Mortgage Mess: Is Relief in Sight?

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 !!!

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.

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.

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.

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.

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.

sorry for double post...administrator will fix I hope?...lol

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.

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.

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

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

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

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

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.

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?

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.

Thanks for the house!! Great deal.