I am paying my neighbor''s mortgage and he didnt say thanks

[beebrisk]

Date: 2/19/2009 1:07:25 PM
Author: Cleopatra
My husband is the financial guru in our household, so I don''t really understand everything that''s going on with this mortgage bailout plan. But what I do understand, it very much bothers me...


My husband (fiance at the time) and I bought our first home (a small condo) about 2 years ago - we were 23 years old and right out of college - the bank approved us for a $450K loan!!!!! Can you imagine that?! We obviously weren''t stupid as we purchased a modest $130K condo - with a 25% cash downpayment - and with a low mortgage that we could afford to pay even if one lost their job.


My question is, because we were responsible, unlike half of America, why is it that MY tax dollars go to bail out the idiot next door who bought too much house? It''s just encouraging people when the government bails you out of the mess you put yourself in. What kind of message does that give the next generation?


This whole bailout mess just really bothers me...

Sigh...Unfortunately it''s ALWAYS the responsible who take care of the irresponsible. And of course, it doesn''t just apply to this mortgage crisis. For 40+ years responsible taxpayers have been "paying" for food, clothing and medical care for those too lazy or too tied down with illegitimate children to take care of them. We''ve also just bailed out the car companies that couldn''t be bothered to rise to the level of the Germans or Japanese and learn to build quality, fuel efficient automobiles. They didn''t do their jobs. They were mis-managed and irresponsible.

It''s maddening. And you SHOULD be angry. Absolutely! Maybe if more people got angry something would change...

Congrats to you on RESPONSIBLE home ownership. May you find many years of warmth and comfort there.

 

[fleur-de-lis]

Date: 2/19/2009 12:57:37 PM
Author:stone_seeker
There is a pretty large group of people that are outraged by this mortgage bailout plan. Most of it has to do with its fairness but also its effectiveness. It basically comes out to be $1600 a year per troubled household. Granted I live in NYC so my idea of value may be distorted but can $1600 a year per home really solve the housing mess? Further, why are we giving money from the people who saved to the people who have proven to be the most irresponsible with money? Also, let''s say a home is now worth $500K - If we lower the principal on someone''s mortgage on that home say from $600K to $500K, and the house in 30 years is worth $600K again - who gets that gain? I see nothing in this plan that says taxpayers should reap that benefit.
(...)

Would love the thoughts of some people here since I am surrounded by generally conservative people and since this website skews democratic, am interested in the other side of this debate.

The reasoning behind these sorts of plans might be easiest to explain with an example. (This example is just off the top of my head, so please be kind in spite of the tremendously broad strokes I''ll have to use.) Hypothetically speaking, if you and 300 other people bought units in your development for $600K, when the price drops to 500K a certain percentage of people may be forced to sell. If 10% of the group is forced to sell (or gives the keys to the bank in foreclosure and then the bank is forced to sell), the 30 units then "race to the bottom" and undercut each other repeatedly for someone from the limited buyer pool due to simple supply and demand, which then results in a new low price. If one seller undercut the rest by selling for 400K in a down market, then 400K is the new value, right? When the remaining 270 people have $600K mortgages and struggle each month to pay it while seeing their new next door neighbors have a monthly mortgage payment that is 30-40% less and will as a result have a perhaps half a million dollars more in their retirement accounts by retirement age, then more of the remaining pool of 270 owners with $600K mortgages are enticed to walk away. If 50/270 "turn the keys over" at $200K underwater, then there are suddenly *80* properties in the building for sale, buyers have a greater selection and ability to drive an even harder bargain, and the price crashes even lower. To wit, how many people will continue to pay a $3500/mo payment towards a condo when their new next door neighbor is only paying $2800? And... how many of those paying $3500/month on a $600K mortgage are sticking it out out of nobility and fear to credit report damage, but might change their mind and take the hit if suddenly their neighbors on BOTH sides are only paying $1500/month because they purchased their units for $300,000? What if $200,000? If there were many, many vacant units in your building all going for $180,000, would you be the rube still struggling each month to pay a $600,000 mortgage?

The idea is stopping a downward spiral before it hits its critical mass tipping point. If a program is able to keep people stuck in their homes-- err, I mean entice people to refinance from non-recourse to recourse loans-- it reduces the number of homes for sale in a market and tips the scales of supple vs. demand in a way that keeps home prices high enough so that even the "honorable" people don''t think about walking away.

