Should the feds bail out "distressed" homeowners?

[DjTj]

Natty, I don't get it. I bought 2 houses in the last 4 years. I still have both (and several others). I don't have my hand out looking of something for nothing. A house is an investment like anything else. If a person pays too much for a property and/or borrows more than they can afford to repay, how is that not their fault?

I think all he's saying is that banks like Countrywide gave out thousands of loans that they knew people couldn't pay if home prices didn't continue to go up. When they give out a loan, it is an investment like anything else. If they did a poor job of assessing the risk, how is it not their fault?

Banks like Bear Stearns bought mortgages and bundled them. That was an investment like anything else. If they overpaid, how is it not their fault?

Banks like AIG sold insurance against those collateralized debt obligations. That was an investment like anything else. If they undercharged, how is it not their fault?

All of those banks have been bailed out. Why not give some of that bailout to the homeowners instead of paying it all out to the banks?

[DeanCollins]

All of those banks have been bailed out. Why not give some of that bailout to the homeowners instead of paying it all out to the banks?

so what about prudent investors, that did their homework, resisted getting over extended, and/or buying into a inflated market, should they be penalized by not receiving some sort of handout? Or shouldn't they be rewarded somehow?

And about your other questions, I didn't think that the banks should've been rewarded for their poor choices, but left to be bought up by other companies.

If we reward people for poor decisions, greed, dishonesty, or stupidity how is that going to help any of us in the long run?

[NattyLight]

I think all he's saying is that banks like Countrywide gave out thousands of loans that they knew people couldn't pay if home prices didn't continue to go up. When they give out a loan, it is an investment like anything else. If they did a poor job of assessing the risk, how is it not their fault?

Banks like Bear Stearns bought mortgages and bundled them. That was an investment like anything else. If they overpaid, how is it not their fault?

Banks like AIG sold insurance against those collateralized debt obligations. That was an investment like anything else. If they undercharged, how is it not their fault?

All of those banks have been bailed out. Why not give some of that bailout to the homeowners instead of paying it all out to the banks?

Also I'm saying, is that these fine pillars of capitalism took a ****ing gamble and lost big time. Their indiscretions were orders of magnitude greater than that of the [would be] homeowner. Sometimes I think you people give these guys too much moral merit. Big banking and the like probably give ****-all whether you live or die. Humans are solid, 1's and 0's are liquid.

[ChocolateCitySkin]

i lot of people were duped into these ARM loans...

i begged to put 20% down and a fixed rate... they tried to force an arm loan down my throat.

i witnessed it first hand. and i am very sympathetic to those that have been forced into this situation... i would like to see their loans restructured and lengthened. as opposed to kicking them to the curb. which does nothing beneficial.

[Bubble Screen]

i lot of people were duped into these ARM loans...

i begged to put 20% down and a fixed rate... they tried to force an arm loan down my throat.

i witnessed it first hand. and i am very sympathetic to those that have been forced into this situation... i would like to see their loans restructured and lengthened. as opposed to kicking them to the curb. which does nothing beneficial.

How can someone be duped into the loan? You either sign or you don't. An ARM stands for "Adjustable" Rate Mortgage. Its not rocket science to know that your rate not only can, but WILL go up. That's inevitable, at some point. So, why then, is this the lender's fault?

As for your situation...When you wanted the fixed rate and they were forcing the ARM on you, did you take the ARM? Sorry man, im not defending the lenders in this whole mess. But alot of people have to look in the mirror. If you make a dumb decision you shouldn't be bailed out.:2cents:

Now, losing your job and not being able to pay your mortage. Whole other story. And for those people, I have much sympathy.

[DjTj]

As for your situation...When you wanted the fixed rate and they were forcing the ARM on you, did you take the ARM? Sorry man, im not defending the lenders in this whole mess. But alot of people have to look in the mirror. If you make a dumb decision you shouldn't be bailed out.:2cents:

When I bought my condo, they really tried to push an ARM on me. I managed to talk my loan officer down from a 5-year to a 10-year ARM. My parents wanted to help me put down a 20% down payment, but the loan officer talked me into just putting up 10%. It literally was very difficult to get a traditional loan - the loan officers would basically call you stupid for wanting to pay more principal or taking a higher rate. When the crisis hit, I refinanced into a 30-year fixed. Now I'm paying down some principal to get to 20% equity, and I'm refinancing to a 15-year fixed. The mortgage market has changed very rapidly in the past few years, and it really was crazy in the middle of the bubble.

so what about prudent investors, that did their homework, resisted getting over extended, and/or buying into a inflated market, should they be penalized by not receiving some sort of handout? Or shouldn't they be rewarded somehow?

