Bundling–a preditory practice/ What is success?

Want to know what is wrong with our economy?  The first thing that you need to look at is the preditory practice of bundling that the banks and mortgage companies are using.  Stop that and we will be well on our way to fixing things.

Bundling needs to be made illegal.  All it does is hide the obvious–that banks have made major mistakes in lending to the wrong people by creating these crazy new mortgage schemes that get people into houses when when they can’t possibly meet nor sustain the terms of the contract– take for instance the variable interest rates–  When the rates are low, it is great for the home owner.  Not so good for the bank.  However, let the rates start climbing and what happens?  The people can’t make their payment.  Their income does not rise to meet the interest rate increases.  The result– Default……..

Then there is the scheme that includes a balloon payment.  This is a real scary one.  When you accept this mortgage  type it seems real simple.  You pay a rather large payment over — say– 14 years.  This part of a loan benefits the banks because normally with the the first half of a normal 30 year contract not much is paid on the principal.  The bank receives the most of its money during this time in the form of interest.   You see, the balloon payment is down the road.  You don’t have to worry about it for a while.  You figure that you’ll be able to get your ailing credit fixed in 14 years and–be able to refinance it long before the balloon payment is due.  This is not a 30 year mortgage.  It is not even a 15 year mortgage.  This is — you pay and pay and pay and bet that you can refinance in time.  Of course, a lot can change in 14 years– as we have seen with the economy the way it is now.

We have a balloon type mortgage.  In fact, we have about 4 years before the deadline is up and we will still owe $79,000.00 on our home.   We have never missed a payment….never!  However, with the economy the way it is we have no guarantee that we will be able to refinance it in time.  If we don’t, we will lose it.

Now, here comes the bundling part.   My mortgage and the mortgages of many others who have never missed a payment will be bundled together and sold in bulk to another bank.  However, included in that bundle will be many home owners who are not so consistent at making their payments.  There will be so many bundled contracts that it will almost be impossible to sort through them to really see what is being bought.  This is good for the bank that is selling the contracts, not so good for the buyer.  These bundles are sold many times during the length of a homeowners contract.  Our mortgage holder has changed hands so many times I can’t possibly keep track of it.

Each time our mortgage is sold we receive a letter.  It has taken us years to get the error that was originally made on our contract, (a wrong address), fixed.  It has taken us years of calling and explaining and demanding that it be fixed.  All we know is we have been making payments on an house at an address that doesn’t exist.  I think we finally got it fixed–but who knows.

If you really want to upset the apple cart just ask for a copy of your original note.  The notes have been passed on endlessly and archived and no one really knows where the original note is.  So, ask the mortgage company for it.  It will take them four to six months to produce it–if they can find it at all.  If your are in foreclosure, this could be time you need.

So, in four years I will know if we were able to refinance.  If not, well, we will be walking out and relocating.  We have dealt with this.  I have been angry.  I have cried.  I have ranted.  I have raved.  I have gone through all the emotions there are.  If worse comes to worse, I will deal with it.  I have a plan B.  We move back west where we have always wanted to be anyway.   I have dealt with the worse case scenario and put it behind.  Having a plan B is really good!  Oh, and we could always sell the house, if it weren’t for this tragic economy.  Not a likely solution these days.

What does make me mad is the banking bail out! They created this mess for themselves and now they want us all to bail them out.  I don’t think so.  Of course our government has just put us all in debt for probably eternity.   But they haven’t addressed the bundling and the crazy mortgage schemes that got us here.

Where are the new laws against this sort of thing?  Throwing money at it won’t help if they just keep doing the same thing over and over again. First we have to stop them from victimizing us again.

So, here is my personal words of wisdoms for those having to leave their homes and start over.

1. It really isn’t starting over.  If you have learned from this, you are never starting over.

2. Remember the old guidelines for purchasing a home– Only spend 25% of your disposable income on housing. We have gotten too used to living high on the hog.  Our parents and grandparents knew the truth.  What good is it, having an expensive house that you can’t afford to furnish?  Oh, and here’s another good one.  If you can’t afford to enjoy your life because you have such a high mortgage, what’s the sense? Living within those 4 walls and being miserable, bored and worried all the time because you are carrying too much debt load…what were you thinking?

3.  Never purchase a home that takes two incomes to sustain. What if something happens to the other person’s income?  What if someone becomes sick or injured?  What is your spouse is killed in a car accident?  What if the other person loses their job?

4.  Keeping up with the Jones– Who are they really? Did you know that most people are only a paycheck away from bankruptcy?  The Jones’ may look like they have it made, but if you were to look at their real finances, you would find them in debt right up to their eyeballs.  That is not wealth.  That is a ball and chain around their neck.   And, if keeping up with the Jones’ is also taking on their debt load and their worries and stress, well, why would you want to do that?

