment" that means they should be willing to liquidate that investment This is a point which is missed by so many people. Every empty-nester I know and consider well prepared for retirement has made downsizing a key component of their overall strategy. I get sentimentality but there's as much sentimental value in retaining financial stability in one's later years. Sure, an empty nest, baby boomer household will usually be able to bear the financial burden well into their retirement. However, seniors find themselves facing large, unplanned healthcare expenses all too often. That's where the $XXX,XXX they gained by downsizing around the time of their retirement would prove invaluable. Not only would they avoid the large tax penalty that comes from withdrawing from a 401K, they'd reduce their fixed expenses while retaining an asset (the smaller home) that can be passed down to the next generation. I've known far too many seniors who have been forced to sell the home they "plan to pass down to the children as a nest egg" just to cover medical bills and it's a sad sight to see.
- coryrc 10y ago
  Who should be paying their medical bills then?
lovich 10y ago
This maybe doesn't apply for many people in the us currently, but in my age group (late 20s) student loan payments are so high that it's not worth moving to a lower cost of living area. Staying in the city where the jobs are and the higher pay is, nets you more money at the end of the month even if rent is >30% of your pay. Having a large static payment is making cost of living a much less important part of my cohorts finances
drspacemonkey 10y ago
>There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. You've kind of hit on a huge part of the problem - there's WAY more than 2 sides. Thanks to swaps, derivatives, and bonds, the originator isn't on the hook if the borrower defaults. The originator isn't even holding the loan anymore. They've bundled it up and sold it off to a 3rd party who never bothers to check if the loans are any good, because THEY bundle it up and sell it off ASAP to a 4th party. Repeat ad nauseum. End result is that nobody in the chain is ever incentivized to actually check if the borrower can afford the loan they've been given. On one side, you've got a giant billion-dollar industry who whose best interests are served by issuing as many loans issued as without concern for the long-term consequences. On the other, you have the borrower. As we learned from the 2008 crisis, putting all the pressure solely on the borrower to think of the long-term consequences is not only unfair, it's dangerous to everyone.
- Intermernet 10y ago
  > The originator isn't even holding the loan anymore. They've bundled it up and sold it off to a 3rd party who never bothers to check if the loans are any good, because THEY bundle it up and sell it off ASAP to a 4th party. Repeat ad nauseum. "You get a hot potato, you pass it on. I passed it on. Listen, there were a lot of people who are very happy to get things taken care of for me. Hey, you know? It was really funny seeing how far and how fast that particular potato got passed on. That told me a lot about who was bright and who was not." The Long Dark Tea-Time of the Soul - Douglas Adams

intrasight 10y ago

I think you've hit the nail on the head when it comes to houses - people form irrational sentimental attachments to their real estate.

Retric 10y ago
It's not necessarily irrational to want to stay in the same home after 40 years. Money is only indirectly beneficial. If you enjoy where you live that can be worth quite a bit.
sdenton4 10y ago
Human irrationality around shelter is a market inefficiency which the banks are happy to take advantage of. They're also happy to write documents that are incomprehensible to the buyer, providing terms in their favor, as they know they are not working with experts, 99 percent of the time. When individuals are put in opposition to large institutions, the individuals are going to lose. No amount of financial education is going to change that. Regulation and good governance are your best bets, though competition sometimes works as well; place another institution in the mix to take the burden off the individuals.
- intrasight 10y ago
  Yes, yes, and yes. I was not trying to shift the blame to the consumer. Information asymmetry is why we need strong consumer financial regulations.
aswanson 10y ago
Buying a home is a massive bet on the local employment market (in your niche) staying fungible over decades. At the rate of creative destruction happening in business these days and the associated deterioration of the employee/employer (implied) social contract since at least the 80s...this just doesn't make sense.
- dvtv75 10y ago
  > Buying a home is a massive bet on the local employment market (in your niche) staying fungible over decades. I've seen "fungible" used to indicate flexibility, and I've seen it used to indicate growth and decay. Are you using it to indicate either of these, or are you attempting to indicate a long-term steady state? When trying to communicate an idea, you may wish to use a word that has a fixed meaning and a reasonable chance of being understood, because to be brutally honest, I haven't any idea what you're actually intending.
deleted 10y ago
[deleted]

