Why Bush's bailout will leave many borrowers out in the cold.
Comment: Did the bill by Bush eventually pass? How can I learn more about it?
Comment: The problem with Bush so called bail outs for mortgages is how many people do you know with this economy have a fico score of 660 what about people with fico scores below that , they are out of luck once again Bush sucks
Comment: Learn more about investing by visiting investmentsforme.com
Comment: Bush's proposal is not a taxpayer bailout. Please read the details first, rant later.
Comment: Listen UP! You're responsible for yourself in everything you choose to do. If you screw up you pay the price.
Where do you pretend to get the nerve to have taxpayer's bail your butt out!?!? Get a real thought.
Comment: The reality is that most of us cannot be helped because the program requirements are too stringent. I have an ARM - it has already re-set, I have never missed a payment, nor been late, but I cannot refinance.
I made improvements to my property, have no car loans and no credit card debt, my FICO score is higher than when I got the loan, but not good enough to refinance. And the value of the property in my neighborhood is of course, lower because of the foreclosures. So, I am stuck.
I am going to try and sell and buy another house down the street (bigger for less money). Wish me luck.
Comment: President Bush???s gesture to help homeowners is largely political. It was prompted by Republican congressmen fearing repercussions in the 2008 elections. The Byzantine eligibility requirements for mortgage relief help relatively few troubled homeowners. Most of those deemed ???eligible??? will probably reside in Republican Congressional districts. Once the election is over, those mortgage lenders who voluntary ???froze??? lending rates can easily ???unvolunteer??? and tack on a number of service and handling fees to make up the difference.
In addition, Bush???s bail out fails to address the real problem - that too few people can afford to live anywhere. For yours inspection, I???d like to offer some stats published in the December issue of PC Magazine (US Cities Tech Jobs)
City Average Household income Average home price
New York)Manhattan) 119,000 1,300,000
Los Angeles 47K 616K
Chicago 41K 339K
Baltimore/DC 53 K 470K
Seattle 88K 543K
As you can see, in many cities the cost of housing is about 8 to 10 times higher than the household income. No wonder realtors turn to ???creative??? financing schemes, such as APR???s rather than the traditional 30 year fixed. (Which requires 20% down and which the housing price is limited to no more than 4 times the household income.) Creative financing simply enables the real estate industry to jack up home prices, which in turn means fewer people can afford to buy homes.
I must add that the average household income is going down, not up. Thanks to globalization, workers in this country must accept lower wages, or their jobs will be outsourced to India or Bangla Desh. People must pay for their own health insurance. If the Republicans have their way and shut down public schools, people will have to pay for their children???s education as well. Many young people are already burdened with debt from educational loans. These economic realities do not bode well for the housing market.
Perhaps Bush???s little scheme may delay the recession, but sooner or later the entire real estate market will come tumbling down. The rich are getting richer and fewer, the poor are getting poorer and more numerous. Bush and his cronies on the Federal Reserve do not even understand that this is a problem.
Comment: And now I read that many people are in even more trouble and cannot afford their car payments. For the past few years people have been living on the edge with large credit card debts as more and more good paying jobs get out sourced and off shored. Good paying union jobs are being sqeezed out in right-to-work days (meaning union are unpopular). Someone needs to take at look at the big picture and work with corporations for the good of the whole. We are too greedy in the corporate world. In the 60's there were not 33,000 lobbyist in D.C. like there is now and CEO's did not make 400 times more than their employees. What ever happened to "ethical" practices and the words honor and integrity....they were replaced by "greed". Greed in government, corporations and religious organization. No one cares or looks at this country for the good of the whole...and now we are in this debt mess. China indeed has us over a barrel and Washington acts like it no big deal. But it iis a big deal. In eight years Bush and company managed to create a huge mess of debt, a needless war for profiteering and allowed corporations to run amoke and those in Iraq .. to waste tax payers hard earned money. When people lose their good paying jobs where is the tax base going to come from and who will have money to buy good (made in China goods). When was the last time you saw a "Made in the USA" label? Have we been out-sourced into a hopefull the river of despair?
Comment: One of the many nice things about Newsweek's decent and honorable practice of permitting these comments is the tremendous magnification and analysis that each article receives from the reading public. I cannot help but think that it must help journalists focus on writing truthful and thought -provoking articles. This can only be a good thing. Even better, since I find the posts left by the vast majority of Newsweek readers are also thought-provoking and truthful expressions of honest opinion, each Newsweek article that is of interest to me becomes something of a feast of voices that matter to me. So thanks to all and Newsweek.
With regard to this feast, I've read pretty much every single comment. As I said, so many are terrific and uplifting reminders of our still vibrant democractic tradition. However, as comforting as this truth is, the sad equally truthful reality is that our government has become a bastion for an elite minority of corporate kingpins and purchased politicians. With the great help of Concerned4490's 12/6 9:55pm post, in which he does such a great service in peeling back the cover on the Bush Bailout, I've come to believe that - while this plan can help some in dire straits - it is really a bailout for the banks. Just consider what Concerned4490 has disclosed: only those with 3% equity at the time of home purchase will qualify. With home prices down, that means that the banks are upside down in those homes since the homeowner has so little equity. Instead, it's the bank that's holding the bag. Bush is paid to prevent the banks from this unpleasant reality. So they got together and figured a way to keep those loans from hurting the banks and their lobbyists. Of course, the public disclosures suggest a kind and gentle rescue of vulnerable homeowners. Yet, as the public is slowly realizing, that rhetoric is - like so much government speech - a pretext that masks the real government intent, which is to protect the elite minority. Two homeowners with identical houses in the same town on the same street with the exact same ARM will be treated differently if one put a 20% downpayment and the other put no money down. The latter will get the help - a five year interest rate freeze - since the bank is holding the bag on his house. The guy who saved to put 20% down gets nothing because the bank has his hard earned equity cushion to rely upon. He gets sacked with the usurious interest rate resets and foreclosuring on this house is not so unseemly for the bank since they can get their pound of flesh out of the collateral. As house prices decline, the banks can rest assured that the homeowner's equity gets bruised first. If housing prices drop by more that 20%, you can anticipate another Bush Bailout for even those who put 20% down so the banks can remain whole. What a scam, and what a disgrace this president is. He is absolutely anathema for America.
