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Old 12-16-2007, 01:07 PM   #241
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Old 12-16-2007, 04:44 PM   #242
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How will this world you describe work? One where everyone is saved from feeling miserable? Make a mistake - no problem, we will save you, we don't want you to feel miserable. Geez, I guess there is no reason to learn not to make mistakes - will save me. In fact, why bother to get an education, or work hard, let's just let someone save us. Let's give all the kids a grade of 'A', we don't want any of them to feel miserable, some of them never would have learned anyway.

I think we would run out of hard working suckers pretty quickly, then everyone is miserable. Sound familiar?

OK, that is an extreme view of this situation, but it holds true. It sets a dangerous precedent, it extends beyond the people that are 'saved'. Others observe that the govt bails you out of bad decisions, and it just snowballs.

Though it sounds harsh in the short term, I really think that expecting some personal responsibility is the kindest thing to do in the long run, and the fairest.

The Declaration of Independence refers to the 'pursuit of Happiness' as an unalienable right. Not 'happiness', the 'pursuit of Happiness'. Big distinction.

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Old 12-16-2007, 09:39 PM   #243
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Old 12-16-2007, 09:54 PM   #244
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I never said 'punish' - I said they should have to abide by the contract they signed (unless fraud was involved). Isn't that the law? I don't think they should be above the law. And I didn't use any deprecatory adjectives that I recall. I think I said that if people are going to take on as large a financial decision as a home mortgage, that yes, they should educate themselves about it first. Terms like 'fixed rate' and 'adjustable rate' are not such difficult concepts. Or they should probably rent until they do learn. Or get some help. I'll stand by that.



And all I am saying is - has that really been weighed against the long term impact of telling a group of people that they won't be held to their contracts if it goes against them? Won't everyone want a piece of that in the future? Unintended consequences?

Hey, maybe some bail-out really is the best that can be done in a bad situation, I'm just offering up an opposing view. I don't think that plan comes w/o some large risks of it's own.

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Old 12-16-2007, 10:09 PM   #245
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What amazes me is the focus on the homeowners. Rather than focus on individual homeowners as beneficiaries despite thier naivety, greed, or ignorance, I am more ticked off about the irresponsible actions of various elements of the mortgage industry are being smoothed over (temporarily). Hopefully the intervention will insulate the rest of the economy, but more of these folks should be facing criminal investigation. I would say the companies should pay big fines, but that cost WOULD be passed on to legitimate customers
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Old 12-17-2007, 08:30 AM   #246
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What amazes me is the focus on the homeowners. Rather than focus on individual homeowners as beneficiaries despite thier naivety, greed, or ignorance, I am more ticked off about the irresponsible actions of various elements of the mortgage industry
I think if you look back at the posts, most people that call for holding people to their contracts put in the caveat at some point 'unless there was fraud on the part of the lender'....

Those people should be held to the law also - not doing so has bad long term impacts also. Some of that fraud may have been complicit though - like 'oh, you can get this mortgage if you tell us you have some other income...., and then the buyer agrees to this fraud'. I have no idea how common this was, but if it was complicit fraud, I say hold the buyer to the contract and punish the lender.

If the govt is getting involved, I prefer prevention/regulation to reaction. There should be 9have been) tougher standards to prevent the problems in the first place.

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Old 12-17-2007, 09:53 AM   #247
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I agree with you ERD50... there are MANY unintended consequences that will come out of the govt helping the lenders, and the homeowners. I think at the very core of it, is a bogus idea that is held by way to many people. Somehow people (and the govt) have come to believe that home ownership is a right in the US. It is not a right to own property, it is a privalege. If you have the money to make the purchase, the home can belong to you. There is no pledge in the consitution that the govt is responsible to "give" you anything. Although there are many that try to spin it that way.
Do not misunderstand me though... if the banks themselves want to re-negotiate deals with their mortgage holders so that bankruptcy does not happen, then I think they are free to go ahead and do so. I think that many lenders would choose that option because the banks really do not want to hold the properties either. But the govt should not get involved here. I think that the govt trying to change the contracts of thousands of homeowners is a very dangerous idea. I do not believe in coersion, by the govt or anyone else. Please keep in mind that stealing $5 from Bill Gates, is just as wrong as stealing $5 from me.
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Old 12-17-2007, 11:20 AM   #248
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Our government has set a precedent this year that will do irreparable damage to both our economy and society for many generations to come. The five year freeze on interest rates and the U.S. Senate bill to lower standards for FHA loans will both serve to bailout irresponsible homeowners and lenders.

