Why America will not work.

Hey Tim, make sure they are applying the extra towards the principal. The banks love to pull this one on you: You add on some extra, instead of applying it to principal, which would reduce their profit, as I stated, they consider it a partial future payment of principal/interest. If you've been paying more, it sounds like that is exactly what they have done to you. Now they are saying your payments are up to date through June. Not that your principal balance has dropped, just you're paid through June. A call might help you figger out what they did.

If they're going to be like that (and I have seen this before), then you have to write a separate check for the principal each month (or whenever) and write "PRINCIPAL ONLY, YOU WORTHLESS, THIEVING MOTHERberkeleyERS" on the check in the memo field, then they can't do that to you. If this is what they have done to you, then here's how you get out of this: If they said your payment is up through June (get it in writing), then continue to make your regularly scheduled monthly payments, but instead write "PRINCIPAL ONLY, YOU WORTHLESS, THIEVING MOTHERberkeleyERS" in the memo field from now till June.

My wifes car's next payment is due in August of 2011. This is because we've paid ahead as you've described. However our bank applies the extra principal to the loan lowering the balance, but since the origional loan was 60 months at $XXX and we have paid 20x$XXX extra they are saying we don't have to give them anything until the loan balance meets up with the loans original amortization schedule. This makes us have no payment due until that date. I would assume this is the same situation Tim has.

^^ Yeah, but the interest keeps on piling up. Same as those 'payment vacations' some credit card companies will offer at times.

Used to be many moons ago that there were early payment penalties on many types of loans, i.e. if you coughed up the entire payoff early you got hit with a fee. You don't see that any more.

Dr Hess is exactly right; extra principal needs to be a separate check marked as he says. Trivia: if you write a set of terms on the back of a check and the payee cashes it, it's considered a legal and binding contract. I'm sure the legal eagles here on the board will jump up and down, but I have seen it work.

I still say the woman who's walking away from the house is every bit as unethical and sleazy as the people who enabled her getting it in the first place. Like my ol' dad sez: two wrongs don't make a right.

Poopshovel for President!

Lesley wrote: Poopshovel for President!

I'll second that.

All I know is that when I bought my last two houses, I was approved for a loan that was 200% more than I could afford. I am no financial expert, but when my monthly salary is X and my expenses are Y but my approved monthly mortgage payment is X times 2...something is wrong. I didn't understand that the entire system was out of whack, I just knew something wasn't fitting.

93celicaGT2 wrote: Oh yeah... nothing will shut up a bank's customer service rep if they're giving you a hard time about being one day late on a payment because of blah blah blah faster than you saying: "Alright, well, i'll just pay the entire thing off today, then, ok?" "Oh no, that's not necessary sir, there's not a problem here, have a great day!"

I always use this to get a lower interest rate on credit cards. The one I use for taxes runs ~9%, I have no idea what a normal one runs anymore 20+%.

As for houses the only thing I will say is that inflation in the long haul, say the next 8-10 years will more then help those who bought reasonably and locked good rates and lived within their means.

We bought the sh1ttiest house on the nicest block in 2000. A zip code w/ a median house price that's hovering around 7 figures right now. We paid 1/4 of that and initially had a 30 yr fixed mortgage at about 7.5% and a small 5 yr ARM to avoid paying PMI. We had appreciated enough in a year to refinance into a single note at 6-something, and again a few years later at about 5%.

As an aside I was working in sales at a motorcycle dealership and I was not making a lot of money. I had average credit, my wife made a bit more than me and had stellar credit.

When the market tanked we dropped a little to where we're valued at about 2-1/2 times what we paid down from closer to 3. We own our cars outright, carry zero debt other than the mortgage and a small home equity line at prime - something, and try not to be too consumeristic.

The overwhelming majority of our neighbors paid between 2 and 5 times as much for their houses than we did, but they also didn't work like slaves for the better part of a decade to make 'em nice, all by themselves.

There's an infinite number of articles in the news and stories on the radio and TV about people who are horribly, irrevocably under water on their ill-advised real estate deals, and were mislead by shifty, disreputable mortgage brokers.

Caveat motherberkeleying emptor, dude. If you get burned as a result of doing zero due diligence and assuming that anything involving a lot of money that looks too good to be true isn't - then I'm afraid you've earned it.

so that's the reason?

Caveat motherberkeleying emptor, dude.

Quoteworthy.

Dr. Hess wrote: Hey Tim, make sure they are applying the extra towards the principal. The banks love to pull this one on you: You add on some extra, instead of applying it to principal, which would reduce their profit, as I stated, they consider it a partial future payment of principal/interest. If you've been paying more, it sounds like that is exactly what they have done to you. Now they are saying your payments are up to date through June. Not that your principal balance has dropped, just you're paid through June. A call might help you figger out what they did.