Are you not being rewarded? You just bought property at deflated prices. I'm sure you got a very good interest rate. I just got the appraisal back on my condo, and I am locked at 4.75% for a refinance. Maybe it's not a handout, but I feel like I'm getting some pretty good rewards. Don't you?

And about your other questions, I didn't think that the banks should've been rewarded for their poor choices, but left to be bought up by other companies.

Well, that's really water under the bridge now, but if you think about it, where did the loans for your new purchases come from? Even if it wasn't directly from a bailed out bank, it's likely that it was funded by a bailed out Fannie or Freddie.

If we reward people for poor decisions, greed, dishonesty, or stupidity how is that going to help any of us in the long run?

Nobody is getting "rewarded" here. I doubt that IONTOP is going to be so cavalier about his next home purchase whether or not he gets bailed out of his current mortgage. I doubt that banks will ever hand out loans like candy ever again. Countrywide, WaMu, Wachovia, et al. are all gone. Bear Stearns, Lehman Brothers, and Merrill Lynch are gone. The days of big Wall Street bonuses and lavish perks are over ... There aren't a lot of "rewards" going around these days.

Maybe they're not all being punished as harshly as you would like to see, but I honestly don't understand the obsession with punishing everyone. They are all hurting right now, and nobody's going to look back on this and say, "Well, wasn't that great? Let's all do it again!"

It sounds like you're going to come out of this with far more in your pocket than any homeowner that is going to be "rewarded" with a bailout. The prudent owners and investors did come out as winners in this crisis. The question now is how much the losers should be made to suffer.

[IONTOP]

This thought isn't threadworthy, but on a small scale, how would this not work? (Seriously, I'm uneducated on the bankruptcy laws)

1st step: Get good credit

2nd step: Take out as many credit cards as you can

3rd step: Buy a house/car/take out student loans

4th step: Use said credit cards to buy a whole bunch of expensive, yet shippable things (TV's, jewelry, etc)

5th step: Post said valuables on Ebay for 25% less than you bought them for (That should make them an easy and fast sell)

6th step: Pay off a good portion (if not all) of your house and student loans

7th step: Declare bankruptcy (because afaik, they won't absolve your student loans/mortgage/car loans)

8th step: Live in that house, drive that car, for 7 years until the bankruptcy is off your credit, rebuild your credit and move...

I know it won't work on a large scale, but if 100 or so people do it, they could get out of debt free and clear... Can I get an expert to tell me where my logic fails?

[DjTj]

I know it won't work on a large scale, but if 100 or so people do it, they could get out of debt free and clear... Can I get an expert to tell me where my logic fails?

Two problems:

(1) It's not that easy to get a credit card with a limit that is greater than the value of your home.

(2) Declaring bankruptcy involves going before a judge, and if the judge sees this post on Extremeskins, he is not going to be very sympathetic...

[Bubble Screen]

When I bought my condo, they really tried to push an ARM on me. I managed to talk my loan officer down from a 5-year to a 10-year ARM. My parents wanted to help me put down a 20% down payment, but the loan officer talked me into just putting up 10%. It literally was very difficult to get a traditional loan - the loan officers would basically call you stupid for wanting to pay more principal or taking a higher rate. When the crisis hit, I refinanced into a 30-year fixed. Now I'm paying down some principal to get to 20% equity, and I'm refinancing to a 15-year fixed. The mortgage market has changed very rapidly in the past few years, and it really was crazy in the middle of the bubble.

Are you not being rewarded? You just bought property at deflated prices. I'm sure you got a very good interest rate. I just got the appraisal back on my condo, and I am locked at 4.75% for a refinance. Maybe it's not a handout, but I feel like I'm getting some pretty good rewards. Don't you?