Comment: The purpose of credit is to allow expenditure based on future income. If as one commenter put it, we only bought what we could afford if we lost our job, no-one would buy anything ever except with cash. This may sound like a great idea, but isn't very practical for things like houses and cars.
The lenders who granted these sub-prime mortgages to people who they knew should not have gotten them are the real issue here. Everyting after that is just fodder for discussion, but does nothing to address the real problem. Yes people should be educated with regard to lending, but ultimately if your financial institution/lender tells you that you qualify, most people will trust that and these lenders know it.
This administration has primarily been propping up the economy based on credit for short term political gain, instead of taking less 'newsworthy' steps to ensure the economy would stay strong. Now that there is a 'credit crunch' everyone is scrambling trying figure out how this could have happened? Give me a break!
The lenders knew they should not be doing sub-prime lending and so did the regulating powers, and did it anyway to avoid negative political repercussions for the current administration. It really is a shame that there was an opportunity for this administration to do great things from the first day they took office and they have essentially accomplished squat, except of course kill off a few thousands loyal american soldiers.
Comment: I admire my mother, born in 1930, a child of the depression. Likewise, my father, of blessed memory, whose own father had the foresight to sell out the stock market in 1929 before it crashed. What I learned from each of them was to live within our means. In my mother's case it was well within our means, without ostentation.
They became, in Tom Brokaw's words, members of the greatest generation. While that tag is due in very great measure to the fighting done in WWII and Korea, it goes without saying that the basic values refined in the crucible of the Depression form the basis of this designation.
Perhaps America needs a gut check again.
Comment: charlesw3: "Seriously, dude - do you really understand what you just said. If we had that we could actually allow the liberals (who are frequently, just as foolishly wrong as conservatives) to NOT fund out military or our prisons. Both of which I cheerfully fund knowing that they are decisions made BY all of us and FOR all of us."
Funding the military protects us all and I happily fund it as well. The point is: if only a few benefit - it's not a candidate for Federal money. Most prisons are state institutions and are funded accordingly so my NC tax dollars aren't paying for a prison in Montana which isn't doing me any good. Federal prisons, again, I would happily fund.
NC's market never inflated like other states and has been largely unaffected - home prices and sales are certainly lower than during the boom but commensurate with (if not actually better than) pre-boom levels. The neighborhood in which I live doesn't have a slew of foreclosures so my tax dollars bailing you out is a complete loss to me. I would rather see another federal prison, an additional F-22 or funding for stem cell research (wishful thinking).
The right thing is not to cry to the "gubmint" - the right thing is to be an adult and suck it up. Sorry you're in a neighborhood that's affected but as my dad used to say - sometimes you eat the bear and sometimes the bear eats you.
You bought a house and took a gamble with its value - like we all did. Just because your payout looks bleak doesn't make it my problem or the problem of any other taxpayer in this country.
Comment: Who is he really trying to help? and what good does it do in the long run. Not many and not much.
Comment: Reward the stupid? Whether that be the misinformed buyer, or the short-sighted lending institution sets a bad precedence. I bought my home to stay in for quite some time, not as an ATM machine for ignorant purchases. So because a bunch of spend happy morons are now screaming "poor me", the financial word must accomodate. Let the chips fall where they may and just maybe our future generations will finally understand what being financially responsible is all about. Did any of these people sign on the dotted line with a gun to their head??? I think not. When I bought my house, I asked myself... If you lose your job, what can you safely afford? Reward the impulsive and they are doomed to repeat these same mistakes !!!
Comment: noodleman: I could not agree with you more. Every loan doc has disclosures that outline the payment, the rate, and terms of the loan. I've watched my neighbors all remodel their homes, get new cars, take vacations, and spend like crazy... now they're crying the blues about their adjusted payment screaming foul.
Comment: Reward the stupid? Whether that be the misinformed buyer, or the short-sighted lending institution sets a bad precedence. I bought my home to stay in for quite some time, not as an ATM machine for ignorant purchases. So because a bunch of spend happy morons are now screaming "poor me", the financial word must accomodate. Let the chips fall where they may and just maybe our future generations will finally understand what being financially responsible is all about. Did any of these people sign on the dotted line with a gun to their head??? I think not. When I bought my house, I asked myself... If you lose your job, what can you safely afford? Reward the impulsive and they are doomed to repeat these same mistakes !!!
Comment: What people do not seem to get is that, if those people cannot afford these mortgages now, how will they afford them five years from now? Does someone have a crystal ball or is someone trying to pass the buck? Some of them may be able to manage a higher interest on their mortgage in five years, but what happens to the ones who can't? Will they get bailed out again? Makes a responsible person feel like a sucker. And, keep in mind, all this does is keep bad mortgages on the books which artificially keeps home prices higher than they should be.
Comment: I have 3 homes out of state and pay rent where I live now yet I make all payments on time. Is there going to be relief for me too? I think not because unfortunately for me, I went with traditional fixed rate loans. Those that were ignorant enough to buy something they couldn't afford are now being rewarded with a rate freeze for the next 5 years. This will ultimately reduce interest rates accross the board and negatively affect those of us that are saving money for the future. It's bad enough that interst on savings accounts sit at around 5.5%, now imagine even lower rates. Why should the financially responsible be penalized for sound decisions? Can I call all my lenders and ask for a reduced rate and have it fixed as well? Maybe I should just go out and buy a home that is well beyond my means and just let the President bail me out later. Heck!!!....why not freeze interest rates on credit cards too so that I can go out and be irresponsible with those too.
