Should the feds bail out "distressed" homeowners?

[SkinsHokieFan]

It looks like this is next on President Obama's agenda

Democrats Tailor Foreclosure Bill

Having been one of the "wise" ones that didn't jump into the cesspool of a housing market from 2004-2006, I am wondering if I made the biggest mistake of my life. I could snagged something, kept a teaser rate for 2 years, missed some payments and then Congress would take care of me.

Right now I still feel local real estate is falling. I am looking at a 4 bedroom home inside the beltway today, that is banked owned, for 283k. But is it the true bottom?

And if the government manages to keep people in their homes and "prop up" housing prices, won't this just lead to a problem later down the line?

That problem being that people took out loans they clearly could not afford in order to get the American dream of home ownership? Won't people just have to do the same thing again to own a home?

[Capt. Kaos]

I know one thing for certain: I will be extremely upset if the gov't takes care of these damn idiots!

Being in a house you can afford and something happening to make it near impossible to keep up with the payments is one thing. Jumping head first in to a house that you have no business buying and then crying because what the mortgage people told you was going to happen, happened.....

STFU and get the hell out of the house!!!!

[Mickalino]

I know one thing for certain: I will be extremely upset if the gov't takes care of these damn idiots!

Being in a house you can afford and something happening to make it near impossible to keep up with the payments is one thing. Jumping head first in to a house that you have no business buying and then crying because what the mortgage people told you was going to happen, happened.....

STFU and get the hell out of the house!!!!

And it will only encourage future foreclosures

[IHOPSkins]

.......I am wondering if I made the biggest mistake of my life. I could snagged something, kept a teaser rate for 2 years, missed some payments and then Congress would take care of me.....

Socialized government needs to stop

We continue to AWARD bad behavior....instead of encouraging good

If there is a BAIL-OUT.....it should ALSO include those of us making our payments (Maybe 1% reduction in mortgage interest subsidized by the fed?)

This would "STIMULATE" the economy by giving me more $$$$$ to save or spend....instead of just another HAND OUT for the irresponsible (not those whose circumstances have changed)

This would be EQUAL PROTECTION UNDER THE LAW

[81artmonk]

Personally I'm tired of the excuse that people got taken by shady lenders. unless there was a bait and switch when signing loan docs, it was stupid lendees.

if you buy a home you cannot afford or lend to someone who you know cannot afford a home, than neither deserves to be helped.

it's absolute idiocy on the govt's part to help homeowners who made poor choices in how much home they could afford.

[Koolblue13]

I wish I bought a house I couldn't afford, then you guys could all help me pay for it.

At least rent is very low everywhere now and I can afford to save a little, so I can save up to buy my own home.

Unless the Fed decides to pay people mortgages with our money, then the prices will go back up and I will once again be paying full price to rent.

[Cskin]

Should the feds bail out "distressed" homeowners?

Many will say..."of course they should"... then look to me and others like me who work hard and are consistently responsible with our money to pay for it. :doh:

Rewarding irresponsible behavior by forcing (via tax hikes)those who are responsible pay for their irresponsibility. Sure sounds like a stimulating mechanism to me!!! :paranoid:

Liberalism (Socialism)... the enemy within.

[D'KanSkinFan]

Socialized government needs to stop

We continue to AWARD bad behavior....instead of encouraging good

If there is a BAIL-OUT.....it should ALSO include those of us making our payments (Maybe 1% reduction in mortgage interest subsidized by the fed?)

This would "STIMULATE" the economy by giving me more $$$$$ to save or spend....instead of just another HAND OUT for the irresponsible (not those whose circumstances have changed)

This would be EQUAL PROTECTION UNDER THE LAW

:applause:I agree; we could place solar panels on our homes, get a wind machine for our electric company - don't know how I am going to modify my gas bill on my home (go all electric and then let the solar and wind work on keeping my payments to 0); "don't know" - but

Those that have housing issues DUE to job loss~ I don't have a bit of problem with them getting a break~

but, there are those homeowners out there (gave an example in another thread) that KNEW they were well above their heads and even with any type of break~ they can't afford their $500,500 home on $30,000 yr earnings.

[Thiebear]

I'm getting a 5% loan this month.. With a floating dropdown to 4.5% if it happens.