I've been trying to convince my wife that banks will do this.

Dr. Hess wrote: Hey Tim, make sure they are applying the extra towards the principal. The banks love to pull this one on you: You add on some extra, instead of applying it to principal, which would reduce their profit, as I stated, they consider it a partial future payment of principal/interest. If you've been paying more, it sounds like that is exactly what they have done to you. Now they are saying your payments are up to date through June. Not that your principal balance has dropped, just you're paid through June. A call might help you figger out what they did.

I've been trying to convince my wife that banks will do this.

pinchvalve wrote: All I know is that when I bought my last two houses, I was approved for a loan that was 200% more than I could afford. I am no financial expert, but when my monthly salary is X and my expenses are Y but my approved monthly mortgage payment is X times 2...something is wrong. I didn't understand that the entire system was out of whack, I just knew something wasn't fitting.

This is why I have a hard time feeling sorry for many (not all) of these folks who are losing their houses. It doesn't take a rocket scientist to figure out it something doesn't add up.

Jensenman wrote: ^^ Yeah, but the interest keeps on piling up. Same as those 'payment vacations' some credit card companies will offer at times.

Well of course the principle still accumulates interest it's still a loan. We paid down to where our original loan has 7K left on it. This 7k is accumulating interest at a 4.95% annual interest rate even though the original loan was for 20K. Whenever we pay the remaining balance we will be clear of the loan. If we stopped making payments, in something like 20 months the 7K principle plus 20 months of interest would have the same value as the original principle balance less 30 months of standard payments, and we would then in the banks eye's begin owing them money again. So in that way we have "pre-payed" our loan, but interest is only accruing on the 7K current balance. Of course the bank would rather we stop making payments so they get 5% of 7K for 20 months rather than 5% of 7K for however long it would take to pay off the loan at the original payment, but if we wrote them a check for 7K today we would be done. Our home mortgage works the same way. If I pay 1500 and my payment is only 1000, since our loan is in it's first 2 years like $950 goes to interest, and $550 would go to principal. Our payment stub has the regular payment amount filled in and then we just indicate extra principal and add it all on 1 check. We haven't been making any extra payments on the house so I'm not 100% sure they wouldn't do some evil plan as you describe, but our loan paperwork says they won't. It states that any portion of our check beyond the standard payment will be applied to lowering the principal balance. When we get the car paid off and start making extra payments I will phone them and verify it works this way.

People that expect someone like a bank or mortgage broker to figure out how much they can afford to pay monthly for a house are financially children and should never have had the opportunity to get into that much trouble. However, they are legally adults, and as such, need to take responsibility for their actions, as has been stated. We can't really have a test to see if people are smart enough to buy a house, gun, vote (most dangerous), have children, etc. Once you start requiring tests, etc., the shiny happy people in charge will game the system again and screw it up worse, consolidating their power even more.

Oh, and Bill, you have to understand the bean counting angle to know why banks do that. Having an undergraduate degree in Business, the bean counting courses were good for this. As my first bean counting instructor (Bean Counting from Hell 203) said, "You are not all going to be accountants [bean counters], but I can guarantee you that at some point you will be sitting across the table from an accountant and you need to know how he thinks." Thus, looking at this from the bean counter's point of view, this is what is going on: You pay your $100 principal and interest, broken down as $95 interest (profit) and $5 principal. You add an additional $50 to your payment. Instead of applying that to the principal, which would lower next months and all future months' interest (profit), that $50 is declared as going towards future payments. One of my student loans (THANKS, TEXAS) does this as a matter of fact and states it plainly on the statements. (STUPID TAX, even I was not immune to doing stoopid things like going to school and taking out loans to pay for it. I plan on winning by dieing before they're paid for - Woo-hoo, screw the man!) Anyway, lets say you add $50 every month. After 2 months, that's $100, a whole payment you are ahead. Instead of dropping the principal so your next $100 regular payment might be $90 interest and $10 principal, lowering the bank's profit on their statement, what they've done is declare that extra $100 as a future payment of $95 interest and $5 principal, taking that bill and declaring the future profit in this period/quarter/year. That's even better than not getting the extra money, from their financial statement point of view, as it's all about the short term profits and you just boosted their profit for this period. You, on the other hand are just screwed.

