Obama's Plan Offers New Hope to Owners on Foreclosures, Underwater Mortgages
By Susie Madrak Wednesday Feb 18, 2009 3:07pm
Hallelujah. This plan not only offers help for families in foreclosure, but also for owner-occupants of underwater mortgages. True, it doesn't address the root cause of inflated housing values (and that must be addressed at some point), but it's a smart, comprehensive plan of attack - and as a whole, a very good beginning. Color me impressed:
MESA, Ariz. — President Obama pledged on Wednesday to help as many as 9 million American homeowners refinance their mortgages or avert foreclosure, an initiative he said would shore up distressed housing prices, stabilize neighborhoods and slow a downward spiral that he said was “unraveling homeownership, the middle class, and the American Dream itself.”
The plan, more ambitious than many housing analysts had expected, was unveiled by Mr. Obama in a high school gymnasium here, in a community that is among the nation’s hardest hit by the foreclosure crisis.
“This plan will not save every home, but it will give millions of families resigned to financial ruin a chance to rebuild,” the president told the crowd. “It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”
The plan has three basic components. One would help homeowners who continue to make loan payments on time, but are paying high interest rates and would otherwise not be able to refinance because they do not have enough equity or their houses are worth less than they borrowed. A second would assist people who are at risk of foreclosure by providing incentives to lenders to alter the terms of loans to make them substantially more affordable to struggling homeowners. The third would try to assure there is plenty of credit available for mortgages by giving $200 billion of additional financial backing to Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies.
The announcement came a day after Mr. Obama signed his $787 billion economic recovery package, and administration officials like Timothy F. Geithner, the Treasury secretary, made the case that they will work in tandem. In announcing the housing plan, Mr. Obama struck a populist note, criticizing speculators and “lenders who knowingly took advantage of homebuyers” with the same vehemence he used in going after Wall Street bankers for giving themselves bonuses as their companies were seeking government help.
“It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell,” he said, adding, “And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.”
The plan will take effect March 4, when the administration publishes detailed rules explaining it. Most of the plan can be enacted by Mr. Obama though his executive powers, although part of it — including changing the bankruptcy laws to allow homeowners to seek changes to their mortgages through bankruptcy proceedings — will require legislation. Mr. Geithner said the administration is already in discussions with lawmakers on how to proceed.
In allowing homeowners who are not delinquent to qualify, the plan marks a sharp break from the housing policies of Mr. Obama’s predecessor, George W. Bush. Mr. Geithner and the new Housing secretary, Shaun Donovan, said the administration’s research had determined that, with 10 percent of American homeowners either in foreclosure or in danger of it, it was better to intervene early.
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Now he's talking. And, hopefully, once Obama has set a responsible, ethical and feasible economic recovery plan in place, he'll then turn his Harvard-trained intellect and political skills to bringing to account those who committed crimes on a whole slew of fronts during the Bushco corporatocracy.
that many of us lost our homes already. Thanks Countrywide!
That is certainly better than Bush who dallied and dallied some more.
However $75 billion is a drop in the bucket of the perhaps $1.5 trillion ALT A and OPT ARM mortgages that are predicted to go bust in the next three years.
Still it is better than nothing.
FORENSIC AUDITS FOR THE BAILED OUT BANKS.
By all means, let's have some auditing! Not only will we create jobs for out of work CPAs, but we might even find where they hid the money.
Even if it's just under the cusions of all the couches in all the board rooms around the country.
A round of applause to Obama on getting this done. It's good first step. I agree with Susie at some point getting the inflated prices off the books and down to current market value must happened (foreclosure rates are current market value). Then let people refinance at those rates, that will go further to get peoples confidence back than anything else.
I have tried to follow some of your posts on other threads (heady, thick stuff a lot of them. This topic's intricacies are definitely ones that I try to understand less that I actually DO understand), so I gotta say it is encouraging that you feel good about this, too.
Thanks, I know I have been a big critic of what the government is doing now. This a first step in the right direction, funny a few days ago I posted on "What We Should Do" here and was talking about this and I'll be damned if Obama didn't lay the hammer down in a good way. It gives me hope Obama is getting some good info from his advisers, I'm encouraged.