I once earned a living as a loan officer for a major mortgage banker in San Diego. We originated FHA, VA and Conventional loans. Although, I only did this for five years beginning in 1978, the knowledge that I gained in personal finance has stayed with me ever since. Those were the days when people were expected to make sufficient money to make payments on a house and make a sizable down payment before loan documents could ever be drawn up. We had two ratios for conventional loans that were required: 1) ratio of monthly Payment (principal, interest, taxes, and fire insurance) to monthly gross income 2) ratio of payment plus bills to monthly gross income. The first ratio could go no higher than 29% and the second ratio could go no higher than 34%. Some lenders were even more conservative than this. Qualifications for FHA and VA loans were different, but in many ways were similar, with the exception that VA loans required no down payment. We tried to do the best job possible in prequalifying borrowers, because nothing is worse for all parties involved in the sale of a home then when a loan is denied by an underwriter after being in escrow for eight or nine weeks. However, with careful pre-qualifications, this rarely ever happened.

What has helped me in my own personal finance and enabled me to retire early on a modest income is that I learned first hand that monthly debt service was the most frequent cause of a single person or married couple's inability to qualify for a loan. Usually, this took the form of one or two car payments. From practical experience, being in the mortgage business taught me not to abuse credit and to avoid high monthly bills, especially on new cars.

It saddens me to see what has happened to society in recent times. There is not longer a sense of personal responsibility for one's actions and decisions. As armor99 so eloquently stated, home ownership is indeed not a right but is rather a privilege. This kind of reminds me of what my high school driver's education teacher would say about our driver's license, "Remember it's a privilege, not a right. You have to earn it and follow the rules of the road in order to keep it." In the same way, many of these subprime borrowers in recent times did not hear, or choose to hear someone tell them that homeownership is a privilege and not a right. To start with, many did not even have to put down money on their house. Many did not even have to pay closing costs. Many did not even have to have good credit. Many did not even have to prove that they even had a job. When the escrow officer explained terms of the loan and what the index was tied to and what was the most they could expect their payment to go up to, many chose not to hear this. But, they liked the idea of moving their family into a big McMansion with little or no down payment and a small starting monthly payment, perhaps even close to what they were paying for rent.

My, how society has changed since I was a loan officer in the late 70's and early 80's and I don't mean for the better. It seems that many do not want to accept responsibility for their poor decisions and now we have a government that reinforces their lack of good judgement. Many want to blame someone else. We've been so generous with our "privileges" that we have even granted driver's licenses and home ownership to many who live illegally in our great nation.

Unfortunately, we're all going to pay for this big time, because society and our economy will suffer for generations to come because of it. I think we've had it far too easy in recent years. Things have been just going too good for us. What happened to the days when we were expected to put 20% down on a house. If you had golden credit, you might be able to get by with 10% or even 5%, if you showed you had a good job history. Was money just so plentiful the past couple of years that banks found it necessary to just give it away?
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Old 12-17-2007, 01:41 PM   #249
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Was money just so plentiful the past couple of years that banks found it necessary to just give it away?
Yes, the Federal Funds rate was 1% from June of 2003 until June of 2004 that created a substantial surplus of liquidity.
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Old 12-17-2007, 02:04 PM   #250
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Here is the blame list:
The Fed - creating cheap money
Wall Street - making risky products available
Mortgage lenders - creating high-risk mortgage products
Loan originators - pushing high-risk products to clients who cannot afford it.
Real estate agents - selling to buyers who could not afford it

Borrowers - going over their heads.
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Old 12-17-2007, 02:16 PM   #251
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Mortgage-Relief Plan Divides Neighbors - WSJ.com

If you read this article, and pay attention especially to the story of the Oropeza family, your blood will start to boil. Clearly they had no intention of being financially responsible to either their mortgage owner, the credit card companies, and the car dealers who have financed their vehicles. These people should NOT be bailed-out.
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Old 12-17-2007, 02:38 PM   #252
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The real problem is that this rot has spread widely through business. Any banks holding derivatives will be writing down a big portion(e.g. WMU). Same with insurance companies. And any company or organization with a DB pension plan will be paying for these loans. This includes people that pay taxes to pay teachers with DB plans.

And, of course, any index funds that hold any of the above will also pay for the writedowns. The real problem is that the size of the writedowns will be greater than the size of the housing bubble because the subprime loans went well beyond just the house equity to people that could not afford the houses and the loans in the first place.

The problem is that the effects of the fraud have spread so widely that it is impossible to deal with it all. It is the ultimate "confidence game".
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Old 12-17-2007, 03:25 PM   #253
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The current planned bail-out won't include them. Their mortgage is higher than the limits, and they aren't current on their payments. Even if it did, it wouldn't be much help, since they can't make the current payments. They will default on their mortgage and the bank will end up owning their California home.

