Have you ever borrowed money to pay off a creditor? If you have, you have participated in a debt Ponzi scheme. Do you manage your finances that way all the time? If so, you are a Ponzi.
Irvine Home Address … 453 EAST YALE Loop #34 Irvine, CA 92614
Resale Home Price …… $634,900
Head like a hole.
Black as your soul.
I'd rather die than give you control.
Bow down before the one you serve.
You're going to get what you deserve.
Nine Inch Nails — Head Like A Hole
Borrowers bow down before their lenders. Borrowers give up control of their own lives when they take on debt as their time and effort go toward paying for the past rather than investing for the future. Borrowing is a weakness, a crushing weight, a debilitating pile of paper detailing a life of servitude in exchange for a borrower's entitlements.
Of course, most borrowers don't see it that way. They feel powerful. Borrowers believe they are rich because someone was willing to loan them money. The more money people borrow, the stronger they feel and the weaker they get. Ponzi Schemes of debt are the highest form of borrower sophistication and financial management. These structures take borrowers to the heights of borrower power and the depths of borrower weakness.
What is a Ponzi Scheme?
The first Ponzi Scheme was the brainchild of Charles Ponzi from whom we get the name. From Wikipedia:
A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.
The term "Ponzi scheme" is a widely known description of any scam that pays early investors returns from the investments of later investors. He promised clients a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage. Ponzi was probably inspired by the scheme of William F. Miller, a Brooklyn bookkeeper who in 1899 used the same scheme to take in $1 million.
Ponzi Schemes remind us that greed is not good and that unfettered capitalism leads not to unlimited prosperity but to the creation of dangerous paper tigers.
Ponzi Schemes of debt
A Ponzi Scheme is any investment where the returns come not from the investment but from the capital contributions of new investors. If you change the terms slightly, a Ponzi Scheme is also any debt where the payment of debt comes not from wage income but from borrowed money from new lenders.
The Ponzi Scheme embedded in the housing bubble was relatively easy to spot from a lending perspective if lenders had bothered to look. Serial refinancing is a clear sign a borrower has gone Ponzi. A prudent lender would not extend credit to a borrower who increases their debt every year. That is an implosion waiting to happen. However, during the housing bubble, lenders did not care. They thought the risk was passed to someone else, so they turned a blind eye to the obvious and gave out free money.
Even now lenders seek to enable Ponzi borrowing. Lenders try to bring borrowers to a boiling point where the borrower is churned with fees and drained with interest. Borrowers learn to tread water in this boiling froth partially submerged for their entire working lives. It is hell on earth, in my opinion.
Going Ponzi often happens in stages. Ponzi is a slow seducer offering tempting pleasures; the devil in disguise. Each step into the trap of Ponzi offers rewards, but like the La Brea tar pits attracted predators to trapped prey, Ponzi puts a death grip on all who enter.
My revulsion toward debt comes from personal experience. I know the evils of debt first-hand.
I remember my first introduction to Ponzi. A brash young man in my real estate development program in college was a born entrepreneur. He mowed lawns for an entire summer to pay for an option contract on a piece of land for a small deal. He was the one who first suggested to me that I take the cash-advance checks from one credit card to pay another. I was floored. I was in my mid 20s, and it didn't occur to me that I could do that. Since it came from an guy I perceived to be a finance genius, I thought it was a great and sophisticated financial management tool. But I didn't jump in right away.
I remember my first taste of Ponzi. I was finishing my education when I embarked on a doomed entrepreneurial adventure. There was a six-month period where I was working many hours without pay as entrepreneurs do, and I didn't work enough paying hours to cover my costs. When I considered my dilemma, the correct decision was to work more paying hours, but the decision I made was to go Ponzi.
I remember my first comfort of Ponzi. That first month after going Ponzi, my stress level dropped significantly. I suddenly had all the money I needed to focus my efforts on starting a new business. Hell, I quit that stupid job at the computer lab. I had thousands of dollars before I reached my credit limit, and I wasn't falling behind that quickly; besides, I was going to be rich soon. I was very peaceful.
