I'd disagree. I never saw those types of calculations until college. I never saw algebra till high school.
Of course it might be nice of mortgage brokers had a fiduciary responsibility to recommend suitable mortgages to those who paid them money, but they don't.
Nice for who (or is it whom, I can't remember)? The "no such thing as a free lunch" principal applies here. Company expenses are increased by errors and omissions coverage, ethical and fiduciary training, compliance with regulatory agencies, et cetera... Corporations, being the profit-seaking entities that they are, pass these expenses on to us, the consumers. I personally don't care to pay higher fees, closing costs, intrest rates, whatever... just to ensure that an "uninformed" borrower doesn't hurt himself.
There may be more factors at work than Sgt. Sausage includes in his analysis but for the most part I agree with him (I do think that some of Elle's points are also very valid). I have a feeling (not proof, just a feeling) that the majority of borrowers that lose their homes in this mess will not willingly get caught up in it again. I hope their children, friends, and family that watched on in horror will also "learn by watching others get burned."
-Just my $0.02
You seem to be ignoring the fact that I wrote that every single kid who attended public schools in America (probably any time in the latter half of the last century through this very day, today), in fact, *did* have the necessary education but *chose* to ignore it.
It's simple 'rithmatic. Plusses, minuses, a few ratios, quotients and multiplications. More complex (compound interest, time value of money (present value/future value) --
*all* is taught to every single kid by early high school. I have my mathematics textbooks from the seventh grade. All of this is in there. All was taught, and tested, in grade school. The education happened. The results you're looking for based upon said education did not.It is not an education issue. These folks were educated and had the necessary tools, but chose denial instead.
I'm not saying that at all. I'm saying that most people wouldn't be helped. The fact that some are coming to this particular forum and others like it -- that specifically excludes 'em from the "most people" category. "most people" don't actively seek out information. "most people" just let life happen to 'em. "most people" will fall for any salesman's pitch. "most people" won't back up the saleman's BS by crunching the numbers themselves. "most people" have the necessary cognitive development and skills to handle this, but *choose* to ignore it. By definition, the folks actively seeking out information are *not* these "most people".
The folks who come to this forum certainly ain't "most people".
.
It, in fact, goes farther with me.
"oh those stupid borrowers" Who borrowed the money.
"oh those stupid brokers" Who found the (equally stupid) folks to loan the money
"oh those stupid bankers" Who initially put up the money to loan.
"oh those stupid investers" Who put up good money to pay for bad paper and relieve the bankers of their risk.
It extends from the bottom to the top -- all the way up and back down again.
They were all ignorant.
My only hope is that it doesn't eventually lead to "oh those stupid taxpayers" who bail out any of the above mentioned ignorant folk. Sorry. No bailouts for anyone. That's the only true solution.
.
Most of the necessary calculations are "pre" algebra. Simple arithmetic, really. You're telling me you were in high-school before you could calculate the difference between 4% and, say, 9% of $200K? No algebra involved in that one, and that's the one that's putting so many of these folks into foreclosure and bankruptcy.
."Sgt.Sausage" wrote
Whence we are back to the judgement that any five-year-old, aided only by the public school system and regardless of the presence of bad or no parenting, is a deadbeat when she or he does not know how to choose wisely at that age and then build on those choices.
We disagree.
Financial education is not taught strictly through the public schools. I would say most education, of any flavor, is not delivered through schools (public or private).
Nor was I -- help us if he does.
They should have, but they got greedy. Such tends to happen. Bailing them out, though, would be an even bigger mistake.
[snip]
Only to those in denial of reality. To the rest of us (you, apparently included) knew (or should have known) better.
We rode the refi train all the way down. Initial ARM to get the low "introductory" rate. Refi to 30 year at 7.75% Refi to 20 yr at 6.25%. Refi to 15 yr at 4.99%. Not once during those refis did we "cash out". When everyone and their brother was getting into an ARM, we were getting out.
Nothing wrong with ARMs, per se -- we used one to start, we just didn't try to take advantage of the situation, (by using the low intro rate to get into something we couldn't afford). No. We knew how to run the numbers ourselves and kept it affordable, fixing the rate as soon as rates were favorable and riding that train all the way to the bottom of the rate curve.
Agreed -- but it shouldn't be. Folks *can* understand this. It ain't RocketScience(tm) -- they simply choose to ignore the facts and stick their heads in the sand.
.
They'll only self-regulate if you let them feel the pain. Let a few banks go under. The rest won't be in such a hurry next time to write bad paper.
I'm saying: Yes, the only way to avoid it is Govt. Intervention. I'm also saying, No -- that's exactly the wrong thing to do.
Back up a few posts. I said "let them feel the pain". It's the only way (outside of Govt. mandate) that they will self-regulate. Why should they regulate if someone comes in and bails 'em out? They won't have any reason to. The obvious answer: Don't intervene and let 'em feel the pain. They'll be sure to self regulate next time (at least for a while, anyway).
.
Now you are shifting your claims. That is a much easier calculation than the future value of money, which is what you first claimed was taught to everyone by 7th grade.
Your claim is false. Repeating it won't make it true.
What would have happened if, after your purchase (while you still had the ARM) the rates had started going up and property prices had started going down?
I think I'm finally getting that through my thick skull.
Then, how do you suggest we provide said financial education to those whom you think are in need of it?
.
Learning the math is the responsibility of the public school system. But math is only a tool- learning how to apply mathematical principles is something most people lack, in my opinion.
I teach adults and kids for a living. There are skills which people need to succeed in anything. But true mastery of anything (decision making) is knowing when to apply what skill to a given situation.
Experience teaches us most of this skill application, but mentoring can also point us to which skills to apply when in doubt.
I live in SW Ohio, and during the last 7 years I have bought my first house, refinanced it, sold it, bought a second house and refinanced it.
During the whole process I learned a few different things. First house was bought with a buy down on the interest rate (2 points 1st year, 1 point second year, normal payment the third year). Loan had PMI. The ratios as listed above were calculated, known and quite tight (we had to do some funny math to make ratios work prior to closing).
Learned to avoid PMI
refinanced to lose PMI. Had a first and second fixed rate loan.
Bought a second house with a 30yr fixed first and 15 year ARM of some sort for second. I quickly learned the second is not what I thought it was, and refinanced whole mortgage bundle (1st and 2nd) within 14 months. This time the ratios weren't an issue- I'm sure they were calculated, but few people within the loan process discussed them.
After the ARM got larger, I recalculated the budget and ratios, and it was clear to me I needed to do something.
During the 4th time, I was able to ask lots more questions based on the experience of first 3. 4th time we bought the rate down, we avoided PMI, both loans are fixed rate.
At same time I watched the budget and ratios.
My point is that we did get sucked into some of this, but if a person is on top of things (persnal finances), they can get out with common sense (as Skip alluded to 2 pages above).
"jIM" wrote
Studies show that the best predictors of a student's success in primary and secondary school--any primary/sec school--are socioeconomic status; parents' education; and parental involvement. If parents want to be certain their kids get an education in financial planning, they need to be involved. This of course can take many forms, from dinner table talk, to time dedicated to reviewing the monthly budget; to setting up the kids with their own allowance and requiring a budget; etc.
That the public school system, and not bad parenting, is chiefly to blame for inadequate educaiton is unfortunately one of the biggest urban legends today.
Yeah? Try sending your kids to an inner city public school. Thumper
"Thumper" wrote E wrote
Where single parent families with working mothers and poverty income are common? Did you really not consider that?
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.