Paulson Plan: Lazs style socialism at its worst

[Sixpence]

IF you bought a home, had no reserve capital, and further, could barely make the payments when you bought it, then you bought more home than you could afford. It's that simple. The problem is, they don't teach economics anymore, not in school, and not at home. People are taught from childhood that borrowing is good, and smart,  therefore borrowing more is better and smarter, and borrowing more than you can afford is great, and brilliant.

The people losing their homes, for the most part, have ARM payments, or even regular mortgage payments, that exceed HALF what they make in a month! And mortgage brokers were not just encouraged, but damned near required, to offer them that mortgage.

ANYTHING causes people like that to lose their home to foreclosure. What would be a minor problem to a family with a house payment of 20%-25% of their monthly income, is an unsurvivable disaster to a family with a house payment of 50%-70% of their monthly income. Even people with a house payment of 30%-40% of their monthly income are flirting with disaster. They're already barely keeping an older vehicle running, they are barely keeping their utilities paid, and if they got their hours at work cut, something would have to give. If their car was wrecked, and it was their fault, they're screwed, because they probably couldn't get coverage on their older car, and even if they could, they couldn't afford it. Even if it only had a major mechanical failure, they'd be screwed. They'd have to try to borrow the money to repair or replace it, and they have no down payment for the loan, nothing to secure it, and even if they did, they can't make the payments.

By giving these loans to anyone, they drove up the value of homes. It got to the point where alot of people who were waiting it out started getting scared they would be priced out of ever buying a home, so they jumped in too.

The loan is bad, letting them put no money down was far worse. If you don't put 30k down on your home, what is the incentive to stick with the loan? If you put nothing down you lose nothing walking away from the loan. What made it worse was some even borrowed more when they got equity on the home, put the money in their pocket, then walked away.

Did some scam? Yeah sure, but most were doing what they had to do to put their family in a home. It fed on itself, if the loans were not written, the prices would not have gone through the roof, and people would not have had to borrow so much to buy a home.

They wrote out these loans like they knew they were going to be bailed out, but most would say I am wearing a tinfoil hat.

The good news is that if you didn't blink, there are some good deals to be had out there.

[Captain Virgil Hilts]

No, most were not "doing what they can to put their family in a home". They were buying absurdly expensive homes they did not need and could not afford, with mortgages they could not pay. They were not forced to buy a home they could not afford. They CHOSE to buy a home they could not afford.

The market where I live is a PRIME example of this. It is one of, if not the fastest growing area in the southeast, if not the country. There were PLENTY of $100K homes available, and idiots making $50K a year were buying $250K and $350K homes because they could get a mortgage written. Then their over time got cut. And they had a car or two leased. The people who were making $50K a year and buying $100K homes made it just fine. The idiots making $50K a year who bought $200K and up homes weren't. They both had the same jobs, their kids went to the same schools. At least until the idiots defaulted. And many STILL haven't learned.

We bought a $70K home, because we made $50K. And even then, when my wife had cancer, then the insurance company and the medical offices disagreed, we got in a tight spot. We made it okay. We could have made it okay if we had a $100K house, maybe even $125K. But we could not have saved a $150K or up mortgage with a high rate. We were not stupid. We have a decent home in a decent area, and not only does my son go to a decent school, but we can afford to help my daughter go to law school. Not much, but enough to get her going. And we're not in a blind panic every time anything goes wrong. We're upgrading the house as we can. We'll soon be in decent shape to refinance to get our rate down. We'll take a little cash out to improve the place more, and my wife wants me to have some extra cash because I made some earlier sacrifices she feels I should be rewarded for. In five years, when my son has been out of school for a year, we'll be in GREAT shape, and our home will possibly be worth $180K to $220K, depending on the market and how smart I am in upgrading and updating. This all worked because we DID NOT feel entitled to the home we wanted, but rather we bought the home we could afford.

[Toad]

It's time to drop the pretense that these loans would have been fine if only gas and food didn't increase in price. That theory flies in the face of economic history.

These loans would never have been fine. Read the Cramer article.

There are plenty of loans out there doing just fine. Read the Cramer article.