John23832 10y ago

> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes. You have the option of mobility because you're young and employable. Probably just because you're employable. The average person has horrible job prospects where they are. Moving into uncertainty of even worse job prospects probably isn't a realistic option. I think most people would try to make it work with the job they have (and get stuck with rents because of it), than leave their job and possibly not be able to find one where they move (and to have spent money moving). > Also, if a homeowner considers their home an "investment" that means they should be willing to liquidate that investment at some point when it makes financial sense to do so. People get sentimentally attached to their homes, which is not true of most "good" (read: fungible/liquid) investments. I'll go ahead and say this. Your home is NEVER an investment. A house that you own, maybe. But, I repeat, your home is never an investment. > We're definitely both against fraud, but unfortunately these government programs that make life better for some by subsidizing mortgages, home renovations, tuitions, etc. can and will always be gamed by unscrupulous individuals. Question is - is the payoff to society (higher homeownership, literacy, energy efficiency) worth it? I agree here, but I think the better question is, "When the unscrupulous individuals form a large, easily identifiable group, why sit idle and do nothing?"

roymurdock 10y ago
Yeah I think we're in agreement in general, just coming at this issue from different perspectives. I'd like to see things changing on the consumer side as well as the gov/regulation side described in the article: Riverside County, Calif., has opened an investigation into marketing practices for PACE loans, and California Gov. Jerry Brown signed into law in September new requirements establishing uniform disclosures for PACE loans, an effort to make lending terms closer to those for mortgages. Homeowners who get a PACE loan now have three days to back out. The largest PACE lender, Renovate America Inc., is accused in three lawsuits filed in November by borrowers of double-charging interest and administrative fees and failing to immediately credit loan payments. The suits seek class-action status. The company denies the allegations and says it will “defend PACE, our company and the program vigorously.” In November, the Energy Department urged administrators of the loan programs to clearly explain loan costs and other terms, allow borrowers to cancel their loan during a short period and deter kickbacks to contractors. It would be nice to be able to trust financial institutions/loan originators, have them explain things to consumers in easy-to-understand and fair ways, and have some type of more personal relationship than we have now with those who provide us with places to save/borrow money.

cc439 10y ago

>If a homeowner considers their home an "investment" that means they should be willing to liquidate that investment This is a point which is missed by so many people. Every empty-nester I know and consider well prepared for retirement has made downsizing a key component of their overall strategy. I get sentimentality but there's as much sentimental value in retaining financial stability in one's later years. Sure, an empty nest, baby boomer household will usually be able to bear the financial burden well into their retirement. However, seniors find themselves facing large, unplanned healthcare expenses all too often. That's where the $XXX,XXX they gained by downsizing around the time of their retirement would prove invaluable. Not only would they avoid the large tax penalty that comes from withdrawing from a 401K, they'd reduce their fixed expenses while retaining an asset (the smaller home) that can be passed down to the next generation. I've known far too many seniors who have been forced to sell the home they "plan to pass down to the children as a nest egg" just to cover medical bills and it's a sad sight to see.

coryrc 10y ago
Who should be paying their medical bills then?

lovich 10y ago

This maybe doesn't apply for many people in the us currently, but in my age group (late 20s) student loan payments are so high that it's not worth moving to a lower cost of living area. Staying in the city where the jobs are and the higher pay is, nets you more money at the end of the month even if rent is >30% of your pay. Having a large static payment is making cost of living a much less important part of my cohorts finances

drspacemonkey 10y ago

>There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. You've kind of hit on a huge part of the problem - there's WAY more than 2 sides. Thanks to swaps, derivatives, and bonds, the originator isn't on the hook if the borrower defaults. The originator isn't even holding the loan anymore. They've bundled it up and sold it off to a 3rd party who never bothers to check if the loans are any good, because THEY bundle it up and sell it off ASAP to a 4th party. Repeat ad nauseum. End result is that nobody in the chain is ever incentivized to actually check if the borrower can afford the loan they've been given. On one side, you've got a giant billion-dollar industry who whose best interests are served by issuing as many loans issued as without concern for the long-term consequences. On the other, you have the borrower. As we learned from the 2008 crisis, putting all the pressure solely on the borrower to think of the long-term consequences is not only unfair, it's dangerous to everyone.

Intermernet 10y ago
> The originator isn't even holding the loan anymore. They've bundled it up and sold it off to a 3rd party who never bothers to check if the loans are any good, because THEY bundle it up and sell it off ASAP to a 4th party. Repeat ad nauseum. "You get a hot potato, you pass it on. I passed it on. Listen, there were a lot of people who are very happy to get things taken care of for me. Hey, you know? It was really funny seeing how far and how fast that particular potato got passed on. That told me a lot about who was bright and who was not." The Long Dark Tea-Time of the Soul - Douglas Adams