Because I have been bitching a lot here in the last few months, I figure I should at least have the decency of adding solutions, otherwise I'm not helping. BTW I submit a lot of what I type here to the contact page at http://www.whitehouse.gov just so people know I'm trying to help in my little way.
I just believe we cannot afford to not challenge our leaders, especially those we elected. They need to know even those who cast a vote for them are watching and expecting good action.
Maybe we will be able to pay more than the interest on our loan now! We are basically underwater, our loan is $462K, our house had gone up to a pretty bubble price of $650K. Now the housing prices have dropped, and the best estimate we have so far is $425.
And we were both making very good money when we bought, but I was laid off two days before our escrow closed (and too late to back out of the buy). So it has been a tough four and a half years of making half what we need to pay the mortgage.
Of course, I am in California too, so we have that little problem of an imploding economy on top of the national imploding economy...whee.
Don't worry, the republicans in CA are coming to the rescue. They have a plan not to raise .......drum roll please, TAXES!
I don't think this mortgage thing is right. If your having a hard time paying your mortage then maybe you shouldn't have bought such an exspensive home to begin with. What about people like myself who when taking a mortgage out decide to stay within my limits of what I could afford instead of getting greedy and wanting more. I too find my mortgage hard to pay but it gets paid. And because I can pay my mortgage I don't get tax payer money to bail me out. You tell me where thats fair? And by the way my home value has dropped too.
This isn't about you pal.
What is it with these republicans and there never ending "what's in it for me bullshit."
source of income magically disappears?
"Me me me me me." We hear that song from your type around here daily. Feel free to piss off with your lack of understanding and empathy, any time.
Anyone ever tell you life isn't 'fair?' What's fair about you being born in a country where you can aspire to own a home, compared to people who live in garbage dumps in the Philippines? That's not at all fair, so just start by leaving 'fair' out of it. You already have a leg up on the majority of the world's population.
I'm having the tiniest pity party in the world over your home's sagging monetary value.
You do have a point. This plan only benefits those who cannot pay their mortgage for a variety of reasons (got a variable rate, lost a job and a number of other things). And I can see how it would make people like you agitated. However, Obama is trying to arrest the collapse of the housing market,which I believe will ultimately benefit the economy.
I would like to see reforms made in the lending industry that makes the contracts concisely and clearly written. No you are not going to be able to cover a mortgage on a single sheet using no legalese but if some of these contracts were more clearly written and the applicants could understand them maybe we wouldn't be in the mess that we are in today.
Traditionally, a home is the most expensive purchase a family will ever make. Traditionally, families had to save for years to accumulate a down-payment and established required credit so that they could qualify for a home loan. Traditionally, this was the American dream.
Things change about 6 years ago – and they changed very quickly and for the worse.
When the Banks found out how much money they could create by selling and reselling the mortgages (CDOs), and how much more they could make by insuring those CDOs (Credit Default Swaps or CDSs), they started to relax the requirements necessary for a mortgage.
Then they started to cheat – and made more money. Then they started to lie by falsifying and not verifying applications. They made more money – and the bubble started to grow. It got worse.
Wall Street started seeing how much money the Bankers and the Insurance Cos were making and they got involved. Soon money was available like it was growing on the trees in the lawns of the houses they were making so much money on. And it got worse.
By 2006, they were selling loans for houses like they were going out of style. They were telling people they didn’t need to verify credit, income, forget the down payment WE’LL PAY YOU. And they made lots and lots and lots of money…until the bubble burst.
Did the home owners need to refinance? Probably not. Could the cleaning lady making 11K a year really afford the 225K house – absolutely not.
But don’t discount the complicity of the loan officers, Wall Street, the Insurance Companies, and the Bankers when it comes to the collapse. That cleaning lady shouldn’t have bought the house, but as it stands, she’s the only one who may never be able to buy one again.
(not really in direct response to you Chris, just in line with the previous comments)
Hey no offense taken. And there is plenty of blame to go around.
the freaken REALTORS/MORTGAGE BROKERS who were the ones who seduced the buyers into buying that big house that they couldn't afford with an exotic low payment mortgage.
I have worked in banking/finance (with a credit union) for 15 years....I would pre-qualify a customer for a purchase price/monthly payment that was within their means and send them out house shopping. Only to never see return with a contract.
