Do you want to pay for the Sub-Prime freeze?

[A854321]

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.

 

[kcowan]

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".

 

[Hamlet]

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.

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.

 

[Tadpole]

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?

 

[youbet]

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!

 

[twaddle]

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?

 

[crazy connie]

Solution

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.

 

[clifp]

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.

 

[Retire Soon]

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?

 

[kcowan]

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...

 

[Retire Soon]

I suppose I might as well be throwing meringues into a black hole trying to talk about facts on this subject, but one more try:

The federal regulators were doing what they were supposed to be doing: they were regulating and restraining the banks in their lending. If you look at the last two years worth of "proposed guidance open for comment" (i.e. this is what we will force you to do shortly, so stop doing it now) that the bank regulators issued, you will see: restrictions on subprime lending, restrictions on construction lending, requirements to qualify borrowers for loans based on verifiable income, etc. system...

The problem now is that the non-bank lenders (who were regulated by the states if at all) have pissed in the punch bowl. Want a cup?

But it isn't the bank regulators' fault.

Brewer12345,

This Feds "Proposed Guidance open for comment" was a joke as was reported yesterday in a New York Times article, entitled, "Fed Shrugged as Subprime Crisis Spread." Regulators waited until December 2005 (the peak of housing prices) to issue "Proposed Guidance" to banks and thrifts. You are wrong in your assertion that the "guidance" as it was originally written applied to subprime loans, because consumer groups were outraged at the time that these new underwriting standards did indeed not apply to subprime loans. In reality, they applied to exotic mortgages, like Option ARM's (some accrued interest is added to principal). The problem here is that exotic mortgages were rarely being made by December 2005, but subprime mortgages were making up 25% of the total mortgage origination.

Finally, the Fed issued another "Guidance" in March of 2007 and this one did indeed address subprime loans. Problem is, these standards were not complete until June of 2007 when over 30% of subprime lenders had gone out of business and more were headed for their demise as well.

Mr. Gramlich, (now deceased) was appointed to the Federal Reserve's Community on Consumer Affairs from 1997 to 2005 and warned Alan Greenspan privately to send examiners into mortgage-lending affiliates of nationally chartered banks (such as Bank of America). Greenspan did not take Gramlich up on his warning because he felt that if the examiners missed any deceptive practices that this would be tantamount to a Fed seal of approval on these lending practices.

Fed Chairman Alan Greenspan was incorrect in his prediction that the, "Housing declines would be local but almost certainly not nationwide." Ms. Bair, Chairman of the Federal Deposit Insurance Corporation in 2006 stated, "Hindsight is always 20-20, but it's clear that the Fed should have acted earlier. Financial innovation is great, but you have to have some basic rules. One of the most basic rules is that a borrower should have the ability to repay."

http://www.nytimes.com/2007/12/18/business/18subprime.html?pagewanted=1&ref=business

 

[W2R]

I would be the first to admit that I do not have a good understanding of the average home-buyer's psychological framework.

But, like many here, I was recently a first-time home buyer (in 2002, in my case). At the time, people at work curiously asked me if I bought it on zero down with an ARM and such. Even though I was a newbie to buying real estate, that all seemed so fishy to me! I couldn't imagine what I would do, if I wanted to stay in my home and couldn't refinance before the ARM rates went up. What if credit got too tight to do that? Besides, I wanted a predictable, solid 30 year fixed mortgage with a big, traditional bank (which I got). OK, I felt a little stupid but I would never have considered going for an ARM, not in a million years.

Seems like a lot of others that I know eventually decided on a 30-year fixed as well; I don't believe that I know anybody around here with an ARM on their own home. Seems like the only people I knew of around here, (or outside of California and the East Coast) with ARM's were flippers and speculators, not people who were planning to actually live in their homes.

The media cry and wail for Joe Average, the common hardworking homeowner and how his home is being taken from him. I think this may be a big misrepresentation. Maybe all this congressional action and otherwise is intended to protect the new INDUSTRY of flipping/speculating, not the average homeowner.

But on the news, all we hear is media sobbing about the poor homeowners. In middle America is this really happening to the extent being reported, or (outside of California) is it another example of the media distorting the truth? Maybe I just don't realize the extent of homeowner involvement here.

