SellyCat said:
I fundamentally disagree with your approach to this subject.
Like, on a very basic level.
Is it because people will lose there homes?
I want to assure you that I do have a very strong emotional response to this, I just don't think that emotions should decide most things as they cloud judgment Basing my response purely on emotions I think its terrible to ever take someones home away from them. In fact I think I could pose a very strong argument as to why society is better of insuring that everyone remains in there home. I think anyone who advertises anything that might threaten to take a persons home from them should be brought to trial if anyone is a victim of these actions.
Emotions make most decisions seem like a cakewalk, everyone feels this way. However basing real decisions on emotion rather than logic creates policies that are simply abused.
When these people made decisions to purchase homes they likely got caught up in the emotion. I know of plenty of people who bought homes with %5 down and with jobs that made the mortgage payments greater than %50 of there monthly income. They fell in love with the home and enjoyed the pride of claiming to be a home owner. In many of these cases when final costs came up and property taxes went up and condo fees went up they found that there monthly costs with utilities were closer to %90 of income. If they had ignored the person trying to sell them a condo, and ignored the media telling them to buy a condo and ignored the person trying to sell them the mortgage they would have looked into what I did. Your much better off saving %20 in RRSP's having much lower closing costs and picking a place that is for sale in distress even if it isn't exactly what you pictured.
When you walk into a bank or a mortgage broker you have to understand that although they want to give you money its to make money off of you and there are several ways for them to make more. The less down payment you have the worse off you are, the less capital in the home the worse off you are, the slower at which you repay the capital the worse off you are. If your getting a great deal and your not starting with capital or paying down capital you shouldn't be purchasing a home.
By coddling and protecting people from making dumb decisions we are doing the opposite of what I believe we should do. I say open the flood gates to all forms of stupid advertising of every form possible. Within 5 years no human being will believe a word of it anymore anyway and it would cease to have any grip upon us. By legislating it peace by peace by peace we are facing a never ending battle that will eventually cross the boundaries of sanity. And in both cases inevitably it will end up in court or it will end up costing homes or it will end up costing lives.
In the case of people over extending themselves and not having coverage to pay there mortgage they are going to lose homes. It may be for no direct fault of there own, it may be for the stupidest negligence on there part or worse yet because they are a victim of others. To lose your home because you lost a job and a spouse lost a business is horrific. At the most basic level we have to accept that part of any loan with collateral allows foreclosure on the collateral if you don't pay. Without this no bank is going to lend money to anyone for a mortgage.
People will also buy a home and make a choice to leave the city they live in, our get divorced and be forced to sell to settle assets especially in cases with large legal bills. Life is a gamble and sometimes you go down in a pit of flames for making a bad choice sometimes you rise.
Meanwhile, the interest-only, adjustable rate mortgage on the family’s two-bedroom duplex swelled from $750 to $1,550
These people were foolish and should never have paid 750 a month for a 2 bedroom home without paying down any principle. Its pretty obviously the same as renting your own home from a mortgage company with the rental rate directly tied to the interest rate. This is the clearest sucker bet on the market and it doesn't take shit all to see why.
If we have to protect people from making this sort of arrangement its going to be damn near impossible. If the people stop paying for 12 months I can see no other option but to force them out liquidate the asset in a timely fashion and return whatever portion of it that is theres to them. If there capital in the home is 100,000 and the mortgage value plus missed payments is 210,000 and the sale price is 260,000 they should receive 50,000 having lost out on the deal. Thats the very basic concept behind borrowing money and mortgages. An interest only mortgage being the easiest one to understand out there is always a sucker bet.
As well housing bubbles do collapse and people really do lose real money and it really does make life hell for them. This is a fact of life and a reason why you should use caution in your decisions and not always listen to others.