Then I would call them back to see how things were going only to find out that the realtor they were using convinced them that they "could afford way more than that" and then took them for a ride like a sleezy used car salesman.
And when the customer would explain that they wouldn't be able to afford that balloon payment on a $500K house the realtor would just say "don't worry the house will be worth twice that by then so you can just sell it and make a profit....everyone is doing it!"
So the realtor walks away with a fat commission and those honest homebuyers just got conned. I saw it so many times!
I remember foolish people rationalizing their investments in worthless companies during the .COM bubble. "It's the new economy!" they would rally.
...silly rabbits.
What's stopping you from re-financing? Interest rates are historically low right now due to the Fed's desperate attempt to shore up our collapsing economy. President Obama specifically addressed this in his speech.
Also, in line with what miss kitty said, your self-pitying Ayn Rand BS isn't going to fly here. You're an American citizen who owns a home - that's already an admission that you have a leg up on millions of people, through no particular effort on your part.
Maybe you should sell your house and move into a rental. Then come back and tell us how unfair it is to be a home owner.
What's to stop you from refinancing??? Maybe you should sell your house??? I'll give you a pass here since you obviously haven't read or listened to anything about the current mortgage crisis... including today's announcement from President Obama, so I'll just explain it real quick.
Step 1: You buy a house responsibly and put 20% as a down payment after saving for years. Let's say the house was $200,000 so you got a $160,000 mortgage.
Step 2: Economic crisis hits. You're lucky enough to have not lost your job, but housing prices have fallen 25% in your neighborhood in the 2 years since you bought your house (this is very conservative drop.. many areas have seen housing prices drop 40% or more). Your home now appraises for $150,000. Since in a standard mortgage you pay down virtually no principle in the first 2 years, you still have a $160K mortgage on a house worth $150K. Your mortgage is underwater, like millions of homeowners.
Most banks and mortgage companies (and any mortgages backed by Fannie or Freddie) will not refinance a house with more than 80% mortgage to value ratio, so it is IMPOSSIBLE to refinance for a better rate to lower your payments.
You can't possibly sell your house, you have negative equity in it. If you sold it for the $150K it's now worth you'd still have to pay off the 160K balance on the principle of your mortgagee (plus lots of fees and probably an early payment penalty).
This is why one of the aspects of the plan Obama described is allowing Fannie and Freddie to re-fi mortgages up to 105% mortgage to value ratio, so that homeowners can get their payments down with the better interest rates.
So.. do you see now why you can't just refinance or sell your house?
This is in response to the guy with no pity... it put my comment wayyyy down here...
In fact, a pretty good investment as houses in the SF Bay Area go. We did buy within our means, both had good paying jobs, but I was laid off as we were in the process of buying (guess you posted before reading?). So it has been tight. We are not foreclosing or defaulting -but I just need my monthly payment lowered. Is that a bad thing? Seems to me then that I would have more cash to spread around in the economy.
And since our mortgage is with Indymac, they already got a bailout ages ago, but they didn't pass any on to me, that's for sure!
Refinancing is not an option when the loan is upside down. Who will loan us enough to cover the old loan when the value has dropped to below that level?
It didn't go as far as what Obama laid down today but they recognized if people were ever going to start spending again even modestly (as they should be) then anyone upside down in their mortgage was going to need a reason to feel better about their situation.
Republican initiative
http://www.fixhousingfirst.com/
I like you pay my mortgage. No doubt some people let emotions rule and they signed without thinking or considering what an ARM loan was. At the same time there were predatory lenders who loaned to people who should not have been loaned money and were duped. Who am I talking about? Sadly people with little education and are ignorant of even little things you and I would call obvious such as “buyer beware”. Flippers recklessly inflated the stupidity, but they got theirs, piss on the rest of the world. Then Wall Street decided to bet on whether or not we could pay our mortgage. Too many people thinking of themselves, too few considered the implications of their actions.
How did get Wall Street get start making all those asinine side bets again, like the ones that hosed our economy in the crash of 1907. Why the 106th Congress unanimously voted to pass the Commodity Futures Modernization Act of 2000, both parties gave it full support and applauded itself for doing it.
