Subprime Blogging
I just checked my spam folder. Can I just tell you how many bogus pitches I have in there from people offering to give me "free" money? (along with the pitches for Viagra, of course. Hel-lo! Google me! I'm a girl. Don't need it. Thanks anyway...)
But back to the free money, these pitches are all the same:
"Boy, do I have a great rate for you...as long as you sign over your house."
Well, let me reiterate what my spam blocker has already ably communicated. That would be a no, thank you. Actually...that would be hell no.
But it does remind me that everyone is not blessed with a) comfortable income, b) financial literacy, and c) a skeptical nature, which is why some people (and the economy) are in financial trouble right now. This brings us to yesterday's segment on subprime mortgages...
It's estimated that a million homes may go into foreclosure this year, the majority of them owned by borrowers with subprime mortgages. Our guest Rep. Gregory Meeks (D-NY) was quick to remind us that not all subprime mortgages are the result of predatory lending practices. But it is clear that these instruments, which allow borrowers with less than pristine credit to buy homes, have a serious downside. Most have low "teaser" rates, and they are adjustable, so when rates go up, the monthly note goes up, sometimes beyond the borrower's ability to pay. And if that borrower becomes confronted with added financial difficulty -- health problems, job loss, credit card debt -- big trouble!
But see, this is why I try not to talk to my guests too much before the interview...sometimes they say interesting things...and since we talk about it before the interview, it doesn't always come up in the interview (darn). What Congressman Meeks said before we went on the air was this: sometimes minorities who don't NEED to get a subprime get one anyway because they assume they're going to be turned down...and so they are often grateful for what they can get.
Now, one would hope that a scrupulous lender would offer the customer the best choice. But is that realistic?
If I walked into the store and there were full-price skirts up front, and sale skirts, of equal quality, in the back...should I expect the salesperson to notify me of the sale? Or, is that on me?
Our regular readers/listeners know we are running our summer financial empowerment series and that one of the types of folks we want to help are people trying to buy a home for the first time. But as our financial guru Alvin Hall has pointed out: some people should NOT buy one. He also says is that if you're not prepared to put the time into educating yourself about your obligations, you're not ready.
Strong medicine.
I've made some dumb financial decisions in my time...often because I didn't know better. There was the time I bought insurance I didn't need -- literally as I was packing my dorm room, two days before graduating from college. Some salesman cold-called me, made a pitch, I fell for it. I got rooked! You know how I found out I got rooked? I started working at the Wall Street Journal where one of my editors covered insurance. So, that's sometimes just how it works...
We want to be a resource for you. We know we can't answer every question, but we want to try to make your life better through knowledge. If you want to get in on the summer series -- work with Alvin Hall to address issues of debt management, homebuying or starting a small business -- now is the time. We're going to pick our finalists in the next week or so. So, get on board.
And, even if you don't want that level of involvement (or exposure!), do feel free to submit questions here for Alvin anytime...
9:15 AM ET | 06-21-2007 | permalink