If only a few people participated in the asset bubble between 2004-2008, this would not be an issue. The scope of the problem, however, necessitates a macroeconomic response. These types of programs are not to save those who may lose their houses when negative equity prevents refinance; it''s to preserve the price point of a home at a high enough value that people like you who can continue to pay your mortgages... do.

Or so the logic goes.

 

[Maria D]

fleur-de-lis, thanks for taking the time to explain the "logic" behind this with an easy to follow example. Like most of the others in this thread, I angry about having to bail out the irresponsible -- and I''m including the banks here. I also don''t really know/understand the details of this plan.

Let me ask a couple of questions about your example. Why are the "remaining pool of 270" suddenly struggling to make their payments? Were they always struggling but thought it was worth it because the value of the condo would go up? Why is it in society''s best interest to keep property prices ridiculously high? In the long run, doesn''t this only benefit banks who profit from all that interest? Is that the point you are trying to show (I''m feeling really dense!) -- that it''s in our best interest that the banks get the money they are owed. In other words, is the point of bailing out the homeowners really just to bail out the banks?

 

[packrat]

I think I understand the logic in some ways, but I can''t say necessarily that I agree with it..all I see are a lot of fat cats in government and businesses living high on the hog and mismanaging their personal and business finances and then expecting and begging to be given help, on taxpayers dollars.

I don''t understand how the loan people could be so underhanded as to tell someone who makes $50,000 a year that they can easily afford a $300,000 loan in the first place, and why those people would believe it. Is it too much of an "I want" society and people willing to take advantage?

One of my coworkers today told me she and her fiance are putting a bid in on a house now b/c they''ll get some sort of rebate of like $5k-$12k?? Does that have anything to do w/the bail out or how is she coming up w/that?

 

[DiamanteBlu]

Don''t get me started on this one . . .

[says she with 70% equity in her house - never did the "Let''s refinance to buy toys and pay off our maxed out credit cards - OMG, I need to be bailed out, help me, help me!" thing]

 

[Cleopatra]

Date: 2/19/2009 6:58:10 PM
Author: packrat
I think I understand the logic in some ways, but I can''t say necessarily that I agree with it..all I see are a lot of fat cats in government and businesses living high on the hog and mismanaging their personal and business finances and then expecting and begging to be given help, on taxpayers dollars.


I don''t understand how the loan people could be so underhanded as to tell someone who makes $50,000 a year that they can easily afford a $300,000 loan in the first place, and why those people would believe it. Is it too much of an ''I want'' society and people willing to take advantage?


One of my coworkers today told me she and her fiance are putting a bid in on a house now b/c they''ll get some sort of rebate of like $5k-$12k?? Does that have anything to do w/the bail out or how is she coming up w/that?

It''s my understanding that people who buy homes this year will get an $8,000 tax rebate - or something along that line? I could be wrong - but yes, I believe this is part of the "plan"...

 

[m76steve]

maria-the bubble started to bust when the govt told freddy &fannie to make loans to all people-weather they could afford them or not-the govt wanted to make housing for all at a terrible cost-this came from the democrats-barnie frank was one of them-these loans were made and pretty soon started to go default because people who signed for them could not afford them. part of thinking was if payments were not made the items could be sold for a profit-soon the market was full of default houses with values falling and no buyers-the holders of the paper became saturated with bad loans and the falling dominos started-what results are being seen today...

 

[bebe]

Date: 2/19/2009 7:21:50 PM
Author: Cleopatra

Date: 2/19/2009 6:58:10 PM
Author: packrat
I think I understand the logic in some ways, but I can''t say necessarily that I agree with it..all I see are a lot of fat cats in government and businesses living high on the hog and mismanaging their personal and business finances and then expecting and begging to be given help, on taxpayers dollars.


I don''t understand how the loan people could be so underhanded as to tell someone who makes $50,000 a year that they can easily afford a $300,000 loan in the first place, and why those people would believe it. Is it too much of an ''I want'' society and people willing to take advantage?


One of my coworkers today told me she and her fiance are putting a bid in on a house now b/c they''ll get some sort of rebate of like $5k-$12k?? Does that have anything to do w/the bail out or how is she coming up w/that?