60 Minutes did a nice piece on this
http://www.cbsnews.com/stories/2008/10/26/60m...
more than those who got the subprimes. I just heard the new Sec. of HUD explain that the plan is to force lenders to refinance those mortgages that are sinking, but not yet underwater, by requiring them to "get some skin in the game" with their own money. Once those sinking mortgages are redone, another step will be taken to address the underwater ones, including the subprimes.
Stabilizing the mortgage market at the bottom will be good for the value of your own home. Call it trickle-up economics.
In addition, the most drastic measures Obama is proposing--compulsory revision of the outstanding principal balance on a promissory note secured by a mortgage--looks like it would require someone to file a Chapter 13 bankruptcy. That alone will dissuade people from doing so lightly. Chapter 13 bankruptcies last at least 36 months in almost all cases--for people whose income is over the median for their state, there's a statutory period of 60 months, unless you manage to pay off 100% of your outstanding debts from when you filed in a shorter timeframe. In addition, it will still wreak havoc on your credit score, which is of course a perfectly fair consequence for someone who managed to borrow their way into a mortgage so deeply underwater that a bankruptcy "cramdown," if made permissible, would be worthwhile.
As for the other parts of the relief package, well, I can understand being a little antsy about another massive chunk of change getting thrown around (anyone remember when $75 billion was real money?), but the parts that actually require public funding will more likely go to borrowers that are only just barely on the edge. Those are the ones that will actually be able to work with their mortgage companies to come to consensual workouts, especially with a small amount of federal money sweetening the pot.
Changing the bankruptcy laws, by contrast, would actually require no federal money. It's not like the federal government reimburses creditors who lose principal balances to cramdowns now (you can cram down most secured debts other than those for your primary residence and those for motor vehicle purchase money security interests 910 days old or less).
http://www.youtube.com/watch?v=6A0p-U1LBbQ
Sounds to me like this is the right approach. At least he is doing something and it's been a long fu*king time since we have had a president who gave a damn about the American people and their lives.
My husband and I played by the rules and our house is paid for. I heard someone on tv today say they played by the rules and their house was paid for, so what was in this plan for them? First of all they don't need anything to be in this plan for them. What they will get hopefully is a beginning to getting their house to the value what it's really worth and not the depressed values the many neighborhood foreclosures have brought about.
that TV person's neighbor. What a selfish schmuck.
Selfish and a pig too. Like a child yelling, I want mine, when he already has some.
Foreclosures mean someone has to take up the slack in the lost property taxes .. so property taxes rise.
"Broken Windows" invite vandals, squatters, crack houses, etc.
Surrounded by foreclosed homes, the area becomes an ongoing crime scene.
Lotsa reasons why someone who owns their home outright would prefer there NOT be foreclosures in the neighborhood.
So right. Having every other house on the block with a 'bank owned' sign is as bad for property values as a next-door-neighbor with a '74 Vega on blocks in his front yard. In one great and quick action Obama has bypassed Wall street and Main street and sent value directly to Suburb street. Keeping a reign on the slide of house prices is one of the best moves that could be made right now.
(Disclaimer: I own my house outright but lease the land from the tribe, so not much of this affects me directly. But indirectly, it helps the community that I live in.)
I have tried explaining that to some of the clueless self-centerd repubs I know. They just don't get it.
This is not about what ones home is worth. This is about what people shouldn't have done to get where they are now. Why would a women making $27,000,00 a year take a mortgage out for a home thats $500,000,00? The fact is she did and now wants the tax payer to bail her out becuse she can't afford the monthly payments. I'm paying for my house with a tight budget. But I can pay the monthly payments because I didn't extend myself with a mortgage way beyond what I could afford.
please get with the program.
I am sorry, you do not count.
You are a loser. I am sorry.
You have nothing to offer here.
Please come back when you have something to offer.
Good luck meantime, bro.
People should not have offered home loans like handing out candy.
Some people should not have taken the offer.
Did i miss anything?
You missed nothing , in fact you saw it all.
Your house isn't going to be worth anything if we don't stabalize the market. That means helping people. Most of the people I know who are screwed, got that way because they had their jobs outsourced, and they are now trying to keep up with the bills working dead end jobs.
What is it with you repukes not wanting to help other people unless you fnd out what's in it for yourself first? WTF!
