[jcoley2]

Nothing pisses me more off right now (other than USC not playing Ohio State for the National Championship) than this:

http://www.bloomberg.com/apps/news?p...1U&refer=home/

I know I might be upsetting some people in here that might benefit from this plan, but I do not see why I, as a taxpayer, should bailing out homeowners that made stupid decisions about over-borrowing against the value of their home and then whine when they cannot pay their mortgage when it resets. (And I do not even want to get into those homeowners that committed fraud about lying about their income.) No one forced them to take out a variable rate mortgages. Every newspaper and every news outlet has been advising homeowners to refinance into fixed rate mortgages since 2003 due to the fact that we are at a 25-year low in the interest rate cycle. And. . .ignorance is no excuse.

For those that do not think it will cost you anything for this plan to go through, think about the following:

1. The plan will give tax relief for those that default on their mortgage and walk away from their property. Background: currently forgiveness of debt is a taxable event (ordinary income). When you walk from you home and it is foreclosed on, you are responsible to claim as income the difference from the loan and the current value of the home. The proposal is to allow homeowners not to claim that income, thereby lowering possible tax receipts.

2. The plan calls for freezing certain interest rates on loans for up to five years. Many of these loans are packaged into CMOs (Collateralized Mortgage Obligations) or CDOs (Collateralized Debt Obligations) that are owned indirectly by you--either in your 401(k), pension plan or State fund. Most investors that bought these (on your behalf as your fiduciary) expect the rate of the mortgage to rise, and therefore, priced the value of the security when they bought them at that time. Since now the interest rate is going to be frozen for 5-years, the value of "your" security is less--you have suffered a loss, even if it's a paper loss right now.

3. It puts an "artificial floor" on the value of real estate. I guess if you own (like I do) that seems good, but I feel the marketplace should be free of manipulation and let the prices move to level they are supposed to. And then again, what if you were waiting to buy since you think the prices are too high, and now you find out that the home prices will not drop by their full amount since there is an artificial floor. That sucks!

4. Most importantly, it sets another bad precedent that Uncle Sam will bail out stupid people doing stupid things. What's next? Credit Cards? Auto Loans? People need to be responsible for their own actions.

Well, at least hat's how I feel about the whole situation.

[SKMDC]

What will it do to predatory lenders? Keep them in business? I don't know if blaming the consumers is appropriate, here in Chicago the big story is how all these lenders gave money to people who shouldn't be buying homes on an adjustable mortgage rate. Lower to moderate wage earners trying desperately to own their first home.

I'm not concerned about the people getting away with anything, chances are they aren't abandoning their homes for a mansion on the hill.

From the commercials I've seen, predatory lenders seem to be targeting college students now. they are scum.

[Moogs]

Fundamentally, jcoley is right. Responsible people shouldn't have to bail out the irresponsible. Most people in this country are completely irresponsible when it comes to money. I can include myself in that category at different times in my life, though, I don't have any "Oprah Horror Stories" per se. We borrow too much, too frequently and pay it back too infrequently. Credit cards are the exact same thing. People should think of credit cards as a LOAN, not cash. It's a friggin high interest LOAN, but they spend with them out the ass anyway.

Americans have become very soft and very irresponsible in how they handle their affairs. You have an entire generation coming up whose parents make lousy examples when it comes to spending wisely, spending money on needs (not wants), and saving money long term. The boom / bust cycle is likely to repeat itself in the near future, and when it does, a whole lot of people are going to be put in a very uncomfortable situation. Not only Bush, but citizens themselves, have set this country up for a financial disaster. Everything over the last 20+ years has been built up on a foundation of sand it seems. Somehow we forgot the lessons our grandparents taught us about what it means to be prosperous.

Not looking forward to the headlines.

[kieran]

I kind of have the feeling that this is a necessary evil.

With all of these people losing there homes, there stood a very good chance of there being a recession.

That would not be good for anyone. So, by bailing out these people, it preserves the economy for everyone else.


But, I do agree with you that bailing these people out for their stupid decisions is stupid. Our government should not be doing this, but it's kind of necessary at this time.

These people should have never been able to qualify for these mortgages in the first place. These people knew this, and that they'd never be able to afford the mortgage rates when they went up, but they banked on the housing market to continue to appreciate and they'd be able to make some money by selling the house before the rates went up.

As we all know, the housing market collapsed and there are now millions of people with ARM's that are being foreclosed on.

With all of this, the government is bailing out these people so the entire country doesn't fall into a recession.

It sucks that our government is going to bail them out with taxpayers money, but it's kind of needed right now.