It''s my understanding that people who buy homes this year will get an $8,000 tax rebate - or something along that line? I could be wrong - but yes, I believe this is part of the ''plan''...

Isn''t that rebate for first time home buyers? I''m not sure on that either.

 

[Cleopatra]

Date: 2/19/2009 7:29:25 PM
Author: bebe

Date: 2/19/2009 7:21:50 PM

Author: Cleopatra

Date: 2/19/2009 6:58:10 PM

Author: packrat

I think I understand the logic in some ways, but I can''t say necessarily that I agree with it..all I see are a lot of fat cats in government and businesses living high on the hog and mismanaging their personal and business finances and then expecting and begging to be given help, on taxpayers dollars.



I don''t understand how the loan people could be so underhanded as to tell someone who makes $50,000 a year that they can easily afford a $300,000 loan in the first place, and why those people would believe it. Is it too much of an ''I want'' society and people willing to take advantage?



One of my coworkers today told me she and her fiance are putting a bid in on a house now b/c they''ll get some sort of rebate of like $5k-$12k?? Does that have anything to do w/the bail out or how is she coming up w/that?

It''s my understanding that people who buy homes this year will get an $8,000 tax rebate - or something along that line? I could be wrong - but yes, I believe this is part of the ''plan''...

Isn''t that rebate for first time home buyers? I''m not sure on that either.

Bebe - you''re probably right! I just know I heard something about buying a house and $8k!

 

[m76steve]

it was originally $15,000.00 for home buyers but that has been reduced or replaced-i think now you get a $8,000.00 credit if that but your president will probably change that-he lies so much these days-he is yours-enjoy...

 

[packrat]

Oh wow-I believe I have my hand firmly grasping the short end of the stick. I guess those of us who already bought houses get..a coke and a smile? The warm and fuzzies for knowing that even tho we''re going without things to pay our own bills and house payment, we can suck it up and struggle a little more to help other people have an easier time making their house payments?

 

[Cleopatra]

Date: 2/19/2009 7:33:59 PM
Author: packrat
Oh wow-I believe I have my hand firmly grasping the short end of the stick. I guess those of us who already bought houses get..a coke and a smile? The warm and fuzzies for knowing that even tho we''re going without things to pay our own bills and house payment, we can suck it up and struggle a little more to help other people have an easier time making their house payments?

The current non-home-owners will get the pick of the crop when it comes to homes and prices! We get stuck with our depreciated homes that are worth less than what we owe - fantastic idea!

 

[diamondseeker2006]

Date: 2/19/2009 7:33:30 PM
Author: m76steve
it was originally $15,000.00 for home buyers but that has been reduced or replaced-i think now you get a $8,000.00 credit if that but your president will probably change that-he lies so much these days-he is yours-enjoy...

What''s so funny is that the "credit" is really a loan that has to be paid back. I''m just watching for this house of cards to crash BIG time.

And yes, it makes me super angry that we who were responsible (and debt-free because we paid off our mortgage!) have to subsidize the greedy and irresponsible!!! I have little sympathy for those struggling to pay their $600,000 mortgages.

 

[MoonWater]

http://www.federalhousingtaxcredit.com/

"A tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. Unlike the tax credit enacted in 2008, the new credit does not have to be repaid."

 

[packrat]

I''m by no means a rocket scientist, mathematician or financial whiz, but when we were looking at houses before we got married, we KNEW beyond a shadow of a doubt what area our budget was in..and it was looooow. Our Realtor helped us, and we went to the bank and asked what kind of limits we were looking at. He showed us the formula-we made $X for the year, and they''d allow us to be at Y% of that. No more. So, if we were told they''d loan us $50,000, we weren''t out looking at $300,000 houses. I''m also curious how people can believe that if they have 5 apples for the month, they can afford a house that costs 4 apples a month. I don''t think it takes MENSA smarts to understand. It reminds me of the commercial of the guy on the mower going ''round and ''round and he''s saying all the things they own, and says "I''m in debt up to my eyeballs..somebody help me"

 

[packrat]

Date: 2/19/2009 8:10:34 PM
Author: MoonWater
http://www.federalhousingtaxcredit.com/


''A tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. Unlike the tax credit enacted in 2008, the new credit does not have to be repaid.''