You are so worried someone else might get help, that you are blind to the fact it will also SAVE YOUR ass!
I am not convinced that nofaith is just another selfish "bootstraps" republican. At least, not based on just nofaith's posts on this thread. I'm sure I agree with some of the sentiments he-she has expressed, but a pure GOP faithful? Don't think so.
because even though he already has plenty, he ain't getting any, in an atmosphere wherein helping others is a real necessity, I don't care about what kind of Thug he is. He's a WATB and blindly selfish.
Where did you get the idea I have plenty? If I had plenty I can assure you I would not be here making statements about what my government is doing. I too am very much tired of paying taxes so some government offical can stuff his or her pockets.
Where do you get this meme that government officials are stuffing their pockets? Unless you're talking about very, very high end political appointees from the last administration, I think that you are off-base regarding public employees. The vast majority of public employees that I know work hard for their benefits and pay.
If you think it's so great, why don't you get the education, public support (and scrutiny) it take to be a government official. And then report back from your vacation home. Most people that I have met that are working on public policy (i.e.; government officials) are true patriots to their communities and could do much better in the private sector. Granted, there are some bad apples, but when they fall it is so much further (and public) then falling in the private sector the graft isn't worth it.
Maybe this works in moron land, but we spot this kind of amateur shit all the time. You can piss off, just for that.
We weren't talking about your fantasy govt officials pocketing imaginary money out of non existent buckets, barrels, bags and shopping carts. You know this because your post that started this never mentioned "some government official...stuff[ing] his or her pockets," until this post I'm responding to.
Your initial concern was over someone maybe getting some help are you weren't going to get the same, even though you didn't need it.
Now here's my question, and it's largely rhetorical (that means it doesn't need an answer). You say that people who need help don't deserve it because it's not 'fair' to people like you, who need no help. If you lost your job and qualified for 'help' would you stand on principle and refuse to take help, because it wouldn't be 'fair' to people who still did not need help?
Because that what your argument is setting you up for.
See what the Thug koolaid does for you? You argue against your own best interests.
EDIT: "Where did you get the idea I have plenty?" You own a house and you need no help from your government. That's plenty to most of the world's population.
I live in the USA not the world
You live in the USA, which is on or in the world.
What are you? 10?
no, just someone who doesn't explicitly agree with you.
I mean to say:
...I am NOT sure I agree with some of the sentiments [nofaith] has expressed...
Small point, but I thought it was relevant.
Look, i am just saying that I am not prepared to lump nofaith in with other truly myopic jerks that have probably permanently run our country into the dirt.
Your very good at reading. I'm just another disturbed American trying to make sense of it all.
'Your' not good at writing.
can I get bail out for that
can try to stop a train:
1. slam on the brakes
2. stand in front of it on the tracks
3. shout at it to stop
Seems to me Obama has chosen step 3.
If Obama is going to succeed, it is going to take him years of work dismantling the corporate fascist plutocracy that the repukes built since Ronnie Raygun.
I appreciate several of his initial overtures.
you and I want the same thing.
I suspect you and I hope for the best.
Right on bro!
i think most of these home owners are going to be in the dumper before they get any help, hope not but the wheels grind slowly unless they are running over you!
I can't believe all the happy comments on this stimulus bill. Do people really think this bill is going to fix the problem this country is in now????? If they truely do their fools. The only thing thats going to happen is more economic hardship for the working class of this so called great country. First off it's not the economy thats the issue with why people are losing their jobs and why they can't get new ones. IT's FREE TRADE thats making the working class poor and without a place to turn. Since free trade large corporations that were made by the working class in this country have been moving our jobs over seas to country that don't care what they make as far as wages go or the way in which they operate. These same corporations are taken American jobs away from the people who made them what they are today. And who's allowing this to happen? Just take a look at what public officals are making today and how wealthy they have become from being in government. Don't people ask themself how the hell do these elected officals become so rich? Large corporations thats how. America has been taken over by these corporate giants and they are running the show now. This stimulus bill is going to change nothing in the end. People are still going to lose their jobs and home and the American right to freedom and the right to prosper.America was once a nation of wealth for everyone that worked for it, but today its for those that have it and want more. America is the country of corruption. Come to America to cheat, lie, steal, and you too can be rich.