[Moogs]

Same thing happens on a different level with health insurance. Joe and Jane healthy constantly bail out Sam and Sue couch potato, who smoke, eat shitty foods 7 days a week, don't exercise, become badly overweight, and ultimately constantly sick / in need of medical attention. Yours and my constantly escalating premium (despite the fact that we never go to the friggin doctor more than once a year), are a result of millions of Sams and Sues, trying to medicate their way to health.

We are already bailing out the stupid on a monthly basis; but people just don't think of it that way.

[jcoley2]

Originally Posted by Moogs Same thing happens on a different level with health insurance..

I have been surprised that the medical insurance industry has not moved more to a varaible pricing scheme to mirror the risk. (The exception is of course life insurance where smokers and sky divers are charged more than normal folks.)

I do not understand why people that are medically higher risk are not priced appropriately--and I am only talking about things that you can control: alcohol and drugs, weight, exercise.

Can imagine if auto insurers charged every one the same, so you would be paying for those idiots that crash their cars twice a year? How about your homeowners insurance? You want to pay for wind insurance in Florida even though you live, say, in Ohio?

I know it is politically insensitive but it is really crazy when you analyze it logically. . . .

[Moogs]

You know... an interesting idea would be to figure out a way to take a non-invasive tissue sample with some fatty cells... and test those cells for smoking, alcohol abuse and other factors that people surely lie about on their applications. Something where, it's not just abstaining from the bad habit for a week to clear your system out, because the bad stuff stays in the tissue for much longer. Then jack their friggin premiums and co-pays accordingly so the rest of our premiums can be lowered accordingly.

I'm happy to go in twice a year at somewhat random intervals, to take that test and keep my premiums down. As long as I don't have to pay more than $10 or $12 for the test, A-OK by me. Spend $12, save $120 a month!

[alcimedes]

Ha, it's been sold as bailing out the consumers, but really they're bailing out the banks/money markets etc. that hold those loans as collateral.

The end result is to bail out the consumer, but I promise you the intent was to bail out the banks/investors.

[torifile]

If Bush thinks it's a good idea, it must not be, so I'm against it.

[bassplayinMacFiend]

Originally Posted by alcimedes Ha, it's been sold as bailing out the consumers, but really they're bailing out the banks/money markets etc. that hold those loans as collateral. The end result is to bail out the consumer, but I promise you the intent was to bail out the banks/investors.

Yup, as the recent bankruptcy law changes show, only big business is being protected right now.

I read an article (don't have the link now) that showed that 70% of people 3 months behind on their mortgage are current on their credit card bills. This is a direct result of the bankruptcy law changes that made it so people have to pay their credit card bills over a 5 year period.

All the companies that are losing their shirts in the subprime market have seen good increases in their credit card business because of these changes. Unfortunately they've robbed Peter to pay Paul, and Peter isn't quite as financially secure as Paul. While credit card profits are up in the hundreds of millions, subprime losses are in the billions.

[faust]

Originally Posted by SKMDC What will it do to predatory lenders? Keep them in business? I don't know if blaming the consumers is appropriate, here in Chicago the big story is how all these lenders gave money to people who shouldn't be buying homes on an adjustable mortgage rate. Lower to moderate wage earners trying desperately to own their first home. I'm not concerned about the people getting away with anything, chances are they aren't abandoning their homes for a mansion on the hill. From the commercials I've seen, predatory lenders seem to be targeting college students now. they are scum.

I purchased my home in the summer of 2006, before even looking at homes I purchased "Home Buying for Dummies" for $13.99. That book explained to me the differences between fixed rate mortgages and adjustable rate ones. It also went over the rules of finances like your monthly mortgage payment should not be more than 28% of your monthly gross income and that when other bills are added in everything together not exceed 35% of your monthly gross. I read up on PMI and why you should put 20% down.

I learned all that from a 13.99 book and maybe 4 hours of my time reading it during my commute.

In the end I purchased a 530,000 home with a 115,000 down payment because the book told me that mortgages over a certain rate are considered jumbo and thus the rates are higher.

Could I have asked the bank for a 617,000 loan over 415,000 and received it? Probably, but it wouldn’t have been fiscally responsible on my part to do so.

I lease a Volvo XC90, is someone out there willing to give me a loan for a Porsche Cayenne? I’m sure, but it’s my responsibility to know what I can afford to payback without eating hurting my bank account.

Blaming the banks is easy, but what about the people who signed for these loans? How about the fact that many of them admit that they didn’t read the papers they were signing? Why are we helping them? I’m paying 6% on a fixed rate mortgage of 415,000, what is my reward for doing the right thing? What is the incentive for me to do the right thing next time?