They should add to that "Those of you who buckle down and work and pay your bills and are responsible and do what you''re supposed to do, please continue to do so b/c we need you to finance the irresponsible and the rest of the entitlement society"

 

[miraclesrule]

I learned a great deal today about why the current economic crisis occurred. It wasn''t any one thing, but there was a dismantling of the safety net. I am not inclined to share the interesting things that I learned, which caused me to re-think some of my prior opinions on the root cause of the meltdown. I was close to understanding most of it, but was missing crucial pieces of the puzzle.

I won''t share the nuggets at received at my conference today, until several of you read this article. It''s intended to bring balance before I share.

Mortgage Fraud-with proof

 

[ksinger]

Date: 2/19/2009 9:37:34 PM
Author: miraclesrule
I learned a great deal today about why the current economic crisis occurred. It wasn''t any one thing, but there was a dismantling of the safety net. I am not inclined to share the interesting things that I learned, which caused me to re-think some of my prior opinions on the root cause of the meltdown. I was close to understanding most of it, but was missing crucial pieces of the puzzle.

I won''t share the nuggets at received at my conference today, until several of you read this article. It''s intended to bring balance before I share.

Mortgage Fraud-with proof

Well out of that article, I keyed in on these:

"Foremost, all of the loans were made with no regard for Vargas’ ability to pay them back"
"A lot of the subprime lending, particularly the predatory loans, would not have occurred if the lenders had not been able to dump those loans into the securitization meat grinder"

Did your conference have any answer to the boring whining of many that the government "forced us to make subprime loans". Funny, I imagine that there are even MORE subprime loans to be had right now, if the lenders went looking for them. I wonder why they still aren''t being "forced" right now....

It is very complicated - I watched a bit of Frontline last night about it. But it has been my contention all along that the lion''s share of the mortgage portion of this meltdown at least, is laid directly at the feet of the "professionals" who should have - and DID - know better, but because, as indicated above, they didn''t have to KEEP the crappy notes they made, made it policy to screw the guys upstream in a giant game of musical chairs. Or maybe Hot Potato...

 

[miraclesrule]

Karen,

No body at the meeting mentioned a peep about "being forced to make sub-prime loans: because it simply isn't true.

However, I now know why the government has to try to bail out the companies. I left all my reference material at work, because I actually have to figure out how to protect my company and am using them as a resource. However, the one thing I didn't really understand was the who, what, when, and why this could have happened and what foundational safety nets were eroded. I got my answer. It was in 1999.

The Glass-Steagel Act of 1933 was intended to insure that commerical banks, investment banks, and insurance companies were separated in a way that would limit the risk of losses. Inasmuch as they are all depository institutions, the act served as a "separation of powers" much like we expect the judicial, executive and legislative branch of government. it provided checks and balances by separating lending, the use of credit, and investing. However, the act was essentially repealed during the Clinton Administration by a bill introduced into the legislature by Phil Gramm (R-Texas) and Jim Leach (R-Iowa).

As a result, the three groups became financial dynasties.

The method and manner that the key note speaker used to take us through the history was awesome. All of the audience participated. He picked a homeowner and gave her some gold (chocolate) coins and some pennies. He picked a mortgage broker at a different table and a lender. We went through the transition of the institutions and what happened in the past when a homeowner qualified for a loan and the trust between the financial institution and the mortgage broker/servicing agent with the "note". Then another P.O. Box was chosen (he was a hot looking P.O. Box too). We learned how they bundled the mortgages and when and what allowed it to happen. It was fascinating to see what happens to the mortgages and who was getting all the money. It was all working well until they didn't have anymore mortgages and the interest rates fell. So the sub-prime mortgage was conceived to keep the money flow going since Wall Street (the table I happened to be sitting in) wanted to get in on the action as well.

The problem is that it is EVERYONE'S money. 401K's, Mutual Funds, etc. The FDIC was increased and additional Federal insurance against Money Market Funds just to prevent a run on the banks, which was beginning to happen. it's all a nightmare. I don't know if anyone knows how to fix it.

