Aces High Bulletin Board
General Forums => The O' Club => Topic started by: Thrawn on August 31, 2007, 10:28:55 AM
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"US President George W Bush is expected to set out plans to help millions of homeowners with sub-prime mortgages avoid defaulting.
Sub-prime mortgages are higher risk loans offered to people with poor credit ratings or on low incomes.
Mr Bernanke said that global financial losses in the credit market had "far exceeded even the most pessimistic projections".
And he insisted it was not the job of the Fed "to protect lenders or investors from the consequences of their financial decisions".
But he added: "The Fed stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of the markets."
Wall Street shares clung to their early gains with the Dow Jones index and Nasdaq both adding about 0.8% in mid-morning trading as investors looked ahead to President Bush's speech.
The Fed will next meet to set rates on 18 September.
Loan guarantees
Rising numbers of defaults on such loans have hit banks, which have bought debt that include these loans.
Worries about defaults have roiled stock markets and investors around the world, and raised the cost of borrowing worldwide.
Reports suggest President Bush will call for Congress to support his plans to allow the government-backed mortgage insurer - the Federal Housing Administration - to guarantee loans for borrowers who are more than 90 days behind with their payments."
http://news.bbc.co.uk/2/hi/business/6971746.stm
So banks make stupid business decisions, like giving mortgages to unreliable people with 0% deposits, and the financially wise people have their hard-earned money stolen from them to bail out the freaking bank? The commification of the US continues unabated.
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Has all the earmarks of the savings and loan bailout. Wouldn't surprise me a bit.
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Can I too get the government to bail me out every time I do something stupid?
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sure... look at the poor katrina "victims"
lazs
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It's funny, the republican literature always bills itself as being the party of small government and lower spending. The spending of this government has been quite a bit bigger than even the one before it, where's the disconnect?
Democrats: Centralized control/Big government, big spending
Republicans: Big government/Centralized control, big spending
Meet the new boss, same as the old boss... but we keep getting fooled again.
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There does not have to be a bail out, just rewrite the loans so they are fixed low rates and the handsomehunkes will be able to pay the loan.
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All comes down to greed!! greed by the seller of the loans and greed from the folks that bought the loans!
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Originally posted by Stang
Can I too get the government to bail me out every time I do something stupid?
Yep, just put enough zeros on your check.
https://www.gop.com/Contribute/ (http://)
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Dallas/Ft.Worth is pretty much the epicenter of the foreclosure zone. The majority of these have been McMansions. If these idiots would stop living beyond their means and the bigger idiot lenders quit making those loans there wouldn't be a problem.
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Originally posted by Sixpence
There does not have to be a bail out, just rewrite the loans so they are fixed low rates and the handsomehunkes will be able to pay the loan.
A very soviet solution. Simply take control of the private companies. It's one step away from nationalization.
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Originally posted by rpm
Dallas/Ft.Worth is pretty much the epicenter of the foreclosure zone. The majority of these have been McMansions. If these idiots would stop living beyond their means and the bigger idiot lenders quit making those loans there wouldn't be a problem.
Not good news because I live here but a report stated that Sarasota Florida was the actual anchor point for the housing market meltdown from a university think tank or whatever.
Not like it really matters either way.
I remember having a realtor tell me how wonderful the interest only mortgage
was and why not live in a better house for less money.. I looked at her and
thought she was nuts, even for someone that casually reads market news and guidlines could have seen this coming drunk...
It will work itself out over time, enjoy the short sales while they last, Im working on one now that is fantastic $150 4\2\2200sf with salt canal access built in 2006
in Fort Myers Fl. to sit on for a few years.
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hope they are planning on bailing out the morons with huge credit card debt - that's the next bubble that will burst
what a bunch of crap - the gov acting as big brother again for idiots who live or want to live beyond their means and the institutions which empower them
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I didn't read it as any sort of bailout. It looks like buyers who have a good credit history but overwhelmed with their mortgage have an oppritunity to have the FHA re-finance them to a fixed rate. This isnt a blank check for all to get help but it sure could help people that are trying to get some assistance.
And they are stepping up enforcement of predatory lenders.
So it seems like the best possible compromise to help some buyers out who show credit history of trying.
Its not a bail out Mr Socialist Thrawn of the Social Republic of Canada :)
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I have the looming sensation of something about to hit the fan...
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I work for a major real estate magazine franchise that operates six different magazines in six different areas. The local books (North Central West Virgina) are strong and growing with lots of new homes and lots of re-sell homes that are selling.
Our other books, (Eastern Panhandle, Shenandoah Valley) are dropping like rocks, Lots of our advertisers can't move there listings, and some of them have been listed for over two years now. Brand new Construction has sat vacant for over a year. My boss has a 5 BR, 3 BA home in Hedgesville WV, has to reduced the price over $150,000. Its been on the market for a little less than a year. It started at $549, its now $399.
