articles.orlandosentinel.com— The misdeeds on Wall Street that worsened the financial crisis have created a legion of angry homeowners asking, "Where's MY bailout?"
Aug 10, 2010View in Crawl 4
We played by the rules. Bought a house out of foreclosure before that was trendy. Fixed it up, lived in it for five years and sold it for a small (very small) profit. It really depends on which rules you played by. We played by the rule "buy low, sell high". Although in fairness we bought low and sold only slightly higher. We didn't take a bath because we bought really, really low.
Nothing has really changed other than the prices, the same principle applies.
When we sold the house, we moved into our RV full time. After living the lifestyle a while, it would be hard to get me back into a house at any price.
I purchased my place while it was on the way down. Properties in the area had already gone down by 1/3 or so, so we purchased. Turns out it wasn't done dropping yet. Good news is we don't have as far to recover, bad news is there's still a long way to go.
The rules the article is talking about is paying the mortgage. Lots of people are voluntarily not paying their mortgage, or took out a bigger mortgage than they could afford, and have no responsibility in the matter. There are no consequences. They did something stupid, and the government is saying, hey, it's okay, you didn't do anything wrong.
Well, they did. Yes, the banks giving the loans share the responsibility, but it's not like they forced people into taking mortgages. Two parties were involved. People got greedy, or wanted more than they could afford for whatever reason, and they should have to pay for it. The problem is, so many Americans (both buyers and lenders) became greedy that it's caused a major meltdown.
So the problem is, the people who took reasonable mortgages, have been paying on time, and have loans they can pay off, have lost TONS of cash thanks to the people who are, quite frankly, greedy selfish assh**es, and yet only the greedy selfish people are getting financial help.
You are absolutely correct. It seems like the general populous is all about blaming the banks, but the people taking out the loans they could not afford share some of the blame and they are getting off scott-free.
I'll just sit here and quietly pay my mortgage that I can afford because I did not try and take out the largest mortgage I could.
I would digg you up a hundred times if I could as well. Rewarding irresponsible, stupid and/or greedy behavior is not going to produce desirable results, and really really irks those of us who have acted in a responsible manner and continue to pay our bills. This is not a way to win political support that is for sure. In fact, it does just the opposite. I will try my best to unseat those who have collaborated in this sham. From what I have read, most of those that have been "helped" end up being foreclosed on anyway. When you reward bad behavior, the only thing you get is more bad behavior.
Like many things in life, this situation is not as simple as you guys are making it out to be.
Let's start with the basics. If someone decides to walk away from their home, there's really nothing anyone can do about it. Obviously their credit will take a major hit and they're taking a calculated risk that they'll still come out better in the long run. There's no "rewarding bad behavior" here. Sure, maybe banks can be more diligent in saying, "Hey, you can afford this mortgage payment. We're not going the short sale route. We're freezing your finances and going after you.", rather than just going the short sale route. But a bank can only do so much when a person simply refuses to make the monthly payment.
Next, for those who can't afford to make their monthly payment, sure, the banks can simply say f**k you! But guess what? Everybody suffers. If you have a house and four people in your neighborhood foreclose, your house price just took a nose dive! It benefits *everybody* for that person to continue making mortgage payments, even if it is on modified terms. Sure, they get something for nothing. You want to get something for nothing too? Well then stop paying your mortgage (and screw your credit up in the process). Comment is buried, click here to see the rest.
@craftyguy - Most of the people I know who have gone into foreclosure in the past two years COULD afford the mortgages they got. Then the economy tanked.
Using your logic, no one should be a homeowner if they don't have guaranteed income until the mortgage is paid, and no one should get a mortgage if there is any chance their life circumstances or the economy might change through no fault of their own.
Before the economic crash, when people lost jobs, had high medical bills or a bread winner died, they could sell their homes -- but now there are few buyers. People are trapped in homes they can no longer afford and can't sell even as a short sale. Those homes go into foreclosure.
It's not their fault that Wall Street and investment bankers ruined the economy.
Scenario #1
Buy a house.
Prices go up.
Sell it for a profit to keep for yourself.
Secenario #2
Buy a house.
Prices go down.
Give it back to the bank and let them take the loss.
Heads I win.
Tails you lose.
The people we should be feeling sorry for are the people who had enormous down payments - I certainly don't feel sorry for the deadbeats with $0 downpayments that walked away losing nothing. I could be wrong, but based on what I'm reading on the internet, it seems that most of the people who feel like they have no obligations to pay their bills on time call themselves libertarians.Comment is buried, click here to see the rest.
First off let me say I spent my College years living near my brother planning to go into Real Estate with him. I listened to Real Estate and Mortgage Brokers talk about everything under the sun.
This entire mortgage crisis is caused solely by the US Government interference in the market.
By 2008 the Government Sponsored Entities Fannie Mae and Freddie Mac had bought up HALF OF THE f**kING MORTGAGE INDUSTRY. That is 5 Trillion with a capital f**king T.
You don't buy up half of an industry with absolutely no oversight and expect to not destroy it. Ask any economist what this kind of market distortion will do to any industry.
"This entire mortgage crisis is caused solely by the US Government interference in the market."
And as a licensee who was an active real estate agent during the boom years, I can tell you that you are 100% full of right wing brand talking point crapoloa. The housing industry melted down because the government didn't step in to stop the most risky behaviors and kept interest rates artificially low at a time they should have pushed interest rates much higher, much sooner.
I saw it with my own eyes. People who barely had a pulse and should never have qualified for a mortgage would get $200,000 or even $300,000. Even one of my own clients with bad credit got $217,000. And it didn't have anything to do with their race or where they bought homes. Some of the most exclusive neighborhoods were the worst hit during the crash. It was insane. I'd try to convince people to shop lower in the market, stick to places they could easily afford, but there would be a mortgage broker telling them why that was bad advice.
The market collapse was greedy bankers in bed with a corrupt industry. And it was because the government didn't step in and clamp down on risky practices that we all wound up in the s**tter.
You can't just blame the greedy bankers (though they are also to blame) but this is really a problem caused by people making bad decisions. Buyers and brokers alike. It's not as cut and dry as saying "EVIL BANKERS caused this by TRICKING PEOPLE"... greedy consumers wanted more house than they could afford.
And now, they're getting bailed out. I understand that if we have THAT many houses in distress it's bad for everyone. But you can't help but feel cheated if you're one of the ones who bought a reasonable house specifically BECAUSE you were afraid of something bad happening, and then it turns out the government is soaking up all the consequences. Irresponsible consumers are getting a slap in the wrist at best but get to keep living in nicer houses paying less money than they should.
In other words, the government is telling people what they did is okay by way of rewarding them with lower interest rates or renegotiated terms of contract or whatever. People won't learn otherwise.
Scenario #3:
Buy a house.
Lose a job
No one will buy the house for what you paid for it or in a short sale (for a price below what you owe)
Bank takes back the house and you can't do anything to prevent the foreclosure
This scenario is common in areas with unemployment that skyrocketed within the last 3 years.
You got lucky. Home prices are dropping faster now than they ever have during the recession with no bottom in sight. I laugh when I hear people talking about buying now to "buy low." Sure, you bought a foreclosure for 50% less than the last person, but have fun when it drops another 50%.
Mortgage rates can't go much lower. If rates go up, we are looking at a situation where the value of homes in some markets could drop below the price of the materials and appliances they are built from. It's happened before in other countries.
They should keep dropping until people can afford them. Why is it that we have to artificially prop-up the price of housing because the baby boomers are upset that their home isn't up in price 9000% like they expected? It's f**king stupid to expect that the people that arrive to the housing market are expected to pay four times as much for the same type of house used and degraded from when it was first bought 20 years ago. All the while their income is the same income or less as someone that bought the property 20 years ago.
Of course who gives a s**t about people that want to buy a home at a reasonable price. Just give them lower interests and cheaper credit so they can drown themselves in more debt to pad some s**t baby boomer pockets that most likely its already the owner of several properties that he bought at a time when prices were fair and people could pay mortgages. Oh and never mind the rampant unemployment. Somehow that home is still priced $300,000 while there aren't even jobs to then be able to take out a mortgage.
I agree completely. We do not have any lack of land to build homes or apartments (look at Japan, they can build up when they start to run low on land), so land value should not increase substantially in real (inflation adjusted) terms. Historically, homes were never appreciating assets. People tend to prefer new homes, not old ones. Homes can provide rental income, but that is it. It is pretty ridiculous that virtually everybody believed that we can build these structures that get older and need to be maintained, and somehow have these things go up in value over time. Homes get old and deteriorate over time. It suppose to lose value over time. If you can get a home for cheap enough, you can make money on rental income and it becomes a profitable investment. However, if you buy a home, pay maintenance and property tax, and hope you can sell it to someone else for a higher price (inflation adjusted) after the home gets older, then you are playing the greater fool game. For many years, this worked because the government kept pumping up home prices with mortgage tax credits (think about how ridiculous this idea is, it simply encourages borrowing and makes home prices go up, it isn't any cheaper in the end), low interest rates, government guarantees by Freddie/Fannie, etc.
There are more houses than households right now, so there are many houses that are simply sitting there rotting away. And people wonder why home prices are not going up.Comment is buried, click here to see the rest.
"We do not have any lack of land to build homes or apartments"
That indicates a huge misunderstanding of what drives home prices. As does this later statement:
"It's f**king stupid to expect that the people that arrive to the housing market are expected to pay four times as much for the same type of house used and degraded from when it was first bought 20 years ago."
Sure, you're right if people are buying piles of concrete and wood in the middle of nowhere. But they're not: they're buying a piece of a neighborhood, a community, a piece of a city. You can't make great neighborhoods and great cities with a cookie cutter (as hard as we've tried) -- they take time to develop, and sometimes they never do in particular areas for one reason or another.
In the areas where they have not developed, you end up with sub-par opportunities: lousy schooling, lousy peers for your kids, lousy pay scales, etc, etc. This is the reality: location matters enormously, and there is limited space in the _desirable_ areas.
All that is not to say that the housing bubble wasn't a bubble -- it was. And a lot of it was driven by speculation, which was stupid and caused a lot of problems. But the general direction of house prices trending upward despite depreciation is a function of supply in demand in desirable areas.
Everyone wants to live somewhere with higher pay scales. Everyone wants to live somewhere with better schools. There simply isn't enough to go around and thus prices rise.
nobleepaladin: I agree about the price of the house, but I think the bigger issue is the value of the property (or at least that's what realtors will say, though they are the ones trying to inflate prices).
As a city expands, new houses are farther and farther from the areas that people want to be close to. At the same time, the population is increasing, which leads to more demand for the property closest to the downtown areas since more people work there.. Location, location, location and all that. While land in general should stay cheap, there's a price people will pay to save an hour on their daily commute.
In Toronto, anyway, I've noticed that you could get a small condo for the same price as a mini-mansion in the suburbs. That indicates that there's more at play than just the size/quality of a home.
@ rotundo, in places like NYC, that is definitely true. However, people greatly overestimate the rarity of land. I live in Boston, one of the oldest towns in the country. Boston is pretty dense compared to most of the country. However, there is still plenty of room in suburbs that are 15-20 minutes away from Boston. Many of these cities are have large apartment complexes still being built (the contracts were from before the bubble burst) or complexes that are brand new. Most of these apartments are empty. Places like Florida, Arizona, and even California are not very dense, which is why the home prices there collapsed so much.
Also, if rarity of land is the variable that causes home prices to increase, it would be a function of population. And population definitely does not grow at double digit percents each year. It grows by less than 1%. So realistically, you would only expect around 1% increase in value per year due to rarity of land (which for the most part is negated by maintenance and taxes). Of course this depends on your region. For example, during the tech boom when everybody rushed to Silicon Valley, land value there should have gone up significantly. But the general belief that homes are investments is very flawed. Stocks and bonds are investments because they generate cash flow. Rental property can be an investment. But the idea that you can buy a property and let it sit there and have it go substantially in value is speculation - some people make money speculating intelligently because they are able to buy property cheap in areas before they become popular (ex: before a large company opens in a small town bringing in lots of new families).
For the most part, people didn't buy houses for rental income, they could have done better in bonds if they wanted income (especially in the states where the bubble hit the hardest). They brought it for price appreciation. And they leveraged up 5:1 (prime mortgage with 20% down) or more to bet on the appreciation. It's very hard to make money on a rental property from the rental income alone if you are paying interest on the home loan - any gains are speculative increases in property value. There is no reason for homes to appreciate in value significantly faster than population growth, faster than income growth, faster than rental prices, etc. If that happens, pretty soon nobody can afford a house any more.
@noblepaladin - you make some good points. A couple more thoughts though:
I grew up in one of those nice communities about 30 minutes from Boston -- Norwood, to be precise. Prices there rose dramatically since my childhood; a factor of 12 still after the recent collapse. Norwood was desirable compared to some places, but it cannot be compared to living in the Boston itself. If you want to live in Boston (and many do) Norwood and the expandable suburbs are not really an option.
Also, Norwood isn't as expandable as it looks. I remember when I used to film the town meetings there were endless battles with developers trying to get land and oftentimes they couldn't.
"if rarity of land is the variable that causes home prices to increase, it would be a function of population."
It's more a function of what the population can spend than just the population. If income or available credit broadly doubles, then the competition for any desirable area will most likely see a doubling of price, even if the population stays the same. In fact, I'd say that population alone doesn't matter much: if population grows but everyone has the same to spend, they can't bid prices up.
I agree that buying on homes for speculation was often a lousy idea, though like in any bubble, a bunch of people executing that lousy idea made out like bandits. It's hard for everyone else to sit by and ignore that success.
I love it when I can Digg up a post by someone with whom I disagree like 99% of the time.
Cool are you retired now, Danger? Where do you live, geographically? Are you just saving your money or something? You live in an RV, right? How do you get internet service? Are you just parked outside the local Starbucks or something?
I've always thought about living the RV lifestyle. How is it working out for you? I am also curious about how you're getting internet; do you just get a 3G/4G hotspot from your wireless carrier or something?
How is it perfectly legal? Your mortgage agreement is a contract you sign with the bank. If you default, you're in breach of contract. Now, the bank's probably not going to sue you, because they figure you don't have enough money to make it worthwhile. But they'll hound you and kill your credit score.Comment is buried, click here to see the rest.
Contracts are civil agreements and you don't break the law by breaking a contract. There are exceptions like you can't enter a contract with the intent to break it, but there are few instances in which breaking a contract becomes criminal or illegal.
Some people even argue that the banks already broke the contract because their reckless lending habits caused the house to be worth less than you paid for it. If banks had fairly judged the value of the home the market wouldn't had skyrocketed like it did because you wouldn't have been able to get a mortgage based on speculative pricing. Responsible lending stabilizes the cost of buying a house. In this argument you're just giving the bank what they said was worth that amount of money.
The argument that in some cases you may even have a moral obligation to perform a strategic default is not without merit. Which is more important your responsibility to your familiy or your responsility to a bank? This leaves you with a moral dilemma. You have to look to your ethics to make the best choice out of a bad situation.
The contract spells out both options -- the keep-paying-and-keep-the-house option, and the stop-paying-and-return-the-house option.
That's the whole idea of a collateral backed loan. It's backed by collateral.
If the bank did an extremely poor job at estimating the value of the collateral, the bank's shareholders and customers might argue that they were grossly negligent and ought to be sued for mismanaging their money -- but it's not the house buyer's fault.
Not paying the mortgage (that is, not repaying the money the bank loaned you) is NOT an "option". What is spelled out in the contract is what happens when you default, which is that the bank can *try* to recover its losses by selling the home.
The biggest part of most contracts covers what happens if one party or the other defaults; that doesn't mean each reason for default is an "option", it just recognizes that obligations are not always fulfilled.Comment is buried, click here to see the rest.
It's not illegal in the criminal sense, but just because you default on your mortgage and they take your underwater house doesn't mean they're done with you. You still owe them the remaining principal, and they can continue pursuing you to get it.
You might not have any money for them to take, in which case, yeah, I guess you "won," but a win that involves being completely broke sounds pretty crappy to me.Comment is buried, click here to see the rest.
Well, yes, you need to know your contract and the consequences of your actions before doing it, and it won't be right for everyone. But as far as I know it isn't illegal just as it's not illegal for a corporation to walk away from a bad investment.
But the fact that they can come after you for the remaining money even after they foreclose your house is defined in the contract.
It is an option to stop paying and allow the bank to have a legal right to take your assets. This is a GOOD option if your assets are worth less than what you owe the bank even after losing your house.
You may have made an irresponsible decision in buying a house you couldn't afford, and you should lose your house. By the same token the bank managers made an irresponsible decision to give you the money to do it so they should lose their jobs when the bank goes under. The bank's shareholders made an irresponsible decision to invest in an irresponsible bank, they should lose their money when the bank goes under.
It all makes sense except that we don't let banks go under anymore. We should be firing (by not reelecting) congressmen that voted for the bailout, and electing new representatives that will try to get some of the money back from the people that received it and don't deserve it.
"You still owe them the remaining principal, and they can continue pursuing you to get it." [citation needed] I've never heard of such a thing for any collateral backed loan.
Lenders can sue for remaining funds in many/most states, but the rules vary greatly. It's probably pretty unusual to be sued, since people who walk away from mortgages usually don't have many other assets.
That's shocking, even if only after seeing market values crash like they did over the past years. Just one more reason I give a big FU to the banking industry. Defaulting homeowners can be on the hook for the difference in value that the housing crisis caused, that the banks caused, even after already seeing their government bail out the same banks. And, of course, these banks also want the bankruptcy laws tightened or eliminated so they can squeeze even more from consumers that have hit hard times.
Isn't taking someone's home enough? What's next... a return to debtors prisons?
Well people AREN'T still on the hook if they declare bankruptcy. Isn't that the point of bankruptcy?
So what if your credit is utterly destroyed. The only thing you need to borrow money for is a house anyway. If I were a bank, I wouldn't ever lend to a person that declared bankruptcy ever again. So what? It is not the end of the world not to own your own house.
In fact if more people actually defaulted on their loans, loans would be much harder to get, and house prices would drop and become more affordable.
I don't think we need to abolish for profit lending (or usury as it was once called), but I think we should allow interest rates reach their normal market value. We shouldn't be subsidizing home owners. All it does is create a housing bubble. It doesn't actually help anyone in the long run (except the banks that are now immune to failure).
"it isn't illegal just as it's not illegal for a corporation to walk away from a bad investment."
There lies the misunderstanding. A mortgage is NOT an investment by the bank in your house. An investment is shared risk, while the mortgage (a loan) is a pre-defined agreement. The bank will never share in any part of the possible profits when you sell your house, why do you think they should share the risk of loss if the value goes down.
Thats a tough one, my opinion. If I borrow something, I DO feel morally obligated to give it back. Why would this be any different if you borrow money to buy something?
Now granted, in the case of a collateral backed loan, I can see the case for it being a business decision rather than a moral decision since, since according to the contract, if you don't pay it back the lender keeps the collateral.
If I take your car and leave you a bag of money, I'd still be charged with car theft.
And with houses and mortgages, the bank almost always loses money in the deal, since most people don't walk away from equity. The banks are not allowed, by law, to make money - they can only recover up to what you owe, and their actual costs (any surplus has to be returned to the homeowner.)Comment is buried, click here to see the rest.
"And with houses and mortgages, the bank almost always loses money in the deal"
I see, so then, the interest paid on a home loan goes...where?
Anyway, stealing a car is not the same as signing a mortgage agreement. In your example, a foreclosure by the bank would be the same as taking your bag of money and replacing it with a car.
The interest argument, I love that. The interest is what they get for loaning you the money - the money *you* asked for.
The interest is interest, by definition it does not reduce what you owe.
Your analogy is horrible. The bank has a contract with the borrower that spells out what happens when someone walks away from a house. A car thief doesn't have any such contract with the car's owner. Again, a terrible analogy.
And banks are not allowed to make money? I think you're confused. Banks don't lend money because they're being nice. As sigmaman2 pointed out, they're charging you interest for a reason. Now if what you meant to say is that banks typically lose when someone walks away from a house, I'd counter with banks are probably losing money *as of lately* because house prices were inflated way too high.
So sure, if a bank gave you a $750K loan on a house that just a year ago was appraised at $400K and you walk away, chances are good they're going to lose money, unless they can get it out of you. But this is just a current phenomena. In the 90s, for example, when house prices were reasonable, things were different. If you paid interest on a mortgage for ten years then couldn't make payments, the bank likely won because they got all of your money for ten years plus they get to keep the house and sell it, more than likely for a profit. This risk is factored in when they give out loans.
Don't forget that the bank is at fault for underwater homes as much as the buyers. It's the Bank's capital that is lent out with the bank expecting a return with interest and that's why the bank sends an appraiser to the house to see what exactly they are getting into. If the Bank lent out money for a house that was over-valued then they are just as at fault (more so IMHO because the bank should have known better) than the buyer.
@blackinthmiddleblackinthmiddle
Banks never "win" - they are not allowed, by law, to make more money on a foreclosure sale than they are owed (plus expenses). If the property did sell for more than the mortgage value, the extra money goes right to the homeowner.
And as I've said, people don't usually walk away from equity, they just sell the house themselves. So yeah, banks almost always lose money on foreclosures; at best, they get paid what they are owed.Comment is buried, click here to see the rest.
1) In normal times, by collecting your interest, a reasonably secure income stream.
2) In crisis times, from fools who continue paying their mortgages even though what they owe is higher than their property value. Bailing out the banks who lenders who had the capability and duty to judge the risks (much higher than individuals), and who are already being bailed out by the government.
It is true that the banks lose money when they foreclose, but if they lose too much, it's guaranteed to be topped up by the taxpayer (since they're too big to fail). Good to be them.
And hey, you're right. Life is full of people who cheat and get ahead.
What about those that played by the rules and lost? I guess the lesson is, you're trading a sense of moral decency for achievement and risk. Only you can decide if that trade is worth it for you.
It's hard to see how it's a moral decision when banks make you pay hundreds of dollars a month in mortgage insurance if you have less than 20% equity.
That would be like crashing your car and paying for it yourself even though you have insurance just because it's the "moral" thing to do. It's stupid and financially irresponsible.
Lenders can *never* profit from a foreclosure; by law, if they sell for more than you owe (plus their selling costs), they have to give the extra money to the homeowner.Comment is buried, click here to see the rest.
IANAL but I'm pretty sure that under US contract law one party is not allowed to go out and take action that could reasonably be construed to harm the other party in the contract. The banks knew or should have known that writing so many mortgages for unqualified borrowers would harm people across the board. Once the first signs of trouble appeared they had a fiduciary duty to stop the problematic behavior to prevent things from getting worse but intentionally, explicitly and with forethought declined to do so.
It depends on if your loan is "no recourse" or not. Be sure to consult an attorney before you walk away, or else they could come after you for the balance.
If you are underwater on your house, and the loan is non-recourse, then it is a morally correct business decision to walk away and give the bank back the house. The banks and lenders involved had no problem taking bailout money from you, nor charging you excessively high interest rates and fees for the privilege. Further, do you think they will give an inch when it comes to a loan modification? If the choice is put food on the table or pay the bank, you would be a negligent provider to your family if you let them go hungry. You aren't doing anything illegal. It's all in the terms of the contract you both signed.
I didn't read anywhere in my mortgage contract that says I was entering into a lifelong commitment to them. Pay or GTFO. You (usually) have a choice.
Because that's their job. Their Shareholders don't give a s**t about morality. They want their dividends. Not that I agree with that. But again, the entire purpose of a corporation is avoiding liability.
If you are underwater, you will have to claim the difference between what the bank sells the property for and what you owe as income on your taxes next year as well. You may be exempt from this if you have lived in the house long enough, but there could be bad tax issues coming if you don't pay attention.
Most people will be exempt from this tax under The Mortgage Forgiveness Debt Relief Act of 2007.
But it's true that you could be liable for a taxable gain if you default on a mortgage.
Keep in mind that the more money banks have to write off the less credit they'll be able to extend. If there is a wave of strategic defaults and banks take a bath, then businesses will have a hard time getting the capital they need to operate and it could cause some serious damage to the economy.
True, but also keep in mind that the banks currently walk up to the Fed for free (0.00 - 0.25% interest) money, and turn around and dump it in Securities (2 - 2.5% return) to make money. They're STILL getting a bailout every day.
Simple solution - don't use credit and save for the things you want.
We're talking about houses bcarl314, not plasma TVs.
House and Cars are loans people can't get around sometimes. The daily purchases however, should be cash whenever possible I agree.
1. Those folks who are defaulting are screwing over their neighbors. The more defaults, the lower THEIR home values go and eventually, they'll be underwater too. Then they may decide to default and round and round we go.
2. It ruins your credit for 7 years.
3. The bank may give you a 1099 and you'll have a tax liability for the difference between what they sold it for and what you owed on the mortgage(s).
4. If it's a second home, the bank may sue you to recoup losses.
5. Many folks have lost on their stock portfolios. How is the real estate any different than stock holdings?
6. When you bought the house, it was a good deal then? If you can afford the payments, then what's the problem?
7. Real estate prices will come back. If you bought a single family residential home as an "investment", you need to learn a few things about investing: for one, what constitutes and investment. MYTH: Homes are investments.
8. It's a douche bag thing to do. Just because there's other people being unethical sleazy douche bags doesn't mean you need to jump into the sleaze pit.
9. As losses mount, banks may start suing single family homeowners too.
10. If you're going to do it, be pretty damn sure you're willing to live with the consequences. There's no free lunch in this World - least for us little people.
"5. Many folks have lost on their stock portfolios. How is the real estate any different than stock holdings?"
You own stock thus profit/losses go to you, but you do not own home (bank does), those profit (your rate) goes to bank, but show should be loss as well. Bank took calculated risk while giving you loan, this is why you pay the % on top of your equity.
"6. When you bought the house, it was a good deal then? If you can afford the payments, then what's the problem?"
No problem, but one should consider legal options to see what the best. Why should not people default if this is essentially an option in their contracts? Is it legal, yes. Was it understood by bank when it gave money for loan? Yes. I do not see any moral or legal issues here.
1. Your neighbors feelings or investments are secondary (or completely irrelevant) to the health and future of your family. Welcome to the real world - the entire economy is based on valuatoins of debt.
2. It ruins your credit for 7 years.
No, it doesn't. Defaulting on a home != bankrupcy. You *will* take a hit, but the hit is relativly low for the nature of the action. Doing such action does NOT disqualify you from buying another home shortly after either.
3. Many are exempt from the federal claim. Even more so, an entity cannot take responsibility for liquidating an asset - to which you have no part/say in the proceedings - then expect you to pay the difference. This is a loss incurred by the lender. Don't pay it, ever. Taxation on it is actually pretty low or can be spread over several years of repayment if you are subject to it.
4. Suing is one thing, collecting is another. The number of homes you has is irrelevant - you could have one or a billion properties. The subject of the loan is that single property. Even if the bank tries to sue you, and gets judgement against you, there is no enforcement of judgements from a court pesperctive. Most states do not allow garnishment of wages on civil matters, especially in conjunction with the siezure/sale of property (it's one or the other). Know the laws in your state. If it's not a federal loan, then there the amount of hassle drops 90%.
5. It's not - in terms of monitary value. Your stocks however are not purchased on loan funds, secured against the value of said stock. Big difference...
6. Completely situational and irrelevant really...
7. Speculating on realestate values is again situational.
8. No, it's not. It's a business move. Might check into what companies do on a daily basis. Trying to pul that manuver shows you lack logical business sense on a matter.
9. While anyone can sue anyone at any time for any thing... banks have to look at potential return vs. money to pursue. As illustrated above, there are very little grounds for civil litigation where a loan was issued against a specific (tangible) asset. Hence the entire design of secured loans...
10. If you are going to do it, understand what you are doing. Knowledge is power, guard it well.
I think you're mistaken on this point. Most state and federal government agencies already realize this last market collapse has changed key fundamentals. Oregon has said that 'Things will not be the same - and we need to re-prioritize now - because we need to get used to having far less money for the next 10-20 years' And most of a state's revenue comes from property taxes.
Oh, property values will return - but how and where they return will likely be very, very different. The market has changed - people's needs and outlooks have changed. Expect continuing high unemployment until 2015 by Obama's estimates and likely longer. Recovery? It'll be 5-10 years out; and by then who knows what people will want or where.
I'll keep renting until the market becomes a bit more clear, jump in early on the rebound and enjoy my 4-5% interest loan. Sure you can't perfectly time the market, but it's far safer to catch it on the upswing and miss the bottom then try to catch a falling knife.
When I worked at a very large bank as a loan officer I gave out ZERO loans to individuals who had filed for bankruptcy. Now before people go out and call me a duech bag for s**tting on someones parade it was never my decision to decline them. I put their information into the computer, and the computer came back with a decision.
I'm not going to argue that it's not impossible to get a bank loan as soon as you file for bankruptcy - however, I will say at the bank I worked at it was impossible.
Home valuations are not comming back for a very long time. It was a bubble. The houses were OVERvalued and now the market is correcting.
The value of a house has always been what people are able to afford. The recent easy credit has let people afford more but that easy credit was wrong and the banks are not going to be able to offer that kind of ridiculous credit in the future.
The value of houses will collapse to what people can afford with normal / conservative credit. Typically 3 times salaries. Eventually inflation will push the raw dollar cost of a house back to where it was but not for a very long time. By then salaries will have inflated up to 1/3 of home prices.
I'm sure your neighbors will love living next to a bunch of boarded up foreclosed homes.
Maybe your default will tank the value of their homes, which will cause them to walk away from their homes as well.
The cycle continues until it's just a couple old ladies who did play by the rules, and are now stuck living on a block with 98% of the homes boarded up.
Of course now their homes, that they have fully paid for are completely worthless, so she can't afford to move.
It will continue until house prices in poor to middle class neighborhood reach a point where people that used to make $30k to ~$75k per year can afford them at whatever new salary and expenses they are dealing with.
