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joshnky
07-29-2008, 10:52 AM
http://news.yahoo.com/s/ap/20080728/ap_en_tv/tv_extreme_makeover_foreclosure

Saw this in the news and was thinking about the issue of debt with the TV thread. I always wondered how effective Extreme Home Makeover was given that they take a family in need with little and build them a half million dollar home (in the same run down neighborhood). Apparently this family still had financial trouble after the new home (shocking) and now are probably in even worse shape after borrowing 450K against the home that was given them.

There is much to be said about the virtues of earning it yourself as opposed to having it given to you. I think the scholarships and work-related training that this show sometimes gives are great but I have a feeling that the home makeover, while it looks great on TV, does not always end up being a blessing.

Ltlabner
07-29-2008, 11:02 AM
Apparently this family still had financial trouble after the new home (shocking) and now are probably in even worse shape after borrowing 450K against the home that was given them.

This is why I advise anyone who asks to never borrow against their home for anything short of a life-threatening emergency (unless it's to fund a project to actually *add* value to the home).

Borrowing against your home to pay off credit card debt is just a horrable idea. Not sure of the details of the family in question so I'm not really commenting about them specifically.

But whether it's borrowing against your home to pay off debt, or borrowing against a home that was gifted to you, unless and until you change the underlying bad habits that got you into hotwater, you are only delaying the inevitable.

Chip R
07-29-2008, 11:11 AM
Yeah, I read this. I can understand some of the bitterness people feel towards this family. They volunteered their effort and time to that house and the family ends up getting foreclosed on. But there were no preconditions on their volunteering. They did it because they wanted to help out. It doesn't make their help any less valid. They did a good thing and no matter what happens, they should be proud of themselves.

As for the family, I don't know all the details but it seems to me that a responsible bank wouldn't loan someone with their financial history that kind of money. It'd be one thing if they used that loan to buy a bunch of crap they didn't need. They used it to start a construction company and if it worked, they could be self-sufficient and all that good stuff. It just didn't work out. It's sad but lots of start-up companies don't work out.

IslandRed
07-29-2008, 11:21 AM
I read somewhere that EMHO has an "after-care" department, just to make sure that the new house doesn't leave the family worse off than it was before, what with increased property taxes, utility bills, maintenance etc. But there's not much they can do about something like that.

I saw the builder had raised money for scholarships for the kids. Hope that money was in something the parents couldn't raid.

registerthis
07-29-2008, 11:33 AM
"As for the family, I don't know all the details but it seems to me that a responsible bank wouldn't loan someone with their financial history that kind of money."

Ding-ding-ding.

Which does not in any way remove the "personal responsibility" that one has over his or her own financial affairs. If you can't be bothered to budget appropriately and educate yourself on the potential ramifications and consequences of your decision(s), then certainly you bear a significant portion of responsibility for what may come. In most circumstances, that is.

But these banks that doled out loans for individuals that were so out of proportion to said individual's financial status as to be laughable shoulder a significant portion of the burden as well. Case in point: a few years back, when the real estate industry was a bloated gold mine, I briefly considered buying a condo out here in DC and got pre-qualified for a mortgage. The amount I was pre-qualified for was mind-boggling, and I thought the loan officer surely must have been pulling my leg.

Fortunately, my better judgment prevailed and I elected not to pursue anything at that time. It's downright frightening to think of the dire straits my personal finances would be in had I elected to purchase a property for the amount I had been pre-qualified for. Lot's of dinners of Kraft Mac'n Cheese and Ramen noodles would be my guess...

Ltlabner
07-29-2008, 11:49 AM
Which does not in any way remove the "personal responsibility" that one has over his or her own financial affairs.

But these banks that doled out loans for individuals that were so out of proportion to said individual's financial status as to be laughable shoulder a significant portion of the burden as well.

I couldn't agree more.

It's pretty obvious I'm big on personal responsibility when it comes to finances, but the current "mortgage crisis" (hate that term) is equal parts people taking out dumb loans and banks making dumb loans.

As far as I'm concerned if you took out a loan you knew (or should have known) you couldn't afford I don't have much pitty when the sherrif is escorting you off the property. However, if you made a bunch of loans you knew the borrowers likely couldn't afford I don't have any pitty when the corporate earnings take a body blow. You make bad business decisions, you pay the price somewhere down the road.

Chip R
07-29-2008, 11:51 AM
"As for the family, I don't know all the details but it seems to me that a responsible bank wouldn't loan someone with their financial history that kind of money."

Ding-ding-ding.

Which does not in any way remove the "personal responsibility" that one has over his or her own financial affairs. If you can't be bothered to budget appropriately and educate yourself on the potential ramifications and consequences of your decision(s), then certainly you bear a significant portion of responsibility for what may come. In most circumstances, that is.



Oh, absolutely. Just because a bank is stupid enough to loan you money doesn't mean you have to spend it like a drunken sailor on shore leave.

