Shout it from the Rooftops!

Last month, I paid off my Lending Club loan. This means I am debt free, minus my mortgage, (but that mortgage was the best purchase ever!) But when you can say the words debt free, you should shout it from the rooftops! You should do a happy dance; post it on social media; throw a party; even put a sign in your front yard if you want! I thought about putting a flag up. Wouldn’t that be something? Driving down the road and see a flag flying in someone’s yard that says “Debt free”? Now there are some that would say, “You’re not really debt free, you still have a mortgage”, but they are party poopers and they aren’t invited to my party. Currently I have a plan for that pesky mortgage too. I have a mortgage with a nice fixed rate, a very low payment and a bazillion years before I pay it off. It’s the standard, run of the mill, every American has one loan, but my mortgage company is awesome! I use Quicken loans and they rock! Some mortgage companies penalize you for paying your mortgage off faster, but not them. No sir! They want to help you help them get paid. They just started offering the bi-weekly payment plan, which if you know me, you know I love bi-weekly payments. That is how I paid off both of my vehicles early and saved tons on interest. So instead of paying 12 payments a year, you actually pay 26 half payments, which is like paying an extra payment a year. Quicken has this cool like amortization calculator where you can crunch your numbers and see how much interest you’ll save on your loan and how many years you knock off. So this is something I have learned playing with my numbers. Since I am use to living without my lending club loan payment, I can actually put it toward my mortgage. If I do that, I will pay my home off in ten years and save a little over $50,000 in interest. That’s amazing! My mom once told me to never give people real money. She said, you don’t know if you’ll still be living there in 30 years, so why give them any more on the loan than what you have to? Well, I’ve got to live somewhere, and how’s this for a kicker – if I pay my mortgage off in ten years and then I have to move in 11 years, I can sell my house and buy my next house with cash, or even get a bigger house with a HUGE down payment, like 50 or 80% down payment. So while my mom has a point with her advice, I like my idea better. It is true what they say, your world opens up without any debt. Or if “they” don’t say that, I said it and it’s true!

Where Were the Watchdogs?

it would have continued to be a sure thing except one thing, people stopped paying their mortgages

Economic crisis -Isn’t this the understatement of the century. Going from a time of economic boom to giving soup-kitchen hand-outs to big name business, the World’s economy hangs on a ledge of little hope. Where were the watchdogs when the American stock-market became its own worst enemy?

CNBC depicted it perfectly in its story, House of Cards,  when they showed that the governmental standards weren’t up to par to prevent a crisis such as this. At one time, not so long ago, the American housing market was at an all-time high, and everyone was cashing in. From Lebanese businessmen, to pizza delivery guys, everyone had a mortgage to sell, and everyone wanted a home.

Businesses such as the company Quick Loan Funding  and other Internet based banks were selling mortgages to unqualified buyers like candy. No qualifications or standards were required for these mortgages. As long as someone on wall street would buy these mortgages, they were selling and profiting. Quick Loan Funding was basically an infomercial, “As seen on TV” type mortgage company. People who bought these mortgages usually were refinancing with the low APR’s they were offering. A new beginning to the buyer, a quick cash scheme for the sellers.

There were other types of mortgages that were available such as “Interest Only” loans and ridiculous mortgages that allowed the buyer to pay a percentage of their payment, in some cases, raising their mortgage principals instead of decreasing them. Anything was game, and wall street bought into it all.

Wall Street also bought into the dreaded CDO’s. CDO’s were mortgage packages, so to speak, these were grouped mortgages, such as entire subdivisions, that complicatedly grouped together and sold to mostly European and Asian governments and municipalities to gain revenue for their area. They were told this was a solid, AAA investment. This was the problem.

Rating agencies, such as Standard and Poor, were to rate an investment as a AAA or a BBB. The AAA’s were less risky, solid investments and the BBB, of course, meant more risk. With everyone cashing in and putting pressure on these rating agencies essentially lowered the AAA standard. Possibly because, if other rating agencies were lowering their standards, and your agency did not, you lost business. Therefore, the greed of Wall Street drove them as well. 

This is why that the economy nearly world wide is poor. A big percentage of Wall Street investors are other countries. Investing in American businesses has almost always been a sure thing, and it would have continued to be a sure thing except one thing, people stopped paying their mortgages. These investments were based on the future revenue of mortgage payments and interests. That required that mortgages be paid to pay out on the investment. Americans began to refinance their homes, taking out home equity loans to pay off their credit cards, using the equity in their home as an ATM machine. Once they paid off their debts, they charged them all up again. The greed of the banks and wall street drove them to never say “enough is enough”. No one ever told the buyer you are over extending yourself. The banks were driven by the competition as well. If the banks said stop, the consumer took their business to another bank. After three mortgages and $50,000 dollars of credit kept families from eating, Americans just stopped paying, thus spiraling our economy into the mess it is now.

So where were the watchdogs during this? The voice of reason from our government stepping up and saying, “there must be better standards.” America’s government has committees and bureaus that watch these kinds of things and they turned a blind eye to it. Perhaps they were cashing in too. Greed was driving everyone all over the world, perhaps the pressure was too great to put a stop to it. Who knows. What is known is that now, when it is too late, they want to scoop in and try to dig us out of the cavern of debt by using spoons. It is not going to happen by handing out big bucks that WE DON”T HAVE to companies that just didn’t know what they were getting into, or the ones that just didn’t care.

So now we all sit and wait, watching the disaster unfold in front of our eyes and think there is nothing we can do to change it. The truth is, I haven’t the answer. All I can do is take care of what is mine. Pay my bills and my mortgage, and clip and save, and hold onto what is more precious than money. Perhaps if we all do the same, we will find a way out of this Economic crisis.