I remember my first feeling of the sophistication of Ponzi. After a few months of juggling credit card bills, I came across the advanced technique of low-interest balance transfers. Since I was now accumulating and storing debt like I used to accumulate and store savings, I needed some new tools. Storing my debt on low-interest credit cards seemed like wise financial management. It was wise. I was a genius. I was as sophisticated as those cool people on TV who pull out their American Dumbass cards.
I remember my first worry about Ponzi. As the pile of debt grew, I began to feel the weight of Ponzi. When I first saw the event horizon of the abyss — the credit limit — a small twinge of regret and worry signaled my upcoming doom. It was a minor worry — easy to ignore. A quick glance at the remaining credit limits on the six other credit cards showed me I had nothing to worry about.
I remember feeling pwned by Ponzi. For many years, I learned to dance with Ponzi. My debt service was a manageable amount of my income, but it was a significant percentage that needed to go out each month. What made matters worse, there wasn't much room in the budget to pay off the debt in a reasonable timeframe — or so I thought. I really didn't want to give up my entitlements. Since paying off Ponzi seemed hopeless and painful, like many others, I chose to dance in the debt meat grinder.
I remember choosing not to live Ponzi. At some level, I knew I was carrying a crushing weight, but denial prevented me from doing anything about it. A small voice inside of me cried out, "enough." I set my intention on purging Ponzi debt from my life. The decisions that followed both big and small were guided by my intention, and they lead me to a life without Ponzi debt.
I remember the freedom releasing Ponzi. I wish I had a great story of personal sacrifice, but I don't. I received outside help, and thanks to the housing bubble, I found good paying work that enabled me to pay off a few remaining debts. Fortunately, I was disciplined enough from my fear of Ponzi to stop using credit at all. It is a healthy fear I carry with me to this day. Once I had purged Ponzi debt from my life, I freed up all of my income. I was losing no energy to the past. It is a wonderful feeling of freedom I enjoy to this day.
The Ponzi limit
Debts are supposed to be paid off. People forget that simple fact and take on debt as if it is something to be endlessly serviced. Those that embrace the debt-service mentality try to surf on the edge of the abyss.
Treading financial water occurs is when the amount a borrower pays toward principal on debt is matched by taking on new debt. When the amount of new debt exceeds the amount debt was paid down, particularly if debt was used to pay debt, the borrower is Ponzi borrowing. There is a point beyond which a borrower cannot pay down debts without continued borrowing, a point where the debt service exceeds the ability to income to support it. This is the dilemma of insolvency, and the brink of insolvency is the Ponzi limit.
Unfortunately, the Ponzi limit is fluid. Many borrowers creep up on the Ponzi limit without knowing it. Lenders often extend credit to borrowers beyond their ability to service it putting the sum of all credit lines beyond the Ponzi limit. Once borrowers cross this unseen threshold, lenders begin to raise the borrower's interest rates and force them to Ponzi borrow in order to make ends meet. At that point, the borrower is insolvent, but ongoing Ponzi borrowing can mask that for a time.
Once borrowers have gone Ponzi, there is no hope — they can't borrow their way out of debt, and they can't afford to earn and pay their way out either. It is only a matter of time before insolvency leads to delinquency and forgiveness of debt usually through a bankruptcy.
The problem with the Great Housing Bubble is insolvency. Lenders underwrote too many loans for too much money. Borrowers everywhere are insolvent, and the main mechanism for curing real estate debt insolvency — foreclosure — is being shunned by our government, lenders and borrowers alike. Thus our government encourages useless loan modifications programs and lenders allow delinquent borrowers to squat. These are not solutions to the problem; these are avoidance mechanisms to prevent dealing with the problem. The debt must be purged.
The fate of Ponzis
The Ponzis have two options once they are insolvent: (1) find another borrower who will loan them money, or (2) experience the The Unceremonious Fall from Entitlement as their lifestyle expenses are reduced to their income level regardless of their needs and wants.
Ponzi borrowing is not sustainable. Once borrowers cross the Ponzi limit, they will financially implode, and any lenders who extend credit to those borrowers will lose their money. Since lenders have so much money tied up in the Ponzis right now, they are working to expand the Ponzi scheme by getting the government involved as the bagholder for the bank's Ponzi loans. The government and the central bank are the lenders and bagholders of last resort. It isn't very likely private lenders will step forward to extend Ponzi loans any time soon. That leaves only one option for the Ponzis….