“IT's FREE TRADE thats making the working class poor and without a place to turn.”
When the Republicans hype tax cuts because they worked for JFK, they leave out that during Kennedy's time, we made what we consumed. So, we got a Keynesian bump, perhaps $1.60 worth of economic activity for every $1.00 of the cut. This time around, that bump will go to the foreign point of manufacture. I think the stimulus treats the symptoms and not the disease. And let's not forget about our medical system, which costs more and delivers less than our competitors.
Support H.R. 676 - ‘Medicare for All’
The only thing thats going to happen from this simulus bill is that the rich will make more money and the government will be in much higher debt with our children and grandchild struggling to pay it off, if they even make it that far as a country. Unless that is if they cheat, lie, and steal like a-rod.
A-rod could steal, I'll give you that. But not as well as Willy Bloomquest or Charles Gibson. And note that Seattle did NOT name a street after Alex like they did for Edgar.
Well said. GM gets billions supposedly to save American jobs, and now they are invesing overseas and cutting thousands of jobs here.
Absolutely! They also leave out that JFK's tax cuts worked so well because it included closing tax loopholes that allowed those who were at the highest tax bracket to deducted so much they wound up paying hardly any taxes at all. The net result was those at the highest tax bracket wound up paying MORE in taxes with JFK's plan. Tax cuts don't do anything for someone who has lost their job!
The result of all of those jobs being outsourced is that we have a surplus of cheap imported goods and no disposable income to buy them! Even if we start manufacturing those goods in the US again, we would be adding to that surplus. It would take years to develop enough demand through disposable income from the returned jobs to offset the over-supply. So what can we do? Create jobs that involve products that are in demand but in short supply. That's where the green jobs come in - hybrid cars, solar/wind technology. Also, infrastructure jobs - these are outsource-proof by nature. Without these NEW jobs, America may be facing a lost decade like Japan did in the 90s.
nofaith:
thats = not a word
that's = that is
"to country that" = wrong
to countries that = right
"taken" = not the word you ment
taking = what you ment
"Just take a look at what public officals are making today and how wealthy they have become from being in government."
Low six figure income at very best? That's not real monetary wealth these days. Comfortable, market value... maybe, but not "wealthy."
If it was me, I'd chuck the home if I was seriously underwater on the mortgage, and get a fresh start.
I don't think they give a horse's patooty about the homeowner. I think the real issue is that these sub prime mortgages form the foundation of a multi-trillion pyramid scheme known as mortgage default swaps.
I'd like them to look at how they can engineer a crash of the pyramid scheme with as little damage as possible. For instance, I'm not holding any mortgage default swaps.
Did you mean Credit Default Swaps?
Did you mean Credit Default Swaps?
Yep
Now that I think about it, I think the word I'm looking for is "derivative". What I'm hearing is, that for every $1 that goes into default on sub-prime mortgages, some sort of multiple $1's unwind through this derivative pyramid scheme. Think what I heard was 10×$1 ?
See my comment here.
I think that's the real concern, the pyramid scheme collapsing. That's why they need that homeowner to stay in the house with an underwater mortgage.
Let the banks bear the burden and let homeowners keep their homes. If I had an "underwater mortgage", a mortgage higher than the value of my house, I'd like to see the homeowner keep paying the mortgage but have his (fixed) interest payments reduced to zero every year until the amount he's obligated to pay over its value equals the interest he would have paid.
It would take complex formulas to work it out, but that would give the homeowner a lower payment, time to increase his income to handle higher payments in the future, and the banks could bear the burden of their predatory lending practices and force them to get low interest rates on those loans they thought would make them wealthy.
When thinking about the mortgage crisis, the CDOs, the CDSs, and the sub-prime machinations, it’s important to realize that the money the Banks and Insurance Cos “LOST” never existed to begin with. No, they won’t get that money back, and giving them lump sums to make up the difference is ridiculous. There ever was only a single asset in these loans – the home. No matter how much it went up in value, and no matter how many times it was included in a CDO and resold, any gain or loss was only on paper. There is still just the house.
I find all the self-serving hand-wringing cry-baby attitude of the greedy Bankers that initiated the melt-down ignoble. The only money they lost was the money they told EACH OTHER they had. Tough shit.
