Roni on the Current Mortgage Crisis

I've always been amazed at the ratios the lending industry uses to determine how much of a house someone can "afford". If you've been to my home, you know that it is very small and very modest. It is also paid for, and has been for several years now. When we were looking for our first home in 1993, we specifically looked for the most reasonable home that we felt we could live in for the rest of our lives if we had to. We did the math, and realized that by getting a 15 year mortgage we would pay about half as much in the long run as we would have with a 30 year mortgage. We took the math even further, and realized that if we paid even just a little extra every month we would pay even less in the long run. Even with a couple of unexpected lay offs we were still able to pay off our first home in 10 years. Sure I'd love to have a big expensive house like many of my friends have, but I'd rather live in my cozy paid for home that I own and not be a slave to a big mortgage.

I'm not trying to put down those who have nice houses. I don't envy you - I am happy for you if that is what makes you happy. We all make choices on how we spend our money, and not everyone has the same goals. However, I do not feel sorry for those people who overextended themselves and now expect the government to bail them out so they don't lose a house that they really couldn't afford in the first place. There is a big difference between someone who buys a house they can afford at the time and loses it due to unfortunate circumstances... and someone who stretches the ratios to the limits to impress their friends....

Shame on the mortgage companies for the way they calculate the ratios. And it isn't just the middle class that gets in trouble. I've known people that make WAY more than I'll ever make and could afford a great house, but they aren't satisfied with great and even some of them overextend themselves.

As for those that invested in the sub-prime mortgage market, and worse yet the "investment advisors" who advised their clients to make these investments, I think they are getting what they deserve. Yes, it is too bad that they are taking the rest of the financial markets down with them. Our investment guru saw this coming over a year ago and advised us to get out of the funds we had that were heavy on real estate investments. He's one of the good ones.

I think Ann Coulter nailed it when she said "The former frat boys who populate Wall Street today understand economics about as well as the pinko professors whose courses they snored through. That's why betting their entire industry on "subprime" loans to people with no jobs and no collateral made sense to them."

My advice.... Do the Math!!!