Unfortunately, those loans are not the 'no down payment, interest only, adjustable rate' loans that people that really couldn't afford a home used to buy a home they could not possibly afford.

There needs to be acceptance of the idea that some families simply don't make enough money to buy their own homes. That is the bottom line.

[Donzo]

No, most were not "doing what they can to put their family in a home". They were buying absurdly expensive homes they did not need and could not afford, with mortgages they could not pay. They were not forced to buy a home they could not afford. They CHOSE to buy a home they could not afford.

The market where I live is a PRIME example of this. It is one of, if not the fastest growing area in the southeast, if not the country. There were PLENTY of $100K homes available, and idiots making $50K a year were buying $250K and $350K homes because they could get a mortgage written. Then their over time got cut. And they had a car or two leased. The people who were making $50K a year and buying $100K homes made it just fine. The idiots making $50K a year who bought $200K and up homes weren't. They both had the same jobs, their kids went to the same schools. At least until the idiots defaulted. And many STILL haven't learned.

We bought a $70K home, because we made $50K. And even then, when my wife had cancer, then the insurance company and the medical offices disagreed, we got in a tight spot. We made it okay. We could have made it okay if we had a $100K house, maybe even $125K. But we could not have saved a $150K or up mortgage with a high rate. We were not stupid. We have a decent home in a decent area, and not only does my son go to a decent school, but we can afford to help my daughter go to law school. Not much, but enough to get her going. And we're not in a blind panic every time anything goes wrong. We're upgrading the house as we can. We'll soon be in decent shape to refinance to get our rate down. We'll take a little cash out to improve the place more, and my wife wants me to have some extra cash because I made some earlier sacrifices she feels I should be rewarded for. In five years, when my son has been out of school for a year, we'll be in GREAT shape, and our home will possibly be worth $180K to $220K, depending on the market and how smart I am in upgrading and updating. This all worked because we DID NOT feel entitled to the home we wanted, but rather we bought the home we could afford.

Well said! 

[Captain Virgil Hilts]

But if you believe the tripe and drivel served up by idiots, EVERY job should support a family, and therefor EVERY family can afford a nice home in the 'burbs.

I'm all for people having good jobs, making a decent living, and their families having decent homes. The family is the foundation upon which everything else is built. But common sense MUST prevail, as society and the economy can not survive without it.

[bustr]

But if you believe the tripe and drivel served up by idiots, EVERY job should support a family, and therefor EVERY family can afford a nice home in the 'burbs.

I'm all for people having good jobs, making a decent living, and their families having decent homes. The family is the foundation upon which everything else is built. But common sense MUST prevail, as society and the economy can not survive without it.

I also bought my home within my means. My mortgage is 2x-4x lower than any of mine or my wifes freinds in our area because we applyed for what we could afford and be out of work 1 year with $10k down.

When you look into the 1999 Bank Modernisation act, you find the seeds for the creative loans via the reinforced Community Reinvestment Act. Through that vehicle congress forced banks to give creative loans to just about anyone or not be able to do business within major population centers all over the U.S. The act was a federal mandate to get minorities into homes by regulating how and where banks could do business if they didn't pay this bribe to community organizers. 

I suspect no one in the banking industry realy expected most of the loans to get paid back, but the language of the bill makes it look like Uncle Sam would ultimently make good. If it were only minorities defaulting at expected yearly rates, it never would have gotten above 2% of the total defaulted home loans in the U.S. at any given time. I worked for Bank of America until 2006 when they began down sizing anyone they could to tighten their asset exposure. My BofA portfolio still looks good because of that action.

The MSM media did not help by trying to create a 1929 CRASH to build up ratings and get the BamaMessiah in the white house. The Media had the choice to help America maintaine confidence and ride this one out! Instead they chose to exaserbate a sad controlable situation into a full blown Katrina melt down for the Obamanator and to prove Bush was a Baaadddd Maaannnn.

[lazs2]

skycrock... your drivel is becoming a parody of even... your drivel.

