Should the feds bail out "distressed" homeowners?

[Bubble Screen]

again, the banks didnt hold a gun to the buyers heads.

Gosh, this environment of zero personal responsibility is depressing!

I bet these same people say its the credit card companies' fault when they run up $20,000 and can't pay it back.

[DjTj]

The careful homeowner gets no direct help.....just higher taxes to pay for above

This is not true. Careful homeowners should be able to refinance right now into much lower rates. Government help will also keep real estate values higher, which will allow homeowners to sell for a decent price if they need to move, or to borrow against their equity if they want to start a business or otherwise need cash.

Careful homeowners will get plenty of help if delinquent homeowners are bailed out. The people who will get no help are those who are renting.

[81artmonk]

the point is some people were forced into these arms... 3 people on here all stated that the banks tried to make them take ARM loans.

I'm just curious, how does a bank force you to take a bad loan. Either, you're stupid(not you personally), or you didn't read or know what you were getting into. In any case, it still falls on the home owner.

WE had a 10yr arm. At which time, 5 years down the road we refinanced to an even lower fixed rate. we knew what we were getting into and we planned to get out of it in 5 yrs.

Either way, it's still your responsibility regardless of how much financial trouble you're in.

[redskins59]

I bet these same people say its the credit card companies' fault when they run up $20,000 and can't pay it back.

But the current recession has nothing to do with credit cards. It has to do with real estate. Sorry, but I don't understand your logic/analogy/whatever because it doesn't make sense.

What do you mean by credit card companies? Visa? Mastercard?

Guess what, these are just processing companies.

Banks are the ones that manage credit. For example, my Visa card reads "Bank of America".

[81artmonk]

I dont think thats a fair statement. No one wants to see anyone crash and burn in this, but many of us also dont feel that we should A( have to pay for the poor decisions of others, and watch other's poor decisions be rewarded with perks while those that played by the rules and used rational thought continue with nothing extra.

Very well said. Isn't that how govt works though itself. Make piss poor choices, than turn around and make others pay for thier mistakes??

I wouldn't mind them doing the refinance thing as long as it would availible to EVERYONE regardless of how much trouble they may be in.

I'm not well versed in these matters,but if all they are doing is allowing them to refinance in order to save thier home, but they still have to make payments like the rest of us and it doesn't cost the govt or the taxpayer, I have no issue with that.

[ChocolateCitySkin]

I'm just curious, how does a bank force you to take a bad loan. Either, you're stupid(not you personally), or you didn't read or know what you were getting into. In any case, it still falls on the home owner.

WE had a 10yr arm. At which time, 5 years down the road we refinanced to an even lower fixed rate. we knew what we were getting into and we planned to get out of it in 5 yrs.

Either way, it's still your responsibility regardless of how much financial trouble you're in.

they tell you they can't give you a fixed rate. then magically as i kept ****ing at a the very last minute they were like. oh we lied we can give you a fixed rate.

you should always be able to get a fixed rate if you have the docs that prove you can pay for it.

[IHOPSkins]

...... Careful homeowners should be able to refinance right now into much lower rates......

At the same rates given to DISTRESSED owners?

[ChocolateCitySkin]

Very well said. Isn't that how govt works though itself. Make piss poor choices, than turn around and make others pay for thier mistakes??

I wouldn't mind them doing the refinance thing as long as it would availible to EVERYONE regardless of how much trouble they may be in.

I'm not well versed in these matters,but if all they are doing is allowing them to refinance in order to save thier home, but they still have to make payments like the rest of us and it doesn't cost the govt or the taxpayer, I have no issue with that.

look i pulled that refi thing out my ass... i don't get why that isn't option.

[redskins59]

I'm just curious, how does a bank force you to take a bad loan. Either, you're stupid(not you personally), or you didn't read or know what you were getting into. In any case, it still falls on the home owner.

WE had a 10yr arm. At which time, 5 years down the road we refinanced to an even lower fixed rate. we knew what we were getting into and we planned to get out of it in 5 yrs.

Either way, it's still your responsibility regardless of how much financial trouble you're in.

First of all, banks need to make the necessary calculations to ensure that people are able to pay their loans WITHOUT refinancing. Secondly, I don't think banks refinance if the market value of your property is below the value of the mortgage. So, for example, if you bought your house for 300k, and the current value of your house is at 250k, you won't be able to refinance.

[81artmonk]

they tell you they can't give you a fixed rate. then magically as i kept ****ing at a the very last minute they were like. oh we lied we can give you a fixed rate.

you should always be able to get a fixed rate if you have the docs that prove you can pay for it.

If that were the case, than that is illegal. However, I doubt, IMO that was going on, on a wide scale. IMO it was the idea of more house than one could afford doing unconventional things in order to make that happen and that is a gamble which right now isn't paying off for many people.

[chipwhich]

First of all, banks need to make the necessary calculations to ensure that people are able to pay their loans WITHOUT refinancing. Secondly, I don't think banks refinance if the market value of your property is below the value of the mortgage. So, for example, if you bought your house for 300k, and the current value of your house is at 250k, you won't be able to refinance.

Oh you can refinance. As long as you shell out the cash to bring the loan amount below 250K.