Unless Ponzis are given more debt, they will all succumb to the weight of their obligations. As each one exhausts their credit lines, bank losses will mount, and pressures on capital reserves will increase. Lenders will remain cautious and zombie-like. Since the spending of the Ponzis has become such a large part of our local and national economy, we may experience a long period of deflation similar to Japan as the Ponzis collapse. As I see it, we will not experience a robust economic recovery as long as the Ponzis keep their debts and banks keep pretending these Ponzis will pay them back.
He got it all
When lenders believe they have no risk, It is astonishing the loans they will make. When a debtor continually refinances and removes any equity the moment it appears, that behavior would ordinarily be a red flag to a lender. Ponzi borrowing is easy to see, and the end result of Ponzi borrowing is always a flame out and default.
Lenders believed they had no risk. In the world of stupid lending, real estate would always go up in value in which case a default costs the lender nothing. Also, since many of these loans were underwritten for Wall Street mortgage-backed security pools sold off to collaterailized debt obligation funds, the originator had no real risk. Once lender no longer cared about risk, they began ignoring the obvious signs of Ponzi borrowing.
- The owner of today's featured property purchased on 3/8/2000 for $353,000. He used a $282,400 first mortgage and a $70,600 down payment.
- On 7/5/2001 he refinanced the first mortgage for $291,000.
- On 3/20/2002 he obtained a $54,000 HELOC.
- On 8/26/2002 he opened a $68,000 HELOC.
- On 10/15/2002 re refinanced with a $300,000 first mortgage.
- On 10/22/2002 he obtained a $28,000 HELOC.
- On 3/20/2003 he refinanced with a $299,500 first mortgage.
- On 7/15/2003 he opened a $95,500 HELOC.
- On 5/12/2004 he obtained a HELOC for $200,000.
- On 5/25/2005 he refinanced with a $442,000 first mortgage.
- On 10/28/2005 he obtained a $245,000 HELOC.
- Total property debt is $687,000.
- Total mortgage equity withdrawal is $404,600
I am impressed at this borrower's ability to sell and resell his house to the bank for ever increasing values. He didn't leave anything on the table. When the prices crashed, the bank gave him peak value. Nice deal — for the borrower….
Some lender looked at this borrower's loan history and still gave this guy $687,000. After the first seven refinancings and a doubling of the original mortgage, isn't it pretty obvious that this borrower has gone Ponzi? Does it really take fancy studies done by lofty academics to see the obvious? Would you loan this guy money?
Irvine Home Address … 453 EAST YALE Loop #34 Irvine, CA 92614
Resale Home Price … $634,900
Home Purchase Price … $353,000
Home Purchase Date …. 3/8/2000
Net Gain (Loss) ………. $243,806
Percent Change ………. 79.9%
Annual Appreciation … 5.5%
Cost of Ownership
$634,900 ………. Asking Price
$126,980 ………. 20% Down Conventional
5.01% …………… Mortgage Interest Rate
$507,920 ………. 30-Year Mortgage
$131,612 ………. Income Requirement
$2,730 ………. Monthly Mortgage Payment
$550 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$53 ………. Homeowners Insurance
$429 ………. Homeowners Association Fees
$3,762 ………. Monthly Cash Outlays
-$467 ………. Tax Savings (% of Interest and Property Tax)
-$609 ………. Equity Hidden in Payment
$248 ………. Lost Income to Down Payment (net of taxes)
$79 ………. Maintenance and Replacement Reserves
$3,012 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$6,349 ………. Furnishing and Move In @1%
$6,349 ………. Closing Costs @1%
$5,079 ………… Interest Points @1% of Loan
$126,980 ………. Down Payment
$144,757 ………. Total Cash Costs
$46,100 ………… Emergency Cash Reserves
$190,857 ………. Total Savings Needed
Property Details for 453 EAST YALE Loop #34 Irvine, CA 92614
Baths: 3 baths
Home size: 2,298 sq ft
($276 / sq ft)
Lot Size: n/a
Year Built: 1984
Days on Market: 9
Listing Updated: 40309
MLS Number: K10050830
Property Type: Condominium, Residential
Beautiful turnkey regular sale condo. Tile and carpet throughout. 2 fireplaces, den off of the kitchen, with a living room plus a formal dining area. Downstairs bedroom is perfect for library, office or media room. Master bedroom has upgraded walk-in closet and bathroom with full bath and shower. Upgraded patio with built in jacuzzi, landscaping and tile. Interior of home was painted throughout in 2008. Great home for entertaining.
