Mortgage Mess: Is Relief in Sight?

I have no problem with people wanting to own a house, I personally don???t want to see foreclosure signs in my neighborhood but I know that the longer this drags out the worse it will be. But let???s face the facts even if they were still renting their rental rate would go up and depending on how the rental agreement was written it could go up substantially. I have friends that have had to move because the rent went up past what they could or were willing to afford.

From another article:
As economists and analysts sift through the debris of the housing bust, it seems clear that what we were all calling a ???housing boom??? was really a ???lending boom.??? With so much credit available to so many buyers, the competition for properties sent home prices soaring.
I think it's time we get our lending/credit under control in this country before it destroys it.

Maybe just like a lottery is a tax on people who can't do math, the subprime and balloon mortgage market weeds out people who are too stupid or too greedy to actually read the print on the documents they are signing. Many of these people are not the struggling, poverty stricken family as they are depicted in the media. Most were greedy materialistic social climbers who got in way over their head.

We'll be better off in the long run if we just let market forces correct the imbalances, rather than monkeying with it. Do we really want to mimic Japan, which has taken 15-years to recover from its real-estate bubble? Trying to manipulate the system will only prolong the time it takes to recover from our credit-bubble.

Interfering with the market forces at work here will only EXTEND the time it takes for the market to re-adjust after the credit-bubble is flushed out of the system. Do we really want a 15-year adjustment like Japan went through? We'll be better off in the long run if we let the market correct on its own in a shorter period of time.

I am not a "big government will solve the problem" type of person, but some common sense regulations about downpayments and income verification need to be in place. Financial folks have been hoodwinking poor or unsophisticated people since time began. Some self-education and self-discipline are in order. A house purchase is the single largest financial expense in most of our lives, treat it with respect and care, not like a trip to the candy store where pappa is paying for all we can eat. As for foreclosures, no one wants to see auction signs in their neighborhood, yet without enduring that pain how can we wring out the excesses? Rich people bought these mortgages as an investment, they should lose too.

I can't beleive the government is involving itself in the market place. Sure Bush may try to avoid coming out and directly saying it but essentially that is what the White House is doing. You can not say that it is going to be a voluntary freeze on interest rates and you can particate if you want, because believe me none of the investors that are hold these mortgages are going to want to take those kinds of hits voluntarly. Sure some of you may say that it is better for these investors to take these kinds of hit rather than losing out and not getting anything. This may be true but you have to realize that this is how the market works. You have to be out of your mind to think that the market can just keep increasing a alarming rate sooner or later there will be a downturn, there has to be. People need to start realizing that you can not keep living outside of your means and get away with it. American have loss there seen of responsibility when it comes to money, you can always have everything you want. I just find it hard to believe that no one learned anything form the housing crisis in the 1970's, if you don't qualify for a fixed rate home loan then your not ready to own a home.

All this means is that there are people who could not and cannot afford the home they've chosen. If borrowers or lenders are unable to understand what's expected of a contract, they should not be entering into it. Why does "let the buyer beware" not apply to mortgages just as it applies to every other purchase. America needs to get off the train that says there's a free ride--that "buy now, pay later" is acceptable

Author's own admission of wanting to preserve his own home's value is very troubling. Today's inflated home prices happened because of giving free (or so it seemed at the time) money to people whose only qualification was a heartbeat. That's the only reason for the current home pricing. It is completely disconnected from incomes and rents (two real market measures of home values).
In essense, this plan is a government price control plan. It never worked, will not do so now. I have more than 100K in cash ready to spend, but won't do so now (not in my wildest nightmare), simply because government price control and associated sentiment of please-give-me-free-money (indirectly admitted by author himself!) makes me a slave of such misguided (and somewhat bizzarre) desires.
No I will wait for crash and burn, and if it doesn't happen I will simply take my money outside the US.
Right now, word 'moral hazard' sounds very philosphical. Wait until people with money take it to the next level - divestment from the US. I live here and am US citizen, and if I am pondering such a move, what do you think will be the thought process of investors outside of the US?