[redskins59]

Oh you can refinance. As long as you shell out the cash to bring the loan amount below 250K.

But most people don't have the necessary cash.

I'll give you another example. My brother has been looking to buy a house recently. This one house he went to see had its value drop from 500k to 330k. That's a big drop.

[DjTj]

At the same rates given to DISTRESSED owners?

I don't know what the plan will be once it is passed, but I know that right now, I can get a rate lower than any distressed homeowner. The Fed's efforts to help the economy are benefiting careful homeowners like myself right now.

[Bubble Screen]

But the current recession has nothing to do with credit cards. It has to do with real estate. Sorry, but I don't understand your logic/analogy/whatever because it doesn't make sense.

What do you mean by credit card companies? Visa? Mastercard?

Guess what, these are just processing companies.

Banks are the ones that manage credit. For example, my Visa card reads "Bank of America".

Dude, keep up with the thread. That went out to you or the other guy who was basically saying they were "forced" to take an ARM loan. Its easier for them to say that, rather than to take RESPONSIBILITY for their actions. Hence, the credit card quote. I was basically saying people need to STFU and hold themselves accountable for their stupid decisions and not expect others to bail them out.

[Grumpy Vet]

It was really interesting going through the buying process this past June. For those that haven't done it recently....it varied greatly from when we bought in 2001.

Our mortgage guy told us we qualified for X. Nobody in their right minds w/ our expenses, debts and income would buy a house for X. I could see 75% of X...but not X. This was right before the crud really hit the fan in the market. We were lucky that we had a fair amount of equity in our previous house and instead of trying to make a killing - we put it on the market for a reasonable price and kept it pristine. It sold 2% below asking in about 80 days. We figured we'd be flexible on that house and try to get a real good deal on our next house. We got a pretty good deal and net net...came out ahead.

The crazy part of the whole process for me was how little the mortgage guy knew. The initial numbers he worked up for me were using a conventional loan w/ a good rate on the 30 year fixed and then a balloon on a substantial second w/ a decent rate. I told him that through the end of last year the limit on a jumbo was raised to be conforming and I didn't want a balloon on the second - I wanted a small 15 year fixed.

The guy couldn't believe I wanted a little bit more of a higher payment per month just to have a fixed rate on both loans. I don't recall the exact numbers but for a small amount of money per month I wouldn't have to worry about that ridiculous balloon payoff in 15 years or fret about having to re-fi.

Anyone that hadn't read the paperwork he initially sent (or didn't understand it) I'm sure will be shocked in the future.

I can see how people that aren't "business savvy" can get taken advantage of or make bad decisions. It isn't right on either side.

That said - we can't bail out everyone and I'm going to be really pissed if my family and I are once again penalized for playing by the rules. We are sitting on a 30 year fixed @ 5.75% and a small second @ 6.75%. I think it is a great rate brought about by years of hard work and attention to our credit rating. If someone that didn't do what they are supposed to is able to re-negotiate their ARM to a 4% loan b/c they overextended or didn't read the fine print....I truly believe something is wrong w/ the "system". If a lower rate or buydown is extended...it should be extended to everyone.

GV

[IHOPSkins]

I don't know what the plan will be once it is passed, but I know that right now, I can get a rate lower than any distressed homeowner. The Fed's efforts to help the economy are benefiting careful homeowners like myself right now.

Can I ask you about how many years to payback?

(years it takes for the savings in new financing to pay for the refinancing fees)

[DjTj]

Can I ask you about how many years to payback? (years it takes for the savings in new financing to pay for the refinancing fees)

Well, I am also paying down a decent amount of principal and going from 30-year to 15-year, so it's not directly comparable.

If I weren't changing the term though, I would recoup the costs in less than two years because my rate is going down by more than a full percentage point.

[IHOPSkins]

....I would recoup the costs in less than two years because my rate is going down by more than a full percentage point.

Good info and Good Luck

Thank You for this

[TimmySmith]

Dude, keep up with the thread. That went out to you or the other guy who was basically saying they were "forced" to take an ARM loan. Its easier for them to say that, rather than to take RESPONSIBILITY for their actions. Hence, the credit card quote. I was basically saying people need to STFU and hold themselves accountable for their stupid decisions and not expect others to bail them out.

So many things here. First off, people ARE taking responsibility, they are being foreclosed upon and moving out. Not much else they can do beside that. However, this is a very poor solution to the problem, that actually hurts you and me more than a bailout. Because if nobody steps in to assume the house (and right now nobody is), then it is going to start bringing down our entire economy. Defaults on loans are bad for everyone.

Second thing, do not confuse ARMs with Sub-Prime loans as so many here do. I have an ARM (2 actually) and they have actually re-adjusted DOWN. I have been getting 4.5% for 5 years now, compare that to the 6% conventional I could have gotten and I have saved thousands. Now I am in position to convert them to conventional if I wish. The only ARMs that I know of that re-adjusted to 11% were for crazy, sub-prime, and completely unconventional. There is enough evidence out there that a majority of these loans were sold to customers using deceptive and fraudulent practices.

The whole "caveat emptor" attitude in this thread is somewhat justified, but the buyer was only one component of the process, and the entire process was flawed.