Comment: I cannot believe this country and personal responsibility. All of these sob stories about people who bought homes they could not afford and then hope the government will bail them out of a contract they didn't understand and signed anyway? How do these people teach their kids? Make a mistake and make the people who practiced personal responsibility bear the burden of the ignorant. Confused? No, just people not willing to take the time to READ what they sign. A bunch of dreamers. I hope this unfounded bailout does not take advantage of the responsible people who can pay their bills and live within their means.
Comment: It seems that hardly anyone will qualify for a rate freeze:
I watched the presentation today and found it interesting that the plan details were not really discussed on camera. After everyone spoke in generalities, they seemed to take a break before going somewhere else for a technical discussion. It seems the details were buried.
After looking all over the place on the Internet, I found a link to the details of the plan here:
http://www.smartmoney.com/consumer/index.cfm?story=20071206
Among the specific details are the 97% OR HIGHER LTV limit (no more than 3% equity) which didn't seem to be mentioned by anyone that I heard:
The much-talked-about five-year rate freeze, on the other hand, will be available to anyone who doesn't qualify for a refinance, particularly folks with low credit scores and little or no equity in their homes.
To qualify for a rate freeze, the loan-to-value ratio on your home must be 97% or higher, which means you must have no more than 3% equity in your home. (This is the loan-to-value ratio during the origination of the loan, so the recent decline in housing values doesn't come into play here.) Then, mortgage servicers will apply a newly-created FICO test. Basically, if your FICO score is 660 or below (scores range between 300 and 850), and it hasn't increased by at least 10% or more since your score at the time you took out the mortgage, you pass the test and qualify for a five-year freeze.
If your score is above 660, or has improved by 10% or more since loan origination, the servicer will look into your financial situation more closely to determine if you qualify. They might consider your income, current debt levels, and any other factors the servicer may deem necessary. This, of course, will take time since such cases will need to be reviewed individually.
What's even stranger is in this report that gives a great amount of detail of composition of the subprime market (as of December 2006):
http://www.responsiblelending.org/pdfs/foreclosure-paper-report-2-17.pdf
On page 47 of the PDF file, Appendix 3 it shows for 1998 - 2004 how much of each type of subprime loan was made. So using the latest year, 2004 as the guide:
-Only 5% of subprime had an LTV greater than 97%.
So for the 5% who pass that hurdle, I would have to imagine these were not likely to be the under 660 FICO's.
But suppose they were just as likely to be.
Then:
-About 60% had a FICO less than 660.
So, we're down to about 3% who might qualify (5% x .6).
And then, 3/4 of those who were not fixed rate:
-About 75% were not fixed rate.
So we're down to about 2%.
Someone check my math on this, but it sounds like best case we're looking at 2% who qualify based on the info in this report. And maybe even less if you assume only the higher FICO's could get 97%+ LTV.
Comment: It seems that hardly anyone will qualify for a rate freeze:
I watched the presentation today and found it interesting that the plan details were not really discussed on camera. After everyone spoke in generalities, they seemed to take a break before going somewhere else for a technical discussion. It seems the details were buried.
After looking all over the place on the Internet, I found a link to the details of the plan here:
http://www.smartmoney.com/consumer/index.cfm?story=20071206
Among the specific details are the 97% OR HIGHER LTV limit (no more than 3% equity) which didn't seem to be mentioned by anyone that I heard:
The much-talked-about five-year rate freeze, on the other hand, will be available to anyone who doesn't qualify for a refinance, particularly folks with low credit scores and little or no equity in their homes.
To qualify for a rate freeze, the loan-to-value ratio on your home must be 97% or higher, which means you must have no more than 3% equity in your home. (This is the loan-to-value ratio during the origination of the loan, so the recent decline in housing values doesn't come into play here.) Then, mortgage servicers will apply a newly-created FICO test. Basically, if your FICO score is 660 or below (scores range between 300 and 850), and it hasn't increased by at least 10% or more since your score at the time you took out the mortgage, you pass the test and qualify for a five-year freeze.
If your score is above 660, or has improved by 10% or more since loan origination, the servicer will look into your financial situation more closely to determine if you qualify. They might consider your income, current debt levels, and any other factors the servicer may deem necessary. This, of course, will take time since such cases will need to be reviewed individually.
What's even stranger is in this report that gives a great amount of detail of composition of the subprime market (as of December 2006):
http://www.responsiblelending.org/pdfs/foreclosure-paper-report-2-17.pdf
On page 47 of the PDF file, Appendix 3 it shows for 1998 - 2004 how much of each type of subprime loan was made. So using the latest year, 2004 as the guide:
-Only 5% of subprime had an LTV greater than 97%.
So for the 5% who pass that hurdle, I would have to imagine these were not likely to be the under 660 FICO's.
But suppose they were just as likely to be.
Then:
-About 60% had a FICO less than 660.
So, we're down to about 3% who might qualify (5% x .6).
And then, 3/4 of those who were not fixed rate:
-About 75% were not fixed rate.
So we're down to about 2%.
Someone check my math on this, but it sounds like best case we're looking at 2% who qualify based on the info in this report. And maybe even less if you assume only the higher FICO's could get 97%+ LTV.
Comment: I've been wanting to buy a home for a couple of years now and could have qualified for a mortgage way beyond what I would have been comfortable sticking myself with. But the easy money kept feeding the boom and artificially inflating prices beyond reason. There will be no way of now avoiding the pain as the markets re-align themselves. If lenders want to modify terms to try and clean up this disaster of their own making, that's fine and in their own self-interest. And I think the government should act to reduce a tax penalty on a short sale to help people get out from a bad investment. But tax-payers should not subsidize reckless investing on any significant scale. Greenspan may not have recognized what was going on, but the blogs were on fire about irresponsible lending standards for years. And a 10 minute review of the lending standards of almost any mortgage broker should have raised plenty of flags to such astute financial minds. I have sympathy for the bartenders and hairdressers who may have naively invested and lost, but I also remember a fair amount of condescension as I continued to rent my small apartment and vainly tried to warn that real estate isn't 'always' a no-lose investment. As the markets return to normal, I will not being 'flipping.' I will be buying a roof over my head.