If we let prices fall, it will eventually bottom. We won't end up with 98% of houses boarded up. Where do you think the people will live? We have a situation that looks like this - Suppose there 1 million households and 1.2 million homes. Therefore, 200 thousand homes are unoccupied. The government is encouraging sales (through tax credits, low interest rates, mortgage guarantees, etc) of homes thinking it will somehow solve the problem. The real problem is that there are more houses than households, that is not helped by encouraging sales. When you encourage sales, the homes simply switch hands. Some households own multiple homes that they intend to sell to someone else. It becomes a game of hot potatoes where the empty homes are juggled around and families move back and forth, but at the end of the day we still have 200 thousand empty homes at any given time. Sure it prevents homes from being boarded up, but it doesn't actually help at all. The problem will fix itself either through encouraging young teenagers to form households, blowing up the excess homes, or waiting until more households are formed through population growth. The last option is the only realistic one. There is no magic bullet, only time will heal the housing market.
While I completely understand why people would want to do a strategic default, if more and more people did it, it would absolutely cripple the economy. You think things are bad now?
It may good for you in the short term, but it will have a broad and devastating economic impact when done a larger scale. Remember that the same banks you are screwing hold your deposits too. If banks lose as much capital as people a nation wide strategic default would do, then say goodbye to those deposits. The FDIC will only cover so much. And that only for banks backed by the FDIC.
This will impact all banks, when not all banks screwed up. Community banks will be the first to go, and they are generally the ones that did things right.
While strategic default may feel like your own personal bailout, it will absolutely kill the US economy on a large scale. I know its frustrating to hear that, but it's true.
Which is exactly why the government is intervening in some cases. Our country is in a bad situation. If the government doesn't intervene we will all be in a worse situation. Unfortunately the intervention will benefit some who don't deserve it.
You can call it rewarding bad behavior, just like intervening for the banks rewarded those who got us into the real estate mess, or intervening for the insurance companies (with the new health care plan) is rewarding those who got us into the health care mess. Life is full of situations where we have to clean up someone else's mess. The proper response is to clean it up AND set up regulations to prevent people and corporations from behaving in the same way again.
I totally agree. There aren't a lot of solutions here that are going to make everyone happy. And I am in full favor of regulations that would keep this from happening again.
Right now the banks are all zombies limping along trying to squeeze as much profit out of the public to fill the big gaping crater that the devalued houses have created on the bank's balance sheets. If everyone strategically defaults, all those banks will fail, the FDIC will come in and protect the depositors and all the shareholders will be screwed right now.
All the people who benefitted from the bailouts will get stuck with the real losses they were all trying to cover up.
There will be a huge domino effect of bankruptcies and lots of people will lose their jobs. It will be absolutely horrible for maybe 6 months to 1 year instead of 10 or more years of dragging along with all the zombie banks.
I can see the side of the government that is willing to avoid the short really bad times for a longer period of still pertty bad times. We can force the short really bad depression if we think we can survive that better than the long drawn out depression.
Agree 100% filovirus. I'm a renter because I saw this coming years ago - blogged about it constantly - and was told I was an idiot. Now I have over $50k in the bank for a down payment and more in investments. But I'm not going to buy yet.
There is NO way the housing market as a whole will do anything but go down for the next year or so - and I want to it crash good and hard. Sure, individual places will see growth - but when the banks are still sitting on hundreds of foreclosed properties, unemployment is expected to stay at current levels until at LEAST 2015 by Obama's own optimistic estimates - and lots of folks sitting on properties continually sinking in value each day - how can anyone think the housing market is going to do anything else?
All the governments plans have done is slow the inevitable. This was coming for a good long time and anyone that looks at any of the data can see that houses are still a good 20% overpriced in a lot of areas from historical averages. Give the country another 12 months of depressed wages and unemployment, and even more houses will be on the market. Eventually those banks will have to start dumping the assets or they'll actually start falling apart as abandoned properties are aught to do.
I'm currently seriously considering approaching banks and offer to live in places for free in exchange for making sure the place looks lived in. Best free rent plan ever.
Very little or nothing can be done to stop the decline - and all the major financial and government players know it. They had a choice - either crash hard and fast, or crash slower and longer. They made the right choice, but it's still going down like a date on prom-night.
They are but it's usually the very rich who are doing it. Why? Because they can afford to. Sure, anyone can walk away from their underwater house. But where will they go? Rent? What landlord is going to take you with the credit score you just ruined by defaulting? It seems easy but the average Joe can't pull of a "strategic default", legal or not.
Get the apartment before you default on the house.
Actually I know a few people who bought a second house before choosing to default on their current residence. Being $300k underwater makes no sense and if you live in a "no-recourse" state there are almost no liability issues with returning the property to the bank.
It does not by any stretch satisfy the terms of the loan. The terms of the loan state that YOU will pay back the loan, no matter what. Having collateral doesn't mean that the collateral will cover the full cost of the loan. What is not covered comes out of your pocket. So if you decide to strategically default, you better not have a dime to your name and you better not desire credit for at least another 7 years.
Every home I've rented for the last 3 years has been foreclosed on less than 6 months into our lease thanks to (seemingly) every landlord in the state sharing your thinking. Having to get up and leave with no notice twice a year tears through every bit of your savings, making it hard to build and maintain credit. Without good credit, I can't buy a house. Without a house, I end up renting again and repeating the cycle when the next landlord defaults.
I wouldn't count on the recent laws protecting you either, the last time this happened I told Fannie Mae about the protecting tenants at foreclosure act (it's supposed to protect your lease in these situations) and they first told me I was wrong, then hired a 3rd party company to take me to court. The judge threw it out.
Seems ironic that renters who pay their bills on time can be kicked out immediately while deadbeat homeowners who don't pay their mortgage can keep living there for 6 months.
The system is truly broken when we reward the deadbeats and punish morality.
What people fail to realize is that, the bank takes the loan, right now they make about 450 bps on whatever the value of the loan is, and then sell it off to fannie or freddie. The govt owns the loan and takes the hit.
Doesn't a default kill your credit rating for a long period of time or is there some loop hole I don't know about? I bought low and fought hard to buy right. Went in with positive equity, low interest, fixed rate, etc... Now I'm stuck owing 80% more than it's worth thanks to the bad loans others sold or took. Is this a true way out or do I end up with a black eye and inability to finance a car or another home?
There are a lot of considerations: taxes, state laws, etc.
It boils down to, how many years will you be destitute because you are paying a mortgage you are locked into because you can't sell underwater or how many years will you be destitute because you have a bad credit rating.
Good credit with no money or bad credit with some money.
It may work out that taking the credit rating hit is less bad. And you will be able to relocate if you can find a better job someplace else.
Odd. I read the article, I seem to have missed the part where the government pays your mortgage for you. No, it just allows banks to write off their loss (much like you or I can write off our capital losses against our income) when compromising on loan principal.
Don't make it sound like it's free money. It isn't. It benefits people who played by the rules by stopping the downward spiral in home prices, and keeps your neighborhood from becoming abandoned.
I don't understand how underwater people are getting screwed by the government. Can you explain it, if they don't need help and they aren't getting any why is that being screwed?
It depends on how you define "don't need help". For example;
Citizen A - Buys house, Xbox, Premium Cable, Cell Phone Plan, big screen TV and other luxury items. Can't make mortgage payment so defaults and keeps luxury items.
Citizen B - Buys house, Sells Xbox, Cancels Premium Cable, gets PayPerGo Cell, and eliminates all other luxury items to save mortgage.
Because of what the government has done with the housing market, many property values have dropped significantly. I bought my condo 3 years ago, and at this point I owe 20k more than it's currently 'valued' at (didn't get it appraised or anything, but that's based on the sale price of a similar unit in the complex). I don't need help paying the mortgage, but I feel a bit screwed because I'm stuck there until the value comes back up or I pay into that 20k.... I wouldn't be able to sell the place and pay off the loan I took out at this point, and that kinda sucks...
Here's the thing. They (we) don't need help to continue paying the mortgage payments each month. But we're underwater, a good many of us. That means that the value of the house is less than the amount we owe, so if we tried to sell the place we would owe money. The big reason our houses dropped in value is BECAUSE of the actions taken by the very people that the government is helping out.
Keep in mind, a lot of the people who are defaulting on their mortgage took huge mortgages that they knew they couldn't afford long-term, but assumed the house value would go up and they would be able to sell at a profit in "a few years", and for most people those few years turned into a few more years and then the payments ballooned up to way more than they could afford. And most of those people KNEW (or were told but forgot) that this was going to happen.
So, in summary, homeowners who play by the rules are stuck without options for moving, beyond paying up to 50% of the house's value to move. We really have two options, as the article points out (three if you count selling at a huge 5-figure loss) - stay and hope it appreciates back to the same levels as before, or voluntarily default and take a huge credit hit. Homeowners who didn't play by the rules and bought more than they could afford are getting government help to continue living above their means.
Meanwhile, while Manther is paying his bills, other people who CAN'T afford to pay their bills b/c they 'bought outside their means' are getting assistance and are getting their mortgages written down to the value of the condo, while s/he's stuck with his at the extra 20k.
So the "responsible" people suffer, and the ones who bought outside their means get cared for by the government.
I think the thing you guys are missing is that the government didn't do this to the housing market (@Manther) and the government isn't screwing you on your loans either. It was and is the banks.
@Manther Sure it sucks, but it's also the 'rub of the green'. I see the whole underwater thing as a fallacy.. If you bought a place as an investment, then constantly monitoring the resale value makes sense. But if you bought it as a home, then you paid what you think it's worth as a home, and now you live in it.
Market value should not matter, since it is your home.
Now to the point. Investments involve risk. So if there was any notion that you purchased it as an investment, then you assumed the risk, and you take the loss.
I feel for you, but that's the rub.
As far as those who are being helped, I agree, they shouldn't be. They should default, have their credit ruined, and the bank should suffer the loss for getting into a bad deal. Progressives will argue these poor souls need help, but I say BS. Let them struggle, and they'll learn a lesson in the end, as will the banks.
This is why regulation is a catch 22. The best regulation is consequences.
@delihound: The banks and mortgage companies were the driving force behind the problem, but they had a lot of assistance from the government and the ratings agencies. In the U.S., the government is going to do what the bankers want it to do, even though both like to pretend otherwise. If the bankers aren't making the decisions themselves (i.e. Paulson, Greenspan, etc.) then they are funding (bribing) those who do.
@delihound: We're not missing 'the thing' here.... If you think government doesn't play a part in this mess just like the banks do, then you have some more learning to do. Banks and Gov't worked pretty closely together to get the country into this mess.
@ArachnidDude: There's a whole world of other variables that you aren't considering in your blanket dismissal of 'underwater homes'... I bought a condo and not a house to minimize the volatility I'd be dealing with, and keep it cheaper should I need to move or anything like that. I planned on being there 5+ years, yes, but since my plans aren't the only deciding factor in where I live, two years after I got there I lost my job and needed to find a new one. That was right after the value dropped, and I was about $45k underwater at that point (value has come back up a bit as well as a small dent in the debt...) so moving was not an option without defaulting, and I was forced to take a less than ideal job in the area that I was already living, so that I could pay what I owed and be a good citizen.
I bought it as a home, but I didn't pay what I thought it was worth, I paid what I could talk the seller down to. That's a pretty silly assertion. Sure, I agreed that it was fairly reasonable, but reasonable also takes into consideration what else is around. And just because it is my home, doesn't mean I hope to live there until I die... Thus, market value plays a huge role in whether or not I can sell it and move elsewhere, or if I'm stuck.
I understand and respect your risk assessment, but the banks and government were hiding some pretty critical facts from the public with regard to that risk. If I'd known there were so many bad mortgages out there that would be defaulted on causing property values to drop significantly, I, like many others, would have kept renting and waiting to buy.... But that wasn't exactly the case was it?
Bottom line is, I was responding to a question on how those of us playing by the rules are getting screwed by enlightening you all to how that works, which is: Banks made big mistakes, some people made big mistakes, some people didn't make any mistakes except following the right rules at the wrong time. Government is helping the banks, and government is helping the people that made big mistakes, and they're using the tax money of those of us that didn't make mistakes, all the while leaving us with their consequences and no help. It pisses me off, not because I'm underwater, I can sleep in the bed I made without complaining, but because everyone else who had a part in making my bed, is getting put up at the Four Seasons while their situation gets fixed....
@Manther Well I completely agree with you that it sucks. The part about the real idiots (and the banks) getting assistance while people like you are dealing with it like real men, or women.
I would just add that it's fairly evident that the U.S. Gov will not let this housing market thing go.. The reason they are bailing people and banks out is to stop the bleeding (which I don't think will succeed).
I have a theory that the most accessible source of power and money for politicians comes from real estate dealings (especially in more localized governments). Of course there are other methods, corporate sweet deals that provide future consulting jobs, etc.. but (and I'd love to see real numbers on this), I'd say the most prominent politician's investment is real estate. So it comes as no surprise to me that bureaucrats will do ANYTHING to recover this market and keep it rolling.
Good summary HeWhoPoops. Where is it stated "The value of thy house is guaranteed to appreciate"? It's an investment. There's no difference between buying a house, no matter the "deal" and buying a stock that is "at the bottom". The house may still lose value and the stock may still go bottom up. That's the way it works. It sucks for those that were "responsible", but it was always a possibility for them.
What sucks is that those that weren't responsible are being rewarded. I understand the response that "Hey, they were stupid and got help, I was smart, I want help too!", but that is a mentality that will just get us in more trouble. It's a continuation of the "entitlement" frame of thinking that got the entire system into the mess to begin with. The correct response is, "Sucks you were irresponsible, good luck finding an apartment. Oh, sorry mister banker, you lost a bunch of money too? Yep, that sucks. Better luck next time, eh?"
In regards to the people who did accept loans they couldn't afford, one could make the argument that they were victims of predatory lending. I think that particular argument only goes so far, but it is true that some people were "tricked" into their sub-prime loans.Comment is buried, click here to see the rest.
@ArachnidDude: we seem to be in agreement at this point, and I've dugg you for it. Also, I don't think your theory is too far off....they are definitely very invested in this market...
@HeWhoPoops: I can be all three, responsible, having played by the books, and having made a bad investment. They are not mutually exclusive. However, I'd argue it wasn't a bad investment as much as it was a good investment at a bad time, but aside from this one response, I can't argue against your statement.... That still doesn't change the fact that I'm pissed off that I'm in the one group of "sufferers", for lack of a better term, who isn't getting government help (and please don't assume that means I want it.....my STRONG preference would be that NO ONE gets it, because as has been pointed out before, the best regulations are consequences...).
Yeah, Manther, I can totally understand the anger.
I'd be angry too, but last year I used a large inheritence to pay off my mortgage. So, I'm just that guy who eyes this problem with an air of self-importance.Comment is buried, click here to see the rest.
@Manther
Predatory lending and ignorant borrowing seem to go hand in hand. I wouldn't say they got tricked, no more than the people who think $99 car payments for 15 years at only 1% got tricked. Either they didn't understand the actual numbers or they didn't read all the documents they signed. People can blame the "predatory lending", which is pretty much just fine print on a mortgage, but I say equal blame belongs to the borrowers.
If you want to get into a discussion about past legislation that affected lending practices we can, but for let's suffice it to say that I'd even only give the lenders half of their of their original half of the blame and the government the rest.
I tried. I have a 760 credit score. I've never missed a mortgage payment. I make a great salary. The lender asked for 3 years of t ax returns which I provided. I was not approved. The reason? My 2008 didn't look too good. My response was, "whose 2008 looked really good." Obviously they hadn't heard about the economic meltdown.
This seems to be the same thing that is happening to everyone I know who are trying to refi.
Oh yeah, I was also told that if I don't pay my mortgage for three months, I might be able to refi. No way.
Yep, i'm in the exact same boat. Great credit, I'm not even underwater on my loan, but got denied...
Problem is darkened is the more lenders you work with the more your credit report gets hit and your score drops. Get too many queries into your credit report in a short time and it takes a big hit.... So I tried last year, got denied, tried a few months ago, got denied.. Problem is though I'm not underwater, my home depreciated enough that my available equity is smaller and it throws off the lenders ratio 80/20 ratio etc....
@samueul: A group of hits over a short period in time impacts your credit score the same as a single one. It's only repeat hits over longer period which may impact it.
We tried the same thing. Wells Fargo is a bunch of crooks. They sent us a letter offering to refinance and then said we didn't have enough equity to refi. Why did they send the letter in the first place? To get credit for "attempting" to help and more free money from the government.
@Samueul
This seems to be the norm, lately. We've been trying to refi to take advantage of low interest rates, but lenders are uninterested. The banks seem more interested in holding money, not lending it, so that is what they are doing... I was actually offered $200 to pay off and permanently close a credit card account recently - despite that credit card having a $0 balance on it. The fear seems to be that I *might* draw a credit on that line, and the card issuer has lowered the available limit of that card by 80% in the past year as well.
A cynical person might suspect that the banks are planning for a large decrease in the value of the dollar due to inflation. But sudden inflation would only be an issue if billions of dollars were infused into the system... wait, where'd all that bailout money come from, exactly?
Not if you're upside down on your mortgage due to something called a "housing market crash". Which happens to be where most people are that bought a house withing the last 10 years or so.
Remember that if you refinance you home for a lower payment, you are selling your home to yourself. That means that if your taxes were low (if you owned the home for a while) you better beleive the appraiser will come and reappraise the house at a higher rate. Plus, once the county appraiser is done, then your insurance goes up to match the appraisal value.
Its not just P&I that matters because you'll end up paying more in tax and ins than the amount you save with the lower rate.
I know people who have been trying to but bank owned/ short sale homes. It's almost impossible, if they accept your offer it takes them forever to close. I think the banks are waiting for another bailout., so they are holding the homes.
I guess I was really lucky. My agent insisted on making an offer that wasn't too much lower than the short sale asking price (half the selling price listed for the two years previous)- which was higher than I would have want to have paid because of the work necessary on the property. As I had an (unsolicited) offer on my house- and needed the cash from the sale to pay full cash for the house- the whole process had to work in tandem. Having bought and sold a number of houses previous, this sale actually went smoother than others and within 3 months of making the offer. In this transaction there were no mortgages involved. I had a great aggressive agent that called the bank- and the broker- almost daily. I've also heard many short sale nightmares, so I am also suspicious about why the banks delay these deals. I was told some of them are held for friends of the bankers, so their friends can get better deals the longer the property sits. It would be easy for them to do as no one would really know.
I'm currently trying to purchase a home, and have run into a few issues with foreclosures / short sales. On a foreclosure, I typically get asked for a "final and best" offer, no negotiation, and my offer is always rejected (one offer was over the asking price). On a previous short sale; I put an offer on the house, but my offer was not accepted (nor looked at), because there was an offer put down 12hrs before mine (mine came in on Monday morning).
Basically, if you want a great deal, you need to have an agent that lists bank foreclosures / short sales. The agent will get full commission (buyer + seller), and they will diamond encrust your offer when they present it to the bank. It's unethical, (probably illegal) but it works.
Dont be silly. Those that played by the rules are in no need of assistance. They are not broke, no-income fools that were given a McMansion by their friendly bank that was FORCED to give them a house by Barney Frank--Superman of the House!Comment is buried, click here to see the rest.
That's horses**t! I bought my house 8 years ago, I was pre-approved to spend double what I bought, but I decided to buy something I knew I could AFFORD, not what the bank said I could.
It's not the fault of the banks or the housing market, it's the morons who didn't think about their purchase then went crying to Nanny Government for a handout when they realized they were in too deep.
Amen. Bought my house twelve years ago for 76k at 5% fixed 30 year and it was worth 135k at the time, I too was pre-approved for well over 250k. I've never missed a payment and I have excellent credit.... I guess I don't need the help and the fed can take my earnings to help those that do..... It's bulls**t.
Thanks for proving my point. 8 years, 12 years, pre-bubble prices, much more manageable. 5-6 years ago, not at all. To put it in perspective, at one point I saw a townhouse with obvious water damage in a development in the middle of nowhere going for $315k, and that was the low end!
What's horses**t is that you lay no blame on a financial market that was lending to people without doing a basic level of due diligence as to whether the loans could be PAID or not.
Same, I bought my house in 2007 (blerhgh). I was approved for over 250k, I bought a house for 128k. There is no possible way I could have afforded a 250k mortgage at the time, even now it would be a stretch and I'm making quite a bit more money now than I was then.
Doing simple math before signing a mortgage = a good idea. Apparently that is missed by some people.
the houses in my area never were out of proportion because they kept building and building more homes which capped the max price at the price of a new home.
No one seems to realize this. Housing prices are still way out of line. And that sucks for people like me who bought a tiny 120k shack because that's all I could afford and if house prices were to go to reasonable levels my shack would surely go down in price, way more than it already has.
The bigger problem is that these schmucks had absolutely nothing to lose.
Even if they only had 5% downpayments they would hesitate before walking away from their mortgages.
When people have nothing to lose, they're more likely to walk away.
Also, the shmucks should have realized something very basic.
Either:
A: If the house is NOT an investment, then it is a good or service, therefor value is strictly materials + labor +a small amount calculated for profit (usually 20 percent.) This means a 50k home goes for around 60k.
B: If the house IS an investment, then there is always the risk it goes t**s up. ALWAYS. Want reduced / no risk? Rent Responsibly.
Simple - 6 years into my 30 mortgage I still have almost no equity. Instead of feeding the local economy by paying the owner of a rental property (in theory), I gave money to a bank that well...
Some of it has to do with short term. Most renters (at least in my area) aren't long term. Usually it's people in the middle of life adjustments (starting out, new in town, recently married/divorced).
I never understood this mentality that renting was throwing money away. I wouldn't consider spending money on shelter to be wasteful.
I have house that seems to be a fixer upper. I bought it starting out, and I'm not the most handy person in the world.
I'll tell you - the nice thing about renting:
Prices are comparable to mortgage, but if you're landlord (or landlord company) fulfills their part, you don't get the bill for the roofer, the new furnace & ac, the plumbing, etc.
My mortgage is comparable to rent.
But 3 years ago - new roof - 5k.
2 years ago, new ac/furnace - 5k.
Probably need about 500-1k worth of plumbing work, let alone some other things wrong like a poorly ventilated bathroom.
So - yeah, I'm gaining equity, but I'm sinking far more into maintenance than I get back in equity, esp. being only two years into a 30 year (refi to lower rate).
What equity? All my neighbors are walking away from their homes which has caused mine to become worth a lot less than I owe. Plus unlike renters I have to mow the lawn and pay for all kinds of maintenance.
When I rented I paid $425 a month. When I first moved into my house I paid $800 a month. But now with all the inflated housing prices, my taxes on the house have go way up and now pay $1000 a month. Renting was much better, I had the weekends to do what I wanted instead of dealing with house. The only real benefit I got was a parking space of my own.
"Rent in most areas was (and still is) on par with a mortgage payment."
Not at all true where I live - and I have a shared spot with a great roommate. Just find yourself a roommate that has a significant other and before they move in make it a lease agreement rule they don't have anyone over more than 7 nights a month. They'll quickly start living with the significant other and you'll have the place to yourself.
I rent a great place downtown with a fireplace, all wood floors, a back patio with BBQ, patio to sit and enjoy the sun, full living room, full dining room, full kitchen, and tons of amenities all for $600/mo. A mortgage on a nearly identical square footage place in the basement next door without most of the niceties is $1200/mo without taxes, condo fees, or maintenance. I'm banking that extra $600/mo and investing it. And even with currently depressed investment return rates, calculating the tax benefits for interest payments, and assuming no repairs - I'm getting a way better return rate than any of my neighbors who own places.
"Throwing your money away on rent" is a fallacy that has been fed to us for years and is a key reason we got into this mess. Yes, for some markets it is cheaper to buy then rent - for others it's cheaper to rent then buy. But you have to do the math for YOUR market - because in some cases it's absolutely the wrong move to own.
Further, as others pointed out, you also calculate in how you want to live your life. I love being able to go out every weekend without worrying about a house or mowing lawns, or leaking pipes, or fighting with crazy neighbors on HOA/condo boards like my owner friends. If anything needs fixing - I just call the landlord and it gets fixed. Since I've lived here for 3 years - my landlord has poured about $3000 in repairs just for my unit from a burst pipe in the wall and a fridge that died of old age. I love banking more than half of my neighbors mortgage payments each month, having over 12 months of living expenses sitting in investments earning far more than the 5% that houses grew on average. I love the idea I can move at any time if my job goes away - especially in this economy.
It's time for people to stop buying realtors garbage like this and do some math for themselves.
Not where I live (my house: $2000 a month on a 300K loan at 5% fixed, rent for the house is going for about $1,200...we're stuck). The house is 1,094 sq. ft. three bedroom (Riverside, CA)
Your reward is that you can now get houses for dirt cheap prices at all time low interest rates. Get out of that money sink while the gettin's good.Comment is buried, click here to see the rest.
Where I come from, "owner" = house belongs to you, not the bank. No mortgage means no deduction. I don't even have the option to walk away from a loan. I can't sell my home because it would be a huge loss.
The value of my investment has plummeted because my neighbors bought homes using sub-prime loans and have defaulted. I have a hard time understanding why our tax dollars are going to pay to bailout people who have caused our investments to drop 50%.
Where's the compensation for folks that played by the rules and got stung by corruption in the banks, Fannie & Freddie, and the House Financial Services Committee (yes, I'm glaring at you, Barney Frank)?
Didn't you get the November 2008 memo? Success is to be punished. The rich are evil.
You're dealing with a group of people that secure their power through political dealings and the promise of distributing the earnings of other men to those who have not earned it.
Discussing the impact that this realignment of rewards and incentives will have on people's behavior is just "being greedy". Pointing out that it was generally greed that caused people to borrow more than they could pay back....well that's either "racism" or "insensitive".
"You're dealing with a group of people that secure their power through political dealings and the promise of distributing the earnings of other men to those who have not earned it."
You seriously want to say this is the purview of only the current administration? (See "Didn't you get the November 2008 memo?")
You want to tell me that no other political figure, no other president, got to where they got without "political dealings"? In your world, it's only the current president that is apparently this evil person.
And by your statement, I assume you are then against Social Security, Medicare, and all the other social systems that are in place? Which, by the way, were enacted WAY before 2008...
No, I'm talking about liberalism in general. This just happens to be the first time in 30 years that liberals have actually succeeded at getting power in all branches of government.
A flat out lie. Your entire post was vitriol about the current administration, with nothing whatsoever about the deregulation causing all this, or anything having to do with SOLVING anything.
If you want to make s**t up, you should try it with people who aren't intelligent enough to read. Here's a good place to start:
Markets DO go down. Especially when the Government has propped them up for political reasons using taxpayer money (hi freddie, hi fannie)....What's that got to do with anything?
A flat out lie. Your entire post was vitriol about the current administration, with nothing whatsoever about the deregulation causing all this, or anything having to do with SOLVING anything.
If you want to make s**t up, you should try it with people who aren't intelligent enough to read. Here's a good place to start:
the problem solves itself when people who can't afford houses stop paying for them, prices drop, and other responsible people take out loans for amounts that they can actually pay back.
Why are we protecting the interests of the irresponsible that bought high and spent more than they could afford, while undercutting the interests of those that would like to buy that house at a cheaper price using funds they can actually pay?
Wow - you completely ignore the benefits to homeowners who played by the rules: homes don't go abandoned, house prices don't spiral down the toilet, and (you seem to really miss this one) - not a single penny goes into the irresponsible homeowner's pocket.
How does "not a single penny" go into irresponsible homeowner's pocket when you're talking about reducing the amount of money they owe on an asset? Where does this money go, and where does it come from?
p.s. you completely ignore the benefits to wannabe homeowners that are saving and keeping a good credit score. Instead of $250k propped up houses, they could be paying $175k in an honest market.
The BANK eats it. Say someone owes $500k on a home, and it's now worth $300k. Ask yourself - given the option of walking away (which is perfectly legal and part of the mortgage agreement), why would you pay on a $500k loan for a $300k house? You wouldn't.
So the program encourages BANKS to meet the owner halfway or so, say, $400k. The bank stands to lose $200k, so a $100k loss isn't so bad. The encouragement comes in allowing the bank to write off more than the $100k loss. Remember, without this program, the bank would be writing off MORE of a loss, and paying even LESS in taxes, putting MORE of a burden on me and you.
The homeowner is still in a home worth less than what they are paying on. The bank has now taken a smaller loss than it could have ended up taking, and is thus paying more taxes on it's profit than it could have ended up paying (benefit: me and you). There are less foreclosures meaning your home value doesn't drop to an artificially low level, and less of your neighbors are looking around going "well, I owed $400k on my home, now it's worth $300k; rational economics says I should walk away".
There - you and I have benefitted by not having banks take as large a tax write-off, home values aren't spiraling downward causing new rounds of walk-aways, and the homeowner is still a bit underwater, but at a point where they won't have to walk away.
Honestly, like most of Obama's policies, if you actually look at what it does, it makes a whole lot of pragmatic sense. It's easy to obfuscate the actual benefits and inflate the costs (or play "victim") if you don't actually find out what it does.
right, because the scary "libruls" hate successful people, unless you are talking about hollywood, google, apple, microsoft, intel, cisco, juniper, facebook, and every other god damned tech company which not only survived during the s**tty economic climate, but GREW.
Ha! "Libruls" hate successful people so much, they are willing to provide anyone and everyone with a basic education, basic healthcare, a basic roof over their head, and sustenance so that anyone, not just the children of rich people, can be one of those most-hated "successful people."
I was specificly referring to the Economic Recovery Tx Act of 1981 and the Tax Reform Act of 1986, the two greatest tax reform acts in the history of this Country.
No other president has ever done more to reduce the role of government and to reward the hard working people of this Country.