It should have never happened. It was a perfect storm. Any one aspect alone was not enough to cause enormous damage, but all of these things together created a nightmare. We can't afford to let the insurance company/banks/investment firms fail because they have ....let me put it this way. The easiest way I could describe it afterward, simply because it is my twisted mind, was "It was like one big orgy, they contracted AIDS, and they are all dying"

 

[ksinger]

Date: 2/19/2009 10:29:55 PM
Author: miraclesrule
Karen,

No body at the meeting mentioned a peep about ''being forced to make sub-prime loans: because it simply isn''t true.

However, I now know why the government has to try to bail out the companies. I left all my reference material at work, because I actually have to figure out how to protect my company and am using them as a resource. However, the one thing I didn''t really understand was the who, what, when, and why this could have happened and what foundational safety nets were eroded. I got my answer. It was in 1999.

The Glass-Steagel Act of 1933 was intended to insure that commerical banks, investment banks, and insurance companies were separated in a way that would limit the risk of losses. Inasmuch as they are all depository institutions, the act served as a ''separation of powers'' much like we expect the judicial, executive and legislative branch of government. it provided checks and balances by separating lending, the use of credit, and investing. However, the act was essentially repealed during the Clinton Administration by Phil Gramm (R-Texas) and Jim Leach (R-Iowa).

As a result, the three groups became financial dynasties.

The method and manner that the key note speaker used to take us through the history was awesome. All of the audience participated. He picked a homeowner and gave her some gold (chocolate) coins and some pennies. He picked a mortgage broker at a different table and a lender. We went through the transition of the institutions and what happened in the past when a homeowner qualified for a loan and the trust between the financial institution and the mortgage broker/servicing agent with the ''note''. Then another P.O. Box was chosen (he was a hot looking P.O. Box too). We learned how they bundled the mortgages and when and what allowed it to happen. It was fascinating to see what happens to the mortgages and who was getting all the money. It was all working well until they didn''t have anymore mortgages and the interest rates fell. So the sub-prime mortgage was conceived to keep the money flow going since Wall Street (the table I happened to be sitting in) wanted to get in on the action as well.

The problem is that it is EVERYONE''S money. 401K''s, Mutual Funds, etc. The FDIC was increased and additional Federal insurance against Money Market Funds just to prevent a run on the banks, which was beginning to happen. it''s all a nightmare. I don''t know if anyone knows how to fix it.

It should have never happened. It was a perfect storm. Any one aspect alone was not enough to cause enormous damage, but all of these things together created a nightmare. We can''t afford to let the insurance company/banks/investment firms fail because they have ....let me put it this way. The easiest way I could describe it afterward, simply because it is my twisted mind, was ''It was like one big orgy, they contracted AIDS, and they are all dying''

Yeah, I''ve been ranting about Glass-Steagall for awhile now. The DH, that fount of all knowledge when it comes to historical bill, acts, purchases and such, told me about that one quite awhile back. And I don''t remember where exactly it was in that original act, but there was even a provision in it to prevent just the sort of "gambling on failure" (they had actual parlours where you could go to place "bets" on whether stocks would fall, kind of the precursor the the CDO. I''m probably not remembering this all that clearly, it was something I saw a few months ago on PBS) that we saw this time around. The DH just sighs this big heavy sigh, shakes his head, and says, "We''ve done this BEFORE. We even did it before the crash of ''29."

And of course the protests that "the government MADE us do it!" are obvious lies. All you have to understand is that they had to keep all the balls juggling in the air at all times.
What was REALLY fun was to watch Greenspan admit that the fed policy during his time, was INTENDED to drive money out of savings and into stocks. And then of course all the "experts" were selling the average person a bill of goods: Oh, you''re 401K is your best bet for retirement. Blah blah blah. My mom''s comment to me 20 years ago: "Just remember, they didn''t create the 401K with YOU in mind." Smart woman, my mother...

 

[Beacon]

Miraclesrule, I think you are onto the truth of the matter: meaning that we may be a bit closer to an abyss than we would like to think and extraordinary actions are being taken to stop the spiral. Will they work? Heck if I know.

One part of Obama''s plan I do like: the notion that even if you have an LTV greater than 80% you can still refi your loan, provided Fannie or Freddie already own it. Now that last bit, about Fannie and Freddie already owning it, does eliminate quite a few mortgages, especially some of the exotic ones and the large ones. But putting that aside, this one part of the plan is quite good.

