Because what they're shown is a payment they *can* afford and the math works out.

Because nobody tells them that the interest rate can go up. Or probably about all the expenses of homeownership besides the mortgage. You know most victims of con men are making bad decisions - often thinking they are doing the cheating rather than being cheated. The bunco squad does not find it a reason to take it easy on any con men they find, and we should not find he fact that some of their vicitims are unsympathetic a reason to go easy on dishonest mortgage brokers or packagers.

Beyond that, as I said, a lot of people caught in this did were not in sub-prime loans. But if they lose their job and have to move and suddenly find they can't sell their house for enough to pay off their mortgage, or rent it for enough to cover the payment - well they will be at least tempted to walk away. In some circumstances they may have no choice.

Also, a lot of people who should have known better took out variable mortgages or negative amortization balloon mortgages on the premise that the value would go up and that they could refinance when the balloon came due. It does not matter whether they are sympathetic or not; that certainly contributes to the crisis. In other words part of life is that people will act like self-destructive dicks. When that threatens others, we pass regulations to limit that behavior. For example health and safety regulations in resteraunts. Nobody expects eating out to be completely risk free. You still have a chance of getting food poisoning or e-coli or something. But regulations do mean you have better odds of getting food that does not make you sick than in nations without those regulations.

First, you should probably state which regulation you mean that would prevent this. >Is it Glass Steagall?

Second, SOX was really supposed to change things, right? No more market corrections?

Gutted from the beginning in response to lobbying.

Third, do you really think we can make markets riskless through regulation?

We can reduce risk, avoid certain forms of mass fraud/stupidity.

Fourth, what regulation could prevent what happened here?

It was too easy to resell and package risky loans because of the repeal of Glass Seagal. Letting banks own or be owned by other financial institutions, allowing all these "bank like" creations. Seriously, the financial sector is not where you want encourage rapid change, and creativity. I like my financial industry stodgy. Let new fincap instruments have to jump through a lot of red tape, and spread slowly.

The house discussion in interesting -- every single one of my friends is a home owner (I'm 35) including my 30 y.o. single girlfriend. When she bought her house, it seems like everyone I know started blah-blahing me about investment, return, yadda yadda, your credit is bad but you're a teacher, a mortage will be a little more than your rent...and it made me fucking crazy.

Two years later, I am so happy to be...er, houseless. I don't WANT a house. They have roofs that trees fall on, and furnances that die in January, and gutters with nasty leaves in them. At the most, I think I'd want a condo, but I don't want to have to be responsible for things like roofs and furnances and sidewalks. That shit is exspensive, and it looks like it would be hot and dirty work.

I do not want a lawnmower. I want to paint my wall turquoise and buy more bookshelves. That's it.

Sure, sumi. But I work in a place with acacia trees, so i could just take giraffe to work with me and he or she could eat there. Until they couldn't fit in the car anymore at around 2 weeks.

Assuming your house will only ever always increase in worth? Rich isn't that easy, otherwise more people would be.

Well, lots of people did manage to get rich this way... especially those who flipped houses. Of course, many of those people are no longer rich.

Until they couldn't fit in the car anymore at around 2 weeks.

Then couldn't you get a special trailer??? I say do it!

My perception is likely colored by my usual thinking that I'm the dumbest person, ever. And if I'm dumb, and I knew it was all smoke and mirrors and putting your life on a blackjack table in the hopes that it would all turn out okay...it's hard for me to grasp that anyone else couldn't see that it was all too good to be true.

My perception is likely colored by my usual thinking that I'm the dumbest person, ever. And if I'm dumb, and I knew it was all smoke and mirrors and putting your life on a blackjack table in the hopes that it would all turn out okay...it's hard for me to grasp that anyone else couldn't see that it was all too good to be true.

See, your logical inference fails, because you are not dumb.

See, your logical inference fails, because you are not dumb.

This. Also, I get the impression that you do not suffer from greed. Not that you don't have a healty respect for money, and a desire for plenty of it (see quote above), but money is not your top priority in life. As any conman knowns, while it is not true that you can't cheat an honest person, it is true that greed or dishonest people are open to being cheated in a whole host of ways that honest and reasonabel people are not. So some of them may not have been inherently stupid, but let themselves be turned into fools by greed. Mind you there were honest people caught in this trap too in various ways, some of which have been described upthread.

Years of therapy to get over that hump, tommyrot.

In better (not-home-owning) home news, my O'Keefe & Merritt stove is now fixed--yeah! We can now use both ovens and all pilot lights work.

It took us a lot of calls to find someone who would make a house call, but he turned out to be super nice (if chatty) and it only cost about $100.