Well, that's really water under the bridge now, but if you think about it, where did the loans for your new purchases come from? Even if it wasn't directly from a bailed out bank, it's likely that it was funded by a bailed out Fannie or Freddie.

Nobody is getting "rewarded" here. I doubt that IONTOP is going to be so cavalier about his next home purchase whether or not he gets bailed out of his current mortgage. I doubt that banks will ever hand out loans like candy ever again. Countrywide, WaMu, Wachovia, et al. are all gone. Bear Stearns, Lehman Brothers, and Merrill Lynch are gone. The days of big Wall Street bonuses and lavish perks are over ... There aren't a lot of "rewards" going around these days.

Maybe they're not all being punished as harshly as you would like to see, but I honestly don't understand the obsession with punishing everyone. They are all hurting right now, and nobody's going to look back on this and say, "Well, wasn't that great? Let's all do it again!"

It sounds like you're going to come out of this with far more in your pocket than any homeowner that is going to be "rewarded" with a bailout. The prudent owners and investors did come out as winners in this crisis. The question now is how much the losers should be made to suffer.

I just wanted to add one other thing to this thread. If this has been mentioned, I apoligize. Because I haven't read the whole thread.

Anyway, I think one area where people make a mistake (especially first-time homeowners) is not having an agent. The real estate biz is very cut-throat. And if you don't have an agent, you can get really screwed. Its no different than buying a car. You have to know, going in, what you're getting yourself into. Again, I HIGHLY recommend people have someone on board with them that knows all the ins and outs. People, its WORTH the extra money to have one.

[SUSkinsFan]

Anyway, I think one area where people make a mistake (especially first-time homeowners) is not having an agent. The real estate biz is very cut-throat. And if you don't have an agent, you can get really screwed. Its no different than buying a car. You have to know, going in, what you're getting yourself into. Again, I HIGHLY recommend people have someone on board with them that knows all the ins and outs. People, its WORTH the extra money to have one.

I'm considering buying a house after I graduate and will definitely keep this in mind. A friend of my family is a realtor and I am gonna talk to him about it.

[Grumpy Vet]

- Your state is going to lose a ton of money from the decline in propert values. Enjoy the tax increases (which will affect people that don't even own homes)

Not here in Howard County, MD. They basically refuse to give me a timely hearing about my home's property taxes and assessment. The good news is that while I go through the appeal process I pay the higher taxes.

We bought our home in June. The assessment from the county was high and therefore the property taxes were more than I thought they should be. I looked into it before we bought the home and found out you can appeal the value. In July (a month after we bought our home) another phase-in tax increase hit raising the taxes even higher.

In July I was being assessed over 40% more than what we paid for the house. It was not distressed, a repo or had any significant issues. It had been on the market over a year and had been reduced many times.

After 4 letters & hearings, I'm on my final appeal. We've gotten the assessment reduced 15%. I rec'd confirmation the appeals board rec'd my last appeal and they will schedule my final hearing in due time. That was 3 months ago. In the meantime, I continue to pay the higher taxes and wait.

I'm not looking for a handout or a break....Even with declining property values, I'd appreciate being taxed on what I paid for the house - no more - no less. I've got a list of 40 other homes w/in 3 miles of me that sold w/in the last calendar year with assessment values equal to or less than their selling price. I'd love to show it to the board some time and have them explain why I have the patriotic responsibility of paying more than my fair share.

I thought about hiring a professional to help me w/ the situation, but that would probably eat up the several thousand dollars we are talking about.

I'm one of those guys that feels like they are getting it stuck to them because they are playing w/in the rules. It sucks.

[twa]

Grumpy you might look into a professional.

We have them here that work on a contingency basis where you only pay half of any savings for the yr protested(and appraisals are good for 3/4 yrs)

They don't reduce the tax bill,they get nothing.

[Elessar78]

McCain voted against it

His bill would NOT have been exactly the same

What I meant to say is that he would've put forth a stimulus as well. And I think the only difference would be is that McCain's would've had more tax cuts. It would've had it's own version of questionable spending.