Comment: sorry for double post...administrator will fix I hope?...lol
Comment: Just another example of this administration doing too little too late, but I digress...lol
Honestly though, why is no-one laying the blame at the feet of the lenders? They created this mess by giving people mortgages who shouldn't have gotten them to begin with or at best put people that should have into higher terms than they should have been in.
The lenders should be taking the brunt of this and if the investors of these mortgage backed funds want to sue anyone, it should be them. If a lender says you qualify, it is their responsibility to do their due diligence and if they make a bad call face the consequences. Ultimately, if the lender says yes, it should stay yes.
If it looks like it may go bad afterall, they should help create an environment whereby the borrower can continue on the path to home ownership.
Comment: I agree that lenders bear a large part of the blame and want them penalized, but.. , the CEO's who put the policies in place will likely not be held accountable or may leave with an obscene 'golden parachute' severance package... meaning investors will pay the price (as always). This an arguement for MORE, not less, Government regulation to prevent this nonsense, just as we COULD HAVE prevented the S+L crisis in the 80's if we hadnt let the 'Free Market' Texicans change the rules.
Comment: I think that Jesus should step in and whip everybody into shape - maybe his paw could help out as well - everyone should just pray and this thing would fix itself.
Comment: Once again this administration is doing too little too late, but I digress...lol
I keep seeing the complaint of tax dollars going to this solution cropping up, when at least as of yet, there are no public monies being put to this 'bailout' effort. Am I missing something here? You can blame the 'buyers' all you want, but in my opinion the lenders brought this on themselves by giving people mortgages who shouldn't have gotten them to begin with. If your bank or lender says you qualify, you should be able to trust that they have done their due diligence. If the lender doesn't, they are responsible for the consequences and 'should' be required to help people out of a bad situation. Notice I am not saying the government should, but rather the people who created the problem. The government should have regulated better, but that is not where the blame lays for the cause of the current situation.
Comment: I'm just eagerly looking forward to paying higher taxes to support a mortgage bailout for people who made a foolish financial decision while I continue to live in my tiny apartment because I knew I could not afford a mortgage once the ARM kicked in.
Sigh
Comment: I'm just eagerly looking forward to paying higher taxes to support a mortgage bailout for people who made a foolish financial decision while I continue to live in my tiny apartment because I knew I could not afford a mortgage once the ARM kicked in.
Sigh
Comment: I'm just eagerly looking forward to paying higher taxes to support a mortgage bailout for people who made a foolish financial decision while I continue to live in my tiny apartment because I knew I could not afford a mortgage once the ARM kicked in.
Sigh
Comment: I'm just eagerly looking forward to paying higher taxes to support a mortgage bailout for people who made a foolish financial decision while I continue to live in my tiny apartment because I knew I could not afford a mortgage once the ARM kicked in.
Sigh
Comment: 20/20 hindsight vision. How many dime-a-dozen critics will we find? No one can make an all-inclusive bill this early, for this many people. Sorry. Let's at least start with something, and continue to build it from there.
Comment: 20/20 hindsight vision! A dime-a-dozen "told-you-so" critics. No matter what answer the Democrats and/or Republicans draw up, someone will complain about how it's not good. Let's start with something, and develop it. How can anyone draw up a complete, 'no one left out' plan this early?
Comment: The greedy dishonest people who bought homes they can't afford, deserve to lose them. Your expressed greed in asking public policy to benefit your ownership is also disgusting. Once again, people who live within their means will be punished my big government and there lackeys in big media - like yourself.
Comment: Thanks for the house!! Great deal.
Comment: Your sympathy for the greedy fools who bought homes they can't afford is absurd. Your own greed as a homeowner is equaly appaling. Those of us who are honest and olny buy what we can afford will be the victims of big government and there media friends like you once again.
Comment: Let's face it, we have been giving ourselves way too much credit for far too long! (This is called a pun.)
Comment: I fail to understand why it would not benefit everyone if the banks froze the interest rates on all mortgages. If this was still a booming housing situation I could understand the bank being willing to foreclose and make back all of their money, but in many circumstances, the house is not worth the amount of the mortgage. We have seen the effect this crisis has had on the stock market, so it would seem that to freeze the interest rates would help the economy as a whole. And the deal struck by the Bush administration is just a lame duck attempt to save some face with America when its really a horrible deal that will not help most people about to get nailed by higher payments. And its time to stop blaming people for this mess, because that does nothing to solve it. Lets get past this thing in one piece and THEN look back at the causes to make sure it doesn't happen again.
Comment: Here's an idea you guys will like:
Take this subprime scum and the illegal aliens and gas them. Or put them in camps and work them to death. Your eyes have been opened, like the German's in the 1930s.
Comment: Take a look at your mail today, How many offers for credit did you recieve? We are facing a huge mess. Our own govermnent is so deep in debt that the monies collected will not even pay the interest. We are sending money to every country , even building swimming pools for the very people that are killing our young men and women in the armed forces. LOOK OUT OR ONE DAY YOU MAY FOUND THAT AMERICA IS FOR SALE AT A FORECLOSURE ACTION.
Comment: I owned my home for 181/2 years. Homes in my neighborhood were selling for nearly $100,000 more
early last year. Now they comping in where the foreclosure accross the street sold for. Walk in my shoes
and come back and tell us all about it.
Comment: Everyone wants a handout. This "mortgage crisis" is the result of extremely poor financial responsibility on part of the borrowers that are unable to fulfill their contractual obligations. These borrowers have put themselves in this situation. If you don't understand what you are doing, get help. If you want to roll the dice on a loan that you don't understand, and your too ignorant to take the time to learn about it, too bad. Hell no, people do not need a bailout, they need tough love for their ignorance and lack of personal accountability for their stupid moves. If this is you... You are stupid.
Comment: Typical spouting, khenson.