Interest rates have moved down and many people cannot take a refi b/c their home will not appraise for enough. This plan would give those people a shot at a refi which would lower their payments right away and give them incentive to stay in the house. Note, that in this case, the mortgage amount does not change, only the payment cause of the lower rate. This is a great thing and will help people and help the forclosure problem.

I do not know the structure of what they intend to do with the modifications and who will be paying the cash flow shortfalls, so I cannot comment on that.

On the moral hazard side, I am totally with the OP - it is a terrible thing that we are going to go into debt to repay the acts of foolish people who made large mistakes due to bad judgement, lack of knowledge, greed or a combo of these.

 

[Harriet]

And some people are still spending irrationally!

 

[ksinger]

Date: 2/19/2009 10:57:38 PM
Author: Beacon
Miraclesrule, I think you are onto the truth of the matter: meaning that we may be a bit closer to an abyss than we would like to think and extraordinary actions are being taken to stop the spiral. Will they work? Heck if I know.

One part of Obama''s plan I do like: the notion that even if you have an LTV greater than 80% you can still refi your loan, provided Fannie or Freddie already own it. Now that last bit, about Fannie and Freddie already owning it, does eliminate quite a few mortgages, especially some of the exotic ones and the large ones. But putting that aside, this one part of the plan is quite good.

Interest rates have moved down and many people cannot take a refi b/c their home will not appraise for enough. This plan would give those people a shot at a refi which would lower their payments right away and give them incentive to stay in the house. Note, that in this case, the mortgage amount does not change, only the payment cause of the lower rate. This is a great thing and will help people and help the forclosure problem.

I do not know the structure of what they intend to do with the modifications and who will be paying the cash flow shortfalls, so I cannot comment on that.

On the moral hazard side, I am totally with the OP - it is a terrible thing that we are going to go into debt to repay the acts of foolish people who made large mistakes due to bad judgement, lack of knowledge, greed or a combo of these.

DH and I were chatting this morning. I was speculating that Obama may not be doing bold enough things. He just said that we aren''t there yet. Things are bad but as you say, we still haven''t actually fallen into the abyss. I think we''re going to have actually fall in and not just hurt, but be in agonizing pain, before we admit that we must do SOMETHING, anything. And I don''t believe it will come without a great deal of social upheaval. That''s a real danger.

 

[tlh]

Date: 2/19/2009 7:33:30 PM
Author: m76steve
it was originally $15,000.00 for home buyers but that has been reduced or replaced-i think now you get a $8,000.00 credit if that but your president will probably change that-he lies so much these days-he is yours-enjoy...

For those that buy a house before Dec. 1, it will be $8,000 cash in your pocket according to Obama''s new plan. it used to be a $7500 interest and tax free loan that you had to repay $500 for 15 years. Now it''s just money for first-time homebuyers...

1400C(e)(4)
Recovery Act 1006(d)(1)
First-time homebuyer credit extended to residences purchased before Dec. 1, 2009 and increased to $8,000 ($4,000 for joint filers); required repayment of credit is waived unless the residence is sold or ceases to be a principal residence within 36 months of purchase
Residences purchased after Dec. 31, 2008 and before Dec. 1, 2009
¶104
¶5006

 

[DivaDiamond007]

Date: 2/19/2009 1:33:34 PM
Author: Cleopatra

Date: 2/19/2009 1:24:10 PM
Author: tlh
I was in the restroom the other day... at work. And two ladies came in, and did the stall poop and talk. Ok gross, I know. Now, I am a prolonged handwasher, and I must say I was appalled at what I heard them discussing. One lady is intentionally NOT paying her morgage so that she too can get bailed out. ''i want my piece too....'' I was very sick at their discussion... she is also talking about maxing out her credit cards, so that when she files for bankrupcy she can get more bang for her buck.


I was very disturbed. Now granted I only heard a fraction of their conversation, so I might have missed something, so I cannot judge.


But I do wonder, how can we fix this? What we are doing is not working. We are trying to put a bandaid on a severed head... and I just don''t know what to do, and I don''t have faith in our government either. A stimulus didn''t work. The bailout of the banks doesn''t seem to work when they aren''t lending... I don''t have the answers, everywhere I look people are affected by this... in soo many ways.

