Join Early Retirement Today
View Poll Results: Should taxpayers subsidize McMansion purchases?
Yes, I think buyers in danger of default should have their mortgage principal reduced. 7 14.00%
No, I don't think buyers in danger of default should have their mortgage principal reduced. 36 72.00%
Not sure. 1 2.00%
I will need more information before expressing my opinion. 6 12.00%
Voters: 50. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
Should Taxpayers Subsidize McMansion Purchases?
Old 09-28-2008, 02:27 PM   #1
Full time employment: Posting here.
Retire Soon's Avatar
 
Join Date: Nov 2005
Posts: 655
Should Taxpayers Subsidize McMansion Purchases?

It's not certain, but probable that the Paulson Bail out Plan will become law. A key provision from the Bail out Summary is this:

"The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year."

Do you think Taxpayers should pay for "reduced principal" on mortgages of Americans who have purchased McMansions ?
__________________

__________________
"I went to the woods because I wished to live deliberately... and not, when I came to die, discover that I had not lived."

--Henry David Thoreau
Retire Soon is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-28-2008, 02:49 PM   #2
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
What I would prefer is to do it through the bankruptcy system, allowing people to do reorganization plans that may involve restructuring their home debt and other debt, while living off of a court approved budget.

Otherwise, we might have even more defaults on upside down mortgages.
__________________

__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 09-28-2008, 03:08 PM   #3
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
They already do and have for years, through the tax deductions for mortgage interest and property taxes.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 09-28-2008, 03:15 PM   #4
Full time employment: Posting here.
 
Join Date: Jan 2006
Posts: 899
I think that you have stated the question in such as manner that very few will reply with a "yes." That is of course what pollsters do when they are trying to manipulate the answer.
__________________
mb is offline   Reply With Quote
Old 09-28-2008, 03:25 PM   #5
Full time employment: Posting here.
Retire Soon's Avatar
 
Join Date: Nov 2005
Posts: 655
That's exactly the point I'm trying to make. When government officials begin reducing the principal on these mortgages, are they going to take the mortgage amount into consideration? That is, will a 100k mortgage have a better chance for subsidy than a 300k mortgage?
__________________
"I went to the woods because I wished to live deliberately... and not, when I came to die, discover that I had not lived."

--Henry David Thoreau
Retire Soon is offline   Reply With Quote
Old 09-28-2008, 03:40 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by Martha View Post
What I would prefer is to do it through the bankruptcy system, allowing people to do reorganization plans that may involve restructuring their home debt and other debt, while living off of a court approved budget.

Otherwise, we might have even more defaults on upside down mortgages.
But that would require a BK system that was not recreated exactly according to the credit card companies' specific wishes. Good luck with that.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 09-28-2008, 03:45 PM   #7
Full time employment: Posting here.
Retire Soon's Avatar
 
Join Date: Nov 2005
Posts: 655
Quote:
Originally Posted by brewer12345 View Post
But that would require a BK system that was not recreated exactly according to the credit card companies' specific wishes. Good luck with that.
You've raised a very important issue:

Banks love bailout, hate credit card curbs - Los Angeles Times
__________________
"I went to the woods because I wished to live deliberately... and not, when I came to die, discover that I had not lived."

--Henry David Thoreau
Retire Soon is offline   Reply With Quote
Old 09-28-2008, 03:50 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by Retire Soon View Post
Actually, the restrictions imposed in the bill are stupid and ill-timed. What needs to be changed is how credit card debt is treated in bankruptcy, not how credit is priced. You restrict the ability of banks to price credit on a flexible basis and you shut off the flow of credit to some proportion of the population.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 09-28-2008, 04:52 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
That raises an interesting question: what happens when everyone stops making their credit card payments?
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 09-28-2008, 04:56 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Oct 2005
Posts: 4,898
Everyone who's interested in this whole shebang really should watch the documentary "Maxed Out." It's available for instant viewing on Netflix. Very enlightening on how we got to this point. I learned a lot about how the banks lobby congress and how they use credit card interest rates and fees to trap people
__________________
Zoocat is offline   Reply With Quote
Old 09-28-2008, 05:09 PM   #11
Moderator Emeritus
laurence's Avatar
 
Join Date: Feb 2005
Location: San Diego
Posts: 5,234
Bailing out your neighbors sounds horrible until you face the alternative. As someone with an empty house behind me and neighbors on the verge of walking out, I can tell you it stinks. More houses in my neighborhood have renters now, and they could give a crap about how their front lawn or cars look. Who knows if it's related, but all of a sudden cars are getting egged, trees tp'ed, our car was broken into along with a dozen others...and from what I've heard we've had it easy compared to some neighborhoods.
__________________
laurence is offline   Reply With Quote
Old 09-28-2008, 05:47 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
I don't think the principal should be reduce.. but if they have a sky high interest rates... That might need to be reduced. Nobody wants those houses back on the market.
__________________
chinaco is offline   Reply With Quote
Old 09-28-2008, 05:49 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
I'm fine with principal reduction as long as any capital gains on future sales are recouped, and people moving with a negative value have to pay at least part of that back over time, probably as part of their taxes...sort of like working off a capital loss...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 09-28-2008, 06:35 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
I just finished skimming the 110 page bailout bill. It looks like the govt won't necessarily be losing money in all cases if it were to reduce the principal amount of a mortgage. Say it buys a mortgage for 60 cents on the dollar and then writes off 40% of the principal amount outstanding. Is it really losing that 40%? No. It is just making the outstanding principal amount equal to the purchase price of the mortgage. The goal of the govt would be to turn the mortgage from one almost guaranteed to go into default into one that has a significant likelihood of being repaid.