"Besides, if you believe these foreclosures in your neighborhood should be ameliorated they why don???t you and your neighbors get together and help them out. After all ??? you all are the only ones who will gain ??? not the rest of us whose tax dollars will be used for the rescue.
Fork it out of your own paychecks if you really believe the crap you spew on here."
Seriously, dude - do you really understand what you just said. If we had that we could actually allow the liberals (who are frequently, just as foolishly wrong as conservatives) to NOT fund out military or our prisons. Both of which I cheerfully fund knowing that they are decisions made BY all of us and FOR all of us.
The economy on a macro-scale is a similar issue.
I don't really think you thought well at all, khenson.
Comment: Look at your mail today. How many offers did you recieve for credit? We have created a huge problem of over use of credit. Look at our own government use of credit the national debt is so huge that the monies collected will not even pay the interest. Take a look at any business or personal finances and what are you facing BANKRUPTCY we may be looking at a sitution where our country may be sold at foreclosure action.
Comment: Try selling your home for 14 months 3 realtors later and $100,000.00 less than the original asking price.
Property comps that kept coming down because of the 14 pages of foreclosures every week in the local
paper. We are all being financially punished by the subprime fiasco even though we paid our mortgages
on time the value is no longer there...............
Comment: Then, sorry, but your original asking price was way too high. The "value" of a home, by definition (thanks, Webster's!) is "the worth of a thing in money". So your home is not worth, to anyone else, what it is worth to you, apparently. My home has nearly doubled in appraised value since we bought it almost 7 years ago, but all that "value" means to me is much higher property taxes. I can't wait for home prices in my area to tank, so my taxes will go back down to a reasonable level. And if I want to sell, I'll just have to take what a buyer is willing to offer. That's the free market for you.
Comment: You are going to be sorely disappointed if you think your taxes are going to go down just because your house has lost value. Your town's costs haven't gone down and they will still need the same amount of money to run things. If property values go down they will have to raise the tax rate (mill rate) in order to produce the same amount of tax revenue. When was the last time your town's budget went DOWN?
Comment: Nope, voters in my county (Wicomico, MD) voted in a revenue cap several years ago. The county is only allowed to take in so much tax revenue a year, and with more people moving into the county and paying property tax, county administrators have to LOWER property taxes across the board so as not to go over the cap. In the past few years, the property tax rate has been reduced from .993 in 2005 to .881 in 2007.
Comment: How long did you own your home?
Comment: charlesw3: I haven't fed into anything without it being completely thought out. The government didn't promote anything through inaction - they did what good government does - they stayed the hell out of the way. If they had stepped in during the housing boom they would have been crucified - and rightly so.
While the government has an interest in preventing downturns they also realize that the market is its own master. The tools given to the Federal Reserve via prime rate adjustments are like turning a battleship with an Evinrude - works, but it takes time and that maneuverability is largely to protect from inflation only - not step in and regulate a financial sector over which they have no (and have never had) control. To blame the government for this mess is moronic at least and irresponsible at worst.
Personal responsibility is the only issue here. To suggest anything different is typical liberal obfuscation.
Besides, if you believe these foreclosures in your neighborhood should be ameliorated they why don???t you and your neighbors get together and help them out. After all ??? you all are the only ones who will gain ??? not the rest of us whose tax dollars will be used for the rescue.
Fork it out of your own paychecks if you really believe the crap you spew on here.
???or do your precious seven habits only work with everyone else???s money?
Comment: I think one thing that is being overlooked is that even if you save people, they wont be able to afford what they have. In the DC area, we had condos at 150K in 2001 and now they are 400k. Most people still are not budging in price and overall most projects are being scrapped or converted. Even if you save that person with the 400k condo, it's true value is not 400k, probably somewhere in the range of 200k because its new and in a nice area. If you save that person, that person is going to be in the hole for 100k+, and at that point, it is better for them to walk away then stick it out even if you want to save them it makes no sense. It is better to let this correct and correct hard so people remember nad pass on wisdom to the next generations
Comment: That's a fair analysis of some situations - but I don't think it applies to all of them.
I think the idea that people pass on wisdom to future generations in economics is dubious at best. My grandparents were great savers and paranoid about stocks since they remembered the Great Depression as told to them by their parents (who actually lost money in it). Their failure to invest in stocks cost them probably 300-500k. So, their children invested in stocks having learnt that lesson.
I, too, learnt it and i invest in stocks. But in 2001-2003 I lost over 100,000 dollars that way. I've got most of that back, but even when you adjust for inflation I am behind on this. Meantime, my parents made a killing on their homes; so I invested in that....
The lesson: economics never provides a free lunch. Nor can you adequately learn your lessons. Prices of a commodity may go up for 3-4 decades and then crash. They may never crash.
It isn't easy. I do homework and I do save money - I will receive no bailout and yet I have been assessed as greedy in other comments. Why is it that if you point out the obvious problems in ideological thinking you get attacked?
Comment: Hundreds of billions of dollars are going to be lost with this. I'm surprised the Democrats aren't mentioning that if all that money had gone into wage hikes that had kept pace with productivity gains (as in the great housing booms for the first 30 years after WWII), then more of the wage-earners would have qualified for flat-rate, traditional mortgages. Rather than needing "new" ideas (i.e. all the exotic products that everyone is supposed to understand), we needed to not abandon old ones that worked. Many candidates say that more Americans need to join unions or start them to get a fair share of the pie. Those who disagree should be made to offer an alternative idea, because whatever is being done now is clearly not working.
The Republican Congress voted out also should get a good share of the blame. They and Bush in 2004 repeatedly pointed to the homeownership stats to say the economy was doing well, and now we know the truth. More pointedly, what was the Republican Congress doing in 2005? Rather than addressing any abuses in banking or reining in their banking industry pals (who spend a LOT of money on lobbying and campaigns, mostly for the GOP), that Congress was passing the bankruptcy bill with all its provisions directed at individuals.