That makes me sick to my stomach. I am so tired of people working the system in a way that it benefits themselves and leaves the rest of us poor (responsible) souls taking care of their mess.....I hope she declares bankruptcy - do these people have no idea what it does to their credit? It''s just plain idiotic to think that this is benefiting themselves in anyway...

**MINOR THREADJACK**

I really try to stay out of the discussions over here, because I wouldn''t consider myself thick-skinned, but here goes. Having worked in bankruptcy for going on 5 years now, maybe this woman should file. If she cannot afford her house or her debt then she should. Filing for bankruptcy is largely a "business" decision that sometimes one has to make. It''s also a decision that needs to be planned. It''s not going to ruin her credit any more than it already is by making late payments and having a large debt-to-income ratio. In fact, her score will likely go up when she gets rid of the debt - because her debt-to-income ratio will go way down. It''s a dirty little secret of filing for bankruptcy. She''ll have the black mark on her report for around 7 years, but the actual affect of a bankruptcy only lasts about 1 year, 2 years when it comes to mortgaging real estate. In the long run she''d be better off. Bankruptcy is not always the most responsible thing to do, and most who file use it as a last resort, but sometimes it''s the best option.

Put yourself in the shoes of someone who has just lost their good paying job and has a mountain of debt (mortgage, car, credit cards, other loans). It''s a very scary reality for many people these days. We''ll wait and see how much worse it gets if/when the automakers fail. My office is bracing for an increase in bankruptcy filings that we haven''t seen since before October 2005 (when the new laws went into effect).

**END THREADJACK**

I''m not totally into politics so I''m not sure what this whole mortgage bailout means to me, especially since I do not own a home and probably won''t for another few years. My tax dollars have been paying for people who are not responsible for a long, long time - i.e. welfare and other government programs so to me this really isn''t anything different.

I guess my question to those that oppose this move by our government is: What is a better option? How would you handle this situation? Do you have any better ideas? Should we really just let all of these people, irresponsible or not, lose their homes, and become homeless? Foreclosures lower property values in neighborhoods. Wouldn''t you rather these people stay in their homes, make their payments, with assistanct or without, and maintain the value of your own home?

I''m not saying that I totally agree with what our government has done, nor do I think that I have all of the answers. I''m just curious as to what you would do differently to help get our economy back on track since we can''t undo what''s already been done.

 

[DivaDiamond007]

Date: 2/19/2009 6:58:10 PM
Author: packrat
I think I understand the logic in some ways, but I can''t say necessarily that I agree with it..all I see are a lot of fat cats in government and businesses living high on the hog and mismanaging their personal and business finances and then expecting and begging to be given help, on taxpayers dollars.

I don''t understand how the loan people could be so underhanded as to tell someone who makes $50,000 a year that they can easily afford a $300,000 loan in the first place, and why those people would believe it. Is it too much of an ''I want'' society and people willing to take advantage?

One of my coworkers today told me she and her fiance are putting a bid in on a house now b/c they''ll get some sort of rebate of like $5k-$12k?? Does that have anything to do w/the bail out or how is she coming up w/that?

Thank you for posting this! I ask myself this all the time, especially now that our economy is in a free fall. Why would a consumer believe that they could afford those payments on that income? I understand that a lot of consumers could not decipher the mortgage documents they signed, but nobody is stopping you from asking everything to be explained, line by line if necessary. If it sounds to good to be true......then it probably is.

 

[DivaDiamond007]

Date: 2/19/2009 8:14:17 PM
Author: packrat
I''m by no means a rocket scientist, mathematician or financial whiz, but when we were looking at houses before we got married, we KNEW beyond a shadow of a doubt what area our budget was in..and it was looooow. Our Realtor helped us, and we went to the bank and asked what kind of limits we were looking at. He showed us the formula-we made $X for the year, and they''d allow us to be at Y% of that. No more. So, if we were told they''d loan us $50,000, we weren''t out looking at $300,000 houses. I''m also curious how people can believe that if they have 5 apples for the month, they can afford a house that costs 4 apples a month. I don''t think it takes MENSA smarts to understand. It reminds me of the commercial of the guy on the mower going ''round and ''round and he''s saying all the things they own, and says ''I''m in debt up to my eyeballs..somebody help me''

Does anybody think that realtors played a role in this? My parents have been house-hunting for several months now and their realtor consistently shows them houses that are out of their budget. Watch any of the shows on HGTV and the realtors on there do the same thing........