Now when the HOME-OWNER loses his house – that’s a completely different story.
I'm not a home owner. I always considered homeownership to be a scam. Nobody that I know has ever managed to pay off a homeloan. Things come up; people burrow money against the equity in there homes; homeowners tend to owe more and more money the older that they get. The handful of people that act responsibly and manage to pay off their loan; what happens to them? They get sick in their old age and their home gets auctioned off to pay the million dollars in medical bills that it costs the average person to die. I decided 20 years ago to not play this little debt pyramid reindeer game and I have never regretted my decision. My total accumulation of life time debt consists of under $6,000 dollars. This years tax refund should be enough to pay it all off. I have not owned a credit card since 1992 nor taken out a car loan since 1992.
This is what pisses me off about this to high hell. I feel as if my elected officials, by buying into this debt scheme on the national level, has decided to make the decision for me to be a debtor. My tax dollars are now being spent to pay into the debt pyramid. The correct solution to this problem would of been to tell the debt industry to suck it up and drive on. If it fails so be it; no big loss. The bail out could of been spent building thousands of factories. We could of moved ourselves back to a production based economy and that would of solved the debt pyramid problem. Instead, we are more heavily invested into the debt pyramid and a bigger crash will come a few years from now.
upchuck, I think that your lifestyle will become more and more standard in the foreseeable future, and we will not be worse off for it.
As people come to terms with the heavy debt burden, maybe we can get out of this fiscal fiasco by adopting these principles.
Not sure I entirely agree with the home ownership scam part, though you make some brutally honest observations, but the rest I can get on board with. I myself am not happy with being forced to invest in a roundabout way, after we defeated that crap plan to gamble away our social security on the stock market. They got into our pockets after all, eh? I guess it was a foregone conclusion: they see a pile of money and they want nothing less than the whole thing in their pockets; no matter if it belongs to them. They want, they take. Gimme!
But, in my defense, when we decided to buy the house, the prices were still on the upswing. Yes, we knew it was somewhat inflated, but since we live in one of the most desirable area in the world, we decided to take the debt on in hopes of selling in a few years and walking away with a little money (with which to invest in businesses, travel, and buy a very cheap little house in Mexico for our old age). We are OK with being renters.
Unfortunately, the bubble bit us in the ass.
I would rather stick to my original scenario, but no one is buying. Looks like we are stuck here for a while.
On the bright side, we live near a major university with a housing shortage, so we could rent the house out to a bunch of students and barely make the mortgage.
But we have no savings left, and so we can't move.
So back to the day when there were boarding houses that provided one meal a day for renters. Maybe we have gotten a bit big for our pants.
I would rather take the 25% of total wealth the top 5% stole from the rest of us over the last 30 years - and rebuild the middle class. The nice part about my plan, is that the rich will still never have to work a day in their lives, and the rest of us can rebuild our country.
Their is absolutely NO reason whatsoever for the wealth some people (greedheads) have accumulated at the detriment of the entire country. WTF does someone need to make $25,000,000 or $500,000,000 dollars a year for? That is sick!!
Oh there was a time when people were able to pay off their home loans. Those were the days after the second world war. When America just got into the industral revalution which created jobs for millions across the country.They were our parents and granparents who were able to pay off their homes and own them out right. America was great then but today is a totally different situation. Today we have all these large corporations that our parents and grandparents help make moving over seas selling the next generation out. Thats whats braking the back of America today. No matter how much money is pumped into our economy, if you don't have the jobs people need then you don't have things getting better. Already those companies that have gotten this bailout money are closing up shop and moving more over seas. GM just announced its laying off more people and taking its company over seas. Even after they got large amounts of this money.The banks already got millions and expect to get more but they too are not doing anything as of yet. The writings on the wall.
Mike Shedlock:
One question I have was not answered by either article. I am very concerned for the borrower's sake about loan modifications turning non-recourse loans into recourse loans.
How many people will become unwitting interest slaves for the rest of their lives by signing up for one of these "loan modifications"? That is likely to happen if non-recourse loans become recourse loans.
In 2002 I refinanced my home. I refinanced from a 8% note with 25 years on it to a 4% note for 15 years. In doing so I took money I had saved and put down more money on my home.