Apparently with Republicans the banks can do anything and try just about any form of deception, but individuals are held to higher standards and get the blame for anything. Laissez-faire and caveat emptor and all that. And we're seeing the result.
Comment: This is not a Republican or Democrat issue, they are both as crooked as the other.
Comment: Blame Greenspan and the people running the banks and wall street. They took their profits and quoted "We had no idea.' Aren't the people in charge "supposed' to be the smart and wise ones? And yet these people are making the decisions that run our financial institutions. It's scary really. Any person with an ounce of common sense was sounding warning bells in 2003 about those ARMs and no one listened, even Greenspan. As soon as I found out that a friend of mine got a loan who made 25k a year and got a loan for a 300K condo, I knew something was wrong. You don't give money to those who most likely cannot afford it or pay it back.
Comment: Just two months ago, when we were looking for a mortgage, a rep from one of the mortgage companies that is now complaining that is hard hit, tried to convince us that we could "only" get an ARM mortgage because we'd been out of the US for two years. Both my husband and I have 790 on our credit scores, no debt, and a significant down payment. When I said that I didn't see why we'd want an ARM, he got very snippy with us and said we'd probably not be able to get a mortgage from any other lender. So I can see how someone who's not feeling good about their credit could have been duped. We DID get two mortgage offers from reputatable companies--not ARMs and at a good, lock-in interest rate. At least we know what we'll be paying for the next several years.
Comment: So, what you are saying is that, if you are responsible and do your homework, you can get a reasonable loan that you know you will be able to pay in the future? Hmmm.... Sounds like a good plan. :-)
Comment: Why is it that only people who can show they don't need credit can get credit? Following that same thought, why is it that the people who are most affected not helped first in this situation? The critieria as I understand it states you must be current on your mortgage payments and your rate is anticipated to go up in the future. ARE YOU KIDDING ME?!? What about the people whose rate has already gone up, they are months behind, and already have a foreclosure letter in hand getting put at the front of the line!! Why should the Bush Administration get kudos for helping people who don't need it yet?!?
Comment: What can we say.. Learn more about money!!
Comment: khenson,
Think some more about this and you will realize that you are just feeding into the same memes without really thinking about them.
To just say that the government has no responsibility would be a true statement EXCEPT
1) The government promoted the use of such products by its lassiez faire approach
2) The government has an interest in preventing severe economic downturns which would hurt all of us (even you khenson)
Personal responsiblity IS an important value and ethic, but it is only ONE value. Others in this particular case are more important ones for the government to consider.
Conservatives have become the sheep from Orwell's Animal Farm. Whenever anyone animal talked about any issue they would bleat FOUR LEGS GOOD, TWO LEGS BAD repeatedly and kill the discussion. The bleat of modern conservatism is PERSONAL RESPONSIBILITY.
It's a great value, but it isn't the only one.
Comment: "Personal responsiblity IS an important value and ethic, but it is only ONE value. Others in this particular case are more important ones for the government to consider."
What are they?
Comment: That's a good one, SDDan. I subscribe to Covey's model the 7 Habits. Each habit to me represents a value:
1) Be Proactive (the Habit of Personal Responsibility)
2) Begin with the End in Mind (the Habit of Vision)
3) Put First things First (the Habit of Integrity and Execution)
4) Think Win-Win (the Habit of Mutual Benefit - THIS is the one that I think overrides and makes it clear that the conservative angle on Habit 1 is unbelievably shortsighted - they are actually thinking Win-Lose and their policy - particularly in this case is actually Lose-Lose)
5) Seek First to Understand then to be Understood (habit of Mutual understanding - they miss this one, too and play pomposity as their first and only card)
6) Synergize (Habit of Creative Cooperation)
7) Sharpen the Saw (Habit of Renewal)
Anyway, the government has to deal with folks who do everything wrong. Most conservative ideologues are very good at understanding the first habit and bleating their answers to everything, but smart folks and those who lead need to understand that many cannot do these things and that sometimes we must save them to help all.
Comment: I don't see how anyone can comment on the relief package unless they have experienced the reality of how
we are all being impacted by the loss of value of our homes. I have been trying to sell my home for the last
14 months and now $100,000.00 less than the original asking price, I've finally gotten my first written offer.
Of course this will be a short sale and I will welcome the tax relief proposal that President Bush introduced.
It has passed the House and today he yelled at Congress for not passing it. yet. So walk in my shoes for 14 months and then think about how you'd feel being punished to the economical conditions created by the subprime mess. We have all lost the value of our homes in most parts of this country and not too far down the line we'll be paying property taxes on inflated munipal property appraisals............
Comment: You keep saying all of you have "lost value" in your homes. You cannot "LOSE" value in anything if it's not worth that to begin with. What is going on is an 'adjustment." Most of you don't want to hear that and keep saying your house is losing it's value.
All you can do is "lose investment" into something you overpaid for. You know you can rent. No one forced you to buy a house. Naivety is not a defense.
Comment: The loss in value of your home was caused by you purchasing it at a peak and then having to sell it. The subprime issue has nothing to do with it. You have no right to reach into my wallet to pay for your mistake.
Comment: This article (and some posters here) thinks that more should be done by the government to protect current home values from the impact of proximity foreclosures. Here's some news: it isn't the function of government to protect idiots from signing mortgages which aren't in their best interest and (listen closely) it's not the government???s job to protect your home's value, either. Those are my tax dollars you're talking about and, contrary to liberal beliefs, that money is not to be used to enhance, increase, protect or establish anyone else's net worth. It's just another poorly disguised form of wealth redistribution. My wife and I researched our butts off before we purchased our home and we waited years before we took the homeowner plunge. We managed a 5%, 30 year fixed and haven't missed a payment. That's called responsibility, personal culpability and discipline. To think differently is a slap in the face to this great nation.
Comment: I agree completely. The government should not be encouraging risk investments.