Thinking about Obama being president now is disgusting after just re-living old memories of how happy, hopeful and proud the entire country was under Ronald Reagan.
The general message in America today is one of fear, distrust and shame.
gizram, Reagan's tax cutting was no better than government spending as he was able to do so at the expense of the national debt, Just like Bush. You know that huge f**king national debt we have? Reagan and Bush did that.
Cutting taxes does not create debt. Spending creates debt. I think you need to take a basic economics source. Even if your argument is that the tax cuts plus the spending created the debt, at least the beneficiaries of that debt were the American taxpayers, not the Chinese government.
By the way, I hate to rain on your parade, but Obama (in two years) has already surpassed Reagan in total debt acquired.
Hey - I don't even own a home - I am still saving for one - but the prices stay high because the government is propping them up, out of my reach. Where's my bailout? Maybe everyone should get a bailout.
I know... let's all bail each other out! Let's send checks to ourselves - problem solved, right? Oh, wait...
Now imagine that in a few years you have enough saved to buy that modest home... and then you start your family.. and 5 years later life is going pretty well and you want to upgrade to a bigger home for your family. Well you can't anymore because your house lost 30% of its value and now you owe more than the house is worth. So before you can save up that down payment for a new house you have to save up money to pay off the extra you owe on your current house.
Also while you are trying to save all that you are still giving some money to the government so they can use it to help the guy who bought that big house 5 years ago that he could not afford.
We still have something like $400 Billion in "stimulus/vote buying" money we're paying interest on. How give everyone in America a 6 month tax holiday. You get to keep your entire paycheck and put the "extra" stimulus where you want to.
I am so very tired of being punished in this country for being responsible. I actually purchased a house I can afford and continue to make payments and all I get is the opportunity to contribute more taxes to those people that purchased a house they could not afford in the first place. Or those that want to whine about lost property value. A house is an investment and like any investment you have the opportunity to either make or lose money. So for all of those people that are bitching about losing money and wanting a handout I guess that means when you made a profit on your last house you contributed a portion (above and beyond taxes & fees) of those profits to "society".
When you factor in taxes, maintenance, upkeep. Big ticket items like roof and AC, appliances... you are lucky to get back what you put in, never mind making any kind of profit.
When did your taxes go up? You can't claim you're paying more in taxes when you're paying less in taxes...
and what about the value your home has retained thanks to a lower number of foreclosures?
And if it's such a great thing for those irresponsible homeowners, what's stopping you from not paying on your home and going into renegotiations with your bank? Your bank owns the home, you can walk away, that's part of the contract your bank signed.Comment is buried, click here to see the rest.
I would much rather take the hit on the value by foreclosing on all of these people than continue to bail them our and reward them. It is time for people to take responsibility for their actions and to quit looking to the gov't to bail them out.
Why don't I walk away? There is something called responsibility plus unlike many of these morons I actually have equity in my house. I do not pay just the minimum every month.
If you look at the laws you can not just walk away from your house with no consequences. Sure some people will only take the hit to their credit. Others will get a nasty surprise when they find a big ass settlement against them for walking away from their house. I am going to laugh my ass of when people start to receive $50k, $60k, and larger bills when they thought they were scott free.
You clearly don't understand how most (not all, but most) states handle foreclosures. The home and only the home is the collateral. If you give back the home, you owe nothing. You are on the hook for taxes on the difference, but not to the bank; you owe that to the government as it is considered income.
In absolutely ZERO of these cases are people getting money from the government. That seems to be the popular misconception here - everyone is so knee jerk quick to cry about someone else getting money when the facts show the opposite. This program gives the bank some incentive to eat part of the loss, a loss the bank would have to eat in WHOLE should the homeowner walk away. To the extent that we all benefit by keeping people in their homes, and to the extent that the bank would be losing MORE money (which means a larger write-off and less taxes paid by that bank), it makes more pragmatic sense to do this program.
The more people start walking away, the less value other homes will have, meaning more people will be in a position to walk away, spiraling downward. You know that equity you have in your home? Kiss it goodbye if more people start walking away. You're going to start seeing homes in your area go for less than what you paid for yours, should we see an uptick in foreclosures, and pretty soon, you'll be asking yourself "why should I pay on a $300k mortgage for a house worth $200k?"
Walking away isn't a responsibility issue - that's how mortgages work. They are priced with this in mind, the bank isn't shocked or surprised to find out homeowners can do this. It is part of the agreement between you and your bank, and is inherent in the price of the loan. It's all in the market, baby.
The program maximizes taxes paid by the bank, minimizes abandoned and neglected homes, keeps your home value from falling further, and averts a serious downward spiral. It doesn't help the homeowner directly, it simply moves them from a really deep hole to a deep hole, and there is no reason on earth you can't do it too.
I've enjoyed the new tactics many banks are trying on strategic defaults - guilt. They are pushing people not to leave a property to which they are sinking in by spinning it as "dishonorable" or making vague (they have to be very very careful what they actually say) on legal action. Many are intimidated by this and continue feeding these organizations money, not fully understanding their rights or the loan documents.
There is absolutely NOTHING wrong with those who played by the rules and otherwise got f**ked in this entire downfall. We're not talking about the lowlifes that actually helped break the system, rather the regular folks that ended up getting screwed. You think feel pitty for the lenders? Hell no - they reaped the benefits of making money hand over fist for years by tossing out - what they knew were - bad loans. Now when it comes time to pony up and deal with the fact many simply wish to walk away, they're making out themselves out to be the victim. In the end, the lenders made the simple agreement of lending out cash, secured by the property, with the profits of said transaction around 150% of value if the entire term runs. There is nothing else to it, very simple yet so many are confused and bullied every day over what they can and cannot do.
I had to pursue this path on behalf of my parents a few years ago. My folks went from making 300K/yr (engineers, father was Vietnam vet) to both of them being hospitalized for declining health over the course of about a year. Even after insurance, they still paid out nearly 500K in medical bills (unknowing that they didn't have to front all of that... again illustrating the power of intimidation of the average consumer) and of course the fallout from one of them being permanently disabled. Nest egg was gone, many assets were liquidated to try and sell off. After shelling out 2K a month in medications and being denied further insurance coverage (thanks BCBS...) bills simply spiraled. I did the math for them and showed that they may survive now, but due to the massive overhead and hit to infrastructure, in the long run they're going to bleed out. They tried to sell the home, but due to entire housing market going to s**t, there was nothing but lowball offers of 50% of value. They weren't even trying to make money on anything, hell they'd plan to lose another 10K in the process... but the entire hting was shaping up to end up costing them 50K out of pocket just to leave a home that continued to drop in value. I convinced them that they had done their due diligence in the past, and had always been on time - but no one was going to care about that, in the end all any company cares about is money.
They turned the home over. It was hard, but it was the logical step given the scenario. The banks went from first being bullies making very hollow threats, to then sending a very official sounding legal letter (which essentially was no different than a mass-mailed collections letter). Once they were getting nowhere with any of that, they then tried the sob story method, trying to make them feel bad for making the decision. That didn't last long, especially when I intervened on their behalf. In the end, the house was gone. I got them set up in a new place and they actually have been far happier in the last few years than they've been in a very long time. I guess change of scenery and reality checks have a way of doing that to ya,
Wait. Someone bought a home that they thought was fairly priced. They got a mortgage and are able to still afford it. They still have a home. Their credit is still good.
I don't see how they got f**ked?
You're under the impression that some people are getting a free ride. They're not. They'll be paying on the back end - BIG TIME.
Those people who are defaulting are f**king themselves. Those that are getting mortgage adjustments are getting f**ked too: their payments are extended to a god awful long time - their monthly payments are lower but over the term of the loan they're paying through the nose.
If you can afford your mortgage, keep paying - I'm telling you, in several years you're going to be real glad you did.
No, read what I wrote. My folks had a normal house (in South Carolina... this isn't housing bubble prone). After going from 300k/yr income to around 40k + having their accountes wiped out + inccuring around 4K in medical expenses alone every month... it simply was not sustainable. The only way to "float" in the short term would be to leverage credit cards - which is the absolute worst thing to do (and CCard companies love that s**t too...).
I am under no impressions people get free rides - unless they actually get free rides by living off the govermennt rules catered for such people. They may ride for free, but everyone else (ie: people who play by the rules their whole life) suffer for it.
I'd recomend you read up a bit more on how credit works and how the business actually works before continuing to make statements. I own 5 properties myself, deal with people in the industry all the time. It is a smoke & mirrors institution built on the concept of you = credit score and all the scary tactics that come with it.
Do you have reading suggestions? Most of my reading has been Yahoo! Finance, Clark Howard, WSJ, mtgprofessor.com.
Everything that I have read and seen shows that defaulting on one's mortgage leaves a big black mark on their credit history; which doesn't roll off the credit report for 7 years: judgments last for 10 years.
A potential lender will pull your credit report(s), see the default, and it will be up to them if they'll still lend you money and at what rate.
Defaulting on any loan will negitivly impact credit, the degree of which depends on several factors. Credit, at it's core, is only important if you actually need to use it. Simply defaulting on a home does not automatically discount anyone from getting another home loan in of itself - starting off with a great score and taking a 100pt hit still puts you in the mid-high range. There may be more paperwork involved for a loan, with higher interest of course, but it's not like you're shut out forever.
judgements show up and are viewed negitivly, more so than the actual default in many cases LOL. However, remember that simply getting sued doesn't mean the other side wins. They must present a case and somehow show where there are monies owed. Unless we're talking HUGE amounts of cash, banks know that more often than not, they'll never see a dime by taking someone to court vs. the cash spent. If they lose the fight, then they have to eat the costs of fees + your laywer fees + damages awarded if any. If they win, they get a judgement...that a court has no stay in enforcement. They then have to leverage collection agencies to try to recoupe money - of which they have very limited tactics also.
It is assumed anyone making this plunge has a contengency plan. If you don't need loans in the near future, then the need for credit is null. Continuing to pay all other debts on time (Ccards, cars, etc) will continue to bolster your credit score over time. Despite the anoying credit commerials - employeers do not leverage credit scores much. They cannot deny you a poition based on credit score (unless it's federal/top secret project, which is a bit more complicated).
Anyone considering this course of action should have *ALL* of their ducks in a row prior to pulling the trigger. Everything must be done in writing, very civil, and planned out. Know you'll take a hit, but do the math on taking a hit on some scoreing system vs. cash in hand/future.
Do you personally know anyone on welfare or social security. Compassion is completely absent from the system.
I know people like to think we spend all this money on people who aren't in need, but I can assure you, more people deserving and in need of help go without than to people who don't need help get by with milking the system.
Don't buy into the GOP "we waste too much money on the poor" argument until you've actually worked with the poor.
Sad thing is, people say stupid s**t just like that. Nevermind that they were shelling out more taxes than most, donated to charities and otherwise were model citizens. Got to love the current medical system (home of the 60$ asprin) + insurance carriers. Been insured for 40 years with the same company? Awesome..just don't get sick. Funny thing happens to - once you get into that catatory of high-risk, you are tagged uninsurable. He got quotes for around 1500/week for insurance once. My mother has since recouped quite a bit and is now a nuclear engineer again - covering both of them under company health insurance.
The government is like a union, it only helps stupid people, drunks and druggies and corporations. My house is worth 1/7th of its cost in 2002. I owe 4/7th. If I walk away I will get sued into the ground, 1099'd for 50plus grand or hounded for the rest of my life. If I could default on it tomorrow and walk away with them keeping it I would do so.
Unless your loan docs have provisions outlining the collection of values in the event of a default, they can't do a damn thing to you. Most loan docs were not structured in this way, as many states prohibit such actions. Loans are secured agains the equity, nothing more. It is no different than a car loan - don't pay on the car, the bank takes it back.
Anyone can file suit for anything, at any time, to any one. The question is if it ever goes beyond that. Tell them to go f**k themselves if you have to. Your finances and "ability to pay" are irrelevant - your home nor documentation has ever been on the contengency that you have the ability to do anything, rather than you suply XXXX payment a month for XXX term.
You are clearly challenged by a lack of reading comprehension.
I never said I spent seven times as much, I said it is worth one-seventh. I bought a reasonable home that cost less than one year combined gross of the income in my family.
The murder rate tripled in the city, the rape rate went up over 11 times and the local PD laid off 74% of its workforce while 38% of the residential structures in the city now stand empty. A union loving convicted felon was the mayor for the 7 years in question.
So, I would be interesting in hearing why a dumb f**k like you thinks I spent too much. I spent 25% less than the value given the property by TWO DIFFERENT appraisal firms.
"The government is like a union, it only helps stupid people, drunks and druggies and corporations."
You sound like you have a very, very shoddy understanding of history so I stopped right there.
Simpletons are easily brainwashed and clearly that's the case here.
As long as the republican party has convinced you that you're right, you'll never change.
Ah, the power of ignorance and willful stupidity, I blame the republicans for the housing crisis in equal parts with moronic democrats who vote parties instead of people. I can tell you are a dumb-ass democrat as opposed to a dumb-ass republican, but both you and your repressed homosexual christian republicans can f**k off.
I grew up in Flint Mi, I know more about Unions and their failures than you will ever learn in that 3 credit course you paid 600 bucks for at your local community college.Comment is buried, click here to see the rest.
The bailout should've involved responsible homeowners getting extra money to pay down their mortgages and let all the other irresponsible homeowners foreclose and rent, which is what they should've been doing to begin with. The home tax credit only made people say, hey we can afford $7500 more when looking for houses.
No, I'd rather have money than not. The mortgage is the main reason why people work so long in life. There should be more of an emphasis on paying them down but (dumb) people always seem to be trading up for bigger ones.
To be fair, there probably shouldn't have been a bailout for *anyone*. From the smallest homeowner to the biggest bank, the government just should not have gotten involved. Entities need to fail in order for the system to truly correct itself.
Many of those people had no business being homeowners in the first place and the banks who attempted risky ventures (subprime mortgages, credit default swaps, etc) should have been left to collapse and liquidated. Otherwise, we're capitalizing the gains and socializing the losses.
The market will overshoot. More will fail than would be necessary and you have the age old ugly economic cycle of boom and crashes. The majority of the regulatory bodies and systems we have in place are there to prevent the big crashes which used to happen extremely regularly.
I can certainly see your point. But let's be honest here: The imminent crash that was on the doorsteps of the big banks just before the big bailout was in no way cyclical. It was a private entity knowingly and willfully pushing a new, complex, and risky venture. Hindsight is of course 20/20, but it was a calculated risk on their part---as with any financial instrument, they knew what they were getting themselves into.
I'm certainly not saying that we should be a completely free-market system with no regulatory agencies in place or government oversight. And I'm also not advocating that we move to a completely socialist, government-run mortgage system. What I am saying is that we need to either s**t or get of the pot: In recent years they've been allowed to enjoy the fruits of a free-market system but suffer losses on behalf of the taxpayer.
The thing is the crash is cyclic the cause is not always the same. What always happens is the economy overshoots it's actual sustainable levels and then has to come back down and usually overshoots that.
What caused the great depression? The influx of investors buying on margin created a stock bubble that burst and the financial contraction in the money supply that resulted shut down the economy.
What cause this last recession? The influx of investors buying CDO's and insuring the risk with CDS's. This created a bubble in a number of area's as that drove the economy pas the point that was sustainable. Made possible by deregulation of the banks.
What caused the recession of the early 1980's? Banks were deregulated and were given the opportunity to lend like never before and the influx of easy money drove the economy past an actual sustainable point and it crashed backed down.
The general gist is that the economy grows past sustainability via some mechanism that fakes us out on how much activity is sustainable and we crash back down.
I don't think you realize what would have happened if we let the market 'correct itself'. Everyone seems to think they would have kept their jobs, only a few unfortunate people that weren't them would have been laid off, and everything would have been fine in a year or two. Everything would have gone under. Literally everything. Let that sink in and try and imagine it. It might be "neat" to live in the 1700s colonial era for a day or two, but for the rest of your life? No thank you.
Because of what? Because of the debt they created unconstitutionally. Because of the printing of money and usurpation of the federal overstepping government. Because of the liars and crooks who took all the gold from Fort Knox for themselves and their mistresses. Because of the apathy of your parents and mine.
Nonsense. There's an actual need for several of the services banks currently provide; so replacements would spring right up. There's nothing magical about banks. There's a great deal that is corrupt, though, and it would be really nice to replace them with a more honest set of institutions.
For instance, making you pay interest all up front, so your equity is the last thing you get, instead of distributing the interest linearly over time; this is *so* loaded in the bank's favor that it is entirely possible to pay them more than your home is worth, then lose the home, and have so little equity in it at the time that you might as well have never bought it.
We moved into our house December of 1999. We've never missed a mortgage payment, picked up a good deal on a refinance a few years ago, never had any claims filed against insurance on the house... and the house is now worth $40,000 less than when we got it, leaving us still owing more money than the house is worth. Taxes, of course, are still being assessed at a much higher home value.
Meanwhile, we have neighbors that have walked away from their houses - six were foreclosed on our block alone last year. One neighbor has been out of work for over a year and a half, and haven't made a mortgage payment in six months.
Now, I'm not saying I want a handout, because we're in the mess we're in now because of those handouts. But some sort of credit for being a reliable, responsible consumer would be nice.
Your neighbors walking will result with a REO sale or short sale. That will lower the comp values for you. Your home assessed taxes should therefore decrease. In my county it's automatically assessed each year. If yours doesn't do it, see if you can petition for a reassessment.
Your situation is unfortunate but you don't get an award for doing what you're supposed to do. You don't get an award for not going to jail or for paying your taxes or for not beating your wife. It is simply the way a responsible adult behaves.
Watching other people break the rules and get away with it doesn't mean that people who follow the rules should be incentivized to continue following the rules. If anything, it just means the law needs to be changed to catch and punish the unscrupulous.
Yeah, I know. But so many people got in way over their heads, knowing they couldn't make the payments, and now they're getting a "Oh, you poor thing! Let me help you!" Meanwhile, we did our due diligence, and shopped around for a long time to find a house we knew we could afford. We even went so far as to tell a realtor to go to hell when he repeatedly tried to oversell us on houses we knew we couldn't pay for long term.
I guess our reward for all of that was going to buy a car dealer and having them fall over themselves when they saw our credit report - "never saw a rating that high", they said :)
I would like to point out that I firmly believe that NO ONE got in "over their heads". Banks simply made bad decisions.
It is not the responsibility of the person asking for a loan to make sure they can pay it back. It is the responsibility of the person lending the money to ensure the person asking for it has the capacity to pay it back.
Banks, not people, screwed this economy. The problem is banks, and not people, are the ones getting the real help.
Zaren, how much was the house you bought in 1999 worth in say, the 2003 to 2005 time range.
I could probably guess that it was considered worth far more than what you paid for it. I could also probably guess that you were more than a little happy about it. Were your taxes reassessed to the new, higher value (assuming that it actually was worth more)? If they weren't, then why the complaint now? Why the complaint about the home value, when it was probably "worth" far more a few years ago?
...Probably because its much easier to rail against the system when its not working FOR you.
Your last statement is the type that always bugs me too: "Now, I'm not saying I want a handout, because we're in the mess we're in now because of those handouts. But some sort of credit for being a reliable, responsible consumer would be nice."
In other words.. I'm not asking for a handout, but can I have a handout?
I understand you are frustrated that people who played a game with their money, and lost, are getting bailed out, but because you were fiscally responsible doesn't mean you should then also be getting anything handed out to you either.
But seriously... Speaking of the tax assessment, I think in most places, if you petition the tax assessors office, they are required to come out and do a reassessment, which, in this case, would probably lead to lower taxes for you.
@bcarl314. WTF are you smoking... It absolutely is the responsibility of the buyer to know if they can afford what they are buying. If you run with your logic, then it's not the consumers fault for being in credit card debt, personal debt, gambling debt etc..
There you go you are all set. That is what you get. It is what I get too for living incredibly lean to pay for a home that may never be worth what I paid for it. We invested in homes. Our homes decreased in value. That is the chance we take when we invest. Luckily, in this case, we can live inside our bad investment. Which makes it not so bad after all.
Your neighbors will be screwed and are being screwed.
Their credit is toast and will be that way for several years. Any mortgage modifications they get only ADD payments to the end of the loan while reducing the monthly payments. So, they'll be paying MUCH more interest than you ever will. They are NOT getting any free rides.
You're not getting screwed. You're not missing out on anything.
You should really get in touch with your tax assessor and give him/her a list of houses that you feel are comparable to yours, so they have justification to lower the tax. IF that doesn't work, there is always bribes or voting in a new assessor.
Something smells fishy here. You bought your house 11 years ago, yet you are $40K underwater? I think you are leaving a few things out of the story Mr "responsible consumer". I'm guessing you had a very low down payment, maybe a 3% FHA loan, possibly even 0% down loan. I also highly doubt you had a 30 year fixed interest loan. I'm guessing a 5 year ARM with a 1% teaser rate. Also you mention a "refi"? You didn't happen to pull money out of your house when you refi'd, like an ATM machine?
You could have never missed a payment, but if you did any of the things I mentioned above, you hardly qualify as a "responsible consumer" in my book.
I "play by the rules" and pay my bills and many times have just enough to get my family to the next paycheck by the skin of our teeth. I live responsibly and my kids are my first priority. They have dinner on the table, clean clothes and a story before bed every night. Their needs come first, and our house reflects this.
My wife and I purchased our home nearly eight years ago when she became pregnant. It's our first home. It's a modest older house that is never going to appreciate in value, but I was able to make the payments with my own salary for several years while she stayed home with our kids until they started preschool. They never had daycare or spent the day being raised by strangers.
Back when I was pre-approved for a home loan and they told me I could have 250,000 I laughed and asked what the mortgage payment would be each month. I forget the exact amount but I recall it was beyond my means. I went with a substantially smaller loan that I could afford and would not require a co-signer as not to put my parents at risk.
If I could have seen in a crystal ball that there was a potential "August Surprise" to bail out upside down homeowners you're damn straight I would have been tempted to buy a bigger house so my family could jump on this train. I wish my kids didn't have to share a bedroom, that the upstairs was larger than a dormer, that we had more than one bathroom, that we lived near a better school.
I didn't get the 8000k housing credit back in my taxes, I was just before that window. I probably wouldn't get whatever this bailout will be. I'm sick and f'ing tired of the squeaky wheel getting greased all the time. I continually feel like I'm screwed by a system that rewards poor judgment.
I'm inclined to "throw the bums out" when I step in the voting booth next time. I see no job creation while fearing for my own, no incentives to return manufacturing to America, no efforts to get the national debt heading down, a deflated dollar and a growing debt burden on my children. We continue to fight expensive wars with no goal. I laughed at Ron Paul and now wish I had voted for him.
My lifestyle is less than my parents enjoyed and I'm sad to think of what my kids can expect. It's all going the wrong way.
"I'm inclined to "throw the bums out" when I step in the voting booth next time. I see no job creation while fearing for my own, no incentives to return manufacturing to America, no efforts to get the national debt heading down, a deflated dollar and a growing debt burden on my children. We continue to fight expensive wars with no goal. I laughed at Ron Paul and now wish I had voted for him."
-shadowman99
I think the problem is either set of bums will never present to you a good situation. One set will violate your morales but possibly improve your pocket book because it does seem you exists in a tax bracket that would be a net benefactor of social programs. The other set of bums may give lip service to your morality but they are don't care an iota about you and will support large well funded entities over you in every conflict you may have with them.
You my friend are screwed in the place you are at.
As for manufacturing, America has been out competed. Any 'inceptive' would be artificial market manipulation to prop it up. If you resent the government propping up people who did poorly why should you support propping up industries that did poorly? National debt? Not exactly a single party problem. To fight this taxes must go up and government must shrink. Both must happen because too much of either will hamper American society. Deflated dollar? Well if you want manufacturing to come back this is what it needs a lower value dollar. I'd agree with you on wars. Ron paul didn't have a chance in hell and he wasn't the savior some painted him to be. He had a few interesting positions but he wouldn't have been able to muster enough support for them to get anywhere and half his ideas would have predictable and severe consequences (a return to gold backed currency)
"My lifestyle is less than my parents enjoyed and I'm sad to think of what my kids can expect. It's all going the wrong way."
-Shadowman99
That probably not true in general. At the moment many things are within reach that weren't to your parents. You will eat better, be able to visit more places at less expense and have access to more knowledge, entertainment, and medical services than your parents will and due to easier credit in the last 15 you could theoretically get a better house. But since the 70's or so wages haven't moved very much so if your parents were adults before the 70's they might have been more hopeful and had decent pay raises for a while.
That nostalgic notion that it was so much better before is just time going by. Every generation has felt it and moaned about it and it's only been true for a very few. It may be true in your specific case that your parents had it better than you but it's not a tautology. My life is much better than my parents. I work 9-5/5 days a week for x2 the money of either of my 7-6/7 day a week parents. I have a modestly priced house that well within my own means with my wife working and it's 800sqft bigger than my parents first house and about the same as their second house.
---nit pick---
"I didn't get the 8000k housing credit back in my taxes, I was just before that window. I probably wouldn't get whatever this bailout will be. I'm sick and f'ing tired of the squeaky wheel getting greased all the time. I continually feel like I'm screwed by a system that rewards poor judgment."
-Shadowman99
8k. A goof. I think most know I'm referring to the first time buyer tax credit of eight thousand dollars. But hey, why not $8m? We're already spending like drunken sailors?
>> "I think the problem is either set of bums will never present to you a good situation... You my friend are screwed in the place you are at."
So say we all. Between my wife and I we have a household income of ~$64000 - lower middle class. We bust ass and work hard. My wife is a teacher's aid. It's criminal what they pay people in education. I'd tell her to get something else but when she tells me about the kids she helps each day I remember there's more to life than money.
While I like things like ipods and flatscreens and better medicine, we also have more street crime and drugs in our society.
I'm aware that my parents had their own wealth destroying period in the 70's. Home loans frequently had APRs between 18 - 25%. There was a recession and oil crisis and a misery index. People can bash on Carter all they want, but he never manipulated the markets and the economy soon corrected. And for all of people's political differences with Reagan, business did flourish during his administration.
W. and Obama have been a one-two punch of bad policy, especially fiscal. If I could be president tomorrow I'd have no idea how to fix this mess.
~$64k does put you at the middle of the income distribution of American households. then again standard of living will vary greatly with where you are. ~$64k in LA is not doing so well while ~$64k in nowhereville, north Dakota may be alright. I agree they generally underpay teachers in the United states. I'm glad someone is doing that job because they couldn't pay me enough to herd cats like your wife does daily.
"While I like things like ipods and flatscreens and better medicine, we also have more street crime and drugs in our society. "
-shadowman99
Crime statistics don't support that. Every category of crime have decline as a long term trend since the late 80's. It was worse for your parents in both property crimes and violent crimes. The perception of more crime comes from the media which has shifted to broader crime reporting. Your parents may have heard about news in their town and some more sensational news in far away places while you are inundated with news about crime form all over your state and every crime that is somewhat interesting from all the rest of the world. So your perception of how often crime occurs has changed but the actual rate of crime has diminished. It may also be that your city has grown so the absolute number of crimes has increased but generally not in proportion to the growth in population. 'Soft' Drug use is probably at all time highs (ha ha) but hard drug use was a problem in the 60's as well.
"W. and Obama have been a one-two punch of bad fiscal policy. If I could be president tomorrow I'd have no idea how to fix this mess."
-shadowman99
I think Obama and the leaders of the economy is in the same boat as you. They don't know what will fix it all and they have to play along with their financial backers. Obama from the outside has not made egregious errors though while his predecessor was a series of face palms. His biggest sin would be staying the course in too many policy matters despite having the numbers to make change. This is probably due to the fact that making democrats agree on anything is like 'herding cats' and their only unifying trait is not being republicans. They also have been bought by some of the same groups as the republicans so they won't be doing anything radically different if they wish to continue getting that money.
Full disclosure: I live in Canada. I have no direct interest in who runs your country but we are frequently impacted by the decisions they make. I'm not sure if everything would be better but it does sound like the majority of your gripes about your government would not exist here. Teachers are relatively better paid. Both of our ruling parties tend to make financial sense once in a while. Our currency is soaring. Our economy is humming a long despite our biggest trading partners woes and while we have a robust safety net you are always aware what your taxes pay from and able to benefit from your taxes. Move up. We could always use more hardworking people.
"Any 'incentive' would be artificial market manipulation to prop it up."
That statement assumes there is no existing artificial market manipulation propping up the current system, like say, the ability of corporations to avoid taxes on their profits by keeping those profits out of the United States.
"That nostalgic notion that it was so much better before is just time going by. Every generation has felt it and moaned about it and it's only been true for a very few. It may be true in your specific case that your parents had it better than you but it's not a tautology."
That's just flat wrong. The statistics are clear. This generation (generation X) is the first generation in U.S. history that WILL have a lower standard of living than the previous generation. It is a mathematical fact.
The reason is clear: Wages have been stagnant (inflation-adjusted dollars or purchasing power, take your pick) for 38 years. This is also a fact. Generation X, and all generations that follow are and will continue to earn paychecks equal in buying power to what they would have earned in 1972.
Productivity, on the other hand, has increased faster in the last 38 years than at any other time in the history of mankind. All of the proceeds were pocketed by middle and upper management and fortunate shareholders. This is also a fact, reflected by the wealth disparity in the U.S. in 2010.
This nation has wasted the educations and cultural legacy of an entire generation of Americans, at a cost of trillions of dollars. At the rate we're going it will take 100 years to recover, even if we disconnect the cranial-rectal interface.
I was recently pre-approved for a home loan that would have been well above my means. Based on some calculations, I figured that I would have to stop eating, driving, and paying utility bills in order to afford the monthly payments.
3 bedroom houses built in the 1960's should not cost $500,000. They shouldn't even cost half that.
If you paid this for one of them and don't want to pay for it anymore, stop paying for it.