 

[DivaDiamond007]

Date: 2/19/2009 9:37:34 PM
Author: miraclesrule
I learned a great deal today about why the current economic crisis occurred. It wasn''t any one thing, but there was a dismantling of the safety net. I am not inclined to share the interesting things that I learned, which caused me to re-think some of my prior opinions on the root cause of the meltdown. I was close to understanding most of it, but was missing crucial pieces of the puzzle.

I won''t share the nuggets at received at my conference today, until several of you read this article. It''s intended to bring balance before I share.

Mortgage Fraud-with proof

MERS is a huge issue with bankruptcy attorneys. We have yet had to challenge foreclosures in my office but it is something that we are considering. Basically, if the Plaintiff in the foreclosure cannot prove that it actually owns your mortgage then it has no ground to initiate the foreclosure to begin with and the case legally cannot move forward. However, sometimes the documents proving ownership of the mortgage have simply been misplaced by the lender and by the Defendant (homeowner) objecting to MERS becomes only a delay tactic used to keep Defendants in their homes longer.

 

[Haven]

I definitely think realtors play a role in this problem. When we were searching for our home our realtor frequently wanted to bring us to homes that were just a tad bit over the price point we were interested in, and she frequently did the whole "but you can afford so much more!" thing because we were approved for much more than we chose to spend. It was very much a slippery slope mentality--if you spend just a bit more look at what you can get! Yikes.

HOWEVER, I think it''s NEL who frequently advocates personal responsibility, and I completely agree. I don''t care if someone is offering to give me a million dollar home loan, or a 30K car loan, or a shiny new credit card, or a bag full of illicit drugs. The bottom line is that I am ultimately the one who makes the choice to accept or to say no, to live within my means or beyond, to inhale or not. While I agree that it is ridiculous for a bank to loan someone an amount of money that they clearly cannot afford, it is even more ridiculous for an individual to accept something just because it''s being offered. People need to be responsible for themselves, and they need to stop spending money they don''t have.

Related anecdote: I teach students in high school English classes. My sophomores are currently reading Ibsen''s An Enemy of the People, which is largely about the irrational tendnecies of the masses and opportunism trumping truth. One of our main inquiries for this play is "Is money the root of all evil?" At the end of one of our discussions yesterday I told my students that I have the secret to financial well-being: Spend less than you earn. They were annoyed by the simplicity of the statement, but if they take only that one thing from my class, I feel I will have done them some good. Of course, most of them stepped into the hallway after our class, plugged their iPods earbuds into their ears, and strutted away in their designer tennis shoes.

 

[stone_seeker]

I appreciate all the discourse on this topic. Some very valid points. I guess I don''t understand where these troubled homeowners were before they got into trouble. Were they renters? If so, why cant they rent again? Is renting considered un-American? Did they sell a smaller home? If so, they probably got a good deal on it and should perhaps downsize. People all over the world are making do with less so why do we need to subsidize that extra bedroom or swimming pool? Or, in the most egregious case, did they take out a ton of money in a refi and spend it on discretionary items? (BMW, 50" plasma, trip to France). The government is going to lose a lot of equity with the American public if they just try to keep these folks in the status quo. I mean why bailout homeowners who lost money? I lost money in the stock market through no fault of my own, where''s my check? Why do we favor homeowners over non-owners?

I am not just whining about the unfairness - I really believe the unfairness is actually going to cause greater issues in the near term and for future generations with its unintended consequences.

Obama campaigned about how low wage workers have been shut out of home ownership and yet he is enacting a plan that will keep prices high! I dont see the value in that. There are a lot of people who can buy a home at lower prices and once they do, they will spend money fixing it up, on washing machines, etc. Which will ultimately help everyone. If we keep piling on debt to keep the irresponsible in the status quo, eventually the house of cards falls. So I say rip off the band aid rather than slowly peel it off.

People should be allowed to go bankrupt and businesses should be allowed to fail. The govt should focus on facilitating that process rather than trying to prevent it. There is no value in heaven without the threat of going to hell.