If i could get 4% i'd do a dance...

I bought a crappy house i can afford.

I bought a crappy used Saturn i could affod.

I bought a crappy 2nd used volvo i could affod just in case the crappy 1st one breaks down.

It's all about personal choices.

You buy a F250 for 50k and a 500,000 house don't ***** when you have nothing left on 80k a year.

[Metskins]

If Obama really wanted to stimulate the economy, he could have wrote down everybody's mortgage by 10%. First, it would have helped the upper, middle and lower class. Second that extra money would probably get spent in some sort of fashion. Third, I bet it would be cheaper than 783 billion.

[DCsportsfan53]

The outrage from those who made smart decisions is clearly understandable but, at the same time, the bank's job is to assess risk. I don't think it's possible, considering the ridiculous number of people who bought houses they couldn't afford, that the banks, and in turn wall street for setting the bank guidelines in what the would buy on the secondary market, that the lending institutions don't bear a great deal of culpability in the matter. Also, a lot of people's situations have changed greatly and people aren't making the money they used to.

Ultimately though, it's just ridiculous to say that it's largely individual irresponsibility because there's no way the bank's should've allowed themselves to enter into so many bad loans. That's not sound banking. :2cents:

[IHOPSkins]

...it's just ridiculous to say that it's largely individual irresponsibility...

Please don't put the majority of the blame on Banks....

Look up "Community Reinvestment Act"...banks were coerced to offer bad loans

And when the Government Backed them......Disaster

[D'KanSkinFan]

The outrage from those who made smart decisions is clearly understandable but, at the same time, the bank's job is to assess risk. I don't think it's possible, considering the ridiculous number of people who bought houses they couldn't afford, that the banks, and in turn wall street for setting the bank guidelines in what the would buy on the secondary market, that the lending institutions don't bear a great deal of culpability in the matter. Also, a lot of people's situations have changed greatly and people aren't making the money they used to.

Ultimately though, it's just ridiculous to say that it's largely individual irresponsibility because there's no way the bank's should've allowed themselves to enter into so many bad loans. That's not sound banking. :2cents:

Please put the Koolaid glass down that your drinkin' and walk away:doh:

Not recognizing personal resposiblity?

So you mean, if I take out my checkbook, write a check~ for, oh, lets say~ $5,000 to buy something; knowing full well I don't have that type of money in the bank~ it's not my fault but the fault of the bank because I order my checks from my bank for free?

Really?

[chipwhich]

Please put the Koolaid glass down that your drinkin' and walk away:doh:

Not recognizing personal resposiblity?

So you mean' date=' if I take out my checkbook, write a check~ for, oh, lets say~ $5,000 to buy something; knowing full well I don't have that type of money in the bank~ it's not my fault but the fault of the bank because I order my checks from my bank for free?

Really?[/quote']

Well that's not really what happened.

I will give you the readers digest version.

Couple goes in to buy house. Lets say at 350K. Loan Officer says I have this great program that will get you into a better house...lets say 450K....but payments at the same 350K house. Couple puts 5% down...or 22,500.

Couple is thrilled. Loan officer is thrilled. Couple gets qualified for a payment on a 450K loan which is a 3 year interest only arm. Loan officer tells couple, the real estate market is going through the roof. This is an incredible investment, you are getting an amazing deal. Couple signs papers.

3 years later, interest only arm ends. House they paid 450 for is now worth 350-400K. They now have negative equity in the house. They can't move because they can't afford to pay someone to take their house. Even if they could pay someone the negative equity, they can't sell it because nobody wants to buy it. The great loan program they got, their payments just jumped $700 a month. They didn't understand the program in the first place. Now they can't sell it, they can't make payments on it, and the bank doesn't want to hear it.

While I think it's shameful people don't understand finances...I would say most of them didn't plan on their house being worth 50-100-150K less than when they bought it.

[TimmySmith]

Well that's not really what happened.

I will give you the readers digest version.

Couple goes in to buy house. Lets say at 350K. Loan Officer says I have this great program that will get you into a better house...lets say 450K....but payments at the same 350K house. Couple puts 5% down...or 22,500.

Couple is thrilled. Loan officer is thrilled. Couple gets qualified for a payment on a 450K loan which is a 3 year interest only arm. Loan officer tells couple, the real estate market is going through the roof. This is an incredible investment, you are getting an amazing deal. Couple signs papers.