There are tens of thousands of people in this country who are being foreclosed on, losing their houses and ruining their credit for many years to come. If you want to join them, nobody is stopping you. So either do it or just deal with the fact that you are horrible at investing in real estate. Please stop whining.
The government is not bailing anyone out but rich corporations, we all realize this now. Don't like it? Vote the f**king people out of office that did it to you... whether they are republican or democrat. That is the only way anything will change.
and what do we do five years from now when all those home owners who walked away and have s**tty credit cannot buy, rent, own, get a job etc. because of their now s**tty credit? They've just added themselves to the poor who will most likely continue to seek and vote for government officials that will bail them out. The fed will print more money to cover the costs and our nation will continue it's slide into history as a failed nation...
Well then I guess we better amend bankruptcy laws for individuals to mimic the extremely favorable conditions we allow corporations to enjoy.
But we both know that our government will never do this as that would give people a fighting chance against the corporate financial machine we are all caught up in.
And what happens when a larger percent of the population is renting rather than owning? Thanks to this economic crash, a lot more people will be renters, and landlords will be able to raise their rents as demand for rentals increase.
I've always considered my monthly mortgage payments to be a way to pre-pay for shelter when I retire. If I lose my home to foreclosure, my living costs will be higher when I'm old.
Walking from an underwater home may be the same as guaranteeing having to make a mortgage or rent payment during retirement.
A house may not be worth that (but then again, it may very well) but property is easily worth $500 grand depending on where it's located and how much you get.
The main reason the housing prices got out of hand in the first place is the appraisals by the localities in which they are located for tax purposes, and real estate brokers all to willing to get financing for buyers at those prices for the high commissions earned on those sales. Couple that with rules allowing mortgage companies to make those loans, and then sell the debt, and walk away free, and you have yourself a full blown housing crisis boys, and girls. A house that was appraised at $300k just two years ago, that is now selling for $90K, should tell you what the house is really worth, and it probably isn't what it's appraisal value is.
House prices got out of hand because lenders were writing loans with 130% equity and blank spaces where the borrower's income was supposed to be included. They were called NINJA loans: No Income, No Job, No Assets. They were written by the thousands, bundled together and sold.
Banks are also being bailed out by borrowing from the Fed at 0% interest. If you can make money hand over fist with a unlimited 0% credit line, you shouldn't be in business in the first place.
And what happens when an entity that receives bailout money goes out of business before being able to repay the loan? Oh that's right, the tax payers get to foot the bill.
You are also missing the point entirely. If inefficient and/or corrupt businesses are being bailed out, other more efficient and ethical businesses will have a really hard time entering the market.
Nearly everyone's house has gone down in value, even if you have no mortgage.
If you bought a smaller house in a less nice neighborhood than you 'qualified for' (realtorspeak), worked really hard and paid off your mortage in record time ... you're now officially a schmuck.
You could have had twice the house in a tonier neighborhood and when the value decreased to less than your mortgage balance .... just wait for your bailout.
Where do you live, I'm sitting in an office of people who work hard and make great salaries, of the ten people sitting closest to me only one is a republican, the rest are very strong democrats.
I try not to focus on it, but it's true. I bought a house I can afford and make all my payments. When it became obvious to me that the mortgage I got was a risky deal, I spent a lot of my own money to get out of it and into a traditional one. But after multiple salary cuts, I've ended up in a position where I've had to chew through all my savings and have racked up credit card debt just so I can keep paying the mortgage. I've tried renegotiating, I've tried the Home Affordability and FHA programs, but I get denied over and over for ridiculous reasons. Meanwhile, I hear every day about people who just quit paying their mortgage and haven't heard from the bank, or who are negotiating rates down to practically zero. If I had just stayed in that terrible mortgage, or if I had just quit making payments, I'd probably be fine. Talk about encouraging risky behavior.
Contact a real-estate attorney as soon as you can and learn what your options are. Don't be afraid to default on your loan and live in your house until the bank forcibly kicks you out, saving up for rent deposit and paying down other debt while doing so. Good luck.
I don't want a foreclosure on my credit for the next ten years. Man, I remember when buying a house was the biggest no-brainer investment in the history of everything. Now it's like, "bail, turn in your keys, stop paying, foreclose, rent!!!
TheYar, it won't be there for 10 years, if you lose your house, depending on the circumstances, you can be eligible for another home loan through the FHA in as little as three and a half years.
The sad thing is the entire mess could have been avoided. What law prevents a bank from renegotiating a mortgage? A socially responsible bank would work with home owners. An example would be if a home owner couldn't afford the arm interest rate going up the annual couple of percent. So a bank has 2 options.
1. raise the interest they signed the contract so screw them
2. realize that some of there decisions were flawed and hold the mortgage so that the rate and the payment stays the same.
We all know that option 1 is what the banks did. The only thing they didn't count on is that there would be so many. In the old paradigm it worked in the banks favor to get foreclosed property. They would get what they were owed plus what ever had been paid previously. They could have stopped this crisis before it even started.
Now don't get me wrong. Socially responsible bank doesn't mean operate at a loss. Most if not all mortgages payments covered at least the minimal break even on the loan so while they would show a short term loss of PROJECTED income, there long term would increase.
I can't agree with you. Anyone with an ARM is making out like a bandit right now. Rates are crazy low. The issue are the fake loans (interest only) and people losing jobs.
So lets assume that you have an ARM at 5% that can adjust up to 2% a year. So in year 1 you are paying $536/month for a $100,000 mortgage and it is affordable. Year 2 comes along and it increases to 7%, your new payment is $665/month. Now that is a pretty significant increase if you are living paycheck to paycheck. Now realize that when the mortgage rate was 5% the Bank is making 3.5% at by loaning government money, when it goes to 7% they are making 5.5%. Of course this was all before banks were getting the money for 0%.
Do I feel sorry for people that got loans they couldn't afford...no. Do I think Banks could have stopped this by showing a little long term vision of the mess they were creating....yes.
Yes, in theory your rates could could go up with an ARM. But in reality, the rates are super low right now. I'm not arguing that it's not smart to convert to a fixed rate loan, all I'm saying is that ARMs aren't the reason for defaults. The rates are low, and the homes financed with an ARM are not suffering from it.
That is exactly what they are trying to encourage - banks are being given a bit more a write-off for renegotiating principal down to a level the homeowner can afford. The house is already worth less than the amount owed.
And nothing stops anyone else from doing the same thing.
current events are "current". Real estate like the stock market is long term. They ain't making no more land. My home isn't worth as much as it was a year and a half ago but it's still worth $20k more than I paid for it
"The reason a lot of people are upside down on their mortgages now is because they falsely believed 'real estate always goes up'. Whose fault was that?"
The lenders who used that as a justification for two-year resets that tripled the payments.
Long ago it was called "The American Dream", hard working Americans worked hard, saved and eventually purchased a home of their own. Then that dream became a nightmare.
Banks pulled underhanded schemes to lure good Americans in so the banks could eventually reap a huge profit, they underwrote the money schemes at the cost of billions and finally the over inflated market the banks created burst.
The Banks then cried they were broke and going under while the banks that were actually responsible got huge mountains of cash from the Gov they secretly paid out millions i Bonuses to special employees who helped design the entire conjob
Economy collapsed jobs lost and now someone writes an article Turning ones with an income against ones who had to take a job making a fraction of what they once earned and all because Republican Leadership sold us out to make a profit and now the American Dream is the American Nightmare.
There /is/ a HARP program for people who have negative equity, still have excellent credit, and want to reduce their interest rates. That is, it's a program for responsible people whose property values were negatively affected by all of the losers, depending on just how upside down you are. If you carry a second, it even appears that most major banks are willing to subordinate their position to let you refinance your first in today's terms.
Of course it’s the seconds that really hurt, as they typically have a higher interest rate, and no one's refinancing those in a negative equity situation.
Yeah well you know what? f**k the people who have negative equity. It's not anyone else's fault that their property value went down. Anyone who was retarded enough to believe property values would keep going up 3-6 years ago is a f**king moron.
If you signed off on X payment for Y house, nothing else should matter unless you lose your income. Quit f**king whining cause your house value went down. No one expects a bailout because their stock portfolio goes down in value. So as long as you still have a job and can make your payments, you deserve not once cent from anyone, in fact you deserve nothing, not even sympathy, just a wag of the finger from everyone who has to hear you whine. If you LOSE your job or income then this STILL isn't about real estate, it's about you needing unemployment and welfare until you get back on your feet.Comment is buried, click here to see the rest.
Duh. The bailouts and stimuli were aimed at two groups - government and the wealthy. It was the largest one-time redistribution of wealth in history, and it went to the wealthy. It was never intended to help anyone other than these groups. That is why everyone except those groups are hurting now.
That said, strategic defaults sound great, but the people who "played by the rules" on the mortgage probably put 20% down to get a conforming loan. 20% is a large amount of equity to walk away from.
They could re-finance at like 4%. It's not what anyone would consider a bailout, but it is taking advantage of the situation that was caused by the s**t storm.
All these homeowners are made that their property values dropped so much and it seems they paid way too much for it and they can't change their contract.
But if these homeowners' property values had skyrocketed up would they be mad that they had seemed to pay way too little for it? Would they let the seller come back and renegotiate the terms of the sale? I doubt it.
I understand that there are all kinds of circumstances out there, but I remember looking for a house in a price range I was prepared to spend. Now, I don't live in CA, NYC, or anywhere like that, so I won't assume I understand the situations of others.
The situation is the same everywhere, in every country, in every walk of life regardless of occupation or income level...As an old Scottish saying states "Spend 1 dollar less than you earn, and you will be rich. Spend 1 dollar more, and you will be bankrupt. "
income > expense. People can adjust either, or both.
BP made a huge mess by their creed and bad practices and the government jumps in and makes them set up a 20 B dollar fund to clean up the mess and help people who are affected by their actions. Wall street and the big banks make a huge mess by their creed and bad practices and the government jumps in and bails them out with our money. Something just does not seem right??
That's a whole other issue. Colleges are wayyyy overpriced and that bubble's gonna burst soon as many up and coming won't be able to afford it.. Look forward to the great college crash of 2020.... Fed will probably bail them out too...
No s**t, right!!?!?!? It's absolutely lunacy that the same books are worth 80% less if you try to resell them back to the same bookstore in perfect condition too. (Of course you don't bother doing that after 1st semester, but still.)
I've been living in Europe for about a year now, and I can tell you that the cheap and effective education available here trumps ours in the States. And it shows in the individuals you meet too, they seem much more rounded and tend to know more about the world than most Americans.
I feel sorry for anyone trying to go to school in the States now, it's totally a defendable position that it's a waste of time and money.
But by all means, banks, continue to f**k us over in all areas of commerce. We just can't get enough.
I have a better idea: how about we stop creating government programs to "help people out" every time they are faced with a problem of their own making?
College would be a lot cheaper if the government didn't subsidize the hell out of it.
To wit, most government subsidy ends up being repaid by the student, in the form of loans (aka, the future). However, that gives the student more money at the time of college. Where colleges once had a bunch of classrooms, professors to teach some classes, and some students to learn, they are now filled will all manner of amenities (gymnasiums, etc.) and administrative staff. If students bore the costs more directly, they'd heave off the fluff, and demand their tuition go to that which matters, education.
I'm not sure I agree that the government subsidizes college education. They might provide backed loans, but as far as subsidizing goes, I think I have to disagree.
As someone paying off a s**t load of college debt I really don't think we can afford to bear the burden of much more. This buy now pay later s**t needs to end.
I've been living in Europe twice now, a year a Germany and nearly a year here in Finland at the moment, and the government actually does subsidize education. I have to say that it's obvious in the overall level of intelligence that you encounter, and that's because everyone at least gets vocational training at a minimum. It's clearly working too, as from what I can tell pretty much everyone I encounter seems to be on average smarter than most college grads in the States.
Education should be considered a basic human right, and while I don't think it's free or cheap, it sure makes for a better society overall. There's no justifiable reason for the US to not 100% subsidize higher education, or at least adjust our existing public system to make useful workers right out of high school.
Here in Finland they in a way start vocational training at 15 if they so desire. Imagine if you had that in the US. Finland pays also a subsidy for people to live while in school if you apply for it, so that one can focus on studies, instead of having to work at some s**tty job just to make it through school and not have your learning suffer.
Now, before you go and say, but the taxes, the taxes!!! Working here as a software developer I pay around 24% of my salary. I'm American and after 2 years of working here I qualify for that same education benefit. And I get full healthcare while I'm here. In the US I was paying nearly 30% tax, with no healthcare (I had to pay that out of my salary post tax), and no access to free education.
Finlands education has been rated as #2 in the world in terms of effectiveness, and I can see why. They actually understand how to make it work. Clearly yet another reason why Finland, and Scandinavia is amongst the highest quality of life in the world.
If there's no water in your boat, there's no need to bail, is there?
I own my home. No mortgage, no debt. And no bailout. Nor is there any reason to consider one for me, I'm fine, because I made much better decisions than people who got bank loans.
I really fail to see the logic of people who aren't in need, crying out because people who are in need, are getting some kind of help (and let's face it, in this case, it is mostly help for the banks, not the homeowners... this stuff is NOT a good deal for a borrower.)
Governments have no money, so in order to bailout the taxpayers, they would first have to take the money from the taxpayers...plus a bit for themselves.
What's great is that the FBI proved that 80%, THAT's 80 PERCENT of these bad mortgages were because of fraud commited by banks and mortgage companies. Yet amazingly they've spun it so the victims of this bulls**t are being blamed. Keep blaming your neighbor because they were completely lied to when getting their mortgage, the corrupt banks and mortgage brokers love that ignorant mob mentality.
How can you have fraud? I really don't believe that 80% of bad mortgages have terms different from what is in the written contract (that would be fraud). If the buyer doesn't read the contract or can't understand it, that does not constitute fraud.
Lenders would fraud the system by 'exaggerating' incomes and falsifying other facts. It had become status quo. Then they never even let the client know that things were not exactly kosher.
and that is also not the banks fault. There may be plenty of blame to go around but nobody twisted anyone's arm to walk into a lenders office and buy a home.... The buyer is mostly at fault for buying something they couldn't afford...
I fail to see how that is fraudulent for a to lender qualify you for more than you can comfortably afford. People have to look out for themselves, this "waaaaaa I thought the banks were looking out for my best interest, wtf happened" is ridiculous.
Regardless of tricks pulled by the lender to get the loan approved, you still see the monthly payment and all terms of payment in closing. If you choose to sign without reading, that is your problem.
actually it is only 4.3% of bad mortgages were because of fraud committed by banks and mortgage companies. Site sources? Naw, we aren't doing that here.
Who is at fault when someone makes a loan and requires no proof of assets nor any proof of employment, and then it turns out that the person who got the loan can't afford the loan?
The person that can't complete the simple math exercise used to determine it wouldn't work. In this case it's the borrower. The lenders played a big part in all of this, but at some point people need to put on their big boy/girl pants and take responsibility for themselves.
You seriously don't place fault on the person who signed the contract? You have to take charge of your own finances. Plenty of people claiming they can't afford their mortgages still have iphones and other unnecessary crap.
The lenders were foolish with their lending, yes, and it was their prerogative to do so. But unless they falsified written information to the borrower there is no fraud being committed against the borrower. The borrower was foolish to take a loan for more than they could afford. If they couldn't see this then, honestly, they had no business even trying to buy a house.
Because letting the chips fall is good sound economic policy? Paint that picture for us starting about mar 2008...even your guys wouldn't have the political will to do that, and don't lie to yourself thinking that they would...retard
dangercollieAug 10, 2010
We played by the rules. Bought a house out of foreclosure before that was trendy. Fixed it up, lived in it for five years and sold it for a small (very small) profit. It really depends on which rules you played by. We played by the rule "buy low, sell high". Although in fairness we bought low and sold only slightly higher. We didn't take a bath because we bought really, really low.
Nothing has really changed other than the prices, the same principle applies.
When we sold the house, we moved into our RV full time. After living the lifestyle a while, it would be hard to get me back into a house at any price.
wagedomainAug 11, 2010
I purchased my place while it was on the way down. Properties in the area had already gone down by 1/3 or so, so we purchased. Turns out it wasn't done dropping yet. Good news is we don't have as far to recover, bad news is there's still a long way to go.
The rules the article is talking about is paying the mortgage. Lots of people are voluntarily not paying their mortgage, or took out a bigger mortgage than they could afford, and have no responsibility in the matter. There are no consequences. They did something stupid, and the government is saying, hey, it's okay, you didn't do anything wrong.
Well, they did. Yes, the banks giving the loans share the responsibility, but it's not like they forced people into taking mortgages. Two parties were involved. People got greedy, or wanted more than they could afford for whatever reason, and they should have to pay for it. The problem is, so many Americans (both buyers and lenders) became greedy that it's caused a major meltdown.
So the problem is, the people who took reasonable mortgages, have been paying on time, and have loans they can pay off, have lost TONS of cash thanks to the people who are, quite frankly, greedy selfish assh**es, and yet only the greedy selfish people are getting financial help.
The system is completely backwards.
craftyguyAug 11, 2010
You are absolutely correct. It seems like the general populous is all about blaming the banks, but the people taking out the loans they could not afford share some of the blame and they are getting off scott-free.
I'll just sit here and quietly pay my mortgage that I can afford because I did not try and take out the largest mortgage I could.
Backwards system indeed.
rpatrick819Aug 11, 2010
A+++++. Would digg again.
schumaccAug 11, 2010
I would digg you up a hundred times if I could as well. Rewarding irresponsible, stupid and/or greedy behavior is not going to produce desirable results, and really really irks those of us who have acted in a responsible manner and continue to pay our bills. This is not a way to win political support that is for sure. In fact, it does just the opposite. I will try my best to unseat those who have collaborated in this sham. From what I have read, most of those that have been "helped" end up being foreclosed on anyway. When you reward bad behavior, the only thing you get is more bad behavior.
blackinthmiddleAug 11, 2010
Like many things in life, this situation is not as simple as you guys are making it out to be.
Let's start with the basics. If someone decides to walk away from their home, there's really nothing anyone can do about it. Obviously their credit will take a major hit and they're taking a calculated risk that they'll still come out better in the long run. There's no "rewarding bad behavior" here. Sure, maybe banks can be more diligent in saying, "Hey, you can afford this mortgage payment. We're not going the short sale route. We're freezing your finances and going after you.", rather than just going the short sale route. But a bank can only do so much when a person simply refuses to make the monthly payment.
Next, for those who can't afford to make their monthly payment, sure, the banks can simply say f**k you! But guess what? Everybody suffers. If you have a house and four people in your neighborhood foreclose, your house price just took a nose dive! It benefits *everybody* for that person to continue making mortgage payments, even if it is on modified terms. Sure, they get something for nothing. You want to get something for nothing too? Well then stop paying your mortgage (and screw your credit up in the process). Comment is buried, click here to see the rest.
gmstoneAug 11, 2010
@craftyguy - Most of the people I know who have gone into foreclosure in the past two years COULD afford the mortgages they got. Then the economy tanked.
Using your logic, no one should be a homeowner if they don't have guaranteed income until the mortgage is paid, and no one should get a mortgage if there is any chance their life circumstances or the economy might change through no fault of their own.
Before the economic crash, when people lost jobs, had high medical bills or a bread winner died, they could sell their homes -- but now there are few buyers. People are trapped in homes they can no longer afford and can't sell even as a short sale. Those homes go into foreclosure.
It's not their fault that Wall Street and investment bankers ruined the economy.
brad3378Aug 11, 2010
Scenario #1
Buy a house.
Prices go up.
Sell it for a profit to keep for yourself.
Secenario #2
Buy a house.
Prices go down.
Give it back to the bank and let them take the loss.
Heads I win.
Tails you lose.
The people we should be feeling sorry for are the people who had enormous down payments - I certainly don't feel sorry for the deadbeats with $0 downpayments that walked away losing nothing. I could be wrong, but based on what I'm reading on the internet, it seems that most of the people who feel like they have no obligations to pay their bills on time call themselves libertarians.Comment is buried, click here to see the rest.
3nder99Aug 12, 2010
@Manther
First off let me say I spent my College years living near my brother planning to go into Real Estate with him. I listened to Real Estate and Mortgage Brokers talk about everything under the sun.
This entire mortgage crisis is caused solely by the US Government interference in the market.
By 2008 the Government Sponsored Entities Fannie Mae and Freddie Mac had bought up HALF OF THE f**kING MORTGAGE INDUSTRY. That is 5 Trillion with a capital f**king T.
You don't buy up half of an industry with absolutely no oversight and expect to not destroy it. Ask any economist what this kind of market distortion will do to any industry.
dangercollieAug 12, 2010
"This entire mortgage crisis is caused solely by the US Government interference in the market."
And as a licensee who was an active real estate agent during the boom years, I can tell you that you are 100% full of right wing brand talking point crapoloa. The housing industry melted down because the government didn't step in to stop the most risky behaviors and kept interest rates artificially low at a time they should have pushed interest rates much higher, much sooner.
I saw it with my own eyes. People who barely had a pulse and should never have qualified for a mortgage would get $200,000 or even $300,000. Even one of my own clients with bad credit got $217,000. And it didn't have anything to do with their race or where they bought homes. Some of the most exclusive neighborhoods were the worst hit during the crash. It was insane. I'd try to convince people to shop lower in the market, stick to places they could easily afford, but there would be a mortgage broker telling them why that was bad advice.
The market collapse was greedy bankers in bed with a corrupt industry. And it was because the government didn't step in and clamp down on risky practices that we all wound up in the s**tter.
wagedomainAug 12, 2010
@DangerCollie
You can't just blame the greedy bankers (though they are also to blame) but this is really a problem caused by people making bad decisions. Buyers and brokers alike. It's not as cut and dry as saying "EVIL BANKERS caused this by TRICKING PEOPLE"... greedy consumers wanted more house than they could afford.
And now, they're getting bailed out. I understand that if we have THAT many houses in distress it's bad for everyone. But you can't help but feel cheated if you're one of the ones who bought a reasonable house specifically BECAUSE you were afraid of something bad happening, and then it turns out the government is soaking up all the consequences. Irresponsible consumers are getting a slap in the wrist at best but get to keep living in nicer houses paying less money than they should.
In other words, the government is telling people what they did is okay by way of rewarding them with lower interest rates or renegotiated terms of contract or whatever. People won't learn otherwise.
gmstoneAug 12, 2010
@brad3378 -
Scenario #3:
Buy a house.
Lose a job
No one will buy the house for what you paid for it or in a short sale (for a price below what you owe)
Bank takes back the house and you can't do anything to prevent the foreclosure
This scenario is common in areas with unemployment that skyrocketed within the last 3 years.
catalysisAug 11, 2010
You got lucky. Home prices are dropping faster now than they ever have during the recession with no bottom in sight. I laugh when I hear people talking about buying now to "buy low." Sure, you bought a foreclosure for 50% less than the last person, but have fun when it drops another 50%.
Mortgage rates can't go much lower. If rates go up, we are looking at a situation where the value of homes in some markets could drop below the price of the materials and appliances they are built from. It's happened before in other countries.
thatmarksguyAug 11, 2010
They should keep dropping until people can afford them. Why is it that we have to artificially prop-up the price of housing because the baby boomers are upset that their home isn't up in price 9000% like they expected? It's f**king stupid to expect that the people that arrive to the housing market are expected to pay four times as much for the same type of house used and degraded from when it was first bought 20 years ago. All the while their income is the same income or less as someone that bought the property 20 years ago.
Of course who gives a s**t about people that want to buy a home at a reasonable price. Just give them lower interests and cheaper credit so they can drown themselves in more debt to pad some s**t baby boomer pockets that most likely its already the owner of several properties that he bought at a time when prices were fair and people could pay mortgages. Oh and never mind the rampant unemployment. Somehow that home is still priced $300,000 while there aren't even jobs to then be able to take out a mortgage.
noblepaladinAug 11, 2010
I agree completely. We do not have any lack of land to build homes or apartments (look at Japan, they can build up when they start to run low on land), so land value should not increase substantially in real (inflation adjusted) terms. Historically, homes were never appreciating assets. People tend to prefer new homes, not old ones. Homes can provide rental income, but that is it. It is pretty ridiculous that virtually everybody believed that we can build these structures that get older and need to be maintained, and somehow have these things go up in value over time. Homes get old and deteriorate over time. It suppose to lose value over time. If you can get a home for cheap enough, you can make money on rental income and it becomes a profitable investment. However, if you buy a home, pay maintenance and property tax, and hope you can sell it to someone else for a higher price (inflation adjusted) after the home gets older, then you are playing the greater fool game. For many years, this worked because the government kept pumping up home prices with mortgage tax credits (think about how ridiculous this idea is, it simply encourages borrowing and makes home prices go up, it isn't any cheaper in the end), low interest rates, government guarantees by Freddie/Fannie, etc.
There are more houses than households right now, so there are many houses that are simply sitting there rotting away. And people wonder why home prices are not going up.Comment is buried, click here to see the rest.
clumsytimeAug 11, 2010
thatmarksguy i wish i could digg you twice
rotundoAug 12, 2010
"We do not have any lack of land to build homes or apartments"
That indicates a huge misunderstanding of what drives home prices. As does this later statement:
"It's f**king stupid to expect that the people that arrive to the housing market are expected to pay four times as much for the same type of house used and degraded from when it was first bought 20 years ago."
Sure, you're right if people are buying piles of concrete and wood in the middle of nowhere. But they're not: they're buying a piece of a neighborhood, a community, a piece of a city. You can't make great neighborhoods and great cities with a cookie cutter (as hard as we've tried) -- they take time to develop, and sometimes they never do in particular areas for one reason or another.
In the areas where they have not developed, you end up with sub-par opportunities: lousy schooling, lousy peers for your kids, lousy pay scales, etc, etc. This is the reality: location matters enormously, and there is limited space in the _desirable_ areas.
All that is not to say that the housing bubble wasn't a bubble -- it was. And a lot of it was driven by speculation, which was stupid and caused a lot of problems. But the general direction of house prices trending upward despite depreciation is a function of supply in demand in desirable areas.
Everyone wants to live somewhere with higher pay scales. Everyone wants to live somewhere with better schools. There simply isn't enough to go around and thus prices rise.
duffman5Aug 12, 2010
nobleepaladin: I agree about the price of the house, but I think the bigger issue is the value of the property (or at least that's what realtors will say, though they are the ones trying to inflate prices).
As a city expands, new houses are farther and farther from the areas that people want to be close to. At the same time, the population is increasing, which leads to more demand for the property closest to the downtown areas since more people work there.. Location, location, location and all that. While land in general should stay cheap, there's a price people will pay to save an hour on their daily commute.
In Toronto, anyway, I've noticed that you could get a small condo for the same price as a mini-mansion in the suburbs. That indicates that there's more at play than just the size/quality of a home.
noblepaladinAug 12, 2010
@ rotundo, in places like NYC, that is definitely true. However, people greatly overestimate the rarity of land. I live in Boston, one of the oldest towns in the country. Boston is pretty dense compared to most of the country. However, there is still plenty of room in suburbs that are 15-20 minutes away from Boston. Many of these cities are have large apartment complexes still being built (the contracts were from before the bubble burst) or complexes that are brand new. Most of these apartments are empty. Places like Florida, Arizona, and even California are not very dense, which is why the home prices there collapsed so much.
Also, if rarity of land is the variable that causes home prices to increase, it would be a function of population. And population definitely does not grow at double digit percents each year. It grows by less than 1%. So realistically, you would only expect around 1% increase in value per year due to rarity of land (which for the most part is negated by maintenance and taxes). Of course this depends on your region. For example, during the tech boom when everybody rushed to Silicon Valley, land value there should have gone up significantly. But the general belief that homes are investments is very flawed. Stocks and bonds are investments because they generate cash flow. Rental property can be an investment. But the idea that you can buy a property and let it sit there and have it go substantially in value is speculation - some people make money speculating intelligently because they are able to buy property cheap in areas before they become popular (ex: before a large company opens in a small town bringing in lots of new families).
For the most part, people didn't buy houses for rental income, they could have done better in bonds if they wanted income (especially in the states where the bubble hit the hardest). They brought it for price appreciation. And they leveraged up 5:1 (prime mortgage with 20% down) or more to bet on the appreciation. It's very hard to make money on a rental property from the rental income alone if you are paying interest on the home loan - any gains are speculative increases in property value. There is no reason for homes to appreciate in value significantly faster than population growth, faster than income growth, faster than rental prices, etc. If that happens, pretty soon nobody can afford a house any more.
rotundoAug 12, 2010
@noblepaladin - you make some good points. A couple more thoughts though:
I grew up in one of those nice communities about 30 minutes from Boston -- Norwood, to be precise. Prices there rose dramatically since my childhood; a factor of 12 still after the recent collapse. Norwood was desirable compared to some places, but it cannot be compared to living in the Boston itself. If you want to live in Boston (and many do) Norwood and the expandable suburbs are not really an option.
Also, Norwood isn't as expandable as it looks. I remember when I used to film the town meetings there were endless battles with developers trying to get land and oftentimes they couldn't.
"if rarity of land is the variable that causes home prices to increase, it would be a function of population."
It's more a function of what the population can spend than just the population. If income or available credit broadly doubles, then the competition for any desirable area will most likely see a doubling of price, even if the population stays the same. In fact, I'd say that population alone doesn't matter much: if population grows but everyone has the same to spend, they can't bid prices up.
I agree that buying on homes for speculation was often a lousy idea, though like in any bubble, a bunch of people executing that lousy idea made out like bandits. It's hard for everyone else to sit by and ignore that success.
vbullingerAug 11, 2010
I love it when I can Digg up a post by someone with whom I disagree like 99% of the time.