To all the whiners: your grandmother new how to manage her money, why can't you? Your grandmother was happy to live in a small house with a single garage and car. She would never spend $10/day on Starbucks coffee and would never buy her children 3 different video gaming systems. Get over yourselves, get to work, and pull yourselves out of your own messes.
Comment: I believe Bush's plan will work for some people. Because yes there are some people that if there interest rate increased they would not be able to afford there payment. I think Bush has proposed a great plan in helping these kinds of people, which are living paycheck to paycheck and of course can't afford a higher payment. Bush is right in saying that he is not "bailing people out". The government shouldn't have to bail people out, they are the ones that took on a mortgage that they knew they probably could not afford. Also it is the fault of lendors who provide subprime mortgages to people who cannot afford them. Lendors lure people in with low intro rates then the rates jump in 6 months or a year. I believe that is a bad lending practice and they are just doing it to make money, but actually they are going to lose money in the end because they are going to have to foreclose on them anyway because they can't afford their increased payments. Like the previous writer stated, people should do their research before buying a home, and learn how an ARM loan works before they get one. Hopefully, now a days everyone knows that ARM stands for "ADJUSTABLE RATE", SO GEEH THINK ABOUT IT FIRST!!!
Comment: Dead on, Missstaceyg. There is no agency relationship with a mortgage broker. They do not have to act in your best interests and are not fiduciaries. At your own risk...
Comment: Savitar,
Did you read the piece or just join the discussion? I am a fairly savvy borrower having taken a straight fixed-loan at 6% 1.5 years ago when everyone thought I was crazy not to take a different loan. Now, I could be penalized for the mortgage mess by having the value of my home go down because so many folks around me overborrowed on bad loan products.
I do not want foreclosures in my neighborhood and am willing to allow that the government should be able to bail out some of the mess (as it will help stabilize my home's falling value - and my consequently falling wealth). It's not a perfect answer, but this NEVER HELP ANYONE answer is simply stupid. I usually would not want the government to "protect" anyone much either, but in this case - it's protecting everyone and if anything doesn't go nearly far enough to really help.
Please, stop the simply too easy to use right-wing memes.
Comment: The home that you bought 1.5 years ago wasn't really worth what you paid for it. It's price was incredibly artificially inflated by loans that should never have been approved.
Comment: That is likely true, SDDan. But who am I to understand market timing? I needed a home for my family.
I have not missed a payment even once; I have been responsible and now I, too, will lose. This is the essence of the interdependent nature of our world economy.
Personal responsibility I have displayed and yet - I, too, will lose.
Comment: You have displayed personal responsibility in paying on time but showed lack of wisdom by buying into an overpriced market. I have 6 figures worth saved in the bank and yet I didn't make the leap into ownership because of absurd appreciations. I mean really, use some common sense. That's the problem, most people are book smart but lacking wisdom and sense.
Comment: Agreed -- you got greedy and bought into an inflated market. The value was never really there, so it can't really be taken away by foreclosures, can it?
Comment: This is really typically not worth responding to, but since the writer decided to question my ethics I need to say - it isn't about my being greedy, but rather about my desire (not need necessarily) to own a home.
And who is to say that the market was necessarily inflated - it may have been fairly valued and is now going to become depressed. I paid only 140k for my home and our household income is more than 70% of that value - I won't be distressed. I made a large down payment.
But I will lose paper wealth. I admit this is not wealth that was ever truly real, BUT I can see that many others are going to lose the only wealth they have. This may cause an economic contraction that will cost far more than any government bailout.
Oh wait, whenever you disagree with a poster you question his ethics - never mind - galabar.
Comment: If you just wanted to own a home, own a home. Live in it until the market rebounds. Losing value in the short term should only benefit you: get it reappraised and lower your property taxes.
Comment: All this "but my broker said..." or " "my lender promised..." just makes me crazy! Since when do you believe everything you are told? When dealing with hundred of thousands of dollars, it is just plain common sense to do some fact-checking and see if the promises can be backed up. A bit of research would have shown borrowers that all that has gone wrong was a distinct possiblity, and that there are no guarantees in real estate. No sure-thing refi, no sure-thing home price increase. You put all your eggs in a basket full of holes, holes that you didn't bother to check for first. No sympathy here.
Comment: Is it too trite to drag out "If it's too good to be true - it probably is." and "You can't cheat an honest man." My guess is that most of these "sub-prime" borrowers were presented with the chance to move into a house they knew they really couldn't afford and jumped on it. The story of not really understanding what they were signing doesn't work as an excuse - if you don't understand it, don't sign it. If no one signs up for some arcane mortgage product, eventually the bankers will translate it into something people can understand - if it is something that, properly understood, is to the borrower's advantage. This pleading of ignorance as to the consequences of what one signed seems to be an abrogation of adulthood - an endless quest for the "do-overs" of childhood. I found myself in a similar situation, but was able to sell the house at a profit and get out from under a mortgage I should have never signed in the first place. It is the governments role to ensure that you have freedom of choice, not to protect you from the consequences of choosing poorly.
Comment: I have just heard of Bush new plan for help. But as stated in the article what about people in fixed mortgages.
I have a fixed mortgage but since interest rates have been falling I have been looking to get into a new loan. Now I learn do to the foreclosures in my area I now owe to much to refi. last year I had $400K in equity. Now I hacve no equity and owe exactly what it's worth so my broker tells me I can't get a loan unless I am at 90%
so OK i'll wait it out but with foreclousres in my area popping up I am afraid next year I'll be upside down. So how will bushs plan help me. I was smart went fixed stayed in my loan for 2 years. Also I have what they call a jumbo jumbo mortgage and there aren't many lenders that will do my loan.
Comment: Houses are not a short term investment or quick turn profit maker. They are a long term investment that put a roof over your head. The whole "I will sell my house for a 20% profit tax free after two years" is the attitude that created this whole mess.
Those that "flip" housing as investments can afford to take a loss as they are investing small percentages of their overall worth. If they lose 100k or 200k on a flip gone wrong, no big deal. The problem is that every average Joe suddenly thought they could make a quick buck doing the same thing, however they were investing everything they had.