 

[armor99]

The media cry and wail for Joe Average, the common hardworking homeowner and how his home is being taken from him. I think this may be a big misrepresentation. Maybe all this congressional action and otherwise is intended to protect the new INDUSTRY of flipping/speculating, not the average homeowner.

Interesting thought Want2retire. I think it is equally fair for both the average Joe to lose his home, or the speculator/investor to loose his investment. Just because someone has less money it does not make them a victim, nor does having more money make you corrupt (immoral). In almost all cases there will always be someone "richer" than you, and someone "poorer" than you. If we start making arbitrary decisions about who is right and wrong bases upon who had more money at the time, then any of us can be victimized at any time.

 

[twaddle]

It's a nationwide problem, but it's concentrated on the coasts. It's not just people who bought homes -- a lot of them simply refi'd at the top of the bubble.

As prices drop, more and more of them are underwater with negative equity. If we get a 30% drop in prices, I've read that 20 million homeowners could be underwater.

http://www.nytimes.com/2007/12/14/opinion/14krugman.html?_r=1&hp&oref=slogin

 

[cute fuzzy bunny]

The folks that bought my wifes old house bought it with a zero down ARM. They're going to get foreclosed on any day now.

A lot of these loans were sold via the same mechanism that cars are sold: people focus only on the monthly payment figure. "Other stuff" that might happen in a couple of years just isnt relevant.

And arent these homes just going to be worth 25% more next year anyhow?!?

 

[jazz4cash]

. Maybe all this congressional action and otherwise is intended to protect the new INDUSTRY of flipping/speculating, not the average homeowner.

I think it's protecting the new INDUSTRY of securitizing subprime and other exotic loans by the mortgage and financial institutions more than anything. I know its unpopular here, but I think I would be hurt worse if too many of my neighbors foreclose and the subdivision looks like a ghost town.

I remember my first home loan in '82. The going rates were >12% for 30yr fixed. I got a state sponsered loan guarantee program for 10.875! We thought rates would NEVER go below 9%. At the time 'creative financing' was popular. Sellers were holding a portion of the mortgage note. The high rates resulted in ARMs gaining popularity, but they offered 3-4% discount to fixed rates. It puzzles me that the current ARMs caught on when fixed rates are <7% and the premium is only 1-2% in many cases

 

[Texas Proud]

I have been away for a bit... but this got my goat...

I have no problem with someone getting a 'better deal' than me... I DO have a problem if they get that deal by using 'my' money.. this includes my taxes..

I am a well off person, but would never ever think about buying a house that is 4 or more times my income...

And I would take the hit for any of my 'bad' decisions... why not the other people out there?

 

[Texas Proud]

Let me go from a different direction on this... and it goes with some of what you say, but also is where I am at...

When I bought my house, I got gvmt assistance.... it was back when the interest rates were very high and they had first time homebuyer mortgages that were backed by local bond issues... I was 'poor' and 'deserving'... if there are some 'poor' and 'deserving' folks who are actually living in their home that is valued at less than the medium home price... then maybe, just maybe I can agree that a break is OK...

But, if someone is in a $200K or $400K home, or is a flipper and got stuck with the property.... screw 'em...

My point.. the crisis is more than just people getting kicked out of their home they scrimped and saved to get into... some took out second or third mortgages and bought 'stuff'... and now have to pay the price.. so, sell the Mercedes or the BMW, stop the expensive vacations and other cash eating activities... and pay your mortgage...

From what I understand... if you 'can' pay, you still will have to pay.

 

[Gumby]

..

 

[starter82]

[

Some of us think that's a good thing. People remember the mistakes of society.

Something of interest: The Associated Press: Bush Signs Mortgage Legislation

 

[Retire Soon]

It was reported today that Washington Mutual is now under investigation by the Securities and Exchange Commission for allegedly putting pressure on appraisers to inflate appraisals.

Free Preview - WSJ.com

 

[Gumby]

..

 

[Retire Soon]

Some of us think that's a good thing. People remember the mistakes of society.

Something of interest: The Associated Press: Bush Signs Mortgage Legislation

People who receive interest forgiveness from lenders on their subprime loans will not have to pay on taxes on this income. However, people who sell second homes will now pay higher taxes and indirectly subsidize the subprime borrowers for defaulting on their loans.

 

[twaddle]

BofA is afraid that it's different this time:

Calculated Risk: BofA: Attitudes Changing Towards Default

There's been a change in social attitudes toward default

 

[Gumby]

..