I don't watch the show so I have no idea what this family is like but it seems to me that their intentions were honorable. They were trying to start a business and (hopefully) not trying to bilk anyone. In hindsight, perhaps what they should have done is sell the house and move into something worth about half of what their new house was worth. Although, I'm sure that the folks who run the show wouldn't have appreciated that too much.

Johnny Footstool
07-29-2008, 12:05 PM
A $450K house, plus $250K in the form of scholarships, a home maintenance fund, etc.

That's a lot of money wasted.

Chip R
07-29-2008, 12:11 PM
A $450K house, plus $250K in the form of scholarships, a home maintenance fund, etc.

That's a lot of money wasted.


Pocket change for the Mouse.

RichRed
07-29-2008, 12:52 PM
Case in point: a few years back, when the real estate industry was a bloated gold mine, I briefly considered buying a condo out here in DC and got pre-qualified for a mortgage. The amount I was pre-qualified for was mind-boggling, and I thought the loan officer surely must have been pulling my leg.

Fortunately, my better judgment prevailed and I elected not to pursue anything at that time. It's downright frightening to think of the dire straits my personal finances would be in had I elected to purchase a property for the amount I had been pre-qualified for. Lot's of dinners of Kraft Mac'n Cheese and Ramen noodles would be my guess...

When my wife and I were in the process of getting the loan for the house we bought, we were told we could've probably qualified for twice the purchase price of the house if we wanted to. We just looked at each other and shook our heads. We budgeted to within an inch of our lives so we knew exactly what we could comfortably afford and it sure as hell wasn't twice as much as what we paid for that house.

I think people thought that qualifying for a certain figure meant they could automatically afford that amount without actually doing the calculations on it for themselves. Foolish on their part and irresponsible on the banks' part.

Blimpie
07-29-2008, 01:24 PM
Yeah, I read this. I can understand some of the bitterness people feel towards this family. They volunteered their effort and time to that house and the family ends up getting foreclosed on. But there were no preconditions on their volunteering. They did it because they wanted to help out. It doesn't make their help any less valid. They did a good thing and no matter what happens, they should be proud of themselves.Exactly...and the same goes for Sears and the manufacturing suppliers who donated items to the home.

If there were any "conditions" issued by those companies, they probably all related to how their individual product logos or mentions of their companies would be staged throughout the television episode.

In my opinion, the shows demonstrate a calculated risk by all parties concerned.

Chip R
07-29-2008, 01:59 PM
Exactly...and the same goes for Sears and the manufacturing suppliers who donated items to the home.

If there were any "conditions" issued by those companies, they probably all related to how their individual product logos or mentions of their companies would be staged throughout the television episode.

In my opinion, the shows demonstrate a calculated risk by all parties concerned.


Exactly. I was mainly referring to the folks who volunteered to help build the new house.

Of course these companies didn't do this out of the goodness of their hearts. Maybe it was a bit of a feel-good moment for them but they were paying for advertising their products. It's over and done with and there's not a thing they can do about it.

Rojo
07-29-2008, 02:31 PM
I think people thought that qualifying for a certain figure meant they could automatically afford that amount without actually doing the calculations on it for themselves. Foolish on their part and irresponsible on the banks' part.

Sure. But if you believed that the rise in home prices, circa 2004-2007, was sustainable, then taking out a big loan for a big house isn't so stupid. Stupid is buying into the hype. And most people did.

I've got friends, intelligent people, who gave me all kinds of reasons why buying an overpriced house in those years was a good move, "Bay Area real estate is always a good investment", "a house is always going to be worth something" and the classic, "they're not making any more land".

How's that looking?

registerthis
07-29-2008, 02:34 PM
How's that looking?

Not good.

RichRed
07-29-2008, 02:59 PM
Sure. But if you believed that the rise in home prices, circa 2004-2007, was sustainable, then taking out a big loan for a big house isn't so stupid. Stupid is buying into the hype. And most people did.

I've got friends, intelligent people, who gave me all kinds of reasons why buying an overpriced house in those years was a good move, "Bay Area real estate is always a good investment", "a house is always going to be worth something" and the classic, "they're not making any more land".

How's that looking?

Don't forget, "Buy now or be priced out forever!"

Rojo
07-29-2008, 05:35 PM
Don't forget, "Buy now or be priced out forever!"


Warren Buffett, "get scared when everyone is greedy, get greedy when everyone is scared."

oneupper
07-29-2008, 06:38 PM
Warren Buffett, "get scared when everyone is greedy, get greedy when everyone is scared."

The wild speculation that was going on the past few years made it really tough for those of us who were just looking for a house (home).

I bought my house in early 2005, KNOWING I was overpaying. It was either an expensive house or NO house. Wife, kids and pets want a place that is THEIRS. There was no waiting option (and heck...we'd still be waiting).

I had enough foresight to get a good fixed rate mortgage, and hedge the price indirectly (short on Long Bond futures and selected homebuilders), so the hit has not been that bad. Plus there are the homeowners tax incentives.

But I work this stuff for a living, you can't expect everyone out there to have that kind of financial acumen.