It appears this guy Ponzied very close to 2010 rental parity.
There must be a larger more important Ponzi story that explains what happened and will continue to happen for the forseeable future.
Mortgage delinquency at record high, but borrowers falling behind at slower rate
The increase in mortgage delinquency was a surprising and unwelcome sign for economists expecting the recent improvements in the economy to translate into fewer homeowners falling into trouble.
On a seasonally adjusted basis, about 10 percent of borrowers were delinquent on their mortgages during the first three months of this year — a record, according to the survey by the Mortgage Bankers Association. That is up from about 9.1 percent during the same period last year and 9.5 percent during the fourth quarter of 2009.
The key point that stands out to me is the decline in new mortgage applications. It would appear that the pool of knife catchers is beginning to show some signs of exhaustion. The tax giveaways pulled in future demand to the present and now demand is on the downslope while shadow inventory continues to grow. It’s obvious where this is going to lead prices even if the interest rates are left at 0 for “extended” periods of time.
Unfortunately, it won’t be until August when the July closed sales figures are released that the drawing forward of future demand will be fully realized by members of the media.
Until then, expect to continue reading rosy reports about increased home sales. Though it is too late for new buyers to go into contract on a house and get the $8K rebate from the government, new home buyers who signed contacts back in late April are in no rush to close before July 1st.
So August’s numbers will reflect a sharp drop… but an expected sharp drop. Expect some people to downplay July’s poor sales figures.
By September, though, it will be pretty clear that the housing market has not recovered, and then there will be some measure of panic for sellers.
You ask: “would you lend to this guy knowing his history?”
My answer: Yes I would – if it was not my money I was lending. If I am paid a commission for getting the loan on the books, why not?
Banks don’t even loan their own money to people. They get to create all of their loan money out of thin air and collect interest on it. Pretty awesome gig if you can get it.
Sad thing is with all that equity extraction and considering the housing bubble has been crashing, he is still able to list the house at market price and not a short sale. That just tells you:
1. The magnitude of house price inflation from 2000-2006.
2. The housing crash in Irvine has not been enough to bring price down to fundamental, and Irvine house price is still dangerously inflated.
Perhaps this reflects my naivete, but the HOA’s on this place total over $400 a month! Who wants to spend that much money each month for… a community pool? Some landscaping? These HOAs are one part of Orange County living that I may never get used to.
The basic Woodbridge master HOA fee is about $80/mo. That pays for the lakes, tennis courts, pools, parks, etc. It’s actually pretty reasonable considering all the facilities for residents.
The other $350/mo must be for the condo sub-association since this is an attached home. I guess that pays for exterior maintenance and maybe insurance, but it seems like a lot. That’s one reason I prefer single family homes even though you do the maintenance yourself. Condo owners get nailed for 2 association fees.
Some people like me even actually like doing that crap. Give me some tall grass, a lawn mower, a weed whacker, some pruning sheers and a six-pack of PBR and I’m all set for an enjoyable Saturday afternoon!
This is a really great post.
Personally I would not be able to handle the stress associated with this debt-upon-debt strategy. I know myself. The shear worry about the future would bring about a nervous breakdown.
The line above that struck me was “avoidance mechanism” of the lenders, borrowers and govt re: these bad loans.
I was watching “Hoarders” on A&E last night. These people fill their houses with collectables not to mention a lot of junk and waste. It’s a psychological condition. They pay a price, but the behavior pays off in provider the “hoarder” a level of comfort. One family’s houses is so full of junk and invested with bedbugs/insects that they have to pitch a tent out in the front yard as winter approaches.
It’s very common for “Hoarders” to close the doors to rooms in their homes that are full to the ceiling with old clothes, junk and waste. It’s an avoidance mechanism. They just don’t want to deal with it.
I think there are some parallels for Ponzies because Ponzies too are somehow able to successfully compartmentalize these collections of debt – and they keep piling on more. Then they close the doors and try to live in the “comfort” you described, ignoring the reality about how unsafe and insecure they are making their lives/homes.