[TimmySmith]

Natty, I don't get it. I bought 2 houses in the last 4 years. I still have both (and several others). I don't have my hand out looking of something for nothing. A house is an investment like anything else. If a person pays too much for a property and/or borrows more than they can afford to repay, how is that not their fault?

It is really at a point now where we are passed fault. I fault the banks first, for throwing away 100 years of principals and lending to those who clearly were risks. I blame the homeowners for being gullible and hopeful and taking miserable risks. I blame the the government, not sure why, but what the heck. But in reality it does not matter. You can blame the dog for crapping on the carpet, but eventually you have to clean it up. That is where we are. We must clean up. The best way is to keep the current property possessors in their house, at whatever price they can afford. Kicking them out would drive down the market to zero. This protects our neighborhoods and our investments.

[chipwhich]

Natty, I don't get it. I bought 2 houses in the last 4 years. I still have both (and several others). I don't have my hand out looking of something for nothing. A house is an investment like anything else. If a person pays too much for a property and/or borrows more than they can afford to repay, how is that not their fault?

You're missing the whole point.

If you bought 4 houses where I live with 20% down in the last 4 years you would have 4 houses with negative equity and an inability to rent them out for even close to what your mortgage payment is.

[Elessar78]

You're missing the whole point.

If you bought 4 houses where I live with 20% down in the last 4 years you would have 4 houses with negative equity and an inability to rent them out for even close to what your mortgage payment is.

right, and all he's saying is that that was a bad investment.

To us tax payers it's an issue of fairness. "Why should they get bailed out when they were stupid and I was smart?"

To gov't officials it's an issue of stabilizing the economy. If these people get kicked to the curb, they won't spend as much money and that will further cause our economy to tighten. I'm not saying I agree with it, just pointing out.

At some point people need to see taxes as a form of "economic insurance".

[Thiebear]

The loan calculators on the internet are damn easy to use.

put in the numbers and they tell you what you'll pay: Include the Property tax and insurance.

=-------------------

thats it. there is no other factors. 5% is now

You buy a house twice that for interest only for 5 years your are making a statement that you WILL MOVE OUT in 5 years based on your income.

when the 5th year hits, don't ***** and moan about not being able to afford it: you got a nice ride in a nice house.. now go back to your rental till you figure out 30yr fixed.

[Grumpy Vet]

Grumpy you might look into a professional.

We have them here that work on a contingency basis where you only pay half of any savings for the yr protested(and appraisals are good for 3/4 yrs)

They don't reduce the tax bill,they get nothing.

I didn't realize they worked on a contingency. I'm going to push to get my hearing scheduled and if I'm unsuccessful w/ some heightened attempts...I'll look into finding someone to help me.

Thanks for the advice.

[Dictator]

I know it won't work on a large scale, but if 100 or so people do it, they could get out of debt free and clear... Can I get an expert to tell me where my logic fails?

The Credit Card Company WILL take you to court if you do this.

They will win. And a judgement will be entered against you.

[chipwhich]

right, and all he's saying is that that was a bad investment.

To us tax payers it's an issue of fairness. "Why should they get bailed out when they were stupid and I was smart?"

To gov't officials it's an issue of stabilizing the economy. If these people get kicked to the curb, they won't spend as much money and that will further cause our economy to tighten. I'm not saying I agree with it, just pointing out.

At some point people need to see taxes as a form of "economic insurance".

Look I am not lobbying for people to get bailed out.

What I am saying is where I live people don't have the option of buying some podunk house for 100K or rent a decent place for a family for $1200.

No homeowner bought a house and "planned" for it to be worth $100K less than they paid for it. To just throw that out there is just plain dumb.

I've walked through dumps in my are that cost 500K. We aren't afforded the opportunity to buy a decent place for a decent price. Thats why some of my friends are stuck driving hours on the road from Hanover Pa, just to go to work in MD.

[Elessar78]

What I am saying is where I live people don't have the option of buying some podunk house for 100K or rent a decent place for a family for $1200.

No homeowner bought a house and "planned" for it to be worth $100K less than they paid for it. To just throw that out there is just plain dumb.

I get that, I lived in Arlington, VA up until 10 months ago. But I'm not understanding how the house dropping in value by a $100K would affect the monthly mortgage. I'm not trying to be accusatory or confrontational here, I'm just trying to understand what you're trying to say.