Author's own admission of wanting to preserve his own home's value is very troubling. Today's inflated home prices happened because of giving free (or so it seemed at the time) money to people whose only qualification was a heartbeat. That's the only reason for the current home pricing. It is completely disconnected from incomes and rents (two real market measures of home values).
In essense, this plan is a government price control plan. It never worked, will not do so now. I have more than 100K in cash ready to spend, but won't do so now (not in my wildest nightmare), simply because government price control and associated sentiment of please-give-me-free-money (indirectly admitted by author himself!) makes me a slave of such misguided (and somewhat bizzarre) desires.
No I will wait for crash and burn, and if it doesn't happen I will simply take my money outside the US.
Right now, word 'moral hazard' sounds very philosphical. Wait until people with money take it to the next level - divestment from the US. I live here and am US citizen, and if I am pondering such a move, what do you think will be the thought process of investors outside of the US?

People like Hyacinth O'Meally are the reason that housing costs have DOUBLED in Florida in recent times. Now people like myself, who didn't fall for the ARM flim-flam, and have been saving for a real mortgage, can't get into a house because of the ridiculously inflated prices caused by speculators, ARMs, and people who were too greedy and bought more house than they could afford. I pity her not, and look forward to the adjustment of housing values to more reasonable levels.

I completely agree with missstaceyg. Many of us took the loan that fit our financial means, which meant securing a smaller house with a fixed-rate interest loan. But others could purchase a larger house with smaller monthly payments, until the rates reset. Now the govt is involved in mortgage welfare for these people. Hoem prices increased due to these quack loans options where people could move in with zero money down and low rates. Now it's up to the honest taxpayers to bail them out and give them mortgage welfare. Let the shakeout occur now so that we can begin the road of recovery now rather than delay it.

I'm a well educated person who researched everything when buying my house. My husband, thank goodness, used to be a loan officer, but got out of the business because of the rampant fraud and deceptive practices. Without him, I'd have been completely lost in all the complicated, conflicting paperwork that no one seemed willing or able to explain to me. So it's not always true that you can get the information in the documents explained to you. BUT, I knew enough to not over-extend myself (I bought a house about 1/3 of what the lender insisted I could afford, because I looked at my budget and the *real* numbers) and insisted on a fixed rate loan. Even if I'd taken an ARM, I wouldn't have done one of the teaser rate ones that would have jumped my payment astronomically in one or two years, I understood exactly what that meant, and WOULD MEAN, to my finances. I think that there's enough accountability here for everyone -- the lenders and the borrowers. At this point we have to look at what the fallout will mean for the whole country and address that.

The devil went to the salesman and said,???If you sell me your soul I will make you rich and famous.??? The salesman said, ???OK, but what is the downside????

Say no more

I would have no problem with some folks getting a rate freeze on their ARM if I got a matching rebate on my fixed rate loan. We avoided those teaser-rate arms because we understood that we could not pay the mortgage if rates went up drastically upon readjustment. And contrary to the authors statements, you don't have to be a genius to figure that out. I did all my research online, just by Googling "fixed rate vs. ARM", getting clear, concise, FREE explainations of the pros and cons of each. We live in a 1,040 house with 3 small bedrooms and 2 tiny bathrooms. Would we like a bigger house? Of course. Can we afford a bigger house? No, we cannot. We accepted it, based our mortgage plans on it, and are now safe and secure in a home we will not lose to foreclosure. I will not vote for any presidential candidate who keeps poor fiscal managers, be they consumers or lenders, from learning their lesson in this mess.

I don't believe the government should at all be involved in any sort of bail out. I agree with the author of this article, that for selfish reasons it is probably best to have some sort of bailout. Longterm however, this does not solve any of the larger issues. As the author correctly pointed out, the very nature of a "Sub-Prime" loan is a loan that someone took out, who probably has a spotty past. Bailing them out of this mess will only serve to re-enforce bad financial behavior. If we really want to address the root of this problem, bailing them out is not the answer. Here is a RADICAL idea, how about teaching our kids basic financial responsibility in our public schools? How about also having a government that practices basic financial responsibility as a example to the populace. What type of example do they set when they themselves can't balance a budget, and have been in debt for the past 60 years. A debt which is growing exponentially with no end in sight. Who will bail them out?

I believe this is a Political solution that was forced down the throats of the Finance industry because Bush and his GOP backers can't have blood on their hands going into the 2008 election. It's a small band-aid on a wave of destruction still heading toward shore. The goal is to get thru the 2008 election with little blood on the hands and then look out below. We have NOT seen the worst of it...................