The lesson is: Yeah, you should make extra principal payments to game the system. BUT, you MUST pay super-close attention to the principal balance the bank is reporting. If you pay $50 extra, look at the principal balance and make sure next month that the prinicpal went down $50 (extra) plus $5 (regular payment to principal). Even if you write a separate check, noting in the memo field: "PRINCIPAL ONLY, YOU WORTHLESS, THIEVING MOTHERberkeleyERS," still check the principal balance every month. You never know when they might make a convienent "mistake" and just apply it to future payments. With the internet and online banking, it is a lot easier today to keep an eye on these things.

Dr. Hess wrote: People that expect someone like a bank or mortgage broker to figure out how much they can afford to pay monthly for a house are financially children and should never have had the opportunity to get into that much trouble. However, they are legally adults, and as such, need to take responsibility for their actions, as has been stated.

As absurd as it sounds to most of us here, some people just don't understand money, it's value, and how the whole program works. Speaking with some of the people I work with, I'm astounded that they manage to buy homes, cars, and even pay bills.

Thanks Hess. It's going to the principal. They're just not happy about it. Boo-friggin-hoo.

My point is the bank doesn't have room to gripe either. They offered the terms for the loan. Supposedly they offered terms they could live with no matter the outcome. If they didn't take into account that this person may default then shame on them for "being bad capitalists." That's poor planning on their part.

example: If I loan a friend money I anticipate they'll never pay me back. It's a potential outcome. I don't loan money I can't live without. If they don't pay me back, I'm pissed. They most likely won't be a friend anymore. But I won't be put out as I don't loan money I need to keep my head above water.

The bank should operate in the same fashion. If they're offering loans in which they can't afford the risk...too bad if they end up on the wrong side of that risk. That applies doubly so to banks offering people terms that would be just this side of impossible to pay back in perfect times. Crap happens especially when you don't know your business partners that well. Don't get caught out.

I am in no way saying the bank is SOLELY responsible. I am saying they play a part which seems to be the road this conversation is taking anyway. They tried the same with my fiance and I when buying our current house. They offered us just enough rope to hang ourselves. We were smart and conservative shoppers. The bank should be smart and conservative as well. This loan being defaulted on is a byproduct of the bank's greed as well as this loan takers lack of foresight and/or buying savvy.

Wrong's all around.

AngryCorvair wrote:

Marty! The quicker picker-upper.... wrote: But why should I care about a bank that gave a $465,000 loan based on a credit score alone? She had no money down, no equity in the property, and no reason to follow through with the terms of the loan. Yet, the bank gave it to her anyway. Why? Because they were also greedy. They figured that if she defaulted that they would just sell the house for more than the loan amount seeing as property values were skyrocketing at the time of purchase. If the bank would have made a responsible loan than we wouldn't have to worry about bailing them out.

it's not about the bank and it's not about the loan and it's not about the credit score. it's about people making a commitment and then not having the character to honor their commitment. her signature is her "reason to follow through". she is a dishonorable person, teaching dishonorable traits to her children.

Round and round we go. Xceler8x: Would you be singing the same tune if the bank suddenly decided "We're not going to honor our end of the bargain. We know we said 6% fixed, but we're jacking up your interested rate to 18%. You don't like it? Get berkeleyed. We'll find someone else to buy your house?"

She signed an agreement that she didn't live up to. The bank lived up to their end of the bargain. She's 100% at fault.

Jensenman wrote: Trivia: if you write a set of terms on the back of a check and the payee cashes it, it's considered a legal and binding contract. I'm sure the legal eagles here on the board will jump up and down, but I have seen it work.

I use that little trick about once a year. I doubt anybody will jump up and down, they teach all of us that in the first year of law school.

OTOH, all contracts are "legal and binding." If something isn't "legal and binding," it isn't a contract.

billy3esq wrote:

Jensenman wrote: Trivia: if you write a set of terms on the back of a check and the payee cashes it, it's considered a legal and binding contract. I'm sure the legal eagles here on the board will jump up and down, but I have seen it work.

I use that little trick about once a year. I doubt anybody will jump up and down, they teach all of us that in the first year of law school. OTOH, all contracts are "legal and binding." If something isn't "legal and binding," it isn't a contract.

I dont like all that fancy lawyerin youre doin there billah, knock it off and talk like a normal 'murikin woudjya?

Where do you get the 1 point font, Billy?

Thanks for the lesson Hess.
I know that took a while to write and I did not want you to think it went out there without making an impact. I know that stuff, but it is always good to get some re-learning.
Ah, the power of the board. Helping learn real life skills!

Mad, Tyte JDM skilz, y0.

Dr. Hess wrote: Where do you get the 1 point font, Billy?

Fine tip on a decent quality pen.

You also learn to be brief. Don't tell my clients, but I really can say a lot with very few words.