Forclosure

[DolfanBob]

I want someone to explain to me how this Billion Dollar bailout is going to effect people that are about to lose their homes to forclosure.
What is the qualifications that it takes to be considered for the help.
Just wondering because I lost my home back in 93 to forclosure, ex-wife, lost job etc.etc.
Now what is the difference of today's society and job losses then what happened to me back then ?
Did I just lose my job at the wrong time in order to get Government assistance ?

[cannon_fodder]

How about this:

I have worked very hard to keep a good credit score.  I saved up 20% down.  My wife and I both work and have minimal debt.  Hence, we got a good rate on our mortgage.

We then choose to purchase a house well within our means.   We don't have new cars so no car payments.  We don't go on expensive vacations.  We don't really spend much money at all.

Thus, we get nothing from any proposed bailout.

Then there is the person who has worked hard but because they lost their job or because their equity line of credit collapse or whatever, they have been struggling to pay the bill.  They did not over extend when they bought their home, they did not blow money on other things.  They have tried to keep current with the payments but fiscally simply can not do it.

AND there are plenty of people (probably the majority of people in foreclosure at the moment) who bought a $500,000 house on $50,000 a year.  They took a loan they could not afford and/or lied about their income.  They had crap credit and overextended so they got poor rates. They had little or no money down  and did not adjust their lifestyle to accommodate their new massive expenses.  They drive 2 new cars they also can't really afford.  Stop me if this sounds too familiar...


Who is going to get rewarded the most in this scenario?  The person who lives within their means, the person who is in an unfortunate situation but trying to keep his mortgage current, or the asshat who is in a home he had no business buying that spends money he doesn't have on crap he doesn't need while stringing out his mortgage?

Message:  blow money and you will be rewarded.  Live within your means and the Federal Government will take your tax money and give it to those that spent all their money.  Those that made the worst decision gets rewarded the most..


ALSO, while I'm on a tirade.  Two more points:

1) A real estate bubble is the primary reason we are in this mess.  Why do we want to prop it back up?  The fact that real estate prices are dropping like a stone in communities that saw them shoot up like a rocket is both rational and required.  We whined about overpriced homes, now they are heading back to reasonable levels and we whine about that.

It would have been preferable to let the bubble down slowly.  But it has popped  Please don't work to pump it back up.

2) BANK BAILOUT MONEY.

Banks were told they were utterly retarded and some told to go ahead and fail because they made horrible and greedy loans.  The loans contributed to the above real estate market bubble.  Now they hold governmental money...

And we are complaining that they aren't making massive stupid loans.

They just got burned for hundreds of billions of dollars.  Of course they are careful with the money the government loaned them.  I'd be more pissed if they went right back out and did the same stupid loans again.

[guido911]

CF, you have to check out that CNBC post in the political forum.

[Conan71]

Anyone see that Octo-mom's mom is 10 mos behind on her mortgage.  She's starting to sound like the ultimate welfare queen.  Used student loan proceeds for fertility treatment....

And she has reproduced herself now 14 times over...pancakes?

[nathanm]

CF, the problem with your tirade is two-fold. In some markets, a $500,000 home is just the cost of entry into homeownership. There simply aren't cheaper places to be had.

However, there are two sides to the coin. People who got loans they shouldn't have, and banks that loaned money to people they shouldn't have. Of course, most of the bad loans were made by mortgage finance companies that aren't regulated as banks and keep no loans whatsoever on their books, so didn't give a **** whether the borrower could actually repay.

Secondly, the plan has features in place to deal with grossly overextended people. No refis over 105% of value or whatever it is.

Thirdly, some decline in home prices is necessary in many places (although mostly on the coasts). A rapid drop helps nobody. A better scenario would be a slow decline.

Personally, I think FHA has a good thing going with their streamline refis. Since they're already on the hook, you can refi into a lower rate regardless of the value of the house. They figure lowering your monthly payment only makes it that much more likely you'll be able to keep paying on the house.