Cool are you retired now, Danger? Where do you live, geographically? Are you just saving your money or something? You live in an RV, right? How do you get internet service? Are you just parked outside the local Starbucks or something?
brad3378Aug 12, 2010
Living the RV lifestyle is a libertarian apocalypse wet dream.
araytaAug 11, 2010
I've always thought about living the RV lifestyle. How is it working out for you? I am also curious about how you're getting internet; do you just get a 3G/4G hotspot from your wireless carrier or something?
elsewhere42Aug 10, 2010
I wish more underwater home owners would perform a "strategic default".
It is perfectly legal and satisfies the terms of the loan. (If you don't pay, the bank gets the house)
This will force the banks to play nice or risk loosing an enormous amount of money.
nosecohnAug 10, 2010
How is it perfectly legal? Your mortgage agreement is a contract you sign with the bank. If you default, you're in breach of contract. Now, the bank's probably not going to sue you, because they figure you don't have enough money to make it worthwhile. But they'll hound you and kill your credit score.Comment is buried, click here to see the rest.
johndiAug 11, 2010
Contracts are civil agreements and you don't break the law by breaking a contract. There are exceptions like you can't enter a contract with the intent to break it, but there are few instances in which breaking a contract becomes criminal or illegal.
Some people even argue that the banks already broke the contract because their reckless lending habits caused the house to be worth less than you paid for it. If banks had fairly judged the value of the home the market wouldn't had skyrocketed like it did because you wouldn't have been able to get a mortgage based on speculative pricing. Responsible lending stabilizes the cost of buying a house. In this argument you're just giving the bank what they said was worth that amount of money.
The argument that in some cases you may even have a moral obligation to perform a strategic default is not without merit. Which is more important your responsibility to your familiy or your responsility to a bank? This leaves you with a moral dilemma. You have to look to your ethics to make the best choice out of a bad situation.
http://www.thebigmoney.com/articles/money-trail/2009/10/08/go-ahead-walk-away?page=0,0
rmxzAug 11, 2010
The contract spells out both options -- the keep-paying-and-keep-the-house option, and the stop-paying-and-return-the-house option.
That's the whole idea of a collateral backed loan. It's backed by collateral.
If the bank did an extremely poor job at estimating the value of the collateral, the bank's shareholders and customers might argue that they were grossly negligent and ought to be sued for mismanaging their money -- but it's not the house buyer's fault.
navicertsAug 11, 2010
This account has been closed by the user
ravagedsoulAug 11, 2010
"The contract spells out both options:"
Not paying the mortgage (that is, not repaying the money the bank loaned you) is NOT an "option". What is spelled out in the contract is what happens when you default, which is that the bank can *try* to recover its losses by selling the home.
The biggest part of most contracts covers what happens if one party or the other defaults; that doesn't mean each reason for default is an "option", it just recognizes that obligations are not always fulfilled.Comment is buried, click here to see the rest.
scottcAug 11, 2010
Okay, then, tell us how it is illegal. Don't forget to cite the federal, state, or local statue that makes it illegal.
number127Aug 11, 2010
It's not illegal in the criminal sense, but just because you default on your mortgage and they take your underwater house doesn't mean they're done with you. You still owe them the remaining principal, and they can continue pursuing you to get it.
You might not have any money for them to take, in which case, yeah, I guess you "won," but a win that involves being completely broke sounds pretty crappy to me.Comment is buried, click here to see the rest.
scottcAug 11, 2010
Well, yes, you need to know your contract and the consequences of your actions before doing it, and it won't be right for everyone. But as far as I know it isn't illegal just as it's not illegal for a corporation to walk away from a bad investment.
tsuruchibrianAug 11, 2010
@Number127
But the fact that they can come after you for the remaining money even after they foreclose your house is defined in the contract.
It is an option to stop paying and allow the bank to have a legal right to take your assets. This is a GOOD option if your assets are worth less than what you owe the bank even after losing your house.
You may have made an irresponsible decision in buying a house you couldn't afford, and you should lose your house. By the same token the bank managers made an irresponsible decision to give you the money to do it so they should lose their jobs when the bank goes under. The bank's shareholders made an irresponsible decision to invest in an irresponsible bank, they should lose their money when the bank goes under.
It all makes sense except that we don't let banks go under anymore. We should be firing (by not reelecting) congressmen that voted for the bailout, and electing new representatives that will try to get some of the money back from the people that received it and don't deserve it.
Closed AccountAug 11, 2010
"You still owe them the remaining principal, and they can continue pursuing you to get it." [citation needed] I've never heard of such a thing for any collateral backed loan.
ravagedsoulAug 11, 2010
Lenders can sue for remaining funds in many/most states, but the rules vary greatly. It's probably pretty unusual to be sued, since people who walk away from mortgages usually don't have many other assets.
A detailed state-by-state list is here:
http://www.foreclosurelawfirms.com/topics.cfm/anti-deficiency-laws.html
Closed AccountAug 11, 2010
That's shocking, even if only after seeing market values crash like they did over the past years. Just one more reason I give a big FU to the banking industry. Defaulting homeowners can be on the hook for the difference in value that the housing crisis caused, that the banks caused, even after already seeing their government bail out the same banks. And, of course, these banks also want the bankruptcy laws tightened or eliminated so they can squeeze even more from consumers that have hit hard times.
Isn't taking someone's home enough? What's next... a return to debtors prisons?
tsuruchibrianAug 11, 2010
Well people AREN'T still on the hook if they declare bankruptcy. Isn't that the point of bankruptcy?
So what if your credit is utterly destroyed. The only thing you need to borrow money for is a house anyway. If I were a bank, I wouldn't ever lend to a person that declared bankruptcy ever again. So what? It is not the end of the world not to own your own house.
In fact if more people actually defaulted on their loans, loans would be much harder to get, and house prices would drop and become more affordable.
I don't think we need to abolish for profit lending (or usury as it was once called), but I think we should allow interest rates reach their normal market value. We shouldn't be subsidizing home owners. All it does is create a housing bubble. It doesn't actually help anyone in the long run (except the banks that are now immune to failure).
crocodile7Aug 11, 2010
@11oops
It's not their home if they haven't paid it off in full.
snkscoreAug 12, 2010
Banks are more and more starting to sue for the balance after the home is foreclosed.
My brother was about to buy a short sale house, but instead the bank decided to foreclose on the sellers and then sue them immediately.
ravagedsoulAug 14, 2010
"it isn't illegal just as it's not illegal for a corporation to walk away from a bad investment."
There lies the misunderstanding. A mortgage is NOT an investment by the bank in your house. An investment is shared risk, while the mortgage (a loan) is a pre-defined agreement. The bank will never share in any part of the possible profits when you sell your house, why do you think they should share the risk of loss if the value goes down.
Closed AccountAug 11, 2010
I agree, but unfortunately people have been conditioned to believe it's a moral decision rather than a business decision.
rwhittak3Aug 11, 2010
Thats a tough one, my opinion. If I borrow something, I DO feel morally obligated to give it back. Why would this be any different if you borrow money to buy something?
Now granted, in the case of a collateral backed loan, I can see the case for it being a business decision rather than a moral decision since, since according to the contract, if you don't pay it back the lender keeps the collateral.
avengingturnipAug 11, 2010
There is an obligation but you do walk away from the house which the bank keeps so technically you are not stealing anything.
ravagedsoulAug 11, 2010
If I take your car and leave you a bag of money, I'd still be charged with car theft.
And with houses and mortgages, the bank almost always loses money in the deal, since most people don't walk away from equity. The banks are not allowed, by law, to make money - they can only recover up to what you owe, and their actual costs (any surplus has to be returned to the homeowner.)Comment is buried, click here to see the rest.
sigmaman2Aug 11, 2010
"And with houses and mortgages, the bank almost always loses money in the deal"
I see, so then, the interest paid on a home loan goes...where?
Anyway, stealing a car is not the same as signing a mortgage agreement. In your example, a foreclosure by the bank would be the same as taking your bag of money and replacing it with a car.
ravagedsoulAug 11, 2010
The interest argument, I love that. The interest is what they get for loaning you the money - the money *you* asked for.
The interest is interest, by definition it does not reduce what you owe.
Replace 'bank' with your friend who was nice enough to loan you money and see how you feel about just walking away from the debt.Comment is buried, click here to see the rest.
blackinthmiddleAug 11, 2010
@RavagedSoul
Your analogy is horrible. The bank has a contract with the borrower that spells out what happens when someone walks away from a house. A car thief doesn't have any such contract with the car's owner. Again, a terrible analogy.
And banks are not allowed to make money? I think you're confused. Banks don't lend money because they're being nice. As sigmaman2 pointed out, they're charging you interest for a reason. Now if what you meant to say is that banks typically lose when someone walks away from a house, I'd counter with banks are probably losing money *as of lately* because house prices were inflated way too high.
So sure, if a bank gave you a $750K loan on a house that just a year ago was appraised at $400K and you walk away, chances are good they're going to lose money, unless they can get it out of you. But this is just a current phenomena. In the 90s, for example, when house prices were reasonable, things were different. If you paid interest on a mortgage for ten years then couldn't make payments, the bank likely won because they got all of your money for ten years plus they get to keep the house and sell it, more than likely for a profit. This risk is factored in when they give out loans.
Closed AccountAug 11, 2010
Don't forget that the bank is at fault for underwater homes as much as the buyers. It's the Bank's capital that is lent out with the bank expecting a return with interest and that's why the bank sends an appraiser to the house to see what exactly they are getting into. If the Bank lent out money for a house that was over-valued then they are just as at fault (more so IMHO because the bank should have known better) than the buyer.
ravagedsoulAug 11, 2010
@blackinthmiddleblackinthmiddle
Banks never "win" - they are not allowed, by law, to make more money on a foreclosure sale than they are owed (plus expenses). If the property did sell for more than the mortgage value, the extra money goes right to the homeowner.
And as I've said, people don't usually walk away from equity, they just sell the house themselves. So yeah, banks almost always lose money on foreclosures; at best, they get paid what they are owed.Comment is buried, click here to see the rest.
crocodile7Aug 11, 2010
@RavagedSoul
Banks don't win at foreclosure, but they win
1) In normal times, by collecting your interest, a reasonably secure income stream.
2) In crisis times, from fools who continue paying their mortgages even though what they owe is higher than their property value. Bailing out the banks who lenders who had the capability and duty to judge the risks (much higher than individuals), and who are already being bailed out by the government.
It is true that the banks lose money when they foreclose, but if they lose too much, it's guaranteed to be topped up by the taxpayer (since they're too big to fail). Good to be them.
808atheistAug 12, 2010
The people who make the moral conditioning are the same people that make the laws.
In Japan its something fierce. It appears exactly like religion.
ayeroxorAug 11, 2010
losing.
And hey, you're right. Life is full of people who cheat and get ahead.
What about those that played by the rules and lost? I guess the lesson is, you're trading a sense of moral decency for achievement and risk. Only you can decide if that trade is worth it for you.
catalysisAug 11, 2010
It's hard to see how it's a moral decision when banks make you pay hundreds of dollars a month in mortgage insurance if you have less than 20% equity.
That would be like crashing your car and paying for it yourself even though you have insurance just because it's the "moral" thing to do. It's stupid and financially irresponsible.
ravagedsoulAug 11, 2010
Lenders can *never* profit from a foreclosure; by law, if they sell for more than you owe (plus their selling costs), they have to give the extra money to the homeowner.Comment is buried, click here to see the rest.
keraneuologyAug 11, 2010
IANAL but I'm pretty sure that under US contract law one party is not allowed to go out and take action that could reasonably be construed to harm the other party in the contract. The banks knew or should have known that writing so many mortgages for unqualified borrowers would harm people across the board. Once the first signs of trouble appeared they had a fiduciary duty to stop the problematic behavior to prevent things from getting worse but intentionally, explicitly and with forethought declined to do so.
lfabAug 11, 2010
It depends on if your loan is "no recourse" or not. Be sure to consult an attorney before you walk away, or else they could come after you for the balance.
If you have the ability, I say walk.
brad3378Aug 12, 2010
If you have the ability, I say pay your bills.
lfabAug 12, 2010
If you are underwater on your house, and the loan is non-recourse, then it is a morally correct business decision to walk away and give the bank back the house. The banks and lenders involved had no problem taking bailout money from you, nor charging you excessively high interest rates and fees for the privilege. Further, do you think they will give an inch when it comes to a loan modification? If the choice is put food on the table or pay the bank, you would be a negligent provider to your family if you let them go hungry. You aren't doing anything illegal. It's all in the terms of the contract you both signed.
I didn't read anywhere in my mortgage contract that says I was entering into a lifelong commitment to them. Pay or GTFO. You (usually) have a choice.
rkthoadanAug 11, 2010
What's worse is that corporations are actually lauded for taking financially sound measures like walking away from an underwater property.
tgc1Aug 11, 2010
Because that's their job. Their Shareholders don't give a s**t about morality. They want their dividends. Not that I agree with that. But again, the entire purpose of a corporation is avoiding liability.
crocodile7Aug 12, 2010
What's good for the gander is not good for flock of geese being legally treated as a limited-liability corporate person.
superkendallAug 12, 2010
Doesn't sound like you are lauding them. In fact I think few people do.
Businesses operate under certain moral principals too. We are not animals, or three-year-olds where every single rule must be written in stone.
wyrdwolfAug 11, 2010
If you are underwater, you will have to claim the difference between what the bank sells the property for and what you owe as income on your taxes next year as well. You may be exempt from this if you have lived in the house long enough, but there could be bad tax issues coming if you don't pay attention.
ravagedsoulAug 11, 2010
Most people will be exempt from this tax under The Mortgage Forgiveness Debt Relief Act of 2007.
But it's true that you could be liable for a taxable gain if you default on a mortgage.
http://www.irs.gov/newsroom/article/0,,id=174034,00.html
rc212vAug 11, 2010
Keep in mind that the more money banks have to write off the less credit they'll be able to extend. If there is a wave of strategic defaults and banks take a bath, then businesses will have a hard time getting the capital they need to operate and it could cause some serious damage to the economy.
bcarl314Aug 11, 2010
True, but also keep in mind that the banks currently walk up to the Fed for free (0.00 - 0.25% interest) money, and turn around and dump it in Securities (2 - 2.5% return) to make money. They're STILL getting a bailout every day.
Simple solution - don't use credit and save for the things you want.
solkreAug 11, 2010
We're talking about houses bcarl314, not plasma TVs.
House and Cars are loans people can't get around sometimes. The daily purchases however, should be cash whenever possible I agree.
6502samAug 11, 2010
1. Those folks who are defaulting are screwing over their neighbors. The more defaults, the lower THEIR home values go and eventually, they'll be underwater too. Then they may decide to default and round and round we go.
2. It ruins your credit for 7 years.
3. The bank may give you a 1099 and you'll have a tax liability for the difference between what they sold it for and what you owed on the mortgage(s).
4. If it's a second home, the bank may sue you to recoup losses.
5. Many folks have lost on their stock portfolios. How is the real estate any different than stock holdings?
6. When you bought the house, it was a good deal then? If you can afford the payments, then what's the problem?
7. Real estate prices will come back. If you bought a single family residential home as an "investment", you need to learn a few things about investing: for one, what constitutes and investment. MYTH: Homes are investments.
8. It's a douche bag thing to do. Just because there's other people being unethical sleazy douche bags doesn't mean you need to jump into the sleaze pit.
9. As losses mount, banks may start suing single family homeowners too.
10. If you're going to do it, be pretty damn sure you're willing to live with the consequences. There's no free lunch in this World - least for us little people.
rc212vAug 11, 2010
Agreed on all points.
mxm111Aug 11, 2010
"5. Many folks have lost on their stock portfolios. How is the real estate any different than stock holdings?"
You own stock thus profit/losses go to you, but you do not own home (bank does), those profit (your rate) goes to bank, but show should be loss as well. Bank took calculated risk while giving you loan, this is why you pay the % on top of your equity.
"6. When you bought the house, it was a good deal then? If you can afford the payments, then what's the problem?"
No problem, but one should consider legal options to see what the best. Why should not people default if this is essentially an option in their contracts? Is it legal, yes. Was it understood by bank when it gave money for loan? Yes. I do not see any moral or legal issues here.
obesesnakeAug 11, 2010
This looks like a talking points list for a bill collector.
theworldisflatAug 11, 2010
1. Your neighbors feelings or investments are secondary (or completely irrelevant) to the health and future of your family. Welcome to the real world - the entire economy is based on valuatoins of debt.
2. It ruins your credit for 7 years.
No, it doesn't. Defaulting on a home != bankrupcy. You *will* take a hit, but the hit is relativly low for the nature of the action. Doing such action does NOT disqualify you from buying another home shortly after either.
3. Many are exempt from the federal claim. Even more so, an entity cannot take responsibility for liquidating an asset - to which you have no part/say in the proceedings - then expect you to pay the difference. This is a loss incurred by the lender. Don't pay it, ever. Taxation on it is actually pretty low or can be spread over several years of repayment if you are subject to it.
4. Suing is one thing, collecting is another. The number of homes you has is irrelevant - you could have one or a billion properties. The subject of the loan is that single property. Even if the bank tries to sue you, and gets judgement against you, there is no enforcement of judgements from a court pesperctive. Most states do not allow garnishment of wages on civil matters, especially in conjunction with the siezure/sale of property (it's one or the other). Know the laws in your state. If it's not a federal loan, then there the amount of hassle drops 90%.
5. It's not - in terms of monitary value. Your stocks however are not purchased on loan funds, secured against the value of said stock. Big difference...
6. Completely situational and irrelevant really...
7. Speculating on realestate values is again situational.
8. No, it's not. It's a business move. Might check into what companies do on a daily basis. Trying to pul that manuver shows you lack logical business sense on a matter.
9. While anyone can sue anyone at any time for any thing... banks have to look at potential return vs. money to pursue. As illustrated above, there are very little grounds for civil litigation where a loan was issued against a specific (tangible) asset. Hence the entire design of secured loans...
10. If you are going to do it, understand what you are doing. Knowledge is power, guard it well.
mattropolisAug 12, 2010
"7. Real estate prices will come back"
I think you're mistaken on this point. Most state and federal government agencies already realize this last market collapse has changed key fundamentals. Oregon has said that 'Things will not be the same - and we need to re-prioritize now - because we need to get used to having far less money for the next 10-20 years' And most of a state's revenue comes from property taxes.
Oh, property values will return - but how and where they return will likely be very, very different. The market has changed - people's needs and outlooks have changed. Expect continuing high unemployment until 2015 by Obama's estimates and likely longer. Recovery? It'll be 5-10 years out; and by then who knows what people will want or where.
I'll keep renting until the market becomes a bit more clear, jump in early on the rebound and enjoy my 4-5% interest loan. Sure you can't perfectly time the market, but it's far safer to catch it on the upswing and miss the bottom then try to catch a falling knife.
frostydf2Aug 12, 2010
When I worked at a very large bank as a loan officer I gave out ZERO loans to individuals who had filed for bankruptcy. Now before people go out and call me a duech bag for s**tting on someones parade it was never my decision to decline them. I put their information into the computer, and the computer came back with a decision.
I'm not going to argue that it's not impossible to get a bank loan as soon as you file for bankruptcy - however, I will say at the bank I worked at it was impossible.
edmcguirkAug 13, 2010
Home valuations are not comming back for a very long time. It was a bubble. The houses were OVERvalued and now the market is correcting.
The value of a house has always been what people are able to afford. The recent easy credit has let people afford more but that easy credit was wrong and the banks are not going to be able to offer that kind of ridiculous credit in the future.
The value of houses will collapse to what people can afford with normal / conservative credit. Typically 3 times salaries. Eventually inflation will push the raw dollar cost of a house back to where it was but not for a very long time. By then salaries will have inflated up to 1/3 of home prices.
elcadAug 11, 2010
I'm sure your neighbors will love living next to a bunch of boarded up foreclosed homes.
Maybe your default will tank the value of their homes, which will cause them to walk away from their homes as well.
The cycle continues until it's just a couple old ladies who did play by the rules, and are now stuck living on a block with 98% of the homes boarded up.
Of course now their homes, that they have fully paid for are completely worthless, so she can't afford to move.
6502samAug 11, 2010
"Maybe your default will tank the value of their homes, which will cause them to walk away from their homes as well."
That's EXACTLY what's happening now.
The foreclosures are starting to fuel themselves.
acknotswAug 11, 2010
It will continue until house prices in poor to middle class neighborhood reach a point where people that used to make $30k to ~$75k per year can afford them at whatever new salary and expenses they are dealing with.
noblepaladinAug 12, 2010
If we let prices fall, it will eventually bottom. We won't end up with 98% of houses boarded up. Where do you think the people will live? We have a situation that looks like this - Suppose there 1 million households and 1.2 million homes. Therefore, 200 thousand homes are unoccupied. The government is encouraging sales (through tax credits, low interest rates, mortgage guarantees, etc) of homes thinking it will somehow solve the problem. The real problem is that there are more houses than households, that is not helped by encouraging sales. When you encourage sales, the homes simply switch hands. Some households own multiple homes that they intend to sell to someone else. It becomes a game of hot potatoes where the empty homes are juggled around and families move back and forth, but at the end of the day we still have 200 thousand empty homes at any given time. Sure it prevents homes from being boarded up, but it doesn't actually help at all. The problem will fix itself either through encouraging young teenagers to form households, blowing up the excess homes, or waiting until more households are formed through population growth. The last option is the only realistic one. There is no magic bullet, only time will heal the housing market.
brianislostAug 11, 2010
While I completely understand why people would want to do a strategic default, if more and more people did it, it would absolutely cripple the economy. You think things are bad now?
It may good for you in the short term, but it will have a broad and devastating economic impact when done a larger scale. Remember that the same banks you are screwing hold your deposits too. If banks lose as much capital as people a nation wide strategic default would do, then say goodbye to those deposits. The FDIC will only cover so much. And that only for banks backed by the FDIC.
This will impact all banks, when not all banks screwed up. Community banks will be the first to go, and they are generally the ones that did things right.
While strategic default may feel like your own personal bailout, it will absolutely kill the US economy on a large scale. I know its frustrating to hear that, but it's true.
scottcAug 11, 2010
Which is exactly why the government is intervening in some cases. Our country is in a bad situation. If the government doesn't intervene we will all be in a worse situation. Unfortunately the intervention will benefit some who don't deserve it.
You can call it rewarding bad behavior, just like intervening for the banks rewarded those who got us into the real estate mess, or intervening for the insurance companies (with the new health care plan) is rewarding those who got us into the health care mess. Life is full of situations where we have to clean up someone else's mess. The proper response is to clean it up AND set up regulations to prevent people and corporations from behaving in the same way again.
brianislostAug 11, 2010
I totally agree. There aren't a lot of solutions here that are going to make everyone happy. And I am in full favor of regulations that would keep this from happening again.
edmcguirkAug 13, 2010
Or you could look at it a little differently.
Right now the banks are all zombies limping along trying to squeeze as much profit out of the public to fill the big gaping crater that the devalued houses have created on the bank's balance sheets. If everyone strategically defaults, all those banks will fail, the FDIC will come in and protect the depositors and all the shareholders will be screwed right now.
All the people who benefitted from the bailouts will get stuck with the real losses they were all trying to cover up.
There will be a huge domino effect of bankruptcies and lots of people will lose their jobs. It will be absolutely horrible for maybe 6 months to 1 year instead of 10 or more years of dragging along with all the zombie banks.
I can see the side of the government that is willing to avoid the short really bad times for a longer period of still pertty bad times. We can force the short really bad depression if we think we can survive that better than the long drawn out depression.
anarcurtAug 11, 2010
As a current renter I wholeheartedly support everyone defaulting. When house prices are finally reasonable I might actually buy one.
brad3378Aug 12, 2010
Their loss is your gain!
Bring on the Great Depression 2.0
Capitalism FTW!
filovirusAug 12, 2010
Just wait, it is still coming. Your leaders have just delayed the inevitable.
mattropolisAug 12, 2010
Agree 100% filovirus. I'm a renter because I saw this coming years ago - blogged about it constantly - and was told I was an idiot. Now I have over $50k in the bank for a down payment and more in investments. But I'm not going to buy yet.
There is NO way the housing market as a whole will do anything but go down for the next year or so - and I want to it crash good and hard. Sure, individual places will see growth - but when the banks are still sitting on hundreds of foreclosed properties, unemployment is expected to stay at current levels until at LEAST 2015 by Obama's own optimistic estimates - and lots of folks sitting on properties continually sinking in value each day - how can anyone think the housing market is going to do anything else?
All the governments plans have done is slow the inevitable. This was coming for a good long time and anyone that looks at any of the data can see that houses are still a good 20% overpriced in a lot of areas from historical averages. Give the country another 12 months of depressed wages and unemployment, and even more houses will be on the market. Eventually those banks will have to start dumping the assets or they'll actually start falling apart as abandoned properties are aught to do.
I'm currently seriously considering approaching banks and offer to live in places for free in exchange for making sure the place looks lived in. Best free rent plan ever.
Very little or nothing can be done to stop the decline - and all the major financial and government players know it. They had a choice - either crash hard and fast, or crash slower and longer. They made the right choice, but it's still going down like a date on prom-night.
jfallon126Aug 11, 2010
They are but it's usually the very rich who are doing it. Why? Because they can afford to. Sure, anyone can walk away from their underwater house. But where will they go? Rent? What landlord is going to take you with the credit score you just ruined by defaulting? It seems easy but the average Joe can't pull of a "strategic default", legal or not.
jbcseeAug 11, 2010
Get the apartment before you default on the house.
Actually I know a few people who bought a second house before choosing to default on their current residence. Being $300k underwater makes no sense and if you live in a "no-recourse" state there are almost no liability issues with returning the property to the bank.
harinezumiAug 12, 2010
"What landlord is going to take you with the credit score you just ruined by defaulting?"
The kind that is desperate for tenants. If you haven't noticed, it's not exactly a seller's market in real estate right now.
theonekenAug 11, 2010
It does not by any stretch satisfy the terms of the loan. The terms of the loan state that YOU will pay back the loan, no matter what. Having collateral doesn't mean that the collateral will cover the full cost of the loan. What is not covered comes out of your pocket. So if you decide to strategically default, you better not have a dime to your name and you better not desire credit for at least another 7 years.
anawnymooseAug 11, 2010
Every home I've rented for the last 3 years has been foreclosed on less than 6 months into our lease thanks to (seemingly) every landlord in the state sharing your thinking. Having to get up and leave with no notice twice a year tears through every bit of your savings, making it hard to build and maintain credit. Without good credit, I can't buy a house. Without a house, I end up renting again and repeating the cycle when the next landlord defaults.
I wouldn't count on the recent laws protecting you either, the last time this happened I told Fannie Mae about the protecting tenants at foreclosure act (it's supposed to protect your lease in these situations) and they first told me I was wrong, then hired a 3rd party company to take me to court. The judge threw it out.
brad3378Aug 12, 2010
Seems ironic that renters who pay their bills on time can be kicked out immediately while deadbeat homeowners who don't pay their mortgage can keep living there for 6 months.
The system is truly broken when we reward the deadbeats and punish morality.
kidviciousAug 11, 2010
"What the hell's a gander?"
"It's a goose that's had the old 'strategic default' pulled on it."
gotmoobsAug 12, 2010
What people fail to realize is that, the bank takes the loan, right now they make about 450 bps on whatever the value of the loan is, and then sell it off to fannie or freddie. The govt owns the loan and takes the hit.
lucutusAug 12, 2010
Doesn't a default kill your credit rating for a long period of time or is there some loop hole I don't know about? I bought low and fought hard to buy right. Went in with positive equity, low interest, fixed rate, etc... Now I'm stuck owing 80% more than it's worth thanks to the bad loans others sold or took. Is this a true way out or do I end up with a black eye and inability to finance a car or another home?
edmcguirkAug 13, 2010
There are a lot of considerations: taxes, state laws, etc.
It boils down to, how many years will you be destitute because you are paying a mortgage you are locked into because you can't sell underwater or how many years will you be destitute because you have a bad credit rating.
Good credit with no money or bad credit with some money.
It may work out that taking the credit rating hit is less bad. And you will be able to relocate if you can find a better job someplace else.
Closed AccountAug 10, 2010
Shut up, you're just being selfish.
/social collectivist.
ayeroxorAug 11, 2010
Shut up. You're just being shellfish.
/bazooka bubblegum joke writer
plainoldfoolAug 11, 2010
23 14 9 62 8
/fortune-cookie lucky numbers writer
kyanAug 11, 2010
50:50
/coin tosser
thetxiAug 11, 2010
I see great tings in ya fyoocha!
/Jamaican psychic hotline operator
vbullingerAug 11, 2010
[Insert racist joke here]
/Non-creative digger
bluto36Aug 10, 2010
Damn all this time i have been paying my own mortgage.
so not fair, the rich people should be paying for me.
atarioAug 11, 2010
Just keep quietly paying the rich their money. Stay in line, citizen.
esteskidAug 11, 2010
"Just keep quietly paying the rich *BACK* their money. Stay in line, citizen."
You realize that's how this works, yes?
dvazgirdAug 11, 2010
"Just keep quietly paying the rich *BACK* their money that they printed out of thin air. Stay in line, citizen."
photojustinAug 11, 2010
Odd. I read the article, I seem to have missed the part where the government pays your mortgage for you. No, it just allows banks to write off their loss (much like you or I can write off our capital losses against our income) when compromising on loan principal.
Don't make it sound like it's free money. It isn't. It benefits people who played by the rules by stopping the downward spiral in home prices, and keeps your neighborhood from becoming abandoned.
gerakis100Aug 11, 2010
playing by the book = getting screwed by the gov
ncmusicAug 11, 2010
I don't understand how underwater people are getting screwed by the government. Can you explain it, if they don't need help and they aren't getting any why is that being screwed?
Closed AccountAug 11, 2010
It depends on how you define "don't need help". For example;
Citizen A - Buys house, Xbox, Premium Cable, Cell Phone Plan, big screen TV and other luxury items. Can't make mortgage payment so defaults and keeps luxury items.