A&E says there are over 2 million “hoarders” in the US today. Not all are poor. Some are/were wealthy and well-educated. This is a very small percentage of the total US population (ca. $380 million).
I wonder: How many Ponzies are there today in the US?
We Americans always find something to do in excess – whether it’s borrowing to appear richer than we are, or hoarding crap for the security it provides.
But the best example is food. We eat in complete excess. 2/3rds of us are overweight and 1/3 obese! We want all the pleasure food provides, and then we complain about the drawbacks.
I know SO WELL what you’re talking about- I fell into credit cards to finance my lifestyle through law school.
I was a working engineer before law school, accustomed to a certain lifestyle. Then I quit to go to law school and worked part time, and while student loans paid for the tuition, credit cards financed my lifestyle when the part time paycheck fell short.
I now have just under $10K in credit card debt that I’ve been paying off rapidly (started off with well over 20 upon graduation). I did the whole 0 interest balance transfer thing by opening up new credit cards. I now have 7 credit cards, only 2 of which carry a balance, with a total credit limit of something like 65K which is absolutely ruining my credit.
If I had not been so fortunate as to have a good job out of law school, I would have been screwed. Bad. On the other hand, at least it would have been dischargable debt rather un-dischargable student loans (thank you President Bush! We really miss you!) It’s wonderful that I can go out, purchase $65K of worthless crap from best buys and costcos and walmarts in a month long spending binge, and then simply declare bankruptcy. The fact that I borrowed $60K to try to educate myself will hang around my neck for the rest of my life. Great setting of priorities, asshole.
I was a financial idiot in my 20s, and I entered law school with credit card debt and an auto loan. I graduated with $140K in student loans, $22K in credit card debt, and a $10K auto loan.
Failure to find an immediate job shredded my belief that “debt was normal” and my “monthly payments were manageable.” I had a ton of free time, and I started reading basic personal finance books. It really is amazing that I could attain such a high level of education, with so little understanding of personal finance.
It’s been about 8 years now, and I’m down to $89K in student loans with no credit card or auto debt.
Pre-Reagan, the student loans were forgivable upon BK. One resident was extermely upset that other residents were BK, getting a great position and the banks lending money to them, but he was paying off his loan. Banks are willing to lend inspite of prior bad credit if they think they can get their money back in th future. That scam was also being used for lawyers.
How does this apply today? Banks are lending to borrowers with little to no chance of paying off the loan, because the banks know that someone else will be holding the bag, taxpayers.
As back in the 1970’s, cocaine was though to be a great drug of choice for the yuppies, esp WS yuppies. It gave a high of invincibility and felt good. Too bad it was very addictive and cocaine rages. Speaking out against cocaine was almost taboo. It was just that evil crack that was bad. HEW, house flipping, all Ponzi schemes, were good. Stimulated the economy. I saw very little creation of real goods from housing inflation. Both made the partakers feel good for a while and society to clean up the mess. Only this time, they are demanding the taxpayers pay for another fix.
IrvineRenter, Good personal story. Hope others are wise enough to learn from your mistake.
CC are recourse loans.
Perspective, in CA you could of rolled your CC and student loans into a HEW and then walked away. The leanders were very helpful to arrange these transactions.
When I hear these stories about ‘I was such an idiot in my twenties…’ I am reminded of my late uncle who taught me two rules early in life:
1: If an item is a necessity, you buy it, whatever its cost – for cash. If it is not, you dont get it even if offered free. Wisdom is all about knowing which is which.
2: never try to help a man who is in debt and asks you for help: by his very nature, he will not tell you all the debts he has. You will inevitably throw good money away.
His father (my grandfather) was a banker in the 1920’s and taught him that.
That’s true, but don’t forget the oppressive structures and ideologies we establish to maintain the wealth and balance of power.
A stupid man makes mistakes and doesn’t learn from them.
An average man makes mistakes and learns from them.
A wise man learns from the mistakes of others and avoids those mistakes.
A wise card player knows when the deck is rigged and either out smarts them or moves to a new game.
I understand the idea, but I prefer maxims with more balance. What is a necessity? Water, rice, a tent?