3 years later, interest only arm ends. House they paid 450 for is now worth 350-400K. They now have negative equity in the house. They can't move because they can't afford to pay someone to take their house. Even if they could pay someone the negative equity, they can't sell it because nobody wants to buy it. The great loan program they got, their payments just jumped $700 a month. They didn't understand the program in the first place. Now they can't sell it, they can't make payments on it, and the bank doesn't want to hear it.

While I think it's shameful people don't understand finances...I would say most of them didn't plan on their house being worth 50-100-150K less than when they bought it.

You left out the part about the couple making 40K a year and qualifying for a 450K house. This why the government is throwing our money away on these bailouts. The whole problem was created by the banks in the first place. Now the govt is giving them more money to throw away. Except they are doing it halfway.

Force to banks who accept the money to refi all loans down to minimum percentage rate. Not just the failing ones, ALL loans. That will help people pay their mortgage and put more money in their pockets to spend.

[chipwhich]

You left out the part about the couple making 40K a year and qualifying for a 450K house. This why the government is throwing our money away on these bailouts. The whole problem was created by the banks in the first place. Now the govt is giving them more money to throw away. Except they are doing it halfway.

Force to banks who accept the money to refi all loans down to minimum percentage rate. Not just the failing ones, ALL loans. That will help people pay their mortgage and put more money in their pockets to spend.

I don't disagree with you on that.

[D'KanSkinFan]

Well that's not really what happened.

I will give you the readers digest version.

Couple goes in to buy house. Lets say at 350K. Loan Officer says I have this great program that will get you into a better house...lets say 450K....but payments at the same 350K house. Couple puts 5% down...or 22,500.

Couple is thrilled. Loan officer is thrilled. Couple gets qualified for a payment on a 450K loan which is a 3 year interest only arm. Loan officer tells couple, the real estate market is going through the roof. This is an incredible investment, you are getting an amazing deal. Couple signs papers.

3 years later, interest only arm ends. House they paid 450 for is now worth 350-400K. They now have negative equity in the house. They can't move because they can't afford to pay someone to take their house. Even if they could pay someone the negative equity, they can't sell it because nobody wants to buy it. The great loan program they got, their payments just jumped $700 a month. They didn't understand the program in the first place. Now they can't sell it, they can't make payments on it, and the bank doesn't want to hear it.

While I think it's shameful people don't understand finances...I would say most of them didn't plan on their house being worth 50-100-150K less than when they bought it.

Thanks for the Reader Digest version~ My example was that of small personal responsiblity~ had a friend that did this check "thing"~ thinking the bank would cover it in a second mortage since she wrote the check for siding repair and painting of her home? :doh:

Did this couple not take this to an attorney for review prior to signing this house contract?

You know~ when we purchased our upgrade home several years ago, we were "given" to opportunity to upgrade about 18 months ago with such an arm interest term on a double the size beautiful grand brand new home.

We turned it down~ thought then~ "sounds" too good to be true, definitely would have a fantastic upgrade, but again, too good to be true.

Asked my attorney friend, *bingo*~ was told that the market was at max, if the housing dropped - we would be _________________(you can fill in blank)

Looks like some Fraud and a law suit should be filed against bank loan officers of lending institutions and Realtors :2cents: for inflating the market.

Got a good attorney friend?

[DjTj]

Force to banks who accept the money to refi all loans down to minimum percentage rate. Not just the failing ones, ALL loans. That will help people pay their mortgage and put more money in their pockets to spend.

You don't need the government to do this for you. If you have 20% equity in your home, you can refinance at the current low rates without any government bailout.

Please don't put the majority of the blame on Banks....

Look up "Community Reinvestment Act"...banks were coerced to offer bad loans

And when the Government Backed them......Disaster

If the government created this problem, then shouldn't the government fix it?

Besides, this debate is really a moot point. These loans will be bailed out one way or another. Our options are basically:

(1) Bank bailout: Give the banks enough cash so that they can afford to foreclose and/or restructure loans and take the losses.

(2) Homeowner bailout: Force banks to restructure loans so that homeowners can walk away and/or make the payments and keep their homes.

(3) Let banks fail and descend into financial chaos...