Citizen B - Buys house, Sells Xbox, Cancels Premium Cable, gets PayPerGo Cell, and eliminates all other luxury items to save mortgage.
Which one "needs" help?
mantherAug 11, 2010
Because of what the government has done with the housing market, many property values have dropped significantly. I bought my condo 3 years ago, and at this point I owe 20k more than it's currently 'valued' at (didn't get it appraised or anything, but that's based on the sale price of a similar unit in the complex). I don't need help paying the mortgage, but I feel a bit screwed because I'm stuck there until the value comes back up or I pay into that 20k.... I wouldn't be able to sell the place and pay off the loan I took out at this point, and that kinda sucks...
wagedomainAug 11, 2010
Here's the thing. They (we) don't need help to continue paying the mortgage payments each month. But we're underwater, a good many of us. That means that the value of the house is less than the amount we owe, so if we tried to sell the place we would owe money. The big reason our houses dropped in value is BECAUSE of the actions taken by the very people that the government is helping out.
Keep in mind, a lot of the people who are defaulting on their mortgage took huge mortgages that they knew they couldn't afford long-term, but assumed the house value would go up and they would be able to sell at a profit in "a few years", and for most people those few years turned into a few more years and then the payments ballooned up to way more than they could afford. And most of those people KNEW (or were told but forgot) that this was going to happen.
So, in summary, homeowners who play by the rules are stuck without options for moving, beyond paying up to 50% of the house's value to move. We really have two options, as the article points out (three if you count selling at a huge 5-figure loss) - stay and hope it appreciates back to the same levels as before, or voluntarily default and take a huge credit hit. Homeowners who didn't play by the rules and bought more than they could afford are getting government help to continue living above their means.
purzzzellAug 11, 2010
Meanwhile, while Manther is paying his bills, other people who CAN'T afford to pay their bills b/c they 'bought outside their means' are getting assistance and are getting their mortgages written down to the value of the condo, while s/he's stuck with his at the extra 20k.
So the "responsible" people suffer, and the ones who bought outside their means get cared for by the government.
delihoundAug 11, 2010
I think the thing you guys are missing is that the government didn't do this to the housing market (@Manther) and the government isn't screwing you on your loans either. It was and is the banks.
arachniddudeAug 11, 2010
@Manther Sure it sucks, but it's also the 'rub of the green'. I see the whole underwater thing as a fallacy.. If you bought a place as an investment, then constantly monitoring the resale value makes sense. But if you bought it as a home, then you paid what you think it's worth as a home, and now you live in it.
Market value should not matter, since it is your home.
Now to the point. Investments involve risk. So if there was any notion that you purchased it as an investment, then you assumed the risk, and you take the loss.
I feel for you, but that's the rub.
As far as those who are being helped, I agree, they shouldn't be. They should default, have their credit ruined, and the bank should suffer the loss for getting into a bad deal. Progressives will argue these poor souls need help, but I say BS. Let them struggle, and they'll learn a lesson in the end, as will the banks.
This is why regulation is a catch 22. The best regulation is consequences.
scottcAug 11, 2010
@delihound: The banks and mortgage companies were the driving force behind the problem, but they had a lot of assistance from the government and the ratings agencies. In the U.S., the government is going to do what the bankers want it to do, even though both like to pretend otherwise. If the bankers aren't making the decisions themselves (i.e. Paulson, Greenspan, etc.) then they are funding (bribing) those who do.
mantherAug 11, 2010
@delihound: We're not missing 'the thing' here.... If you think government doesn't play a part in this mess just like the banks do, then you have some more learning to do. Banks and Gov't worked pretty closely together to get the country into this mess.
@ArachnidDude: There's a whole world of other variables that you aren't considering in your blanket dismissal of 'underwater homes'... I bought a condo and not a house to minimize the volatility I'd be dealing with, and keep it cheaper should I need to move or anything like that. I planned on being there 5+ years, yes, but since my plans aren't the only deciding factor in where I live, two years after I got there I lost my job and needed to find a new one. That was right after the value dropped, and I was about $45k underwater at that point (value has come back up a bit as well as a small dent in the debt...) so moving was not an option without defaulting, and I was forced to take a less than ideal job in the area that I was already living, so that I could pay what I owed and be a good citizen.
I bought it as a home, but I didn't pay what I thought it was worth, I paid what I could talk the seller down to. That's a pretty silly assertion. Sure, I agreed that it was fairly reasonable, but reasonable also takes into consideration what else is around. And just because it is my home, doesn't mean I hope to live there until I die... Thus, market value plays a huge role in whether or not I can sell it and move elsewhere, or if I'm stuck.
I understand and respect your risk assessment, but the banks and government were hiding some pretty critical facts from the public with regard to that risk. If I'd known there were so many bad mortgages out there that would be defaulted on causing property values to drop significantly, I, like many others, would have kept renting and waiting to buy.... But that wasn't exactly the case was it?
Bottom line is, I was responding to a question on how those of us playing by the rules are getting screwed by enlightening you all to how that works, which is: Banks made big mistakes, some people made big mistakes, some people didn't make any mistakes except following the right rules at the wrong time. Government is helping the banks, and government is helping the people that made big mistakes, and they're using the tax money of those of us that didn't make mistakes, all the while leaving us with their consequences and no help. It pisses me off, not because I'm underwater, I can sleep in the bed I made without complaining, but because everyone else who had a part in making my bed, is getting put up at the Four Seasons while their situation gets fixed....
arachniddudeAug 11, 2010
@Manther Well I completely agree with you that it sucks. The part about the real idiots (and the banks) getting assistance while people like you are dealing with it like real men, or women.
I would just add that it's fairly evident that the U.S. Gov will not let this housing market thing go.. The reason they are bailing people and banks out is to stop the bleeding (which I don't think will succeed).
I have a theory that the most accessible source of power and money for politicians comes from real estate dealings (especially in more localized governments). Of course there are other methods, corporate sweet deals that provide future consulting jobs, etc.. but (and I'd love to see real numbers on this), I'd say the most prominent politician's investment is real estate. So it comes as no surprise to me that bureaucrats will do ANYTHING to recover this market and keep it rolling.
Far too many of them have skin in the game..
as investors.
hewhopoopsAug 11, 2010
You can call yourself "responsible" or say you "played by the books."
But, the fact is you just made a bad investment.
peeequalsnpAug 11, 2010
Good summary HeWhoPoops. Where is it stated "The value of thy house is guaranteed to appreciate"? It's an investment. There's no difference between buying a house, no matter the "deal" and buying a stock that is "at the bottom". The house may still lose value and the stock may still go bottom up. That's the way it works. It sucks for those that were "responsible", but it was always a possibility for them.
What sucks is that those that weren't responsible are being rewarded. I understand the response that "Hey, they were stupid and got help, I was smart, I want help too!", but that is a mentality that will just get us in more trouble. It's a continuation of the "entitlement" frame of thinking that got the entire system into the mess to begin with. The correct response is, "Sucks you were irresponsible, good luck finding an apartment. Oh, sorry mister banker, you lost a bunch of money too? Yep, that sucks. Better luck next time, eh?"
hewhopoopsAug 11, 2010
In regards to the people who did accept loans they couldn't afford, one could make the argument that they were victims of predatory lending. I think that particular argument only goes so far, but it is true that some people were "tricked" into their sub-prime loans.Comment is buried, click here to see the rest.
mantherAug 11, 2010
@ArachnidDude: we seem to be in agreement at this point, and I've dugg you for it. Also, I don't think your theory is too far off....they are definitely very invested in this market...
@HeWhoPoops: I can be all three, responsible, having played by the books, and having made a bad investment. They are not mutually exclusive. However, I'd argue it wasn't a bad investment as much as it was a good investment at a bad time, but aside from this one response, I can't argue against your statement.... That still doesn't change the fact that I'm pissed off that I'm in the one group of "sufferers", for lack of a better term, who isn't getting government help (and please don't assume that means I want it.....my STRONG preference would be that NO ONE gets it, because as has been pointed out before, the best regulations are consequences...).
hewhopoopsAug 11, 2010
Yeah, Manther, I can totally understand the anger.
I'd be angry too, but last year I used a large inheritence to pay off my mortgage. So, I'm just that guy who eyes this problem with an air of self-importance.Comment is buried, click here to see the rest.
peeequalsnpAug 11, 2010
@Manther
Predatory lending and ignorant borrowing seem to go hand in hand. I wouldn't say they got tricked, no more than the people who think $99 car payments for 15 years at only 1% got tricked. Either they didn't understand the actual numbers or they didn't read all the documents they signed. People can blame the "predatory lending", which is pretty much just fine print on a mortgage, but I say equal blame belongs to the borrowers.
If you want to get into a discussion about past legislation that affected lending practices we can, but for let's suffice it to say that I'd even only give the lenders half of their of their original half of the blame and the government the rest.
darkstar3333Aug 12, 2010
If you buy a house with a best-case scenario budget in mind your simply bought a house you can not afford.
darthjureAug 11, 2010
Interest rates are at a historic low. At best we can refinance our mortgages...
joeynineAug 11, 2010
I tried. I have a 760 credit score. I've never missed a mortgage payment. I make a great salary. The lender asked for 3 years of t ax returns which I provided. I was not approved. The reason? My 2008 didn't look too good. My response was, "whose 2008 looked really good." Obviously they hadn't heard about the economic meltdown.
This seems to be the same thing that is happening to everyone I know who are trying to refi.
Oh yeah, I was also told that if I don't pay my mortgage for three months, I might be able to refi. No way.
Closed AccountAug 11, 2010
Sounds like you need to work with more lenders.
Closed AccountAug 11, 2010
Yep, i'm in the exact same boat. Great credit, I'm not even underwater on my loan, but got denied...
Problem is darkened is the more lenders you work with the more your credit report gets hit and your score drops. Get too many queries into your credit report in a short time and it takes a big hit.... So I tried last year, got denied, tried a few months ago, got denied.. Problem is though I'm not underwater, my home depreciated enough that my available equity is smaller and it throws off the lenders ratio 80/20 ratio etc....
Closed AccountAug 11, 2010
@Samueul
Actually that a misconception, if you apply for multiple home loans within a close time period, the bureaus wont drop your score
kingmanicAug 11, 2010
@samueul: A group of hits over a short period in time impacts your credit score the same as a single one. It's only repeat hits over longer period which may impact it.
Closed AccountAug 11, 2010
We tried the same thing. Wells Fargo is a bunch of crooks. They sent us a letter offering to refinance and then said we didn't have enough equity to refi. Why did they send the letter in the first place? To get credit for "attempting" to help and more free money from the government.
bry2Aug 11, 2010
@Samueul
This seems to be the norm, lately. We've been trying to refi to take advantage of low interest rates, but lenders are uninterested. The banks seem more interested in holding money, not lending it, so that is what they are doing... I was actually offered $200 to pay off and permanently close a credit card account recently - despite that credit card having a $0 balance on it. The fear seems to be that I *might* draw a credit on that line, and the card issuer has lowered the available limit of that card by 80% in the past year as well.
A cynical person might suspect that the banks are planning for a large decrease in the value of the dollar due to inflation. But sudden inflation would only be an issue if billions of dollars were infused into the system... wait, where'd all that bailout money come from, exactly?
oninboninAug 11, 2010
I think that period is something like 30 days from the first hit, then your score gets dropped..
rwhittak3Aug 11, 2010
Its hard to refinance when your house won't appraise for the value you need to finance.
farkdogAug 11, 2010
Look into the HARP program. Allows you to refinance for up to 125% of the value of your home.
thanakarAug 11, 2010
I tried to refinance and always was disapproved. 4 years ago my house was worth 300k, not its only worth 157k, 10k more than what I still have to pay.
Closed AccountAug 11, 2010
Not if you're upside down on your mortgage due to something called a "housing market crash". Which happens to be where most people are that bought a house withing the last 10 years or so.
jabbrwockeyAug 11, 2010
Interest rates are at historic lows, yet banks refuse to go below 5%.
dauntless1Aug 12, 2010
It's actually 11% average in my area. 11%!
jabbrwockeyAug 13, 2010
I know. Federal rate was at 0%, but banks were 6.5% in my area last time I checked.
When I asked why they were so much while the fed rate was so low, they said that "people were refinancing mortgages."
f**king snakes I tell you.
cimmerianxAug 11, 2010
Remember that if you refinance you home for a lower payment, you are selling your home to yourself. That means that if your taxes were low (if you owned the home for a while) you better beleive the appraiser will come and reappraise the house at a higher rate. Plus, once the county appraiser is done, then your insurance goes up to match the appraisal value.
Its not just P&I that matters because you'll end up paying more in tax and ins than the amount you save with the lower rate.
grandpamunsterAug 11, 2010
I know people who have been trying to but bank owned/ short sale homes. It's almost impossible, if they accept your offer it takes them forever to close. I think the banks are waiting for another bailout., so they are holding the homes.
absorberAug 11, 2010
My brother has been trying to buy a short sale home. He's finally closing next week, after over a year of waiting.
marogerAug 11, 2010
I guess I was really lucky. My agent insisted on making an offer that wasn't too much lower than the short sale asking price (half the selling price listed for the two years previous)- which was higher than I would have want to have paid because of the work necessary on the property. As I had an (unsolicited) offer on my house- and needed the cash from the sale to pay full cash for the house- the whole process had to work in tandem. Having bought and sold a number of houses previous, this sale actually went smoother than others and within 3 months of making the offer. In this transaction there were no mortgages involved. I had a great aggressive agent that called the bank- and the broker- almost daily. I've also heard many short sale nightmares, so I am also suspicious about why the banks delay these deals. I was told some of them are held for friends of the bankers, so their friends can get better deals the longer the property sits. It would be easy for them to do as no one would really know.
servo888Aug 11, 2010
I'm currently trying to purchase a home, and have run into a few issues with foreclosures / short sales. On a foreclosure, I typically get asked for a "final and best" offer, no negotiation, and my offer is always rejected (one offer was over the asking price). On a previous short sale; I put an offer on the house, but my offer was not accepted (nor looked at), because there was an offer put down 12hrs before mine (mine came in on Monday morning).
Basically, if you want a great deal, you need to have an agent that lists bank foreclosures / short sales. The agent will get full commission (buyer + seller), and they will diamond encrust your offer when they present it to the bank. It's unethical, (probably illegal) but it works.
Cheers
homercles337Aug 11, 2010
Dont be silly. Those that played by the rules are in no need of assistance. They are not broke, no-income fools that were given a McMansion by their friendly bank that was FORCED to give them a house by Barney Frank--Superman of the House!Comment is buried, click here to see the rest.
hewhopoopsAug 11, 2010
What's the weather like in your particular misinterpretation of reality?
Closed AccountAug 11, 2010
Are you feeling OK, homercles337?
homercles337Aug 11, 2010
Did i forget my sarcasm tags?-)
Closed AccountAug 11, 2010
If home prices wearn't blown completely out of proportion, none of this would have been a problem.
ayeroxorAug 11, 2010
Wearn't. I like it.
v3n0mAug 11, 2010
That's horses**t! I bought my house 8 years ago, I was pre-approved to spend double what I bought, but I decided to buy something I knew I could AFFORD, not what the bank said I could.
It's not the fault of the banks or the housing market, it's the morons who didn't think about their purchase then went crying to Nanny Government for a handout when they realized they were in too deep.
Closed AccountAug 11, 2010
Amen. Bought my house twelve years ago for 76k at 5% fixed 30 year and it was worth 135k at the time, I too was pre-approved for well over 250k. I've never missed a payment and I have excellent credit.... I guess I don't need the help and the fed can take my earnings to help those that do..... It's bulls**t.
Closed AccountAug 11, 2010
Thanks for proving my point. 8 years, 12 years, pre-bubble prices, much more manageable. 5-6 years ago, not at all. To put it in perspective, at one point I saw a townhouse with obvious water damage in a development in the middle of nowhere going for $315k, and that was the low end!
What's horses**t is that you lay no blame on a financial market that was lending to people without doing a basic level of due diligence as to whether the loans could be PAID or not.
dave122Aug 11, 2010
Same, I bought my house in 2007 (blerhgh). I was approved for over 250k, I bought a house for 128k. There is no possible way I could have afforded a 250k mortgage at the time, even now it would be a stretch and I'm making quite a bit more money now than I was then.
Doing simple math before signing a mortgage = a good idea. Apparently that is missed by some people.
jstrahnAug 11, 2010
A-f**king-Men!
It's your responsibility to figure out your budget, figure out how much of that budget can be used on a mortgage, and then buy a house accordingly.
These f**king people will never learn if you hand them money and there are no consequences.
wolfmannAug 11, 2010
the houses in my area never were out of proportion because they kept building and building more homes which capped the max price at the price of a new home.
Closed AccountAug 11, 2010
I wish more places had done this.
Closed AccountAug 11, 2010
i was pre-approved for 250k but only bought a 135k house becuase THATS WHAT I COULD AFFORD.
i knew i couldnt afford an inflated overpriced house so i didnt buy one.
other irresponsible people bought those 250k houses no 5 year arms and are just asmuch to blame as the banks for giving the lans in the first place.
nextwiggin4Aug 11, 2010
I want to live somewhere where they sell houses for less then 250 K.
Closed AccountAug 11, 2010
There's a reason why they sell them for under 250k in those places. How else do you get people to buy 'em?
sgvpreludeAug 11, 2010
Unfortunately for us Californians, decent homes for under 200k don't exists unless you want to live in the desert.
protodonAug 11, 2010
No one seems to realize this. Housing prices are still way out of line. And that sucks for people like me who bought a tiny 120k shack because that's all I could afford and if house prices were to go to reasonable levels my shack would surely go down in price, way more than it already has.
stavrogin2Aug 11, 2010
If banks hadn't approved loans for every schmuck that walked in the door, we wouldn't have had a bubble in the first place.
brad3378Aug 12, 2010
The bigger problem is that these schmucks had absolutely nothing to lose.
Even if they only had 5% downpayments they would hesitate before walking away from their mortgages.
When people have nothing to lose, they're more likely to walk away.
dauntless1Aug 12, 2010
Also, the shmucks should have realized something very basic.
Either:
A: If the house is NOT an investment, then it is a good or service, therefor value is strictly materials + labor +a small amount calculated for profit (usually 20 percent.) This means a 50k home goes for around 60k.
B: If the house IS an investment, then there is always the risk it goes t**s up. ALWAYS. Want reduced / no risk? Rent Responsibly.
You can't f**king have it both ways.
buckrogers1965Aug 11, 2010
Why ask for a handout that you don't need.
Buried.
dreamacheAug 11, 2010
Glad your s**tty ass comment was buried instead.
Closed AccountAug 11, 2010
You've just won the "Dumbest thing I've heard all day" award!
dmm219Aug 11, 2010
um, how about RENTERS who were the ONLY responsible ones for refusing to buy vastly inflated and overprice homes (which, they still are...)
therightsideAug 11, 2010
unintentionally responsible?
dauntless1Aug 12, 2010
So, by not purchasing overpriced homes, they're wrong?
blklightningAug 12, 2010
damn, you beat me to it.
navicertsAug 11, 2010
This account has been closed by the user
numbskiAug 11, 2010
Simple - 6 years into my 30 mortgage I still have almost no equity. Instead of feeding the local economy by paying the owner of a rental property (in theory), I gave money to a bank that well...
boner79Aug 11, 2010
"Throw money away"? You must be a Realtor. Now's the time to buy!!!!
rc212vAug 11, 2010
Rent in the DC Metro is somewhere around 2/3 to half what the mortgage rate is. Still doesn't make sense to buy in a lot of areas.
Closed AccountAug 11, 2010
Some of it has to do with short term. Most renters (at least in my area) aren't long term. Usually it's people in the middle of life adjustments (starting out, new in town, recently married/divorced).
I never understood this mentality that renting was throwing money away. I wouldn't consider spending money on shelter to be wasteful.
purzzzellAug 11, 2010
I have house that seems to be a fixer upper. I bought it starting out, and I'm not the most handy person in the world.
I'll tell you - the nice thing about renting:
Prices are comparable to mortgage, but if you're landlord (or landlord company) fulfills their part, you don't get the bill for the roofer, the new furnace & ac, the plumbing, etc.
My mortgage is comparable to rent.
But 3 years ago - new roof - 5k.
2 years ago, new ac/furnace - 5k.
Probably need about 500-1k worth of plumbing work, let alone some other things wrong like a poorly ventilated bathroom.
So - yeah, I'm gaining equity, but I'm sinking far more into maintenance than I get back in equity, esp. being only two years into a 30 year (refi to lower rate).
pxtlAug 11, 2010
I love this line of thinking - as if your mortgage was the only expense of home-ownership.
Remind me not to every buy anything you've ever owned in the past.
elcadAug 11, 2010
What equity? All my neighbors are walking away from their homes which has caused mine to become worth a lot less than I owe. Plus unlike renters I have to mow the lawn and pay for all kinds of maintenance.
When I rented I paid $425 a month. When I first moved into my house I paid $800 a month. But now with all the inflated housing prices, my taxes on the house have go way up and now pay $1000 a month. Renting was much better, I had the weekends to do what I wanted instead of dealing with house. The only real benefit I got was a parking space of my own.
jabbrwockeyAug 11, 2010
"Rent in most areas was (and still is) on par with a mortgage payment."
Where the hell do you live?
mattropolisAug 12, 2010
"Rent in most areas was (and still is) on par with a mortgage payment."
Not at all true where I live - and I have a shared spot with a great roommate. Just find yourself a roommate that has a significant other and before they move in make it a lease agreement rule they don't have anyone over more than 7 nights a month. They'll quickly start living with the significant other and you'll have the place to yourself.
I rent a great place downtown with a fireplace, all wood floors, a back patio with BBQ, patio to sit and enjoy the sun, full living room, full dining room, full kitchen, and tons of amenities all for $600/mo. A mortgage on a nearly identical square footage place in the basement next door without most of the niceties is $1200/mo without taxes, condo fees, or maintenance. I'm banking that extra $600/mo and investing it. And even with currently depressed investment return rates, calculating the tax benefits for interest payments, and assuming no repairs - I'm getting a way better return rate than any of my neighbors who own places.
"Throwing your money away on rent" is a fallacy that has been fed to us for years and is a key reason we got into this mess. Yes, for some markets it is cheaper to buy then rent - for others it's cheaper to rent then buy. But you have to do the math for YOUR market - because in some cases it's absolutely the wrong move to own.
Further, as others pointed out, you also calculate in how you want to live your life. I love being able to go out every weekend without worrying about a house or mowing lawns, or leaking pipes, or fighting with crazy neighbors on HOA/condo boards like my owner friends. If anything needs fixing - I just call the landlord and it gets fixed. Since I've lived here for 3 years - my landlord has poured about $3000 in repairs just for my unit from a burst pipe in the wall and a fridge that died of old age. I love banking more than half of my neighbors mortgage payments each month, having over 12 months of living expenses sitting in investments earning far more than the 5% that houses grew on average. I love the idea I can move at any time if my job goes away - especially in this economy.
It's time for people to stop buying realtors garbage like this and do some math for themselves.
djtoddAug 12, 2010
Not where I live (my house: $2000 a month on a 300K loan at 5% fixed, rent for the house is going for about $1,200...we're stuck). The house is 1,094 sq. ft. three bedroom (Riverside, CA)
Closed AccountAug 11, 2010
Your reward is that you can now get houses for dirt cheap prices at all time low interest rates. Get out of that money sink while the gettin's good.Comment is buried, click here to see the rest.
wagedomainAug 11, 2010
But... by renting you're just paying for someone else's mortgage. So you're part of the system too.
markglAug 11, 2010
No love for us homeowners.
boner79Aug 11, 2010
except for the mortgage interest tax deduction.
d3dmAug 11, 2010
Where I come from, "owner" = house belongs to you, not the bank. No mortgage means no deduction. I don't even have the option to walk away from a loan. I can't sell my home because it would be a huge loss.
The value of my investment has plummeted because my neighbors bought homes using sub-prime loans and have defaulted. I have a hard time understanding why our tax dollars are going to pay to bailout people who have caused our investments to drop 50%.
Where's the compensation for folks that played by the rules and got stung by corruption in the banks, Fannie & Freddie, and the House Financial Services Committee (yes, I'm glaring at you, Barney Frank)?
andyswanAug 11, 2010
Didn't you get the November 2008 memo? Success is to be punished. The rich are evil.
You're dealing with a group of people that secure their power through political dealings and the promise of distributing the earnings of other men to those who have not earned it.
Discussing the impact that this realignment of rewards and incentives will have on people's behavior is just "being greedy". Pointing out that it was generally greed that caused people to borrow more than they could pay back....well that's either "racism" or "insensitive".
All hail the recipient!
dreamacheAug 11, 2010
If I could digg this 20x I would.
kyanAug 11, 2010
well, you're obviously not a digg patriot, now,are you?
Closed AccountAug 11, 2010
The stupid is strong with this one.
dividebyoAug 11, 2010
"You're dealing with a group of people that secure their power through political dealings and the promise of distributing the earnings of other men to those who have not earned it."
You seriously want to say this is the purview of only the current administration? (See "Didn't you get the November 2008 memo?")
You want to tell me that no other political figure, no other president, got to where they got without "political dealings"? In your world, it's only the current president that is apparently this evil person.
And by your statement, I assume you are then against Social Security, Medicare, and all the other social systems that are in place? Which, by the way, were enacted WAY before 2008...
Please think a little before posting...Comment is buried, click here to see the rest.
andyswanAug 11, 2010
No, I'm talking about liberalism in general. This just happens to be the first time in 30 years that liberals have actually succeeded at getting power in all branches of government.
Hope, change, and class warfare....yay!Comment is buried, click here to see the rest.
snkscoreAug 12, 2010
Cutting taxes for the rich from 70 something percent to 35 or so = just fine.
Allowing the Bush "Tax Cuts for the Rich" to expire for people who making over 300k = class warfare.
Brilliant.
dauntless1Aug 12, 2010
@andyswan
A flat out lie. Your entire post was vitriol about the current administration, with nothing whatsoever about the deregulation causing all this, or anything having to do with SOLVING anything.
If you want to make s**t up, you should try it with people who aren't intelligent enough to read. Here's a good place to start:
http://www.foxnews.com/opinion/2010/08/08/rev-shuler-anne-rice-christianity-quit-christ-pharisees-god-love-forgiveness//?storytab=story-comments
stavrogin2Aug 11, 2010
The housing market imploded before Obama was elected, you moron.
andyswanAug 11, 2010
Markets DO go down. Especially when the Government has propped them up for political reasons using taxpayer money (hi freddie, hi fannie)....What's that got to do with anything?
This discussion is about what we do about it NOW....Comment is buried, click here to see the rest.
dauntless1Aug 12, 2010
@andyswan
A flat out lie. Your entire post was vitriol about the current administration, with nothing whatsoever about the deregulation causing all this, or anything having to do with SOLVING anything.
If you want to make s**t up, you should try it with people who aren't intelligent enough to read. Here's a good place to start:
http://www.foxnews.com/opinion/2010/08/08/rev-shuler-anne-rice-christianity-quit-christ-pharisees-god-love-forgiveness//?storytab=story-comments
andyswanAug 12, 2010
@dauntless1
the problem solves itself when people who can't afford houses stop paying for them, prices drop, and other responsible people take out loans for amounts that they can actually pay back.
Why are we protecting the interests of the irresponsible that bought high and spent more than they could afford, while undercutting the interests of those that would like to buy that house at a cheaper price using funds they can actually pay?
photojustinAug 11, 2010
Wow - you completely ignore the benefits to homeowners who played by the rules: homes don't go abandoned, house prices don't spiral down the toilet, and (you seem to really miss this one) - not a single penny goes into the irresponsible homeowner's pocket.
andyswanAug 12, 2010
How does "not a single penny" go into irresponsible homeowner's pocket when you're talking about reducing the amount of money they owe on an asset? Where does this money go, and where does it come from?
p.s. you completely ignore the benefits to wannabe homeowners that are saving and keeping a good credit score. Instead of $250k propped up houses, they could be paying $175k in an honest market.
photojustinAug 12, 2010
Where does this money go?
The BANK eats it. Say someone owes $500k on a home, and it's now worth $300k. Ask yourself - given the option of walking away (which is perfectly legal and part of the mortgage agreement), why would you pay on a $500k loan for a $300k house? You wouldn't.
So the program encourages BANKS to meet the owner halfway or so, say, $400k. The bank stands to lose $200k, so a $100k loss isn't so bad. The encouragement comes in allowing the bank to write off more than the $100k loss. Remember, without this program, the bank would be writing off MORE of a loss, and paying even LESS in taxes, putting MORE of a burden on me and you.
The homeowner is still in a home worth less than what they are paying on. The bank has now taken a smaller loss than it could have ended up taking, and is thus paying more taxes on it's profit than it could have ended up paying (benefit: me and you). There are less foreclosures meaning your home value doesn't drop to an artificially low level, and less of your neighbors are looking around going "well, I owed $400k on my home, now it's worth $300k; rational economics says I should walk away".
There - you and I have benefitted by not having banks take as large a tax write-off, home values aren't spiraling downward causing new rounds of walk-aways, and the homeowner is still a bit underwater, but at a point where they won't have to walk away.
Honestly, like most of Obama's policies, if you actually look at what it does, it makes a whole lot of pragmatic sense. It's easy to obfuscate the actual benefits and inflate the costs (or play "victim") if you don't actually find out what it does.
enantiodromiaAug 12, 2010
right, because the scary "libruls" hate successful people, unless you are talking about hollywood, google, apple, microsoft, intel, cisco, juniper, facebook, and every other god damned tech company which not only survived during the s**tty economic climate, but GREW.
enough phony outrage and strawmen.
photojustinAug 12, 2010
Ha! "Libruls" hate successful people so much, they are willing to provide anyone and everyone with a basic education, basic healthcare, a basic roof over their head, and sustenance so that anyone, not just the children of rich people, can be one of those most-hated "successful people."
