Financial Advice from a Softball Dad

[jonriv]

I saw that underwriting idea by someone on TV--- felt it made more sense.

[PDad]

Dave Ramsey-- old school math. Envelope for every expense. If there is no money left over for eating out stay at home n eat beans n rice. Sell everything until the kids think they are the next thing to be sold. There is no entitlement or credit cards. ...

A manual system executed with good discipline beats any system with poor discipline.

[DonnieS]

My girls had the benefit of having an older brother who made or is trying to make every mistake in the book. He lectured them about focusing on finding ways to pay for school other than loans - his words to them, "If you take the athletic money and play ball for school, when you graduate, you can do what you want, work where you want, you dont have student loan payments as the driver for what job you accept." My daughters had the misfortune to have a dad who thought he was building the next Federal Express, it turned out to be a high tech Enron, but they recovered and have taken their brother's advice.

[exD1dad]

An underwriting system based upon the ability to pay back a loan is ludicrous. First of all the arts would be trashed (even though IMO any female who wants to act should never go to college to study drama) and who decides the value of what education some bean counting pencil pushing business major who was promoted half the time because he was taller than everybody else?

Comparing an education to LTV is plan pure stupidity. that is a single minded train of thought plan & simple.

[Sam]

An underwriting system based upon the ability to pay back a loan is ludicrous. First of all the arts would be trashed (even though IMO any female who wants to act should never go to college to study drama) and who decides the value of what education some bean counting pencil pushing business major who was promoted half the time because he was taller than everybody else?

Comparing an education to LTV is plan pure stupidity. that is a single minded train of thought plan & simple.

Actually, the entire lending system is based upon the ability to pay back. The "bubble" we just went through was due in huge part to the Government telling lenders to make loans to people who had no ability to pay back the loan. The difference is that college loans can't be bankrupted away....they last until they are paid off or the borrower dies. So if a student has no ability to pay back a loan, they will have horrible credit throughout their lifetime and be stuck in a financial hole that they will never be able to emerge from. This is what happens when the Feds stick their noses into anything that has to do with economics.

[jonriv]

Several years ago we were trying to secure credit for an Attorney customer of mine- it turns out that he had gone deliquent on his student loan(he later had a settlement) but it still showed as a federal deliquency and we were unable to to do an SBA backed loan

Most of the banks are getting out of the student loan business because the log term economics as well as the reputational risk are too great.

Ironically- the feds took over a lot of the loan program because they thought the Banks were gouging- the rates are higher now under the Fed program.

[exD1dad]

Jonriv you are on the money with the race to the bottom when the Fed told banks to lend to minorities who had lower credit scores (thus producing a change in qualifying & underwriting standards) & whom the banks deemed un-credit worthy due to their FICO (not their race). However IMHO the true back breaker was giving "liar loans" or stated income loans (which were setup for business owners who had assets but great CPA's to writeoff income) to wage earners who really didn't qualify.

To compare a Psyc major to an Art major to an Accounting major would be an impossible task which would be futile in determining an ability to pay back the loan based upon major. I would compare this line of thinking to Team Muzuno (now Bat busters) who a year & 1/2 ago had tryouts with 100+ kids. They separated the girls into 2 groups, big girls & small girls (not tiny, up to 5'5) & then thanked the small girls & possibly sent home a future All American player based solely on size.

You cannot judge a persons "habit of industry" based upon their college major

[jonriv]

The whole background of the financial crisiss is material for a whole other post- there are many truths in what you say- many, many more shades of gray!!! Having lived through it on the financial side I can give you some of the good, the bad the ugly. A full range of culprits as well( greedy mtg shops, well intentioned Congress people, predatory lenders that went after minority groups, financial rating agencies, real estate brokers etc.........) Actula percentage of bad loans was small, but at they say- all it takes is a little sh** in a well to make it bad!" but I digress

Now back to teh subject:

The underwriting based on majors is not that far off- I am sure there are pretty accuarate actuary tables on future earnings based on College majors- there is also very accurate ROI on different schools, majors etc...

[Sam]

Predatory Lending is a myth. You had people lending money to purchase homes to people who knew they couldn't afford to purchase homes. When the payments couldn't be made, these "victims" stayed in these homes, at no cost, for months and some for years. Exactly who is being preyed upon? Fannie Mae is the victim most of the time because they ended up purchasing virtually all of this bad paper.....which meant that WE, the taxpayers, were the real victims. This is all thanks to the "well intentioned" efforts of the idiots we place in congress.

Now lenders are actually applying underwriting standards and the same suspects are starting to complain that they are too strict. They are starting to do this all over again......those well intentioned f#*king morons in DC.

[jonriv]

Predatory lending is not a myth- there were several small mtg shops that set-up mortgages with ridiculous terms with the idea of securing property- I have seen it personally. These loans did not go near freddie or fannie

Small percentage, but Sam I assure you it is and was no myth