Moreover, while there was greed, there was a LOT of misinformation and deception going on. Mortgage Brokers doing bait and switches right before closing, just as an example.

While the guys in the show got their house for free, and lost it stupidly, I can't help thinking of a lot of good folks who are losing theirs. I can't write them all off as greedy.

To top it all off, another group of good folks are losing or going to lose their jobs as this mess plays out while possibly oblivious to the whole thing.

Sorry for the rant, mods...if it's too political, remember I can't vote (yet).

BCubb2003
07-29-2008, 06:51 PM
Warren Buffett, "get scared when everyone is greedy, get greedy when everyone is scared."

In other words, Moneyball.

Ltlabner
07-29-2008, 11:34 PM
Moreover, while there was greed, there was a LOT of misinformation and deception going on. Mortgage Brokers doing bait and switches right before closing, just as an example.

Yep. Bought our current home in 2004 taking advantage of a foreclosed property that wasn't beat to death.

Two days before closing the broker say the rate will be almost 2 points higher. She thought she had us over a barrel because the implied pressure of "losing our dream home". Simply told her to give us the old rate or we would walk.

To cover myself on the back-end (and give the broker some incentive), I tracked down her boss in Columbus and let him know of my displeasure.

About two hours later I got a tearfull call from the broker saying we had our old rate.

Funny thing is, even though the broker tried to pull a fast one, at no point was their a gun to my head to sign a deal I (a) didn't understand or (b) couldn't afford. The word "no" can be so powerfull.

wolfboy
07-30-2008, 09:52 AM
Yep. Bought our current home in 2004 taking advantage of a foreclosed property that wasn't beat to death.

Two days before closing the broker say the rate will be almost 2 points higher. She thought she had us over a barrel because the implied pressure of "losing our dream home". Simply told her to give us the old rate or we would walk.

To cover myself on the back-end (and give the broker some incentive), I tracked down her boss in Columbus and let him know of my displeasure.

About two hours later I got a tearfull call from the broker saying we had our old rate.

Funny thing is, even though the broker tried to pull a fast one, at no point was their a gun to my head to sign a deal I (a) didn't understand or (b) couldn't afford. The word "no" can be so powerfull.

There are a good number of people in prison for their activities in subprime lending. I hope you understand that they aren't there for trying to give a higher rate a few days before the closing. The mortgage bubble was littered with fraud. Trust me on this. I saw a heck of a lot of it in my previous job.

jmcclain19
08-01-2008, 05:24 AM
Maybe this might be the beginning of being able to pull down the facade that is Extreme Makeover Home Edition.

How about instead of giving one family a $500-750k custom mansion loaded to the gills with top of the line perks they spread that money around communities a little more. But that doesn't make quite as good a show.

As an extra note of bitterness, my three year old home was built by a builder who's been on the show 3 times. I'm reminded of that because it's everywhere, on their literature, on their website, on their letters...and so on.

On the show - the builder is treated with god like reverence because they took time out to build one house. Yet I live in a community riddled with problems due to that same builders malfeasance. Their flippant attitude towards the issues my neighbors face simply adds gasoline to the fire (the actual fires of which there have been several).

But hey - they did get good pub from ABC - so they have that going for them. Which is nice.

IslandRed
08-01-2008, 10:33 AM
Maybe this might be the beginning of being able to pull down the facade that is Extreme Makeover Home Edition.

How about instead of giving one family a $500-750k custom mansion loaded to the gills with top of the line perks they spread that money around communities a little more. But that doesn't make quite as good a show.

Yeah. They should put on a worse TV show, get cancelled, then no one gets anything. That would be much better. :p:

minus5
08-01-2008, 10:53 AM
Yeah. They should put on a worse TV show
Impossible:cool:

wolfboy
08-01-2008, 02:56 PM
Impossible:cool:

Yes. For the most part, it's all on an equal plane of bad.

oneupper
08-02-2008, 08:58 AM
How about instead of giving one family a $500-750k custom mansion loaded to the gills with top of the line perks they spread that money around communities a little more. But that doesn't make quite as good a show.



Financially, it's a game show. The difference is that the network gets to pick the winner and said winner is usually picked for being a huge loser (for whatever reason, many times not their own fault).

I'm surprised there aren't more of these cases.

Ltlabner
08-02-2008, 09:01 AM
There are a good number of people in prison for their activities in subprime lending. I hope you understand that they aren't there for trying to give a higher rate a few days before the closing. The mortgage bubble was littered with fraud. Trust me on this. I saw a heck of a lot of it in my previous job.

Obviously there was fraud and bad business decisions being made left and right.

Just seems that people are more willing to blame the "big bad evil corporations" and completley absolve the people who made horrifically bad decisions.

There is blame on both sides of the so called "mortgage crisis".

VR
08-02-2008, 12:48 PM
A $450K house, plus $250K in the form of scholarships, a home maintenance fund, etc.

That's a lot of money wasted.

That's nearly impossible to blow. What am I missing here? If the family stayed at the Ritz Carlton every night for the last 3 years, it would barely by 500K.