[sauerkraut]

I guess everyone should quit paying their mortgage and go into forclosures. Who wants to work hard and pay your bills only to get punished?[xx(]

[nathanm]

quote:Originally posted by sauerkraut

I guess everyone should quit paying their mortgage and go into forclosures. Who wants to work hard and pay your bills only to get punished?[xx(]

I still can't figure out where this crap is coming from.

We're helping people in trouble adjust their mortgages so the payments are more affordable so everybody should just stop paying altogether?

[TeeDub]

I want to have someone pay for my house.  Where do I sign up?

I am tired of being a responsible taxpayer.

[cannon_fodder]

Nathan:

1) I understand an entry level home in some markets is $500,000.  Unfortunately, not everyone can afford that (I would not be able to).  Thus, not everyone should can have a home.  If you can not realistically afford a home in the area you current reside - you can either live in an apartment or move.

Not sure why that sounds harsh, it's just reality.  It's why I don't live in San Francisco, Key West or a slew of other locations. I can't afford the housing so moved elsewhere.  

You are not entitled to own a house, particular one that is worth 10 times your annual salary. If you choose to attempt it anyway, you have chosen to suffer the consequences.  Sorry - home ownership is not a realistic goal for all people in all locations (like me: if I lived in any of the crazy market places).

2) Banks (or whoever).

I agree.  The banks should and will lose money on this deal.  I am not attempting to defend them but at the end of the day the homeowners is just as responsible.

3) We already had the big drop.  I am in favoring of slowing that drop, as I indicated.  But don't work to pump it back up.

[Gaspar]

quote:Originally posted by nathanm

quote:Originally posted by sauerkraut

I guess everyone should quit paying their mortgage and go into forclosures. Who wants to work hard and pay your bills only to get punished?[xx(]

I still can't figure out where this crap is coming from.

We're helping people in trouble adjust their mortgages so the payments are more affordable so everybody should just stop paying altogether?

LOL. . . We're just delaying the inevitable and reinforcing the poor decision making process that got us here.

CF you are correct, but don't waste your breath trying to explain it.

Reason is not automatic. Those who deny it cannot be conquered by it. Do not count on them. Leave them alone.
Ayn Rand

[nathanm]

quote:Originally posted by cannon_fodder

Nathan:

1) I understand an entry level home in some markets is $500,000.  Unfortunately, not everyone can afford that (I would not be able to).  Thus, not everyone should can have a home.  If you can not realistically afford a home in the area you current reside - you can either live in an apartment or move.

3) We already had the big drop.  I am in favoring of slowing that drop, as I indicated.  But don't work to pump it back up.

On #1, I completely agree that not everybody should own a home. (I wouldn't, if it weren't cheaper than renting for me)

That said, we have this strange habit of drilling into people the idea that if you don't own a home, you're a loser. That sort of societal pressure leads people to make bad decisions. It doesn't excuse those decisions, but it does explain them.

Regarding #3, we agree. A slow decline gets home prices back to reality without causing as much damage to the economy as a whole.

On the subject of culpability for the mess, I would argue that the experts who have the money are somewhat more to blame as compared to the borrower who is generally less informed about the entirety of the deal.

Note that I don't think that borrowers were all at the mercy of eevil mortgage brokers out to make a quick buck. However, some of them were taken advantage of, either by not having the terms of their interest only loan or option arm completely explained or, in some cases, by going in and asking for a 30 year fixed or a traditional ARM and walking out with one of the esoteric products that pays more to the broker.

In some cases, people with the scores and funds for prime loans were written subprime loans just because it made the bank and broker more money.

Regardless of that, helping people stay in their homes helps all homeowners. Hell, it helps renters, too. Basically it helps anybody who wants their city to be a nice place to live. Vacant houses aren't usually maintained very well. If an adjustment of loan terms is all that is needed to allow someone to continue timely paying the mortgage, I don't see anything wrong with that.

Sadly, we've got all these juveniles saying "oh noes, I should just stop paying my bills!" in response.

Another thing I think we should pursue is somehow making it more attractive for banks to hold on to the mortgages. When I was growing up, we were nearly foreclosed upon since my dad couldn't pay the mortgage for a few months. He went to the bank and asked them to refi his first and second mortgages into a new 30 year fixed at a lower interest rate. They did. After that we didn't have a problem with it anymore.

