Thanks to L for this refreshingly honest story of one borrower’s "subprime nightmare": [The video is great.]
[I]n 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds.
What a great answer. Of all the reasons I’ve heard for what caused the Great American Financial Debacle, this one rings truest- the perpetrators all thought they could beat the odds.
This is today’s open thread. Feel free to weigh in on this story- or anything else of note today.
Bubble Meter
Ohio Fraudclosure
Mish's Global Economic Analysis
Northern Virginia Housing Bubble Fallout
UK House Bubble
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
I responded to this story on CRisk as well because of the striking similarities and differences between the author and my own story.
Striking similarities: I got divorced in 2003, remarried in 2005, and my wife moved here to be with me without a job (she was a teacher for the prior nine years). Also, I have $2000 in monthly obligations to my two kids, earn about 120k per year, and live in Silver Spring MD. I might even see the author shopping or on the metro.
The key differences:
- When I was dating my wife I told her everything about my finances, including 30k in debts and no savings. We knew our first year or more of married life was going to be financially tight, and we decided to live in a modest 1BR apartment for just over $1000/month.
- We use a monthly budget on a simple excel spreadsheet so we have to be completely honest with ourselves about our finances. As a result, we save about 3000/month, a third of our combined take-home income (my wife’s teaching position pays 49k).
- We got to a point in mid-2006 where we had eliminated my debts (my wife sold her apartment for a 40k net gain). We checked into the housing market here, and recognized right away that there was a crazy housing bubble when I was approved for 500k with “no documentation.”
- We decided to hold off looking for a house completely for a year, and I began researching what had been going on through CRisk and the links on this site.
- When we resumed our housing search we set a goal of paying no more than a third off the peak prices. We are still waiting patiently today, but the prices are finally coming back into range.
- As a result of our patience and discipline, we now have over 80k in savings, no debts, and are approved for a 730k FHA loan. My credit score is over 810 and my wife’s is over 740. We expect to buy something within the next year or so, but we’ve learned not to be anxious to own or to engage in “magical thinking.”
I share my story not to boast but to contrast it with the author’s. I have no lucrative book contract because our culture is not really so interested in creating a new sensibility based on the right role models. Geez, even the crash in equities that happened late last year and early this year has been forgotten by many people I know.
This author will sell books because it will make others feel good about their own mistakes and poor self-management. I’m not saying that’s his motive.
DC-
You should be ashamed of yourself. We have an economy to stimulate, based on a cycle of ever increasing debt and spending. You are not doing your part.
If everyone thought like you, there would have been no housing bubble and crash- and a lot fewer interesting books at Barnes and Noble. : ) [Congratulations!]
Thanks, Twist!
One of these days we’ll be homeowners, but in the meantime I’ll stop in every now and then and chat with who feel like old friends at this point!
Really, whenever we wobbled it was places like HousingDoom that helped us stay balanced and sensible. I think you’ve really helped a lot of people.
DC you da man!
Failure to engage in ‘magical thinking’ has been considered very unpatriotic in recent years. Worse, the desire for the public to engage in magical thinking comes from the authorities, who OUGHT to be trying to straighten things out.
In 2004 I didn’t have a life-altering personal event to affect my finances. However, even with just an Idaho high school education, I was able to discern that someone had teleported me to Bizzarro world.
Drywallers were living in mansions equipped with outdoor kitchens. Self-indulgent oafs who earn half what I earn were driving new Hummers to tow their new ski boats to the lake.
While the mortgage lenders were spamming for refis, I managed to hook up a 15yr fixed at 4.00% in 2003. I also maxed my retirement savings.
To be honest, this spartan life has kinda sucked. I have been pumping a great deal of my earnings into paying off mortgage debt and saving for retirement. There is not a lot of coin left to have fun with in the present. On the other hand, I am getting near the “f**k you” number in my retirement account (at age 48), and that kind of satisfaction/freedom from fear is difficult to measure.
In 2005 I shifted my 401(k) into bonds. I was a bit early, I admit. I missed Dow 12,000 to 14,000. I also missed Dow 14000 to Dow 6400.
So… the house now has 9 yrs remaining on the mortgage, and the retirement plan took no hit at all. All because I tuned out Greenspan and CNBC. Instead I paid attention to John M and Twist (and a few others). God bless you guys!
Way to go, Idaho!!!
Yeah, I’m no good at timing short-term rallies and such because I cannot relate to a short-term mindset very well. But I timed exiting equities the first time in 1999 at 11000, and again in 2007 at 13000 (that time I just got my family and friends out since I had no investments).
You’ll be living comfortably while others are in a fog of worry and disillusionment. Plus you’ll sleep well knowing you paid attention to the fundamental truths in life versus the “big sell.”
Megan McArdle at The Atlantic says; “turns out the story has been tidied up a little”
http://meganmcardle.theatlantic.com/archives/2009/05/the_road_to_bankruptcy.php