Your crock tears and shameless and evil socialism would make marx blush.   If people can't afford a house because they can't give up a few hostess twinkies a week or they can't figure out how to cut down on most of the useless trips they drive around for...  if those few bucks put them out of a home by your reconning then..  they are even dumber than you are or... think we are.

lazs

[SkyRock]

skycrock... your drivel is becoming a parody of even... your drivel.

Your crock tears and shameless and evil socialism would make marx blush.   If people can't afford a house because they can't give up a few hostess twinkies a week or they can't figure out how to cut down on most of the useless trips they drive around for...  if those few bucks put them out of a home by your reconning then..  they are even dumber than you are or... think we are.

lazs

blah blah blah, go fret over your ex some more boy, come back and talk when you have something to say!

[DYNAMITE]

My wife and I got got an interest only mortgage for our home (it's our first).

We live in D.C. and when we bought the bubble looked like it would never burst... and it seemed like the right thing to do.

We both have masters degrees, both have steady jobs... and we can afford our mortgage just fine.  The mortgage lender would have given us more than what we got, but we didn't want to risk it.

As it is, our home is worth 70K less than what we paid for it... but thankfully we don't have a balloon payment we need to worry about (yay good credit) so we're just gonna ride it out.

I can't help but think we were who this type of loan were originally intended for... we're a good risk.  We make a nice living but by the nature of where we live we couldn't afford a place in a safe neighborhood without this type of loan.   Also, we didn't use this to re-fi or buy a 2nd or 3rd home like many folks...

IMHO it's sad to see that this type of program was abused to the point that it was... and that we're in the state that we're in now because of it (and the many other contributing factors).

[Donzo]

blah blah blah, go fret over your ex some more boy, come back and talk when you have something to say!

Is it just me, or is SkyRock getting more personal with his posts?

Are these hopeless posts of desperation? 
Those of a defeated individual that just doesn't realize he's defeated?

[bustr]

No his style of MA and DA combat won't translate in here and I suspect he is not willing to invest the time on the learning curve like he did for the cartoon airplane game. The shane style of verbal abuse in this arena is not amusing and lacks credibility to the non greifer discussion members. At one point I thought he had loaned his ID to Arlo......

[bongaroo]

Is it just me, or is SkyRock getting more personal with his posts?

Are these hopeless posts of desperation? 
Those of a defeated individual that just doesn't realize he's defeated?

nope, he's still just laying out stinky bait for a lot of conservatives to get their panties in a wad over.  I think he's copied lazs, bodhi, and hangs playbook, it appears to be working.

[lazs2]

dynamite...  interest only is a bad way to go but.. if you think that your situation will improve in a few years and are willing to take that chance..  it is a doable thing.. 

I would not call what you did all that risky to the loan company except... you couldn't afford it.. not really..

What if you had got a divorce?   what  if one had gotten injured?

The way an American should buy a home.. and the loan companies loan.. is that a certain amount be needed for a down payment.   real money that was saved.   There  would be no bubble that caused your home to be worth 70k less than you paid for it if everyone had done that in the first place.

The thing is..  everyone does not deserve a home.. we should not raise the minimum wage so that every person working at walmart can raise a family of three and have unlimited health care and buy a home.

That is just the reality of it.   

My first home was the cheapest house for sale in a city of 50k  I put one third down and the total cost per month was one third of my salary.. not mine and my wifes.. mine.. after any other debts.

My next house was better as I had equity and a better job.. next was better yet.   Now... first time buyers have to have homes that are as good as middle aged couples can afford.

lazs

[john9001]

dynamite, better check your mortgage, i think there is a balloon in a interest only loan when you have to start paying on the principle but it is far down the road, i could be mistaken but you should check just in case.

[DYNAMITE]

Oh there's a balloon... but it's years down the road (like 99). 

We're paying extra on our mortgage which is being applied to the principle... and we've been able to save at the same time.  Right now we've got a multi-month cushion (6 i believe), and we both could cover the mortgage by ourselves if the other lost their job or, god forbid was hurt.  My lord we would be house poor... but we could make it.

Nevertheless... watching this bubble break has certainly made my back side pucker.  I'm a 30 year fixed guy from now on