5.  Plan for the future — Savings, emergency preparedness, food storage– Alwasy have a Plan B.  Have a goal for financial independence.  Plan for it.  Work for it.  Ask yourself this question every time you want something.  Will purchasing this item get me further towards my goal of financial independence?  Do I really need this or do I just want it?  What will the the benefits of purchasing this item be?

6.  What hole are you trying to fill by buying things? Does having things create happiness?   Or are you trying to medicate yourself with things?  Perhaps you need to do some sole searching to find out why you have this need to collect things.  I am choosing to simplify my life.  Things take up space and cost to maintain.  Having a horse is nice.  I used to have horses when I was a kid.  However, it takes space to maintain it.  It costs money to purchase or rent a space.  It cost money to feed and care fore the horse.  It also takes time to do this.  Is it realistic to have a horse?  Does it really fall into your lifestyle?  How often will you be able to enjoy it?  Will it stand around in a pasture or stable or will he actually get ridden?  Animals, especially large ones, can become a money pit just as much as a boat or a vacation home or an RV.  So, before you make these major purchases, sit down with the family and go over everyone’s needs, wants, and responsibilities before you dive in.  It could just be that while it sounds nice in the beginning, it becomes a real negative soon after.  Make sure that it is intricate to enhancing your lifestyle, not just stroking your ego. And, if it becomes a negative, opt out of it as quickly as you can before it sucks you dry.

7.  Your home  can be a reflection of your personality without costing an arm and a leg. I was walking through the new IKEA that just opened in Charlotte.  A walk through that store  puts everything in perspective.  They can create an entire home in a few square feet of showroom space.  It is not the size of the home, it is what you do with it.   One of the things we do is create outdoor living space.  It gives us more room without the expense of having to have a larger home.  Another thing we are now doing is downscaling the size of our furniture and fixtures.  IKEA has a bathroom sink unit that is half the depth of a normal sink unit.  Not only is it half the depth, it has a shallower foot print.  The sink is not deep like a normal bathroom sink.  It is shallow and allows the vanity stand it sits on to have drawers, not cupboards.  I like this because everything that used to sit on the sink and around the sink can now go in the drawers.  The area under the sink was simply wasted space, as far as I was concerned.  Now, these new sinks actually improve our living rather than just take up space.   Why is this important?  Decorating for function as well as design if one of the most valuable things we can do.  When I first bought my furniture bigger was better.  Large leather sofa, a large leather love seat, large coffee table, large…….  Now, we realize that it has really handicapped us.  Smaller furniture allows us to arrange things in a much more asthetic and functional way and doesn’t detract from the beauty.  Bigger is not always better.

Let’s go back to the bathroom sink.  We have limited space in our master bath and we don’t have the money to add.  Using sinks units that have a smaller foot print gives us the extra space we need so we don’t feel so cramped.  We can take out the huge linen closet that takes up so much space and allows us a corner to put a chair for reading.  It creates a spa look without having to increase the size.   It also gives us enough additional space we can purchase a different tub that fits our needs.    Ultimately, we will be much happier and have more space without the cost of adding on.

In our master bedroom– the space is pretty cramped.  However, we are going to take one of the windows out and put in a door and build a deck where we can put a hot tub that is just outside our bedroom.  We gain more living space without building a whole new room.  We are also going to go with storage units on the walls and built in units around the flat screen TV.  Storage solution solved in the same space.

So, the status quo can be holding you back and making your life miserable.  You can have just as much enjoyment in a smaller home than a big one without the cost of maintence and expense of higher utilities.  Be creative and really look at how you live.  Create a space that enhances your life, not adds more stress to it.  If you have the oppertunity, walk through an IKEA store.  It will open your eyes to new and innovative options.

Well,  I hope I have given you a lot to think about.  Having to downsize is not a bad thing.  It teaches us to live with less and be happier.  So, if you find yourself having to leave that large monstrosity and move into something smaller, don’t fret.  This could be just what you need to kick-start a new and more meaningful lifestyle.  It’s all in how you look at it.  And, smaller doesn’t have to be a reflection of your success.  It can be a reflection of someone who is secure in themselves and doesn’t have to have their ego stroked all the time to be OK.  Success is not how others perceive you. It is how happy and content you are in the lifestyle you have chosen for yourself, no matter what that is.  Success is relaxing and peaceful and does not have to cause tension and worry.  So live successfully and tell the Jones’ to take a hike!  If people judge you by what you have, they need your help!  Because you are OK!

Chris

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~ by womenstudycenter on February 19, 2009.

One Response to “Bundling–a preditory practice/ What is success?”

  1. First blog I read after wakeup from sleep today!

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