That's how much we hate successful people.
therightsideAug 11, 2010
Obama administration continues to reward failure.
kinggeoffAug 11, 2010
Which administration hasn't done this?
gizram84Aug 11, 2010
Reagan's.
kornbred79Aug 11, 2010
Really?
I seem to remember this thing call the Savings and Loan crisis.....
gizram84Aug 11, 2010
@Kornbred79
I was specificly referring to the Economic Recovery Tx Act of 1981 and the Tax Reform Act of 1986, the two greatest tax reform acts in the history of this Country.
No other president has ever done more to reduce the role of government and to reward the hard working people of this Country.
Thinking about Obama being president now is disgusting after just re-living old memories of how happy, hopeful and proud the entire country was under Ronald Reagan.
The general message in America today is one of fear, distrust and shame.
brad3378Aug 12, 2010
Are you also proud that Reagan tripled the national debt?
Closed AccountAug 12, 2010
gizram, Reagan's tax cutting was no better than government spending as he was able to do so at the expense of the national debt, Just like Bush. You know that huge f**king national debt we have? Reagan and Bush did that.
gizram84Aug 12, 2010
@stevenwalters
Cutting taxes does not create debt. Spending creates debt. I think you need to take a basic economics source. Even if your argument is that the tax cuts plus the spending created the debt, at least the beneficiaries of that debt were the American taxpayers, not the Chinese government.
By the way, I hate to rain on your parade, but Obama (in two years) has already surpassed Reagan in total debt acquired.
kinggeoffAug 12, 2010
Just thought I'd share this, thought it was a great read and a real eye opener
http://www.marke****ch.com/story/reagan-insider-gop-destroyed-us-economy-2010-08-10?pagenumber=1
Closed AccountAug 13, 2010
Cutting taxes creates debt when you obviously have no means to lower spending. Its JUST the same.
Closed AccountAug 11, 2010
Replace Obama administration with American political system and you're right. I love spitting on the troll bait some people leave.
asus3000Aug 11, 2010
Obama is Euthanizing Pavlov's Dog.
http://ireport.cnn.com/docs/DOC-212331
rignopolisAug 11, 2010
Reparations FTW!
generalalcazarAug 11, 2010
Hey - I don't even own a home - I am still saving for one - but the prices stay high because the government is propping them up, out of my reach. Where's my bailout? Maybe everyone should get a bailout.
I know... let's all bail each other out! Let's send checks to ourselves - problem solved, right? Oh, wait...
julikAug 11, 2010
Now imagine that in a few years you have enough saved to buy that modest home... and then you start your family.. and 5 years later life is going pretty well and you want to upgrade to a bigger home for your family. Well you can't anymore because your house lost 30% of its value and now you owe more than the house is worth. So before you can save up that down payment for a new house you have to save up money to pay off the extra you owe on your current house.
Also while you are trying to save all that you are still giving some money to the government so they can use it to help the guy who bought that big house 5 years ago that he could not afford.
artworkz918Aug 11, 2010
sounds like used cars to me
stevelroweAug 11, 2010
We still have something like $400 Billion in "stimulus/vote buying" money we're paying interest on. How give everyone in America a 6 month tax holiday. You get to keep your entire paycheck and put the "extra" stimulus where you want to.
artworkz918Aug 11, 2010
its better when the govt takes it and does it for you
darkmatter911Aug 11, 2010
I am so very tired of being punished in this country for being responsible. I actually purchased a house I can afford and continue to make payments and all I get is the opportunity to contribute more taxes to those people that purchased a house they could not afford in the first place. Or those that want to whine about lost property value. A house is an investment and like any investment you have the opportunity to either make or lose money. So for all of those people that are bitching about losing money and wanting a handout I guess that means when you made a profit on your last house you contributed a portion (above and beyond taxes & fees) of those profits to "society".
mysql101Aug 11, 2010
A house isn't an investment. A house is a place to live.
Prices for houses have traditionally increased with inflation, but it wasn't a piggybank.
Just buy something you can afford, and enjoy it for what it is.
Closed AccountAug 11, 2010
Why, when I can buy something that I can't afford and have the government bail me out?
kjcdudeAug 12, 2010
A house is one of the most consistent best investments around.
mysql101Aug 12, 2010
When you factor in taxes, maintenance, upkeep. Big ticket items like roof and AC, appliances... you are lucky to get back what you put in, never mind making any kind of profit.
photojustinAug 11, 2010
When did your taxes go up? You can't claim you're paying more in taxes when you're paying less in taxes...
and what about the value your home has retained thanks to a lower number of foreclosures?
And if it's such a great thing for those irresponsible homeowners, what's stopping you from not paying on your home and going into renegotiations with your bank? Your bank owns the home, you can walk away, that's part of the contract your bank signed.Comment is buried, click here to see the rest.
darkmatter911Aug 12, 2010
I would much rather take the hit on the value by foreclosing on all of these people than continue to bail them our and reward them. It is time for people to take responsibility for their actions and to quit looking to the gov't to bail them out.
Why don't I walk away? There is something called responsibility plus unlike many of these morons I actually have equity in my house. I do not pay just the minimum every month.
If you look at the laws you can not just walk away from your house with no consequences. Sure some people will only take the hit to their credit. Others will get a nasty surprise when they find a big ass settlement against them for walking away from their house. I am going to laugh my ass of when people start to receive $50k, $60k, and larger bills when they thought they were scott free.
photojustinAug 12, 2010
You clearly don't understand how most (not all, but most) states handle foreclosures. The home and only the home is the collateral. If you give back the home, you owe nothing. You are on the hook for taxes on the difference, but not to the bank; you owe that to the government as it is considered income.
In absolutely ZERO of these cases are people getting money from the government. That seems to be the popular misconception here - everyone is so knee jerk quick to cry about someone else getting money when the facts show the opposite. This program gives the bank some incentive to eat part of the loss, a loss the bank would have to eat in WHOLE should the homeowner walk away. To the extent that we all benefit by keeping people in their homes, and to the extent that the bank would be losing MORE money (which means a larger write-off and less taxes paid by that bank), it makes more pragmatic sense to do this program.
The more people start walking away, the less value other homes will have, meaning more people will be in a position to walk away, spiraling downward. You know that equity you have in your home? Kiss it goodbye if more people start walking away. You're going to start seeing homes in your area go for less than what you paid for yours, should we see an uptick in foreclosures, and pretty soon, you'll be asking yourself "why should I pay on a $300k mortgage for a house worth $200k?"
Walking away isn't a responsibility issue - that's how mortgages work. They are priced with this in mind, the bank isn't shocked or surprised to find out homeowners can do this. It is part of the agreement between you and your bank, and is inherent in the price of the loan. It's all in the market, baby.
The program maximizes taxes paid by the bank, minimizes abandoned and neglected homes, keeps your home value from falling further, and averts a serious downward spiral. It doesn't help the homeowner directly, it simply moves them from a really deep hole to a deep hole, and there is no reason on earth you can't do it too.
theworldisflatAug 11, 2010
I've enjoyed the new tactics many banks are trying on strategic defaults - guilt. They are pushing people not to leave a property to which they are sinking in by spinning it as "dishonorable" or making vague (they have to be very very careful what they actually say) on legal action. Many are intimidated by this and continue feeding these organizations money, not fully understanding their rights or the loan documents.
There is absolutely NOTHING wrong with those who played by the rules and otherwise got f**ked in this entire downfall. We're not talking about the lowlifes that actually helped break the system, rather the regular folks that ended up getting screwed. You think feel pitty for the lenders? Hell no - they reaped the benefits of making money hand over fist for years by tossing out - what they knew were - bad loans. Now when it comes time to pony up and deal with the fact many simply wish to walk away, they're making out themselves out to be the victim. In the end, the lenders made the simple agreement of lending out cash, secured by the property, with the profits of said transaction around 150% of value if the entire term runs. There is nothing else to it, very simple yet so many are confused and bullied every day over what they can and cannot do.
I had to pursue this path on behalf of my parents a few years ago. My folks went from making 300K/yr (engineers, father was Vietnam vet) to both of them being hospitalized for declining health over the course of about a year. Even after insurance, they still paid out nearly 500K in medical bills (unknowing that they didn't have to front all of that... again illustrating the power of intimidation of the average consumer) and of course the fallout from one of them being permanently disabled. Nest egg was gone, many assets were liquidated to try and sell off. After shelling out 2K a month in medications and being denied further insurance coverage (thanks BCBS...) bills simply spiraled. I did the math for them and showed that they may survive now, but due to the massive overhead and hit to infrastructure, in the long run they're going to bleed out. They tried to sell the home, but due to entire housing market going to s**t, there was nothing but lowball offers of 50% of value. They weren't even trying to make money on anything, hell they'd plan to lose another 10K in the process... but the entire hting was shaping up to end up costing them 50K out of pocket just to leave a home that continued to drop in value. I convinced them that they had done their due diligence in the past, and had always been on time - but no one was going to care about that, in the end all any company cares about is money.
They turned the home over. It was hard, but it was the logical step given the scenario. The banks went from first being bullies making very hollow threats, to then sending a very official sounding legal letter (which essentially was no different than a mass-mailed collections letter). Once they were getting nowhere with any of that, they then tried the sob story method, trying to make them feel bad for making the decision. That didn't last long, especially when I intervened on their behalf. In the end, the house was gone. I got them set up in a new place and they actually have been far happier in the last few years than they've been in a very long time. I guess change of scenery and reality checks have a way of doing that to ya,
6502samAug 11, 2010
Wait. Someone bought a home that they thought was fairly priced. They got a mortgage and are able to still afford it. They still have a home. Their credit is still good.
I don't see how they got f**ked?
You're under the impression that some people are getting a free ride. They're not. They'll be paying on the back end - BIG TIME.
Those people who are defaulting are f**king themselves. Those that are getting mortgage adjustments are getting f**ked too: their payments are extended to a god awful long time - their monthly payments are lower but over the term of the loan they're paying through the nose.
If you can afford your mortgage, keep paying - I'm telling you, in several years you're going to be real glad you did.
theworldisflatAug 11, 2010
No, read what I wrote. My folks had a normal house (in South Carolina... this isn't housing bubble prone). After going from 300k/yr income to around 40k + having their accountes wiped out + inccuring around 4K in medical expenses alone every month... it simply was not sustainable. The only way to "float" in the short term would be to leverage credit cards - which is the absolute worst thing to do (and CCard companies love that s**t too...).
I am under no impressions people get free rides - unless they actually get free rides by living off the govermennt rules catered for such people. They may ride for free, but everyone else (ie: people who play by the rules their whole life) suffer for it.
I'd recomend you read up a bit more on how credit works and how the business actually works before continuing to make statements. I own 5 properties myself, deal with people in the industry all the time. It is a smoke & mirrors institution built on the concept of you = credit score and all the scary tactics that come with it.
6502samAug 11, 2010
Do you have reading suggestions? Most of my reading has been Yahoo! Finance, Clark Howard, WSJ, mtgprofessor.com.
Everything that I have read and seen shows that defaulting on one's mortgage leaves a big black mark on their credit history; which doesn't roll off the credit report for 7 years: judgments last for 10 years.
A potential lender will pull your credit report(s), see the default, and it will be up to them if they'll still lend you money and at what rate.
I've seen people get denied credit for a couple of late credit card or car payments.Comment is buried, click here to see the rest.
theworldisflatAug 11, 2010
@6502Sam
Defaulting on any loan will negitivly impact credit, the degree of which depends on several factors. Credit, at it's core, is only important if you actually need to use it. Simply defaulting on a home does not automatically discount anyone from getting another home loan in of itself - starting off with a great score and taking a 100pt hit still puts you in the mid-high range. There may be more paperwork involved for a loan, with higher interest of course, but it's not like you're shut out forever.
judgements show up and are viewed negitivly, more so than the actual default in many cases LOL. However, remember that simply getting sued doesn't mean the other side wins. They must present a case and somehow show where there are monies owed. Unless we're talking HUGE amounts of cash, banks know that more often than not, they'll never see a dime by taking someone to court vs. the cash spent. If they lose the fight, then they have to eat the costs of fees + your laywer fees + damages awarded if any. If they win, they get a judgement...that a court has no stay in enforcement. They then have to leverage collection agencies to try to recoupe money - of which they have very limited tactics also.
It is assumed anyone making this plunge has a contengency plan. If you don't need loans in the near future, then the need for credit is null. Continuing to pay all other debts on time (Ccards, cars, etc) will continue to bolster your credit score over time. Despite the anoying credit commerials - employeers do not leverage credit scores much. They cannot deny you a poition based on credit score (unless it's federal/top secret project, which is a bit more complicated).
Anyone considering this course of action should have *ALL* of their ducks in a row prior to pulling the trigger. Everything must be done in writing, very civil, and planned out. Know you'll take a hit, but do the math on taking a hit on some scoreing system vs. cash in hand/future.
bcarl314Aug 11, 2010
"in the end all any company cares about is money."
This is the fundamental problem in America. Lack of compassion.
linuxpersonAug 11, 2010
Lack of compassion? Have you seen the level of spending on the welfare state?
bcarl314Aug 11, 2010
Do you personally know anyone on welfare or social security. Compassion is completely absent from the system.
I know people like to think we spend all this money on people who aren't in need, but I can assure you, more people deserving and in need of help go without than to people who don't need help get by with milking the system.
Don't buy into the GOP "we waste too much money on the poor" argument until you've actually worked with the poor.
brad3378Aug 12, 2010
Capitalism FTW!
theworldisflatAug 12, 2010
LOL
Sad thing is, people say stupid s**t just like that. Nevermind that they were shelling out more taxes than most, donated to charities and otherwise were model citizens. Got to love the current medical system (home of the 60$ asprin) + insurance carriers. Been insured for 40 years with the same company? Awesome..just don't get sick. Funny thing happens to - once you get into that catatory of high-risk, you are tagged uninsurable. He got quotes for around 1500/week for insurance once. My mother has since recouped quite a bit and is now a nuclear engineer again - covering both of them under company health insurance.
It was a wild ride for a while.
kylereAug 11, 2010
The government is like a union, it only helps stupid people, drunks and druggies and corporations. My house is worth 1/7th of its cost in 2002. I owe 4/7th. If I walk away I will get sued into the ground, 1099'd for 50plus grand or hounded for the rest of my life. If I could default on it tomorrow and walk away with them keeping it I would do so.
theworldisflatAug 11, 2010
Unless your loan docs have provisions outlining the collection of values in the event of a default, they can't do a damn thing to you. Most loan docs were not structured in this way, as many states prohibit such actions. Loans are secured agains the equity, nothing more. It is no different than a car loan - don't pay on the car, the bank takes it back.
Anyone can file suit for anything, at any time, to any one. The question is if it ever goes beyond that. Tell them to go f**k themselves if you have to. Your finances and "ability to pay" are irrelevant - your home nor documentation has ever been on the contengency that you have the ability to do anything, rather than you suply XXXX payment a month for XXX term.
blklightningAug 12, 2010
so you're saying if a bank repossesses your car, you're free and clear? that doesn't sound right.
yourfuzzygodAug 11, 2010
I am interested in hearing more about how unions help stupid people from someone who spent 7 times what they should have on a house.
kylereAug 11, 2010
You are clearly challenged by a lack of reading comprehension.
I never said I spent seven times as much, I said it is worth one-seventh. I bought a reasonable home that cost less than one year combined gross of the income in my family.
The murder rate tripled in the city, the rape rate went up over 11 times and the local PD laid off 74% of its workforce while 38% of the residential structures in the city now stand empty. A union loving convicted felon was the mayor for the 7 years in question.
So, I would be interesting in hearing why a dumb f**k like you thinks I spent too much. I spent 25% less than the value given the property by TWO DIFFERENT appraisal firms.
hewhopoopsAug 11, 2010
/applause
hewhopoopsAug 11, 2010
kylere, you're investment didn't pay off. You lost on it.
It happens.
Closed AccountAug 11, 2010
"The government is like a union, it only helps stupid people, drunks and druggies and corporations."
You sound like you have a very, very shoddy understanding of history so I stopped right there.
Simpletons are easily brainwashed and clearly that's the case here.
As long as the republican party has convinced you that you're right, you'll never change.
Ah, the power of ignorance and willful stupidity.
kylereAug 11, 2010
Ah, the power of ignorance and willful stupidity, I blame the republicans for the housing crisis in equal parts with moronic democrats who vote parties instead of people. I can tell you are a dumb-ass democrat as opposed to a dumb-ass republican, but both you and your repressed homosexual christian republicans can f**k off.
I grew up in Flint Mi, I know more about Unions and their failures than you will ever learn in that 3 credit course you paid 600 bucks for at your local community college.Comment is buried, click here to see the rest.
yourfuzzygodAug 11, 2010
@kylere: More than one person thinks you're an idiot. Get over it.
kylereAug 11, 2010
Umm you complete and utter waste of oxygen/nitrogen, you LEFT THE AL TURD NAME on the FUZZY LOGIC ACCOUNT.
Pathetic little bitch.
bubbasmoothAug 11, 2010
Wha?
brad3378Aug 12, 2010
Where do you live where a home can lose 6/7 of its value since 2002?
Is your home really worth 25% of what you still owe or are you trolling us?
skubiszmAug 12, 2010
See housing in Detroit. Some houses were for sale for $1.
kylereAug 12, 2010
Brad, I wish to my mortgage in one state and my rent in another I was trolling you.I would love for it to be a troll.
brad3378Aug 12, 2010
I'm from Metro Detroit - and things are bad, but they're not *that* bad.
I'm in the same situation as Kylere. I'm paying for a mortgage in Michigan while paying rent and working in another state.
protodonAug 11, 2010
The bailout should've involved responsible homeowners getting extra money to pay down their mortgages and let all the other irresponsible homeowners foreclose and rent, which is what they should've been doing to begin with. The home tax credit only made people say, hey we can afford $7500 more when looking for houses.
mysql101Aug 11, 2010
How about not giving anyone money?
The government shouldn't be messing with anything. Bank failing? Good. Let it fail. Insurance company failing? Good, let it fail.
You can't afford your $600,000 house? Get the f-- out of there. No reason why your mortgage rate should be decreased, or principle reduced.
protodonAug 11, 2010
No, I'd rather have money than not. The mortgage is the main reason why people work so long in life. There should be more of an emphasis on paying them down but (dumb) people always seem to be trading up for bigger ones.
Closed AccountAug 11, 2010
If all the banks fail then no one has to pay their mortgage! WIN!
hewhopoopsAug 11, 2010
"Reponsible" homeowners simply made a bad investment.
"Irresponsible" homeowners were, in many instances, victims of predatory lending practices.
betteroffedAug 11, 2010
To be fair, there probably shouldn't have been a bailout for *anyone*. From the smallest homeowner to the biggest bank, the government just should not have gotten involved. Entities need to fail in order for the system to truly correct itself.
Many of those people had no business being homeowners in the first place and the banks who attempted risky ventures (subprime mortgages, credit default swaps, etc) should have been left to collapse and liquidated. Otherwise, we're capitalizing the gains and socializing the losses.
kingmanicAug 11, 2010
The market will overshoot. More will fail than would be necessary and you have the age old ugly economic cycle of boom and crashes. The majority of the regulatory bodies and systems we have in place are there to prevent the big crashes which used to happen extremely regularly.
betteroffedAug 11, 2010
I can certainly see your point. But let's be honest here: The imminent crash that was on the doorsteps of the big banks just before the big bailout was in no way cyclical. It was a private entity knowingly and willfully pushing a new, complex, and risky venture. Hindsight is of course 20/20, but it was a calculated risk on their part---as with any financial instrument, they knew what they were getting themselves into.
I'm certainly not saying that we should be a completely free-market system with no regulatory agencies in place or government oversight. And I'm also not advocating that we move to a completely socialist, government-run mortgage system. What I am saying is that we need to either s**t or get of the pot: In recent years they've been allowed to enjoy the fruits of a free-market system but suffer losses on behalf of the taxpayer.
6502samAug 11, 2010
Agreed. BUT - the big banks: BOA, JP, Wells, etc... should be broken up so that they don't have the potential to take down the economy again.
That's why they got a bailout: the Fed was worried that their failure would wipe us out. And those could do that because they got too big.
kingmanicAug 11, 2010
The thing is the crash is cyclic the cause is not always the same. What always happens is the economy overshoots it's actual sustainable levels and then has to come back down and usually overshoots that.
What caused the great depression? The influx of investors buying on margin created a stock bubble that burst and the financial contraction in the money supply that resulted shut down the economy.
What cause this last recession? The influx of investors buying CDO's and insuring the risk with CDS's. This created a bubble in a number of area's as that drove the economy pas the point that was sustainable. Made possible by deregulation of the banks.
What caused the recession of the early 1980's? Banks were deregulated and were given the opportunity to lend like never before and the influx of easy money drove the economy past an actual sustainable point and it crashed backed down.
The general gist is that the economy grows past sustainability via some mechanism that fakes us out on how much activity is sustainable and we crash back down.
pippersAug 11, 2010
I don't think you realize what would have happened if we let the market 'correct itself'. Everyone seems to think they would have kept their jobs, only a few unfortunate people that weren't them would have been laid off, and everything would have been fine in a year or two. Everything would have gone under. Literally everything. Let that sink in and try and imagine it. It might be "neat" to live in the 1700s colonial era for a day or two, but for the rest of your life? No thank you.
asus3000Aug 11, 2010
Because of what? Because of the debt they created unconstitutionally. Because of the printing of money and usurpation of the federal overstepping government. Because of the liars and crooks who took all the gold from Fort Knox for themselves and their mistresses. Because of the apathy of your parents and mine.
I say let it all fall an do it again lawfully as the forefathers intended.Comment is buried, click here to see the rest.
reebee52Aug 11, 2010
You *can't* let the banks fail. It would be catastrophic.
fyngyrzAug 12, 2010
Nonsense. There's an actual need for several of the services banks currently provide; so replacements would spring right up. There's nothing magical about banks. There's a great deal that is corrupt, though, and it would be really nice to replace them with a more honest set of institutions.
For instance, making you pay interest all up front, so your equity is the last thing you get, instead of distributing the interest linearly over time; this is *so* loaded in the bank's favor that it is entirely possible to pay them more than your home is worth, then lose the home, and have so little equity in it at the time that you might as well have never bought it.
zarenAug 11, 2010
We moved into our house December of 1999. We've never missed a mortgage payment, picked up a good deal on a refinance a few years ago, never had any claims filed against insurance on the house... and the house is now worth $40,000 less than when we got it, leaving us still owing more money than the house is worth. Taxes, of course, are still being assessed at a much higher home value.
Meanwhile, we have neighbors that have walked away from their houses - six were foreclosed on our block alone last year. One neighbor has been out of work for over a year and a half, and haven't made a mortgage payment in six months.
Now, I'm not saying I want a handout, because we're in the mess we're in now because of those handouts. But some sort of credit for being a reliable, responsible consumer would be nice.
mysql101Aug 11, 2010
Your neighbors walking will result with a REO sale or short sale. That will lower the comp values for you. Your home assessed taxes should therefore decrease. In my county it's automatically assessed each year. If yours doesn't do it, see if you can petition for a reassessment.
Closed AccountAug 11, 2010
Unfortunately, I've never had my home taxes assessed at a lower value though my house has decreased in worth over the last five years... Go figure..
Closed AccountAug 11, 2010
"Taxes, of course, are still being assessed at a much higher home value. " QFT
rc212vAug 11, 2010
Your situation is unfortunate but you don't get an award for doing what you're supposed to do. You don't get an award for not going to jail or for paying your taxes or for not beating your wife. It is simply the way a responsible adult behaves.
Watching other people break the rules and get away with it doesn't mean that people who follow the rules should be incentivized to continue following the rules. If anything, it just means the law needs to be changed to catch and punish the unscrupulous.
zarenAug 11, 2010
Yeah, I know. But so many people got in way over their heads, knowing they couldn't make the payments, and now they're getting a "Oh, you poor thing! Let me help you!" Meanwhile, we did our due diligence, and shopped around for a long time to find a house we knew we could afford. We even went so far as to tell a realtor to go to hell when he repeatedly tried to oversell us on houses we knew we couldn't pay for long term.
I guess our reward for all of that was going to buy a car dealer and having them fall over themselves when they saw our credit report - "never saw a rating that high", they said :)
bcarl314Aug 11, 2010
I would like to point out that I firmly believe that NO ONE got in "over their heads". Banks simply made bad decisions.
It is not the responsibility of the person asking for a loan to make sure they can pay it back. It is the responsibility of the person lending the money to ensure the person asking for it has the capacity to pay it back.
Banks, not people, screwed this economy. The problem is banks, and not people, are the ones getting the real help.
dividebyoAug 11, 2010
Zaren, how much was the house you bought in 1999 worth in say, the 2003 to 2005 time range.
I could probably guess that it was considered worth far more than what you paid for it. I could also probably guess that you were more than a little happy about it. Were your taxes reassessed to the new, higher value (assuming that it actually was worth more)? If they weren't, then why the complaint now? Why the complaint about the home value, when it was probably "worth" far more a few years ago?
...Probably because its much easier to rail against the system when its not working FOR you.
Your last statement is the type that always bugs me too: "Now, I'm not saying I want a handout, because we're in the mess we're in now because of those handouts. But some sort of credit for being a reliable, responsible consumer would be nice."
In other words.. I'm not asking for a handout, but can I have a handout?
I understand you are frustrated that people who played a game with their money, and lost, are getting bailed out, but because you were fiscally responsible doesn't mean you should then also be getting anything handed out to you either.
But seriously... Speaking of the tax assessment, I think in most places, if you petition the tax assessors office, they are required to come out and do a reassessment, which, in this case, would probably lead to lower taxes for you.
Closed AccountAug 11, 2010
@bcarl314. WTF are you smoking... It absolutely is the responsibility of the buyer to know if they can afford what they are buying. If you run with your logic, then it's not the consumers fault for being in credit card debt, personal debt, gambling debt etc..
YOU ARE PART OF THE PROBLEM!
greedonvrfiredAug 11, 2010
Good job responsible consumer!
There you go you are all set. That is what you get. It is what I get too for living incredibly lean to pay for a home that may never be worth what I paid for it. We invested in homes. Our homes decreased in value. That is the chance we take when we invest. Luckily, in this case, we can live inside our bad investment. Which makes it not so bad after all.
6502samAug 11, 2010
Your neighbors will be screwed and are being screwed.
Their credit is toast and will be that way for several years. Any mortgage modifications they get only ADD payments to the end of the loan while reducing the monthly payments. So, they'll be paying MUCH more interest than you ever will. They are NOT getting any free rides.
You're not getting screwed. You're not missing out on anything.
pe5t1lenceAug 12, 2010
You should really get in touch with your tax assessor and give him/her a list of houses that you feel are comparable to yours, so they have justification to lower the tax. IF that doesn't work, there is always bribes or voting in a new assessor.
skubiszmAug 12, 2010
Something smells fishy here. You bought your house 11 years ago, yet you are $40K underwater? I think you are leaving a few things out of the story Mr "responsible consumer". I'm guessing you had a very low down payment, maybe a 3% FHA loan, possibly even 0% down loan. I also highly doubt you had a 30 year fixed interest loan. I'm guessing a 5 year ARM with a 1% teaser rate. Also you mention a "refi"? You didn't happen to pull money out of your house when you refi'd, like an ATM machine?
You could have never missed a payment, but if you did any of the things I mentioned above, you hardly qualify as a "responsible consumer" in my book.
shadowman99Aug 11, 2010
I "play by the rules" and pay my bills and many times have just enough to get my family to the next paycheck by the skin of our teeth. I live responsibly and my kids are my first priority. They have dinner on the table, clean clothes and a story before bed every night. Their needs come first, and our house reflects this.
My wife and I purchased our home nearly eight years ago when she became pregnant. It's our first home. It's a modest older house that is never going to appreciate in value, but I was able to make the payments with my own salary for several years while she stayed home with our kids until they started preschool. They never had daycare or spent the day being raised by strangers.
Back when I was pre-approved for a home loan and they told me I could have 250,000 I laughed and asked what the mortgage payment would be each month. I forget the exact amount but I recall it was beyond my means. I went with a substantially smaller loan that I could afford and would not require a co-signer as not to put my parents at risk.
If I could have seen in a crystal ball that there was a potential "August Surprise" to bail out upside down homeowners you're damn straight I would have been tempted to buy a bigger house so my family could jump on this train. I wish my kids didn't have to share a bedroom, that the upstairs was larger than a dormer, that we had more than one bathroom, that we lived near a better school.
I didn't get the 8000k housing credit back in my taxes, I was just before that window. I probably wouldn't get whatever this bailout will be. I'm sick and f'ing tired of the squeaky wheel getting greased all the time. I continually feel like I'm screwed by a system that rewards poor judgment.
I'm inclined to "throw the bums out" when I step in the voting booth next time. I see no job creation while fearing for my own, no incentives to return manufacturing to America, no efforts to get the national debt heading down, a deflated dollar and a growing debt burden on my children. We continue to fight expensive wars with no goal. I laughed at Ron Paul and now wish I had voted for him.
My lifestyle is less than my parents enjoyed and I'm sad to think of what my kids can expect. It's all going the wrong way.
kingmanicAug 11, 2010
"I'm inclined to "throw the bums out" when I step in the voting booth next time. I see no job creation while fearing for my own, no incentives to return manufacturing to America, no efforts to get the national debt heading down, a deflated dollar and a growing debt burden on my children. We continue to fight expensive wars with no goal. I laughed at Ron Paul and now wish I had voted for him."
-shadowman99
I think the problem is either set of bums will never present to you a good situation. One set will violate your morales but possibly improve your pocket book because it does seem you exists in a tax bracket that would be a net benefactor of social programs. The other set of bums may give lip service to your morality but they are don't care an iota about you and will support large well funded entities over you in every conflict you may have with them.