I assume they will make the payments on the Texas home and their fancy new cars. They scammed the lender and will probably get away with it, aside from having their credit wrecked.

I really don't feel sorry for the lender though. Part of mortgage lending has always included managing your risks. Making 100% cashout financing available to people who don't have enough income to support the payments is bad banking. If you leave a big pile of money unattended in a public place, I'm not going to feel too bad for you when someone takes it. That's what these lenders did. They are too dumb to be bankers.


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Mortgage-Relief Plan Divides Neighbors - WSJ.com

If you read this article, and pay attention especially to the story of the Oropeza family, your blood will start to boil. Clearly they had no intention of being financially responsible to either their mortgage owner, the credit card companies, and the car dealers who have financed their vehicles. These people should NOT be bailed-out.
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Old 12-17-2007, 04:35 PM   #254
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Whatever happens, you will pay whether your personal behavior was above reproach or not.

When did you first realize that it was a house of cards? What did you do to shield yourself from the debris?
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Old 12-17-2007, 11:50 PM   #255
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Since we seem to have folks who are for a taxpayer funded bailout and folks who are against it, why doesn't the fed gov add a line on 1040 forms where those that want to pay for the bailout can voluntarily write in the dollar amount they want to contribute? If they're getting a refund, it would simply reduce that. If they owe, now they'd owe some more. Win - win for everyone!
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Old 12-18-2007, 10:57 AM   #256
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Since we seem to have folks who are for a taxpayer funded bailout and folks who are against it, why doesn't the fed gov add a line on 1040 forms where those that want to pay for the bailout can voluntarily write in the dollar amount they want to contribute? If they're getting a refund, it would simply reduce that. If they owe, now they'd owe some more. Win - win for everyone!
I always wanted those checkboxes for stuff like the Bush War, farm subsidies, etc. Where do I sign up?
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Old 12-18-2007, 08:48 PM   #257
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Ok folks!!! I have read most all of the comments posted on all 3 of these threads and many of the published commentaries. It is a sorry mess to say the least. Where in the name of common sense are the comments to these misguided and poor lost souls who drank the home ownership Kool-Aide that property always appreciates at 10 to 20% per annum. Also, is there a law against a couple taking on a part-time job or two for a couple of years?

Mortgages and home ownership is a LONG TERM INVESTMENT!!!

There are no free lunches.

New cars and consumer debt is a choice and the stores are full of crap you can live without. Eating at home is not as much fun as dining out but a good nights sleep and your personal honor and integrity are worth a hell of a lot more than trash & trinkets.
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Old 12-18-2007, 08:55 PM   #258
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I always wanted those checkboxes for stuff like the Bush War, farm subsidies, etc. Where do I sign up?
I think because the Presidential campaign funding (despite it not increasing your tax liability) has had a pretty poor response a tax payer check off would result in near zero revenue for the government. Now why this would be a bad thing is an exercise for others to figure out.
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Old 12-18-2007, 10:25 PM   #259
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Ok folks!!! I have read most all of the comments posted on all 3 of these threads and many of the published commentaries. It is a sorry mess to say the least. Where in the name of common sense are the comments to these misguided and poor lost souls who drank the home ownership Kool-Aide that property always appreciates at 10 to 20% per annum. Also, is there a law against a couple taking on a part-time job or two for a couple of years?

Mortgages and home ownership is a LONG TERM INVESTMENT!!!

There are no free lunches.

New cars and consumer debt is a choice and the stores are full of crap you can live without. Eating at home is not as much fun as dining out but a good nights sleep and your personal honor and integrity are worth a hell of a lot more than trash & trinkets.
Crazy Connie, everything you say in your post rings with truth and common sense. I especially like your comment about a couple taking on part-time jobs to make their increasing house payments. I haven't heard anyone raise this possibility. Also, protection of a couple's personal honor and integrity could be salvaged by working extra hours. Unfortunately, our federal government did not want them to learn this lesson. Are we becoming a weak society?
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Old 12-19-2007, 10:44 AM   #260
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Thousands of school, fire, water and other local districts across the U.S. keep their cash in state- and county-run pools. These public accounts, modeled after private money market funds, are supposed to invest in safe, liquid, short-term debt such as U.S. Treasuries and certificates of deposit from highly rated banks.

The Florida pool, which was the largest of its kind in the U.S. at $27 billion before the recent spate of withdrawals, has invested $2 billion in SIVs and other subprime-tainted debt, state records show. Connecticut, Maine, Montana and King County, Washington, are among other governments holding similar investments, in smaller quantities.
CDs or CDOs?
Bloomberg.com: Worldwide

The rot spreads further than we think...
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