[81artmonk]

Well that's not really what happened.

I will give you the readers digest version.

Couple goes in to buy house. Lets say at 350K. Loan Officer says I have this great program that will get you into a better house...lets say 450K....but payments at the same 350K house. Couple puts 5% down...or 22,500.

Couple is thrilled. Loan officer is thrilled. Couple gets qualified for a payment on a 450K loan which is a 3 year interest only arm. Loan officer tells couple, the real estate market is going through the roof. This is an incredible investment, you are getting an amazing deal. Couple signs papers.

3 years later, interest only arm ends. House they paid 450 for is now worth 350-400K. They now have negative equity in the house. They can't move because they can't afford to pay someone to take their house. Even if they could pay someone the negative equity, they can't sell it because nobody wants to buy it. The great loan program they got, their payments just jumped $700 a month. They didn't understand the program in the first place. Now they can't sell it, they can't make payments on it, and the bank doesn't want to hear it.

While I think it's shameful people don't understand finances...I would say most of them didn't plan on their house being worth 50-100-150K less than when they bought it.

This is very true, but who holds the blame. Ignorant people who didn't understand or banks for selling them the product??

IMO it's the people. When we bought our house, we spent hours asking questions and reading loan docs to make sure we weren't getting into something that would bite us later.

The other side to this is, no one expected the housing market to crash as it did, however, that doesn't negate the fact that doing something like you stated is a gamble. On both sides the people buying houses and the banks.

To make it even simpler, if I buy a car and the saleman tells me about this to good to believe deal, I'm going to ask, "what's the catch"? Or at the very least ask him to explain and show me paperwork that has the details. Like the saying goes, the devils in the details.

[81artmonk]

You don't need the government to do this for you. If you have 20% equity in your home, you can refinance at the current low rates without any government bailout.

If the government created this problem, then shouldn't the government fix it?

Besides, this debate is really a moot point. These loans will be bailed out one way or another. Our options are basically:

(1) Bank bailout: Give the banks enough cash so that they can afford to foreclose and/or restructure loans and take the losses.

(2) Homeowner bailout: Force banks to restructure loans so that homeowners can walk away and/or make the payments and keep their homes.

(3) Let banks fail and descend into financial chaos...

Not really, IMO. People assume that if banks fail that there aren't other types of financial institutions that can come behind and fill in.

Alot of the local smaller banks are doing fine and didn't need bailouts becuase they didn't do stupid things.

people IMO think that if these banks fail without a bailout that a big black hole will be left, and again IMO I doubt that will happen.

[IHOPSkins]

.....Alot of the local smaller banks are doing fine and didn't need bailouts becuase they didn't do stupid things.....

Capitalism Works!!!

Its GOVERNMENT thats the problem

I said it before and I will say it again

BAD laws/regulations are worse then none

[NattyLight]

We just bought our first house last year. We were approved for $500K, competitive credit and extremely good debt-to-income ratio and NO CASH. We said, "uh great, we're not 1/2 million dollar house type people." Let's put it this way, we said that $330K was outside of our means. At the time we grossed $130K / year. That's a 33% difference in principal approaved and about 30% of our gross income we KNEW was a stretch!

I agree wholeheartedly with IHOPSkins first post. The responsible person got screwed as well, because they bought an artificially inflated house no matter what! I'm not for government handouts, but if they are a given, hook this guy up. I still have $12000 MORE to spend on my wedding and every dollar counts!

[NattyLight]

Capitalism Works!!!

Its GOVERNMENT thats the problem

I said it before and I will say it again

BAD laws/regulations are worse then none

I don't necessarily agree with this, however. I like capitalism, as it's been shown to work more effectively than facism or socialism (communism) How many datapoints (time) to we really have though? A ton for the other disciplines, but capitalism is still in its infancy.

Your assertion that it works is because you are living in a time which it has been successful; facism and socialism have exhibited success as well during the course of human history.

[Elessar78]

Socialized government needs to stop.

I have a strong feeling that Bush or McCain would've done the exact same thing. I'm not saying it's the right move, but let's not make this a move ONLY Obama would have made.

[Elessar78]

Capitalism Works!!!

Capitalism does work, but it needs some constraints. Unbridled capitalism would lead to the exploitation of the working class.