You my friend are screwed in the place you are at.
As for manufacturing, America has been out competed. Any 'inceptive' would be artificial market manipulation to prop it up. If you resent the government propping up people who did poorly why should you support propping up industries that did poorly? National debt? Not exactly a single party problem. To fight this taxes must go up and government must shrink. Both must happen because too much of either will hamper American society. Deflated dollar? Well if you want manufacturing to come back this is what it needs a lower value dollar. I'd agree with you on wars. Ron paul didn't have a chance in hell and he wasn't the savior some painted him to be. He had a few interesting positions but he wouldn't have been able to muster enough support for them to get anywhere and half his ideas would have predictable and severe consequences (a return to gold backed currency)
"My lifestyle is less than my parents enjoyed and I'm sad to think of what my kids can expect. It's all going the wrong way."
-Shadowman99
That probably not true in general. At the moment many things are within reach that weren't to your parents. You will eat better, be able to visit more places at less expense and have access to more knowledge, entertainment, and medical services than your parents will and due to easier credit in the last 15 you could theoretically get a better house. But since the 70's or so wages haven't moved very much so if your parents were adults before the 70's they might have been more hopeful and had decent pay raises for a while.
That nostalgic notion that it was so much better before is just time going by. Every generation has felt it and moaned about it and it's only been true for a very few. It may be true in your specific case that your parents had it better than you but it's not a tautology. My life is much better than my parents. I work 9-5/5 days a week for x2 the money of either of my 7-6/7 day a week parents. I have a modestly priced house that well within my own means with my wife working and it's 800sqft bigger than my parents first house and about the same as their second house.
---nit pick---
"I didn't get the 8000k housing credit back in my taxes, I was just before that window. I probably wouldn't get whatever this bailout will be. I'm sick and f'ing tired of the squeaky wheel getting greased all the time. I continually feel like I'm screwed by a system that rewards poor judgment."
-Shadowman99
8 million housing tax credit? wow.Comment is buried, click here to see the rest.
shadowman99Aug 11, 2010
8k. A goof. I think most know I'm referring to the first time buyer tax credit of eight thousand dollars. But hey, why not $8m? We're already spending like drunken sailors?
>> "I think the problem is either set of bums will never present to you a good situation... You my friend are screwed in the place you are at."
So say we all. Between my wife and I we have a household income of ~$64000 - lower middle class. We bust ass and work hard. My wife is a teacher's aid. It's criminal what they pay people in education. I'd tell her to get something else but when she tells me about the kids she helps each day I remember there's more to life than money.
While I like things like ipods and flatscreens and better medicine, we also have more street crime and drugs in our society.
I'm aware that my parents had their own wealth destroying period in the 70's. Home loans frequently had APRs between 18 - 25%. There was a recession and oil crisis and a misery index. People can bash on Carter all they want, but he never manipulated the markets and the economy soon corrected. And for all of people's political differences with Reagan, business did flourish during his administration.
W. and Obama have been a one-two punch of bad policy, especially fiscal. If I could be president tomorrow I'd have no idea how to fix this mess.
kingmanicAug 11, 2010
~$64k does put you at the middle of the income distribution of American households. then again standard of living will vary greatly with where you are. ~$64k in LA is not doing so well while ~$64k in nowhereville, north Dakota may be alright. I agree they generally underpay teachers in the United states. I'm glad someone is doing that job because they couldn't pay me enough to herd cats like your wife does daily.
"While I like things like ipods and flatscreens and better medicine, we also have more street crime and drugs in our society. "
-shadowman99
Crime statistics don't support that. Every category of crime have decline as a long term trend since the late 80's. It was worse for your parents in both property crimes and violent crimes. The perception of more crime comes from the media which has shifted to broader crime reporting. Your parents may have heard about news in their town and some more sensational news in far away places while you are inundated with news about crime form all over your state and every crime that is somewhat interesting from all the rest of the world. So your perception of how often crime occurs has changed but the actual rate of crime has diminished. It may also be that your city has grown so the absolute number of crimes has increased but generally not in proportion to the growth in population. 'Soft' Drug use is probably at all time highs (ha ha) but hard drug use was a problem in the 60's as well.
"W. and Obama have been a one-two punch of bad fiscal policy. If I could be president tomorrow I'd have no idea how to fix this mess."
-shadowman99
I think Obama and the leaders of the economy is in the same boat as you. They don't know what will fix it all and they have to play along with their financial backers. Obama from the outside has not made egregious errors though while his predecessor was a series of face palms. His biggest sin would be staying the course in too many policy matters despite having the numbers to make change. This is probably due to the fact that making democrats agree on anything is like 'herding cats' and their only unifying trait is not being republicans. They also have been bought by some of the same groups as the republicans so they won't be doing anything radically different if they wish to continue getting that money.
Full disclosure: I live in Canada. I have no direct interest in who runs your country but we are frequently impacted by the decisions they make. I'm not sure if everything would be better but it does sound like the majority of your gripes about your government would not exist here. Teachers are relatively better paid. Both of our ruling parties tend to make financial sense once in a while. Our currency is soaring. Our economy is humming a long despite our biggest trading partners woes and while we have a robust safety net you are always aware what your taxes pay from and able to benefit from your taxes. Move up. We could always use more hardworking people.
shadowman99Aug 11, 2010
Thanks for the invite. If I can learn to say "aboot" and do the flippy head thing I might take you up on it. Vancouver certainly seems to be growing.
cubicledroneAug 11, 2010
"Any 'incentive' would be artificial market manipulation to prop it up."
That statement assumes there is no existing artificial market manipulation propping up the current system, like say, the ability of corporations to avoid taxes on their profits by keeping those profits out of the United States.
"That nostalgic notion that it was so much better before is just time going by. Every generation has felt it and moaned about it and it's only been true for a very few. It may be true in your specific case that your parents had it better than you but it's not a tautology."
That's just flat wrong. The statistics are clear. This generation (generation X) is the first generation in U.S. history that WILL have a lower standard of living than the previous generation. It is a mathematical fact.
The reason is clear: Wages have been stagnant (inflation-adjusted dollars or purchasing power, take your pick) for 38 years. This is also a fact. Generation X, and all generations that follow are and will continue to earn paychecks equal in buying power to what they would have earned in 1972.
Productivity, on the other hand, has increased faster in the last 38 years than at any other time in the history of mankind. All of the proceeds were pocketed by middle and upper management and fortunate shareholders. This is also a fact, reflected by the wealth disparity in the U.S. in 2010.
This nation has wasted the educations and cultural legacy of an entire generation of Americans, at a cost of trillions of dollars. At the rate we're going it will take 100 years to recover, even if we disconnect the cranial-rectal interface.
linuxpersonAug 11, 2010
I was recently pre-approved for a home loan that would have been well above my means. Based on some calculations, I figured that I would have to stop eating, driving, and paying utility bills in order to afford the monthly payments.
theghoulAug 11, 2010
Playing by the rules are for end users not corporations.
See "Donald Trump Bankruptcies" for a fine example..
There is no honor in finance.
Do whats best for you. They will. Guaranteed.
6502samAug 11, 2010
The Donald's rules don't apply to people like us.
You know why he got a sweet deal? Because if HE defaulted, the bank could be wiped out or would have to book a HUGE loss.
We default, the bank just has some extra paperwork to fill out.
fyngyrzAug 12, 2010
Borrow $1000, the bank owns you.
Borrow $1000000, you own the bank.
rsm33Aug 11, 2010
Hey everyone:
3 bedroom houses built in the 1960's should not cost $500,000. They shouldn't even cost half that.
If you paid this for one of them and don't want to pay for it anymore, stop paying for it.
There are tens of thousands of people in this country who are being foreclosed on, losing their houses and ruining their credit for many years to come. If you want to join them, nobody is stopping you. So either do it or just deal with the fact that you are horrible at investing in real estate. Please stop whining.
The government is not bailing anyone out but rich corporations, we all realize this now. Don't like it? Vote the f**king people out of office that did it to you... whether they are republican or democrat. That is the only way anything will change.
plopfishAug 11, 2010
Location, Location, Location
jabbrwockeyAug 11, 2010
That 1960's house on the lakefront, near downtown, should not cost $500,000.
Closed AccountAug 11, 2010
and what do we do five years from now when all those home owners who walked away and have s**tty credit cannot buy, rent, own, get a job etc. because of their now s**tty credit? They've just added themselves to the poor who will most likely continue to seek and vote for government officials that will bail them out. The fed will print more money to cover the costs and our nation will continue it's slide into history as a failed nation...
meatball402Aug 11, 2010
or, you know, we can stop spending a trillion dollars a year on war and defense, but that's just stupid talk.
rsm33Aug 11, 2010
Well then I guess we better amend bankruptcy laws for individuals to mimic the extremely favorable conditions we allow corporations to enjoy.
But we both know that our government will never do this as that would give people a fighting chance against the corporate financial machine we are all caught up in.
gmstoneAug 11, 2010
And what happens when a larger percent of the population is renting rather than owning? Thanks to this economic crash, a lot more people will be renters, and landlords will be able to raise their rents as demand for rentals increase.
I've always considered my monthly mortgage payments to be a way to pre-pay for shelter when I retire. If I lose my home to foreclosure, my living costs will be higher when I'm old.
Walking from an underwater home may be the same as guaranteeing having to make a mortgage or rent payment during retirement.
Closed AccountAug 11, 2010
A house may not be worth that (but then again, it may very well) but property is easily worth $500 grand depending on where it's located and how much you get.
skews13Aug 11, 2010
The main reason the housing prices got out of hand in the first place is the appraisals by the localities in which they are located for tax purposes, and real estate brokers all to willing to get financing for buyers at those prices for the high commissions earned on those sales. Couple that with rules allowing mortgage companies to make those loans, and then sell the debt, and walk away free, and you have yourself a full blown housing crisis boys, and girls. A house that was appraised at $300k just two years ago, that is now selling for $90K, should tell you what the house is really worth, and it probably isn't what it's appraisal value is.
6502samAug 11, 2010
No.
House prices got out of hand because of very interest rates and the tax breaks for homeowners. That created the get-rich-quick mentality.
cubicledroneAug 11, 2010
No.
House prices got out of hand because lenders were writing loans with 130% equity and blank spaces where the borrower's income was supposed to be included. They were called NINJA loans: No Income, No Job, No Assets. They were written by the thousands, bundled together and sold.
It had nothing to do with the borrowers.
alienmushroomAug 11, 2010
FYI, bail outs are not free money. They are loans.
rpatrick819Aug 11, 2010
Except the "payback" on those loans is usually mostly junk.
Plus, 8k tax credit is not a loan. It's money they take from me and give to someone else...to help the banks.
enantiodromiaAug 12, 2010
seriously? billions and billion have already been paid back, with interest.
skubiszmAug 12, 2010
Fannie and Freddie bailout may total in the trillions, and will never be paid back.
http://www.thenewamerican.com/index.php/economy/markets-mainmenu-45/3779-fanniefreddie-bailout-may-reach-1-trillion
Banks are also being bailed out by borrowing from the Fed at 0% interest. If you can make money hand over fist with a unlimited 0% credit line, you shouldn't be in business in the first place.
linuxpersonAug 11, 2010
And what happens when an entity that receives bailout money goes out of business before being able to repay the loan? Oh that's right, the tax payers get to foot the bill.
You are also missing the point entirely. If inefficient and/or corrupt businesses are being bailed out, other more efficient and ethical businesses will have a really hard time entering the market.
juliaxaAug 11, 2010
Nearly everyone's house has gone down in value, even if you have no mortgage.
If you bought a smaller house in a less nice neighborhood than you 'qualified for' (realtorspeak), worked really hard and paid off your mortage in record time ... you're now officially a schmuck.
You could have had twice the house in a tonier neighborhood and when the value decreased to less than your mortgage balance .... just wait for your bailout.
bracomadarAug 11, 2010
Do you have a lobbyist in Washington? No, but I did vote for...
NO SOUP FOR YOU!
mflynn00Aug 12, 2010
someone should tell warren buffet that instead of giving his money away, he should just lobby for actually good government with it
ilovesalsaAug 11, 2010
12a61c7f7958000
tman84Aug 11, 2010
Most people who work hard and do not depend on handouts are politically to the right, so why would the Dems bail them out?
hatepasteAug 11, 2010
I'm not the left, but this is just dumb.
asus3000Aug 11, 2010
Which is why they empowered the lowest class to vote for them...
110pctAug 11, 2010
On and on and on with the generalizations...
jbcseeAug 11, 2010
Where do you live, I'm sitting in an office of people who work hard and make great salaries, of the ten people sitting closest to me only one is a republican, the rest are very strong democrats.
Oh you must live in some flyover area...got it.
photojustinAug 12, 2010
Oh, yes, only people just like you are real Americans, right?
theyarAug 11, 2010
I try not to focus on it, but it's true. I bought a house I can afford and make all my payments. When it became obvious to me that the mortgage I got was a risky deal, I spent a lot of my own money to get out of it and into a traditional one. But after multiple salary cuts, I've ended up in a position where I've had to chew through all my savings and have racked up credit card debt just so I can keep paying the mortgage. I've tried renegotiating, I've tried the Home Affordability and FHA programs, but I get denied over and over for ridiculous reasons. Meanwhile, I hear every day about people who just quit paying their mortgage and haven't heard from the bank, or who are negotiating rates down to practically zero. If I had just stayed in that terrible mortgage, or if I had just quit making payments, I'd probably be fine. Talk about encouraging risky behavior.
Closed AccountAug 11, 2010
Contact a real-estate attorney as soon as you can and learn what your options are. Don't be afraid to default on your loan and live in your house until the bank forcibly kicks you out, saving up for rent deposit and paying down other debt while doing so. Good luck.
theyarAug 11, 2010
I don't want a foreclosure on my credit for the next ten years. Man, I remember when buying a house was the biggest no-brainer investment in the history of everything. Now it's like, "bail, turn in your keys, stop paying, foreclose, rent!!!
Closed AccountAug 11, 2010
TheYar, it won't be there for 10 years, if you lose your house, depending on the circumstances, you can be eligible for another home loan through the FHA in as little as three and a half years.
Closed AccountAug 11, 2010
haha, welcome to the American Dream 2.0. That's where people that game the system prosper and those that play by the rules are penalized.
jd72277Aug 11, 2010
Why would I need relief? I can afford my house. This doesn't make any sense.
6502samAug 11, 2010
That's exactly right.
And all that relief that others are getting comes at a steep price.
Closed AccountAug 11, 2010
That's awesome! Now pay more taxes so I can afford mine, thanks!
ozekiiAug 11, 2010
The sad thing is the entire mess could have been avoided. What law prevents a bank from renegotiating a mortgage? A socially responsible bank would work with home owners. An example would be if a home owner couldn't afford the arm interest rate going up the annual couple of percent. So a bank has 2 options.
1. raise the interest they signed the contract so screw them
2. realize that some of there decisions were flawed and hold the mortgage so that the rate and the payment stays the same.
We all know that option 1 is what the banks did. The only thing they didn't count on is that there would be so many. In the old paradigm it worked in the banks favor to get foreclosed property. They would get what they were owed plus what ever had been paid previously. They could have stopped this crisis before it even started.
Now don't get me wrong. Socially responsible bank doesn't mean operate at a loss. Most if not all mortgages payments covered at least the minimal break even on the loan so while they would show a short term loss of PROJECTED income, there long term would increase.
mysql101Aug 11, 2010
I can't agree with you. Anyone with an ARM is making out like a bandit right now. Rates are crazy low. The issue are the fake loans (interest only) and people losing jobs.
ozekiiAug 11, 2010
So lets assume that you have an ARM at 5% that can adjust up to 2% a year. So in year 1 you are paying $536/month for a $100,000 mortgage and it is affordable. Year 2 comes along and it increases to 7%, your new payment is $665/month. Now that is a pretty significant increase if you are living paycheck to paycheck. Now realize that when the mortgage rate was 5% the Bank is making 3.5% at by loaning government money, when it goes to 7% they are making 5.5%. Of course this was all before banks were getting the money for 0%.
Do I feel sorry for people that got loans they couldn't afford...no. Do I think Banks could have stopped this by showing a little long term vision of the mess they were creating....yes.
mysql101Aug 11, 2010
Yes, in theory your rates could could go up with an ARM. But in reality, the rates are super low right now. I'm not arguing that it's not smart to convert to a fixed rate loan, all I'm saying is that ARMs aren't the reason for defaults. The rates are low, and the homes financed with an ARM are not suffering from it.
photojustinAug 12, 2010
That is exactly what they are trying to encourage - banks are being given a bit more a write-off for renegotiating principal down to a level the homeowner can afford. The house is already worth less than the amount owed.
And nothing stops anyone else from doing the same thing.
rc212vAug 11, 2010
The reason a lot of people are upside down on their mortgages now is because they falsely believed 'real estate always goes up'. Whose fault was that?
artworkz918Aug 11, 2010
it does
headinawheelAug 11, 2010
Then explain current events.
artworkz918Aug 12, 2010
current events are "current". Real estate like the stock market is long term. They ain't making no more land. My home isn't worth as much as it was a year and a half ago but it's still worth $20k more than I paid for it
cubicledroneAug 11, 2010
"The reason a lot of people are upside down on their mortgages now is because they falsely believed 'real estate always goes up'. Whose fault was that?"
The lenders who used that as a justification for two-year resets that tripled the payments.
110pctAug 11, 2010
50+ years of charts...
eh123Aug 11, 2010
If you play by the rules, work hard, maybe save a little money, your only relief will come in the form of higher taxes.
asus3000Aug 11, 2010
Don't forget about inflation..
(All unconstitutional btw..)
stardust13Aug 11, 2010
Long ago it was called "The American Dream", hard working Americans worked hard, saved and eventually purchased a home of their own. Then that dream became a nightmare.
Banks pulled underhanded schemes to lure good Americans in so the banks could eventually reap a huge profit, they underwrote the money schemes at the cost of billions and finally the over inflated market the banks created burst.
The Banks then cried they were broke and going under while the banks that were actually responsible got huge mountains of cash from the Gov they secretly paid out millions i Bonuses to special employees who helped design the entire conjob
Economy collapsed jobs lost and now someone writes an article Turning ones with an income against ones who had to take a job making a fraction of what they once earned and all because Republican Leadership sold us out to make a profit and now the American Dream is the American Nightmare.
mysql101Aug 11, 2010
Long ago, it didn't take 30 years to pay off a house.
The ability to offload payment for 30 years is part of why the prices were able to climb so high.
asus3000Aug 11, 2010
LOL "all because Republican Leadership sold us out"
You still don't get it.. Both parties are wings of the same monster.
balthisarAug 11, 2010
There /is/ a HARP program for people who have negative equity, still have excellent credit, and want to reduce their interest rates. That is, it's a program for responsible people whose property values were negatively affected by all of the losers, depending on just how upside down you are. If you carry a second, it even appears that most major banks are willing to subordinate their position to let you refinance your first in today's terms.
Of course it’s the seconds that really hurt, as they typically have a higher interest rate, and no one's refinancing those in a negative equity situation.
clumsytimeAug 11, 2010
Yeah well you know what? f**k the people who have negative equity. It's not anyone else's fault that their property value went down. Anyone who was retarded enough to believe property values would keep going up 3-6 years ago is a f**king moron.
If you signed off on X payment for Y house, nothing else should matter unless you lose your income. Quit f**king whining cause your house value went down. No one expects a bailout because their stock portfolio goes down in value. So as long as you still have a job and can make your payments, you deserve not once cent from anyone, in fact you deserve nothing, not even sympathy, just a wag of the finger from everyone who has to hear you whine. If you LOSE your job or income then this STILL isn't about real estate, it's about you needing unemployment and welfare until you get back on your feet.Comment is buried, click here to see the rest.
Closed AccountAug 11, 2010
Duh. The bailouts and stimuli were aimed at two groups - government and the wealthy. It was the largest one-time redistribution of wealth in history, and it went to the wealthy. It was never intended to help anyone other than these groups. That is why everyone except those groups are hurting now.
That said, strategic defaults sound great, but the people who "played by the rules" on the mortgage probably put 20% down to get a conforming loan. 20% is a large amount of equity to walk away from.
basmasta7Aug 11, 2010
They could re-finance at like 4%. It's not what anyone would consider a bailout, but it is taking advantage of the situation that was caused by the s**t storm.
methdwman3Aug 11, 2010
I know lots of existing homeowners who have benefited from this downturn in the form of refinancing.
golfguy6Aug 11, 2010
Said owners better plan on living in said house for a long time...
methdwman3Aug 11, 2010
They are generally 30 year notes for a reason..
dushAug 11, 2010
All these homeowners are made that their property values dropped so much and it seems they paid way too much for it and they can't change their contract.
But if these homeowners' property values had skyrocketed up would they be mad that they had seemed to pay way too little for it? Would they let the seller come back and renegotiate the terms of the sale? I doubt it.
rollwitdiggAug 11, 2010
It all comes down to bad bets.
werfwerAug 11, 2010
great. so next we can use tax dollars to bailout vegas gamblers.
jd72277Aug 11, 2010
I understand that there are all kinds of circumstances out there, but I remember looking for a house in a price range I was prepared to spend. Now, I don't live in CA, NYC, or anywhere like that, so I won't assume I understand the situations of others.
waiting2awakeAug 11, 2010
The situation is the same everywhere, in every country, in every walk of life regardless of occupation or income level...As an old Scottish saying states "Spend 1 dollar less than you earn, and you will be rich. Spend 1 dollar more, and you will be bankrupt. "
income > expense. People can adjust either, or both.
dtfinchAug 11, 2010
Why can't responsible, deserving, hard working people collect unemployment, welfare, and food stamps too? /s
Closed AccountAug 11, 2010
Hell I pay into all of those and I don't qualify for any of them......
roofviewAug 11, 2010
BP made a huge mess by their creed and bad practices and the government jumps in and makes them set up a 20 B dollar fund to clean up the mess and help people who are affected by their actions. Wall street and the big banks make a huge mess by their creed and bad practices and the government jumps in and bails them out with our money. Something just does not seem right??
Closed AccountAug 11, 2010
Follow the money trail and you'll have your answer.
bobjohnsonmilwAug 11, 2010
More to the point, how about helping out college debt ridden people that can't even get jobs now?
Closed AccountAug 11, 2010
That's a whole other issue. Colleges are wayyyy overpriced and that bubble's gonna burst soon as many up and coming won't be able to afford it.. Look forward to the great college crash of 2020.... Fed will probably bail them out too...
Why does a first year math book cost $147.00?
bobjohnsonmilwAug 11, 2010
No s**t, right!!?!?!? It's absolutely lunacy that the same books are worth 80% less if you try to resell them back to the same bookstore in perfect condition too. (Of course you don't bother doing that after 1st semester, but still.)
I've been living in Europe for about a year now, and I can tell you that the cheap and effective education available here trumps ours in the States. And it shows in the individuals you meet too, they seem much more rounded and tend to know more about the world than most Americans.
I feel sorry for anyone trying to go to school in the States now, it's totally a defendable position that it's a waste of time and money.
But by all means, banks, continue to f**k us over in all areas of commerce. We just can't get enough.
randyzaiaAug 11, 2010
I have a better idea: how about we stop creating government programs to "help people out" every time they are faced with a problem of their own making?
theblackgeckoAug 12, 2010
College would be a lot cheaper if the government didn't subsidize the hell out of it.
To wit, most government subsidy ends up being repaid by the student, in the form of loans (aka, the future). However, that gives the student more money at the time of college. Where colleges once had a bunch of classrooms, professors to teach some classes, and some students to learn, they are now filled will all manner of amenities (gymnasiums, etc.) and administrative staff. If students bore the costs more directly, they'd heave off the fluff, and demand their tuition go to that which matters, education.
bobjohnsonmilwAug 12, 2010
I'm not sure I agree that the government subsidizes college education. They might provide backed loans, but as far as subsidizing goes, I think I have to disagree.
As someone paying off a s**t load of college debt I really don't think we can afford to bear the burden of much more. This buy now pay later s**t needs to end.
I've been living in Europe twice now, a year a Germany and nearly a year here in Finland at the moment, and the government actually does subsidize education. I have to say that it's obvious in the overall level of intelligence that you encounter, and that's because everyone at least gets vocational training at a minimum. It's clearly working too, as from what I can tell pretty much everyone I encounter seems to be on average smarter than most college grads in the States.
Education should be considered a basic human right, and while I don't think it's free or cheap, it sure makes for a better society overall. There's no justifiable reason for the US to not 100% subsidize higher education, or at least adjust our existing public system to make useful workers right out of high school.
Here in Finland they in a way start vocational training at 15 if they so desire. Imagine if you had that in the US. Finland pays also a subsidy for people to live while in school if you apply for it, so that one can focus on studies, instead of having to work at some s**tty job just to make it through school and not have your learning suffer.
Now, before you go and say, but the taxes, the taxes!!! Working here as a software developer I pay around 24% of my salary. I'm American and after 2 years of working here I qualify for that same education benefit. And I get full healthcare while I'm here. In the US I was paying nearly 30% tax, with no healthcare (I had to pay that out of my salary post tax), and no access to free education.
Finlands education has been rated as #2 in the world in terms of effectiveness, and I can see why. They actually understand how to make it work. Clearly yet another reason why Finland, and Scandinavia is amongst the highest quality of life in the world.
akatsukiAug 11, 2010
Where's the bailout for people who didn't buy an overpriced home to begin with?
fyngyrzAug 12, 2010
If there's no water in your boat, there's no need to bail, is there?
I own my home. No mortgage, no debt. And no bailout. Nor is there any reason to consider one for me, I'm fine, because I made much better decisions than people who got bank loans.
I really fail to see the logic of people who aren't in need, crying out because people who are in need, are getting some kind of help (and let's face it, in this case, it is mostly help for the banks, not the homeowners... this stuff is NOT a good deal for a borrower.)
pivenAug 11, 2010
Where is my bailout ?
Instead of rewarding the mortgage cheats, the government should bail out the honest and hardworking taxpayers .
waiting2awakeAug 11, 2010
Governments have no money, so in order to bailout the taxpayers, they would first have to take the money from the taxpayers...plus a bit for themselves.
psiphreAug 11, 2010
they could just not tax the taxpayers as much to begin with, that would be nice.
Closed AccountAug 11, 2010
But...but....but that's still socialism. RIGHT?
porgieAug 11, 2010
There, you see how the government causes us to be divided amongst ourselves now?
fyngyrzAug 12, 2010
"Instead of rewarding the mortgage cheats, the government should bail out the honest and hardworking taxpayers ."
Yes, and instead of giving food stamps to the hungry and homeless, they should give them to you, because you work hard and earn enough, is that right?
Do you even understand what a social safety net *is*?
daggorathAug 11, 2010
What's great is that the FBI proved that 80%, THAT's 80 PERCENT of these bad mortgages were because of fraud commited by banks and mortgage companies. Yet amazingly they've spun it so the victims of this bulls**t are being blamed. Keep blaming your neighbor because they were completely lied to when getting their mortgage, the corrupt banks and mortgage brokers love that ignorant mob mentality.
Closed AccountAug 11, 2010
How can you have fraud? I really don't believe that 80% of bad mortgages have terms different from what is in the written contract (that would be fraud). If the buyer doesn't read the contract or can't understand it, that does not constitute fraud.
wrxpertAug 11, 2010
Lenders would fraud the system by 'exaggerating' incomes and falsifying other facts. It had become status quo. Then they never even let the client know that things were not exactly kosher.
Closed AccountAug 11, 2010
and that is also not the banks fault. There may be plenty of blame to go around but nobody twisted anyone's arm to walk into a lenders office and buy a home.... The buyer is mostly at fault for buying something they couldn't afford...
spacemanspiff22Aug 11, 2010
I fail to see how that is fraudulent for a to lender qualify you for more than you can comfortably afford. People have to look out for themselves, this "waaaaaa I thought the banks were looking out for my best interest, wtf happened" is ridiculous.
droweAug 11, 2010
Regardless of tricks pulled by the lender to get the loan approved, you still see the monthly payment and all terms of payment in closing. If you choose to sign without reading, that is your problem.
ieatskunkAug 11, 2010
actually it is only 4.3% of bad mortgages were because of fraud committed by banks and mortgage companies. Site sources? Naw, we aren't doing that here.
golfguy6Aug 11, 2010
Only problem with your logic is that the victims weren't victims and were just plain stupid.
farkdogAug 11, 2010
Who is at fault when someone makes a loan and requires no proof of assets nor any proof of employment, and then it turns out that the person who got the loan can't afford the loan?
golfguy6Aug 11, 2010
The person that can't complete the simple math exercise used to determine it wouldn't work. In this case it's the borrower. The lenders played a big part in all of this, but at some point people need to put on their big boy/girl pants and take responsibility for themselves.
spacemanspiff22Aug 11, 2010
You seriously don't place fault on the person who signed the contract? You have to take charge of your own finances. Plenty of people claiming they can't afford their mortgages still have iphones and other unnecessary crap.
ieatskunkAug 11, 2010
The lenders were foolish with their lending, yes, and it was their prerogative to do so. But unless they falsified written information to the borrower there is no fraud being committed against the borrower. The borrower was foolish to take a loan for more than they could afford. If they couldn't see this then, honestly, they had no business even trying to buy a house.
mrteqAug 11, 2010
They bailed the people out for you, because if they didn't you'd be royally f**ked.
waiting2awakeAug 11, 2010
They are royally f**ked, it is just now they are more in debt, and more royally f**ked.
asus3000Aug 11, 2010
LMAO!
110pctAug 11, 2010
Because letting the chips fall is good sound economic policy? Paint that picture for us starting about mar 2008...even your guys wouldn't have the political will to do that, and don't lie to yourself thinking that they would...retard