While I was doing that others were refinancing and taking equity out of their homes. Or taking seconds on their homes to remove equity. They then took that equity and bought new SUVs, new boats, new cars, invested in the stock market, a new motorcycle or ATV, took trips and vacations. I could go on, but why bother, you get the idea.
Now they are in deep shit. Their homes are upside down, the notes are costing more. They have real problems. They also have all the toys they bought. They still may even own the stock they financed with the equity from their homes for whatever that may be worth.
Now Obama comes along and says that he is going to help these people out? What about all of us who did the right thing. What about those of us who didn't use that equity for vacations and toys? Where is our reward from the government? Where is our taxpayer benefits? Why are we punished for doing the right thing? And that is what it is. We are getting punished because, if we had been irresponsible and done what everyone else was doing, we too would have had the toys and vacations. We too would have had all the "fun". But we gave all that up to be responsible. Now all these people that took when they could get are getting let off the hook for their greed and bad decisions and those that did the right thing are getting to pay for it. What a crock!
I know that there were cases where people were given loans that they shouldn't have been given. I know that there was a great deal of flim-flam that went on and I believe that those people who should have never been given these loans should have the ability to either refi at prime or choose to walk away from their homes with no additional costs. Let the homes be purchased by Fannie and Freddie and used for Section 8 housing until the markets recover and then they can be slowly put back on the market.
But if someone refi'd their home and took that money out (didn't re-invest it into the home in upgrades and repairs) and now their home is at risk. Tough crap! If you were stupid enough to play russian roulette with the roof over your head, then you deserve exactly what the people who got caught in the Internet bubble's burst got. Nada. You gambled and you lost. You were foolish and looked at your home as a piggy bank and forgot that first and foremost your home is where you live. You were willing to play risk and you lost. You don't deserve anything... unless those of us who didn't play and lose, but did the right thing get a "reward" as big as whatever they get.
I lost over $150K in the burst of the Internet bubble and learned my lesson. I didn't get squat back from the government. I gambled and I lost. If you refi'd your home and took the money out (did not re-invest it in your home) you did the same thing. You don't deserve "help" on my taxpayer dime. I didn't deserve help when I gambled and lost, and neither do these people.
This is just what I was trying to say. I feel for those that lost their jobs and can't pay the mortgage. But those that are crying their mortgage is too high because they decided to sign the dotted line knowing what the page said shouldn't be getting bailed out.You need to be responsible about your dealings in life and not just jump on something because you see dollar signs. And your right about alot people using their homes as a way to get bigger loans for more things in life. What happened to the true American way of working and saving for what you want?
See, I'm torn on stuff like this. From the standpoint of the whole of humanity and being a humanitarian, this really is necessary--there are a lot of people who, however stupid, don't deserve to be out on the street, and if we let them end up there it hurts pretty much everybody.
But on the other hand, I started trying to buy a house just as prices spiked in an area where we literally saw a tripling in prices in the space of 4 years. I ended up unable to afford anything but a ridculously overpriced dump, and shortly thereafter nothing at all.
Now, I was being tempted by all the preposterous loans out there and watching prices continue to skyrocket, but I refused to jump into something that looked horribly unsustainable. So I just sat here, rented, and saved.
Well, now prices have gone down about 30% in the last year and are creeping toward what I can afford. But see, the more of these underwater mortgages that get foreclosed, the more chance I have of being able to buy a decent place at a decent price. So what sucks for the world at large *helps* me.
Therefore, part of me looks at every new bit of glum news in the housing disaster as "It's about damn time. Burn, baby, burn!" It's cruel, and were I to lose my job counterproductive, but it's hard overcoming the rage of "If I'd been two years older I'd have a nice house right now and a reasonable mortgage."
Anyway, right call, just one part of me wishes Obama hadn't gotten right.
I'd sooner color you naive.
If you live in a state that is suing one of the banks that ingaged in rampant TILA violations "WACHOVIA". Good luck with our presidents "Making Home Affordable" plan.
* Wachovia, in particular will not help you. I have never missed a payment. If you miss 4 then they will talk to you.
*I Voted for President Obama, but I don't think anybody knows that these banks are not cooperating. When the second shoe drops, this will blow up in our presidents face.
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