I do have concerns with the fact that these borrowers will never be required to pay any of the forgiven debt back, and further that they won't have to pay tax on debt forgiveness (BTW, this bailout bill extends the nontaxation of forgiven debt from 2010 to 2013). I wonder if the govt could agree to write off certain principal amounts and then agree with the homeowner to have a portion (20-50%) become debt they owe to the IRS and payable over time starting after a 5 year grace period or so. That way, the government gets a portion of their money back, the homeowner gets a break, and hopefully everyone/everything will be solvent and sane in 5 years. Make the debt IRS debt so they can't easily discharge it in BK and the govt has a number of sticks to hit them with to encourage payment.

In the meantime, I'm off to figure out ways to get my hands on some sweeeeet government handouts!
__________________
FUEGO is offline   Reply With Quote
Old 09-28-2008, 06:35 PM   #15
Moderator Emeritus
laurence's Avatar
 
Join Date: Feb 2005
Location: San Diego
Posts: 5,234
Quote:
Originally Posted by cute fuzzy bunny View Post
I'm fine with principal reduction as long as any capital gains on future sales are recouped, and people moving with a negative value have to pay at least part of that back over time, probably as part of their taxes...sort of like working off a capital loss...
+1. Some sort of "we get a cut of your profits from the sale down the road" plan.
__________________
laurence is offline   Reply With Quote
Old 09-28-2008, 07:02 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
I'd sure at heck hate to see these folks get a principal chunk forgiven, and then sell the house 6 years from now for a 5 figure gain, tax free...that better not happen.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 09-28-2008, 07:23 PM   #17
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by FUEGO View Post
I just finished skimming the 110 page bailout bill. It looks like the govt won't necessarily be losing money in all cases if it were to reduce the principal amount of a mortgage. Say it buys a mortgage for 60 cents on the dollar and then writes off 40% of the principal amount outstanding. Is it really losing that 40%? No. It is just making the outstanding principal amount equal to the purchase price of the mortgage. The goal of the govt would be to turn the mortgage from one almost guaranteed to go into default into one that has a significant likelihood of being repaid.
In addition, as Warren Buffett and Bill Gross have pointed out, the government should make a few percentage points on the carry since it can raise the money to buy the mortgage at less than 4%.
__________________
FIRE'd@51 is offline   Reply With Quote
Old 09-28-2008, 09:03 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,947
I'd prefer extending the term of the loan over a reduction in principal.
__________________
jazz4cash is online now   Reply With Quote
Old 09-28-2008, 09:49 PM   #19
Full time employment: Posting here.
 
Join Date: Feb 2007
Posts: 595
My thoughts on this one are pretty simple. I believe that as an american citizen we NEED to pay SOME taxes. The govt has no money of it's own to purchase anything. The only money the govt has is what it collects from the citizens via our taxes. That being said, if that tax money is being collected from everyone, then morally it must only be used for things that can be utilized by everyone. The education system, roads, libraries, police, national defense, military hardware, etc. These are all things that I either have used, do use, or will at some in the future have some use for, or derive some benefit from. However, when my tax dollars are being put into the hands of another individual, or a privately held company, then I cannot derive any use of that money whatsoever!
I think by now I truly do understand if not agree with the other side of this arguement. And that objection is.. (so the other side will tell me) that the govt is responsible for the well being of EVERY american citizen, and the govt MUST help everyone responsible, and irresponsible alike, in adherance to that mandate. But the one point that always seems to get missed here, is on WHOS nickle is that being funded? Remember govt money is OUR money (the citizens...)
__________________
armor99 is offline   Reply With Quote
Old 09-28-2008, 11:01 PM   #20
Recycles dryer sheets
Gardnr's Avatar
 
Join Date: Jul 2008
Location: ENE MO - near STL
Posts: 424
Quote:
Originally Posted by cute fuzzy bunny View Post
I'm fine with principal reduction as long as any capital gains on future sales are recouped, and people moving with a negative value have to pay at least part of that back over time, probably as part of their taxes...sort of like working off a capital loss...
Bingo. That shouldn't be so hard to do, and it makes it a lot more fair while giving the short term relief needed.
__________________

__________________
Gardnr is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
retiring to save the taxpayers money s_boy Hi, I am... 16 02-28-2011 03:14 PM
what would you do with a few unlimited $$ purchases? figner Other topics 58 06-24-2008 12:55 PM
McMansion curbs cute fuzzy bunny Other topics 18 08-02-2006 01:32 PM
Online purchases Arif Other topics 1 05-03-2006 11:54 PM
How Big is Your McMansion? SteveR Other topics 42 12-04-2005 10:22 AM

 

 
All times are GMT -6. The time now is 09:31 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.