Comment: it seems unfair that the people who made bad decisions w/ their mortgages will now be receiving any financial assistance at all. I originally financed on a 5 yr arm. I refinanced just prior to the end of that term. However, I did not finance more than I could afford to pay. I'm a single parent receiving no child support. I work hard and I pay my bills. Why should the consumers who make bad choices receive any help and those of us who work hard, make the right decisions, and still don't have EXTRA continue to struggle??
Comment: People who work hard, pay their bills, play by the rules, and invest wisely will always be in the cross hairs of socialism. We have to be -- we've made wise decisions and built up wealth. Where else will politicians go to fund their pet projects and bailout schemes?
Comment: Why does everyone accuse people of whining? Have you ever gotten a 10k doctors bill because your teenage step daughter has become suicidal. The man with the young family, please be sure you do your best to keep your family whole, because kids of divorced parents really get screwed up. I own my mistakes, and try to make up for them. Still never late on payments yet, I just see things looking grim for myself and feel for those that have really tried and didn't succeed. I don't however feel sorry for those that have 250-400k loans and went way over their means. I personally thought I was within my means, bought into a loan option to buy me some more time and foresee that this is going to bite me hard to the point where I may lose it all. But I have other options as mentioned before I do my own house construction and will most likely tap into that experience this next year if possible. So I will work my two jobs 60-80hrs /week and pick up something else. Is it suppose to be this way though? I don't recall growing up seeing other families having to do this.
Comment: Sorry but I don't agree we should be bailing people out. Back in '99 I bit the bullet and bought a home I could afford with a fixed-rate mortgage. Sure, it would have been nice to have more house but I knew the risks of an ARM and was unable to take them. Now I have relocated and have my home on the market at the worst possible time to sell.........a market that is in the dumper because of this mess. So as a responsible person, I AM paying for this mess in lost equity. Now you want me to pay again with my tax dollars too?
The world (and the government) don't owe you a thing, folks! If you're in a jam because of poor decisions then find your own solution.
Comment: I'm right there with you, boumerlin! We bought a small home in early 2001 with a sensible fixed-rate loan, and now that we would like to move up to a larger home we cannot because prices in our area have been so artificially inflated by folks with these ARMs. That's even assuming we could sell the house we are in now, which isn't likely because everyone else is selling, too. Thanks, speculators, for ruining the market!
Comment: You're contradicting yourself. Either housing prices are inflated or they aren't. You seem to be saying that you can't afford a bigger house because it is too expensive and with an inflated price, whereas you can't sell your house because you can't get enough for it and the price is deflated. In reality, you are in luck (as is everyone that wants to move up in house).. It is true that you'll lose some money on your smaller house. However, you'll save more in total because the house you are moving to will drop by about the same percentage (which translates to a larger dollar saving for you).
Comment: Sorry, I wasn't clear. In my area, the people who are selling in high numbers are the folks in small starter homes like mine. So there is a glut of them. Folks in mid-sized homes - the kink that we want to move up to, say 2000 sq. feet or so, are mostly staying put. There are very few this size on the market, so they are very high priced (in the cost per square foot sense). We are hoping that in the next few years more of these home will hit the market, or be built, but if they don't we have a solid roof over our head and will be fine.
Comment: Can you tell me your general area?
Comment: Many layers of problems in this issue: Brokers more concerned with their own income than doing what is right (see also stock brokers, auto brokers, etc...). People more concerned with living beyond their means than conserving what they have. And worst of all, continue the trend of looking for someone else to blame for our own bad decisions. Responsibility has to start somewhere. If people can prove they were wronged by illegal activites on behalf of a broker, that's what the courts and judges are there to decide. Bail outs send the wrong message to absolutely everyone in the chain. Instead of learning, the problem will simply repeat.
Comment: As a real estate and litigation attorney who has conducted thousands of settlements and represented borrowers against lenders in foreclosure proceedings, I think I am as qualified as most to write on this topic. I take serious issue with the representation that people did not know what they were getting into. Anyone sitting at a closing table with me and anyone like me with a bit of professional ethics knew good and well what the terms were, because for any product other than a fixed rate note, at least 3 separate disclosure statements were presented to them with the following, verbatim introduction "Once again, the lender is telling you that this is an adjustable rate mortage, which adjusts on ______________, with a new rate of ____________, as calculated by ___________, which will adjust thereafter on _________________." Put simply, I don't want you suing me later, claiming I didn't tell you what you were getting into.
Further, each and every borrower on a refinance has a federally mandated right of recission. In english, this means you take all these documents home and you have three calendar business days before the loan becomes legal. What bothers me is that each side of this discussion is at fault. The lenders, the secondary market, the derivative market, the mortgage insurers (next to go down) the realtors who sold houses to people that would never have traditionally qualifed and the rate quoters (I mean mortgage brokers), who have on average the same ability that my dogs have to read a rate sheet.
Granted, people were victimized and I represent some on my litigation side. But my well educated guess is that many is not most and just like the tech stock boom, the greedy latecomers are now getting killed along with those who had no business buying in the first place. You didn't have to buy that house, just like you didn't have to drive a car on lease for $880 a month. Now, however, the last refinance is no longer an option. Get ready for different days as I told one client, who specd a house for 1.3 million with a no down loan 18 months ago. The house is worth 960k today, and I don't see anyone buying it for Christmas.
Comment: Can anyone help me - I am trying to get a 3% loan so I can add on to my house,buy a new car, and spend a week at Seaside with my girlfriend. The typical rate of 6-7% is not to my liking. I would also like to take this money and re-invest it at the typical MM rate of 5%. Please help as this is really starting to crimp my lifestyle
Comment: No problem -- just get the riskiest loan you can. President Clinton will freeze any foreclosure action against you and forgive your loan because you were obviously swindled by the "Lending Industrial Complex."