[faust]

Originally Posted by alcimedes Ha, it's been sold as bailing out the consumers, but really they're bailing out the banks/money markets etc. that hold those loans as collateral. The end result is to bail out the consumer, but I promise you the intent was to bail out the banks/investors.

If the banks are losing money on 20% of their subprime loans just think of the money they are making on the other 80%.

EDIT: It's losing, not loosing. I have to change this every time because it's so annoying - Luca

[Moogs]

Your incentive should be your own self-respect / making sure you're not part of the problem. It's hard to watch people of lesser character take the easy way out that, in the short run puts them on easy street, but that's life.

There are always losers who take short-cuts in everything they do. They're the same douche bags who half-ass it at work while sucking up to the right people, the same people who instead of waiting in the turn lane, tear onto the shoulder and drive down that at 50mph then cut in front of someone, the same one who gets indignant with store clerks or chashiers when they can't find something they want or aren't moving through the line fast enough, etc.

The best we can hope for is that they all get hit by a bus, sparing their children from being raised by an idiot, thus turning the kids into idiots in the process. But most likely not going to happen.

[Kickaha]

Originally Posted by torifile If Bush thinks it's a good idea, it must not be, so I'm against it.

This is gonna be fun - the traditional 'save the witless victim!' groups coming out in favor of free market forces simply because That Other Party suggested it. I can't wait to see the contortions of justification this causes.

I know you're tongue in cheek, tori, but a lot of people won't be.

[Moogs]

Personally, I care less that this is a Bush move, than it ignores the real problem (irresponsible citizens) as noted at various points above. That the Bush administration suggests it gives somewhat instant credibility to the cynicism factor of "OK why are they really doing this / who are they really aiming to benefit", but it's a moot point in some ways.

If millions of people didn't spend with their head up their ass [year after year], there would be no need to legislate such things.

[bassplayinMacFiend]

Isn't this what happened in the late 80s? Except it was an oversupply of commercial buildings that brought down the S&Ls. We The People are still paying for that.

[beardedmacuser]

Originally Posted by faust It also went over the rules of finances like your monthly mortgage payment should not be more than 28% of your monthly gross income and that when other bills are added in everything together not exceed 35% of your monthly gross. I read up on PMI and why you should put 20% down.

Hmmm... maybe. Mortgage and bills (not including pension, car, travel, food and my Mac habit) for me are almost 45 percent of my monthly gross, and I'm still saving cash away on top of that. I'm very much under-mortgaged compared to my contemporaries, with the result that my mortgage shouldn't take more than seven years total to completely pay-off! Fixed-rate too (although I need to re-mortgage in about a year's time)!

Originally Posted by faust Could I have asked the bank for a 617,000 loan over 415,000 and received it? Probably, but it wouldn’t have been fiscally responsible on my part to do so.

Couldn't agree more! Absolutely, I could have got a mortgage another 50 percent higher without a problem, maybe even higher if I lived in London. Would it have been financially sensible and secure? Only time would answer that question. The only thing for sure would be I'd pay a heck of a lot more interest over the period of the mortgage.

But maybe it's because I'm Scottish* and careful with debt. I wouldn't dream of ever borrowing money to buy a car. Average cars are such lousy depreciating financial investments, that the idea of paying interest on a loan to buy something depreciating in value seems crazy! But each to their own I guess...


* Scottish folk are stereotypically "financially cautious."

[torifile]

I know you're tongue in cheek, tori, but a lot of people won't be.

I long ago accepted the fact that politics sometimes make strange bedfellows.

I'm not sure where I stand on this issue. I'm one of those who got a 5 year ARM when we bought our home*. This won't affect me because I'm not one of those in trouble but it's an interesting dilemma...

(*Not because we couldn't afford a slightly higher fixed rate but because we *knew* that we'd be moving out of the house within 5 years (and it would be incentive to do so). We could have bought much more house than we did - we pay something like 9% of our monthly gross income to our mortgage - but we're so financially sound right now, I wouldn't change it for the world. )

[Kickaha]

Originally Posted by Moogs If millions of people didn't spend with their head up their ass [year after year], there would be no need to legislate such things.

And if there were no legislation to bail their sorry, stupid asses out, to the point that you could see the flaming death spiral of other people in the community as warning beacons, maybe we wouldn't *have* millions of people spending with their heads up their asses.

Right now there is very little incentive to be fiscally responsible.

[Moogs]

People are financially irresponsible because they don't plan, don't think it through, don't pay attention. Not because they're like faust, looking into everything and then say "well I don't have any incentive to do the right thing."

Most people just blindly spend thousands of dollars every year on shit they don't need, buy houses and cars beyond their means for vanity's sake, etc. There's no excuse to be made for them (if that's what you're saying).

