Maybe Subprime Loans Aren't Pure Evil
For the past few months, barely a day has gone by without some newspaper or politician (or blog!) trumpeting the evils of sub-prime mortgages. The case is simple: Predatory lenders foist a complicated new kind of mortgage on a poor, unsuspecting victim which leads to foreclosure two or three years later when the rate ratchets…
For the past few months, barely a day has gone by without some newspaper or politician (or blog!) trumpeting the evils of sub-prime mortgages. The case is simple: Predatory lenders foist a complicated new kind of mortgage on a poor, unsuspecting victim which leads to foreclosure two or three years later when the rate ratchets up. An article in today’s New York Times, however, provides an interesting counterpoint to the hysteria. The article cites a new study conducted by Kristopher Gerardi and Paul S. Willen of the Federal Reserve Bank of Boston and Harvey Rosen of Princeton called Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market which makes the case that the enormous creativity in the mortgage market since 1970 has, on balance, been very favorable. As Professor Rosen explains, just because one is poor doesn’t mean you won’t make rational use of more creative mortgage products:
Our findings suggest that people make sensible housing decisions in that the size of house they buy today relates to their future income, not just their current income and that the innovations in mortgages over 30 years gave many people the opportunity to own a home that they would not have otherwise had, just because they didn’t have enough assets in the bank at the moment they needed the house.
Rosen also points out that clamping down on the newer mortgage products may end up hurting the very people everyone thinks they’re trying to protect.
‘Irresponsible’ Mortgages Have Opened Doors to Many [NY Times]
not sure why the need for all the nasty comments once again. i’m telling you my closing costs were 3,000. tops. i think i’d know. just bought the place in november. 30 year mortgage through citibank.
maybe they are more on a condo vs a co-op.
your ridiculous insults do not make me any less happy with buying a place in brooklyn.
and i’m not in the real estate or financing profession. i’m a musician. so i’ll leave it to you all to fight out the numbers. now i know why i prefer to have friends who don’t work in your professions.
assholes.
Can somebody PLEASE tell me where they are offering the $3K mortgage closings? I mean REALLY…. Don’t hold out!!!!!
Anon @2:12 I am glad that your housing decisions are based on the psycological factors; because clearly you dont know anything about real estate or financing. New York City has 2.175% mortgage recording tax which would be over $14,000 alone, then you are going to have Bank fees, attorney fees, title searches etc…
And the downpayment isnt = 20% of the mortgage its 20% of the purchase price.
Here are 2 Brownstones for less that $720. They do exist. So it’s not such a stretch
http://corcoran.com/property/listing.aspx?Region=NYC&ListingID=948512
http://corcoran.com/property/listing.aspx?Region=NYC&ListingID=934433
i love all these absurd math calculations. 20% of 650K is 130K. not 165.
and closing costs will not be 25K. my closing costs were about 3,000. granted half the price we are speaking of but still…you do the math.
and the whole renting vs. buying thing is not so easy to sum up in these calculations. i just recently in the past year have bought my first apartment and the level of satisfaction involved for some people that ownership provides is not able to be calculated.
to know that in a city with such limited space, to know that you own a little piece in which you are able to do what you want and not be at the mercy of the many greedy and inadequate landlords in the city, in my opinion far outweigh anything i’ve ever experienced renting a property.
sure, i know we’re talking about the money part of it, but not everyone looks at buying a home as trying to win the lottery. i look at it as my own tiny slice if heaven in what i consider the best city to possibly own in.
not to mention a relative deal compared with other cities of new york’s stature.
Newstoner – I agree that it all depends I was simply referring to your comment @ 11:07 above:
“So, in today’s low interest rate environment, you’ll be hard pressed to find an apartment that makes more sense to rent, than a comparable co-op,condo, or brownstone w/ tenants of the same size.”
I will leave out the Brownstone w/ tenants senario because introduces too many variables but otherwise I believe this comment is generally wrong. In today’s high price enviroment you’d be hard pressed to find an apartment where it wouldnt make more financial sense to rent a comparable apartment.
brownstone? for 650? right.
you know for a fact you can make 25%? fantastic! go ahead and buy anything you’d like! also, enjoy your powers of flight, invisibility and time travel! you are one awesome hedge fund manager!
For what it’s worth, I got a good deal on a studio apartment in Clinton Hill a few years back and am paying $800 a month for maint and mortgage. If you can find a good deal on a place and if you can secure a good rate (I got 4.75%!), it’s a no-brainer to buy.