It’s better to say, you likely don’t need it, if you have to borrow money to obtain it. So only borrow money if your reasoning can survive a very high standard of analysis.
es, your story made me cringe–especially the “accustomed to a certain lifestyle” line, which you use twice. How about this lifestyle: you were a student. You should have lived like one. When I was a child, I learned from my parents, who lived within their means. When I was in college, I lived within my means. I worked after college, and lived within my means. Then I went to graduate school. Guess what didn’t change? Yup–I still lived within my means. What is so hard about this? I have to admit it saddens me to read your words, and know there are MILLIONS like you.
Take responsibility for your actions. You brought it upon yourself, and you should pay your debts.
We tend to forget that Ponzi is a family name. Imagine trying to get a respectable job and having an employer wonder, “Can I send a guy named Ponzi out to meet clients?” You would have to change your name or settle for a job in banking or real estate.
Fractional Reserve banking is a Ponzi scheme. The Social Security system is a Ponzi scheme.
And yet the majority think that the USD is strong and will not fail.
Humanity is a Ponzi scheme. It’s unfortunate but true.
Why is humanity a Ponzi scheme?
Because when you get too old to hunt/fish/make shelter/feed yourself, the youg’uns do it for you
IrvineRenter: “a Ponzi Scheme is also any debt where the payment of debt comes not from wage income but from borrowed money from new lenders”
This statement makes any refinancing look like as Ponzi Scheme.
Also, unsustainable mortgage does not always mean fraud. It is necessary to separate victims from criminals.
“This statement makes any refinancing look like as Ponzi Scheme.”
Yes, it does because generally, it is. Any cash-out refinancing used for anything other than home improvements is Ponzi borrowing in my opinion.
IMHO, major home improvement project is bad investment. For example, I will not be surprised if $80K major kitchen remodel will add less than $60K to resale value.
There are other ways to invest this cash. For example, I know dentist who bought new x-ray machine for his business. Better service, more satsfied customers.
Would you prefer dentist, who spent money on custom kitchen cabinets, stone countertop and ceramic tile backsplash? Well, the choice is always yours.
Debt, if managed properly, is not automatically a bad thing. The key is moderation.
I’ll give you an example: Imagine an area where monthly costs of buying a house (in total, including taxes and insurance and repairs and HOA fees (if any)) are less than the cost to rent a similiar place. Unless you are a very short term resident, or have such lousy credit that you can’t qualify for a loan, only a fool wouldn’t take out a loan to buy a house.
This was supposed to be a reply to Cynic above.
I will be buying with cash. According to you, I am a fool. For some reason, I am not bothered.
It looks like Irvine will be named the safest city in America yet again:
“Irvine Is on track for not only its sixth straight safest large city crown, but also the lowest overall crime rate in the community’s history, according to preliminary FBI statistics.”
This is an impressive accomplishment considering Irvine is only 40 miles from LA, and adjacent to cities that are not neccesarily safe. Irvine is an enigma in every way.
Whenever I see someone who looks like they don’t belong in Irvine, often I see Irvine police following them around. Kudos the police.
Irvine is just short of a police state. You hear about their gestapo like HOAs, the police that follow everyone who’s skin is darker than a pair of dockers- it looks about as much fun to live in as a a Wal Mart.
There are no WalMarts in Irvine.
And, yes, the IPD is on the totalitarian side of things.
I guess one of the things that makes Irvine ‘safer’ is that the residential communities are buffered from others by industrial parks. The only place this is not quite true is in Northwood which is next to Tustin.
Interesting observation… never thought of it before. Historically Irvine has been an “island” with the El Toro Marine base, Tustin Helicopter base, northern hills/canyons, SNA Airport, coastal hills and UCI almost completely encircling it. Couldn’t have planned it any better.
Well, make it that Tustin borders Walnut, W Irvine, and Northwood. However, these Irvine “villages” border Tustin Ranch which is just as nice and safe as Irvine. More buffer to it 🙂
Also, more expensive housing is another hoop to jump.
Its funny to me how most of Irvine is a very conservative politcal base, yet it is one of the most socialistic places to live. High HOA’s (just like a social-good tax) and police and HOA nazi’s who strip freedoms.
Well, it’s because conservatives want less government! ROFLMFAO! Yea, republi-fascists only want less government when it comes to THEM, smoke a doobie and go to jail. Get a hooker, go to jail.