[Kickaha]

No, my point is that, like most herd animals, if sheeples see another member of the herd get mauled and taken down after doing something stupid, they tend to shy away from that same behavior. "Heyyyyyyy, every time someone goes near that watering hole, this big scaly thing pops out and eats them... maybe I shouldn't go near that watering hole..."

Eliminating all possible bad outcomes just leads to ever more stupid sheeples.

"Gee, everyone else buys all this crap, and nothing bad happens to them... sure!"

[Moogs]

Ah... well 100% with you on that then.

[Kickaha]

Here's to the Heartless Bastard Brigade! *clink*

[Taskiss]

I don't have a problem with stupid people taking an axe and smashing a hole in the bottom of the boat they're in, but we're all in the same boat with this, the economy being what it is. If it goes down it's taking more folks than those with axes in their hands.

[faust]

Originally Posted by Moogs People are financially irresponsible because they don't plan, don't think it through, don't pay attention. Not because they're like faust, looking into everything and then say "well I don't have any incentive to do the right thing." Most people just blindly spend thousands of dollars every year on shit they don't need, buy houses and cars beyond their means for vanity's sake, etc. There's no excuse to be made for them (if that's what you're saying).

Moogs totaly with you on the blind spending and keeping up with this or that person. Nothing pisses me off more than to see someone cry how poor they are while wearing those ugly Ugg boots online to see a $100 concert. Or to drive past a "poor" part of town and see 3 cars per driveway, a DirectTV dish on the roof and an empty Xbox360 box at the curb.



Luca thanks for the fix.

[Moogs]

Originally Posted by Kickaha Here's to the Heartless Bastard Brigade! *clink*

Cheers!

[Partial]

Originally Posted by torifile If Bush thinks it's a good idea, it must not be, so I'm against it.

That's a really poor attitude to have. George Bush would be a great president if Americans had any idea how to manage their money and stop depending on credit cards. Everything gets blamed on the government, but the average American should take a look in a mirror and see how the American dream has changed, and how everyone wants to live outside their means and have cool toys instead of paying off their debts.

[Partial]

Originally Posted by Moogs Same thing happens on a different level with health insurance. Joe and Jane healthy constantly bail out Sam and Sue couch potato, who smoke, eat shitty foods 7 days a week, don't exercise, become badly overweight, and ultimately constantly sick / in need of medical attention. Yours and my constantly escalating premium (despite the fact that we never go to the friggin doctor more than once a year), are a result of millions of Sams and Sues, trying to medicate their way to health. We are already bailing out the stupid on a monthly basis; but people just don't think of it that way.

And its damn time that insurers trim the fat and deliver a message loud and clear. These people need to change themselves and stop relying on others to bail them out.

[Kickaha]

Originally Posted by tensdanny38 George Bush would be a great president if Americans had any idea how to manage their money and stop depending on credit cards.

Now that's just crazy talk. I mean, he's still a politician.

[Partial]

Originally Posted by kieran23kk I kind of have the feeling that this is a necessary evil. With all of these people losing there homes, there stood a very good chance of there being a recession. That would not be good for anyone. So, by bailing out these people, it preserves the economy for everyone else. But, I do agree with you that bailing these people out for their stupid decisions is stupid. Our government should not be doing this, but it's kind of necessary at this time. These people should have never been able to qualify for these mortgages in the first place. These people knew this, and that they'd never be able to afford the mortgage rates when they went up, but they banked on the housing market to continue to appreciate and they'd be able to make some money by selling the house before the rates went up. As we all know, the housing market collapsed and there are now millions of people with ARM's that are being foreclosed on. With all of this, the government is bailing out these people so the entire country doesn't fall into a recession. It sucks that our government is going to bail them out with taxpayers money, but it's kind of needed right now.

Might go into a recession?!? Look at unemployment. Also, look at your average job. 10 years ago, one of my co-workers was making 25% more than they are making now. 25% more!!!! The cost of living in that time has almost doubled. DOUBLED.

The problem isn't the government, its the lazy americans who would rather buy a 2000 dollar tractor to mow their 3/4 acre lawn instead of buying a modest house with a 1/4 acre lawn and buying a 100 dollar push mower to get the job done. Not a perfect analogy, but the point is American Joe doesn't know how to live within his means.

It's kind of funny, despite my grandparents and father being millionaires several times over, they still drive old cars, have a modest home, small yards, don't have cable or the internet, don't have a cell phone, etc. Yet, I see people making 35k a year driving 30k cars, buying huge houses on 30 year mortgages paying the minimum monthly payment, etc. Funny how that works