AskDong

Yesterday, I received yet another inquiry from a certain wealthy individual seeking help with “a large sum of money”, $28.5 million to be exact. I’m not sure who they think they’re tricking with these emails, but I certainly don’t plan on being one of them. Normally I wouldn’t think too much of the email, but I was astounded by the lack of guile in the email.

Normally these emails are from some individual in Africa, Asia or Eastern Europe. The story of hardship and bureaucracy sound on the fringe of plausible. The email yesterday was from gentleman in the Netherlands. The Dutch have not been know for their oppressive and imperialistic ways in centuries. Sure, there is currently some ethnic strife between what has been of the more liberal European populations of the past century and recent Muslim immigrants. These conflict however are pale in comparison to the tales of corruption that are rampant in other parts of the world. I would not expect a Dutch citizen to require the help of an individual like myself to get at money that is legally his.

Regardless of the exact tale. It’s not important since it’s not true anyways. What really shocked me was the moniker this is supposed millionaire went under, Joe Smith. I mean can you get any more fake than that?

Walter Updegreave got what I thought was interesting question from a reader about buying a 1st home in Silicon Valley. The reader is 27 year old guy living at home who’s managed to put 80,000 into CDs and Money Market Funds. 80,000 would be plenty for downpayment on a very nice home in many parts of the country. Silicon Valley is not one of these places. Personally, I didn’t care much for Walter’s suggestion to the guy. He basically suggested that the poor guy should move. Relocation should be a consideration, but I strongly believe that finances should not be the primary driver in deciding where one lives. So what should someone who lives in one of these sky high markets do?

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I have a relatively small set of blogs I link to, and I’m looking to add to the list. The blogs I’ve included I think are useful and well written, and am looking for more well written and useful blogs in the personal finance space. If you’re interested in exchanging links please contact me, and I will review your site and hopefully we’ll make an exchange of links. Though, it’s not like I’m in any place to make demands with my humble limited release blog.  So if you’re interested just contact me via the contact form.

I reserve the right to archive links as blogs become stale. A blog that does not care to update itself is not a blog I care to actively associate myself with.

I have great sympathy for borrowers and some sympathy for the ultimate lenders.  Who I don’t have sympathy for are the agents and underwriters who peddled these wares.   I don’t know exactly what the demographics of subprime borrowers are, but I don’t think I’d be going out on limb by speculating that sub-prime borrowers would tend to be lower income, and less educated (often underpriviliged minorities I imagine as well).   By definition subprime borrowers can document less income, and have poor credit history.    Sure there are too many “rich” people spending too much money as well, but at least they have the income on paper.  Mortgage applications question your debt obligations but not one’s spending habit.
I firmly believe that borrowers in the past couple years have been sweet talked by both real estate agents and mortgage lenders to buy more house than they can really afford.   It was only a matter of time they would be drowning in home equity.   Can’t afford that house on fixed rate – no problem take interest only ARM with a low teaser rate – just refinance later.    Many in the media have placed blamed on the mortgage options available.   While the exotic mortgages resetting higher rates contribute to the problem, it’s really the people selling the mortgages.  The mortgage agent who gives me my loan today doesn’t care if I can pay my mortgage in two years nor does the agent who sells me a house as long as I can get the mortgage to pay for it today.   Both of them make their money NOW.   I don’t believe mortgage agents are looking to screw people over, but if they themselves bear none of the risk… It’s near classic moral hazard/principal agent problem.   I don’t know exactly how the compensation is structured for mortgage agents and underwriters, but ideally their compensation should be tied to how well they vet their clients.   If their clients default, they should somehow have financial repercussions.  Obviously, there are economic situations that are outside the personal control of a mortgage underwriter, but a homeowner defaulting on 2 year ARM after the teaser rate expires because rates are higher is not one of those situations.   A short term ARM is ideally intended for someone who is planning on selling quickly, and does need the guarantee of a fixed rate.   A financially savvy flipper would be good candidate, not a single mother barely scraping by as is.
Full Disclosure:  I own AHM which is a Mortgage REIT that has taken a beating in the stock market with the sub-prime debacle.  They are primarily a prime lender, though they have a fair amount of option ARMs. 

A reader asks: 

How come there isn’t a Category for “Love” or “Dating”. Some people would like to get laid more than once per year (current rate)? Sure I want more Benjamins in my wallet, but I would also like the opportunity to potentially get my [edited for content]….

It true when I first established this blog almost a year ago, I intended to answer questions on relationships as well.  Given that there wasn’t much demand for either, I decided to focus on Finances since clearly that was the more intersting subject.   It’s not like anyone wants to talk about love and sex.   However,  I will still unofficially answer question regarding to relationships.

 Dear gentle reader:

I would make the argument that putting benjamins in your wallet in the long run will also serve to your other needs.   I don’t mean to say that you should be paying for services - that takes benjamins out of your wallet.   Nor do I think women are gold diggers.   Some are as are some men.  But I do believe that women will gravitate to men who have their #$% together, and even if you don’t - having more benjamins in your wallet will at least create the illusion of that.

 -Dong