I've walked through dumps in my are that cost 500K. We aren't afforded the opportunity to buy a decent place for a decent price. Thats why some of my friends are stuck driving hours on the road from Hanover Pa, just to go to work in MD.

I'm not trying to be argumentative here, but choosing to live in Hanover, PA is a choice. 300K will buy you more house there than say Mont. Co, but you can choose to live in a 300K townhouse in Germantown as well (as opposed to a SFH out in PA).

[Dictator]

I get that, I lived in Arlington, VA up until 10 months ago. But I'm not understanding how the house dropping in value by a $100K would affect the monthly mortgage. I'm not trying to be accusatory or confrontational here, I'm just trying to understand what you're trying to say.

well, then the ARM came due, there wasn't any equity in the house to enable people to refinance. The APR shot up, they couldn't make their payments. They were upside down at that point.

[SkinsHokieFan]

I've walked through dumps in my are that cost 500K. We aren't afforded the opportunity to buy a decent place for a decent price. Thats why some of my friends are stuck driving hours on the road from Hanover Pa, just to go to work in MD.

Exactly. And that is a major part of my concern

Incomes did NOT keep up with rising home values. So if you are someone with a career in the DC area looking to buy a home, odds are you need to take out a loan that comes close to, if not exceeds, what you can afford

Someone who makes 75,000 a year is probably safe with a 1,500 dollar mortgage. 2,000 is probably the limit to go on a mortgage (seeing how you probably net around 4,000 a month)

Now you are talking about a 300k mortgage, give or take a little bit, but thats the top end range you should safely be looking in.

Right now, how many 75k jobs are out there for single people to buy that 300k condo in Fairfax?

And who wants to pay 300k for a condo?

The whole point of my little rant is, the government has to let the housing market still deflate to get back to that equilibrium we had in 1997 and 1998 where incomes and housing prices matched up pretty well

We are far from that still

[TimmySmith]

to us tax payers it's an issue of fairness. "Why should they get bailed out when they were stupid and I was smart?"

To gov't officials it's an issue of stabilizing the economy. If these people get kicked to the curb, they won't spend as much money and that will further cause our economy to tighten. I'm not saying I agree with it, just pointing out.

This is not 1 or 20 people, it's millions. So we kick all of them to the curb and leave milllions of houses vacant. Because there are no buyers. So what you have done is leave TRILLIONS of dollars worth of real estate vacant. With nobody paying a dime on them. Now all the houses around them are going to be worthless, whether the owners are paying on time or not. Exactly how does this stimulate the economy? I said it before, the issue that these people were stupid or greedy is moot.

[chipwhich]

I'm not trying to be argumentative here, but choosing to live in Hanover, PA is a choice. 300K will buy you more house there than say Mont. Co, but you can choose to live in a 300K townhouse in Germantown as well (as opposed to a SFH out in PA).

I hear you, and I don't disagree with you in full.

If you watched the housing market in this area for say the last 12 years, at some point houses started rising at such a rapid rate that people realized if they wanted to be able to ever afford a home, they would have to jump in.

So imagine you are some young couple. You got your whole life ahead of you, you scrape together what you can to buy a house. In order to qualify you have to take out an arm. You discuss with all your friends...lots of them have arms, interest rates have been going down, they all tell you to do it. You think you can do it. So 3 years ago you buy your first home. After a year into it, you find out its now worth 20K less than you paid and interest rates are rising.

2 years in it's now worth 50K less than you paid and interest rates are rising.

Now your arm kicks in, your payments rise. Lets say they realize they can't afford it.

Now they can't afford it, can't refi it, and can't sell it.

They aren't bank robbers. They weren't trying to cheat the system. They weren't trying to keep up with the joneses. They made a mistake.

I have a friend who is 100K in negative equity on his home and he and his wife are separating. He didn't plan either. So he can't sell it, he can't afford to pay for it and a place to rent, he can't refinanace it. He is stuck.

Oh and btw, my friends house in Hanover is now worth less than what he has into it. Fortunately for him he is planning to stay for a long time.

And just for reference, the average time a homeowner holds onto a house is like 7 years. Most don't buy to die in them.