Sure, the overall issues still existed, such that we couldn't afford cable or even a phone, but the $400 a month saved there made all the difference.

These days, loan modifications are very difficult since the servicer generally has no incentive to help you keep your house and there are many fingers in each mortgage pie. And no bank wants to do a refi for somebody who's already late, since they aren't already looking at a loss on a loan they kept in house.

When the bank is actually the one who stands to lose, they have something to gain by helping the homeowner avoid foreclosure.

[TeeDub]

quote:Originally posted by nathanm

Note that I don't think that borrowers were all at the mercy of eevil mortgage brokers out to make a quick buck. However, some of them were taken advantage of, either by not having the terms of their interest only loan or option arm completely explained or, in some cases, by going in and asking for a 30 year fixed or a traditional ARM and walking out with one of the esoteric products that pays more to the broker.

...

These days, loan modifications are very difficult since the servicer generally has no incentive to help you keep your house and there are many fingers in each mortgage pie. And no bank wants to do a refi for somebody who's already late, since they aren't already looking at a loss on a loan they kept in house.

First,
People are stupid.   Most were told they could afford a $xxx house and decided to max that out.   Rather than taking personal responsibility and crunching a few numbers themselves, they threw themselves at the mercy of the bankers without a second thought.

Second,
Loan restructuring isn't working.   Less than 50% of the loans that are being restructured are staying out of foreclosure.   These people literally borrowed to the hilt, and any little "hiccup" is causing them to lose their house.

http://www.uslaw.com/library/Legal_Commentary/Uhoh_Mortgage_Modification_Programs_Terribly_Ineffective.php?item=318123
Almost 53 percent of borrowers whose loans were modified in the first quarter of this year re-defaulted by being more than 30 days overdue, John Dugan, head of the Treasury Department?s Office of the Comptroller of the Currency, said today at a housing conference in Washington.

[cannon_fodder]

Nathan, by and large we agree.  I still assert that even an unsophisticated borrower should be able to have SOME notion of affordability on a loan.  They tell you flat our what the payment will be.  $500,000 mortgage plus taxes =~ $3,800 a month on a 30 year note.  Tack on $200 a month for insurance and 10% of your payment for maintenance and you're near $4,500 a month.

Few would argue I'm some genius, but I can tell you right off that I could not afford that.  Certainly not afford that AND eat.  Throw in whatever crazy mortgage scheme you want, deferred interest, interest only... whatever.  The basic Google search will tell you what it will cost you.

If they played the refi or flip game and got burned by the drop.  Too damn bad.  

So while the banks (financial institutions et al) should have known better, and get no sympathy from me, the borrowers are to blame for their own woes.  I'm sure there are a few really deserving of sympathy, but most got greedy.  As a nation we are paying the piper for buying now and figuring out a way to pay later - fine lesson we learned (what's the national deficit now?).
- - -

In re incentives to encourage home ownership, I also agree.  Tax law, social norms, and everything else encourages it.  People need to realize it is not always the best option nor always a good investment.  

And frankly, to take a bit of a leftist stance, it encourages an ownership class while providing no benefit to renters.  Renters pay a mortgage just as much as I do (and real estate taxes)... they just do it on behalf of someone else.  Why should a portion of my "rent" to the bank be tax deductible while all of your rent to the landlord just get sucked out of your pocket.  (this little rant of course ignore the inherent regressive tax system already in place, just sayin')

[Conan71]

Cannon, hopefully the lesson from this is buyers will become less impulsive and growth in the next up-swing will be much slower and steady.  So the housing industry wouldn't have grown as rapidly over the last 10-15 years.  Looking at the aftermath, that would have been preferable.

Let's hope banks exercize restraint in trying to get FCL's off the books and buyers will do an honest self-appraisal and rein in their lifestyles.

Maybe we are all finally getting the lesson our depression-era grandparents got about living within our means and saving a % of our income for a worst-case scenario.  Let's just hope the depression-era legacy of a new welfare class isn't born from this though.

[GG]

Santelli's Chicago Tea Party


http://www.cnbc.com/id/15840232?video=1039849853