The sad thing is, people are giving up their freedoms every single minute for “security”, the reality of that is, you deserve NEITHER.
Hopefully. one of your sons or daughters gets shot by the Nazi’s because they “believe” he did something wrong and didn’t stop, or better yet, your mom or grandmom gets busted for smoking pot to alleviate everyday pains. I really want the majority of oppressive people who live in Irvine to suffer in direct proportion to those whom they oppress. Stop making crimes out of things that are by GOD’S design, not crimes. Oh yea, sorry, I can only mention God if I’m in Mariners or Saddleback…so sorry.
Irvine has no soul whatsoever.
Rancho Palo Verdes (CA) is having a crime wave.
Apparently their 2 police cars on patrol are not cutting it.
RPV Homicides 0, rape 1, robberies 12, burgarlies 116, theft 311 for 2008 and about the same for 2007. Apparently the citizens are not spending enough to reduce crime.
How many police cars does Irvine have on patrol?
Ponzi Scheme — Mortgage Scheme— What ponzi scheme(s) — I don’t know of any!!
Nick Gardner writes in the Sunday Australia Telegraph article Revealed: The Home Loan That Could Save You A Fortune:
ING Direct, Australia’s fifth largest lender, is preparing to sell loans that have no fixed term and no requirement to repay any capital along the way.
At current rates, the interest-only loans would cut repayments on a $300,000 mortgage by $5000 a year.
“People are needlessly being denied the chance to buy a property while prices spiral rapidly out of their reach” ING Direct CEO Don Koch said. “There is an urgent need to provide more affordable options and borrowers should be able to choose whether they want to repay the capital, or not.”
Mr Koch wants to position the bank as a “mortgage partner for life”, with borrowers carrying the same interest-only loan from property to property for as long as they wish, accumulating equity from rising house prices as they go.
Then, as they near retirement, they could sell their property for a big enough profit to pay off the original loan and buy a smaller place outright, leaving them mortgage-free. Or, they could keep the mortgage going and repay the original capital from their estate, after death.
Banks already offer interest-only loans, but borrowers often are allowed to keep them only for five to 10 years. Then they must start paying the capital.
But ING says this preoccupation with paying off the loan is unnecessary.
“There is no economic reason for banks to insist on regular capital repayment,” Mr Koch said. “It just makes the loan more expensive for the borrower.
Financial comparison website InfoChoice CEO Shaun Cornelius said the move was a welcome innovation: “Depending on the size of the loan, it could add hundreds of thousands of dollars to a borrower’s cash flow over their lifetime.”
The Australian interest-only loan makes sense, in a way, for the lender, but only because of Australian lending rules. To the best of my knowledge, lenders do not make fixed rate loans in Australia. All loans are tied to a benchmark interest rate set by the Reserve Bank of Australia. So, what we have here in a interest-only loan whose payments fluctuate based on the prevailing mortgage interest rates. That’s not a terrible deal for the lender, because it means that — unlike with American fixed rate loans — they aren’t taking the interest rate risk. The borrower is. As long as the property is effectively secured with a low enough LTV ratio, the bank is set for life — they earn an acceptable profit above the cost of the funds they have to borrow to finance the loan.
Since mortgage interest expense is not tax deductible in Australia, it is less clear why this is a good deal for the borrower, but in the current, relatively low interest rate environment, it could look good for awhile, until interest rates start to rise. In the long run though, it would only make sene if the cost of the interest and of the other aspects of property ownership were less than the cost of an equivalent rental.
IR: “I remember feeling pwned by Ponzi.”
LOL! Any blog that works ‘pwned’ into the articles gets a big thumbs-up from me! 🙂
OK, ‘fess up, which games do you play? 😉
My confession: currently League of Legends plus every Blizzard game since Warcraft 2, and used to play the grand soul-sucker of them all, World of Warcraft (but then I escaped that death-trap); plus dabbling in too many others to list here
The last game I was addicted to was Heroes of Might and Magic 5. I have played it from start to finish 3 times (taking 4-6 weeks each time) repeating some sections multiple times because I enjoyed the character combat.
I was a big fan of the Civilization series, SimCity, and if you go way back Alpha Centuri and Doom.