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Well, its either this or a recession... I cant say I disagree with the desicion to try to avoid the recession.
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''It is not the responsibility of the Federal Reserve -- nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions,'' Bernanke said. ``But the developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account.''
Bernanke seems to have his head on straight.
"One measure announced by Bush would allow homeowners with a good credit history but cannot afford their current payments to refinance into federally insured mortgages.
He also encouraged lenders to try to work out payment arrangements with financially strapped homeowners and urged Congress to pass additional relief measures."
LePaul is right. This isn't a handout. It's just refinancing under the FHA, and that is only for homeowners with good credit.
The other people in foreclosure need to downsize into the house that they should have gotten in the first place. No need for the government to bail them out of a mortgage they should not have gotten in the first place.
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I hope they do this. Uncle Ben is afraid to pull the trigger on his first drop in the Fed Rate and I told my CFA he would do it in June last December and if he had we would not have this problem. My bonds have lost about 25k in value tho most will be payed at the call date so there is no loss if not sold. The credit crunch had forced the value lower and fixing the crunch will put money back in my accounts. My Bond Mutfunds have lost value and they will take quite a while to gain. Usually when Equities get troublesome, bonds will do well. This is not the case now. My mother's portfollio had flucuated 10k a day this month. So, bail em out. Some of us make money:-)
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Here is the Edwards/Clinton approach to fixing the foreclosure issue:
Mr. Edwards: I agree with that. But we also need a home rescue fund for all the millions of Americans who are worried about losing their homes.
http://thecaucus.blogs.nytimes.com/2007/08/19/debate-outtakes-the-mortgage-crisis/
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Specifically, The Washington Post says, she [Clinton] wants to spend $1 billion in taxpayer money "to help homeowners catch up on mortgage payments, renegotiate their loan terms or pay for financial counseling."
http://www.jacksonville.com/tu-online/stories/082807/opi_195064274.shtml
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George Bush on the issue:
"One thing the president promised not do was a direct bailout of homeowners facing foreclosures or of lenders with financial problems traced to portfolios of defaulting subprime loans."
Such bailouts, he said, "would only aggravate the problem."
I actually agree with the Pres on this issue.
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Originally posted by Mickey1992
LePaul is right. This isn't a handout. It's just refinancing under the FHA, and that is only for homeowners with good credit.
A sub-prime borrower doesn't have good credit in the first place...that's why they are sub-prime.
So Bush is offering to your money, to a person with bad credit, that has demonstrated that they can't make payments on the loan the they already have.
Well, its either this or a recession... I cant say I disagree with the desicion to try to avoid the recession.
Madness. Taking money and resources away from financially wise, successful people to retards that live beyond their means is suppose to stop a recession? It might look that way but all that is happening is the problem is being made worse.
The US government tried to stop recessions in the early 1900s by the creation of the Federal Reserve Bank and the fractional reserve system. This lead directly to the Great Depression. The government can't "fix" economic issues, it can only exacerbate them. Hell they are the cause of most economic problems in the firs place.
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Originally posted by Thrawn
So Bush is offering to your money, to a person with bad credit, that has demonstrated that they can't make payments on the loan the they already have.
No, people with crappy credit who probably should not have gotten the mortgage in the first place would not qualify for the FHA guarantee. Did you not read the article?
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Originally posted by Thrawn
Taking money and resources away from financially wise, successful people to retards that live beyond their means is suppose to stop a recession?
Short answer, yes.
Longer answer, exactly.
Im not sure if I should bother with trying to explain to you how the US economy is driving the european economy right now, and how the US economy is driven by domestic consumer spending. If I did, perhaps you would understand why it is vital to keep the US citizens spending their money on consumer goods...but somehow I doubt you are interested in hearing the cold facts here. You seem much more intent on hyperbole and pointless libertarian grandstanding.
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Originally posted by Hortlund
...it is vital to keep the US citizens spending their money on consumer goods...
Yes, but people who are living in a house that is sucking up all of their disposable income are not spending money on consumer goods.
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Originally posted by Mickey1992
Yes, but people who are living in a house that is sucking up all of their disposable income are not spending money on consumer goods.
Sure they are, they are spending money they dont have (credit cards etc) on consumer goods.
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Originally posted by Thrawn
The government can't "fix" economic issues, it can only exacerbate them.
Utter BS
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Originally posted by Hortlund
Sure they are, they are spending money they dont have (credit cards etc) on consumer goods.
So you think it is a good idea for American homeowners to live beyond their means with a mortgage they should not have been approved for, coupled with maxed-out credit cards?
A very high percentage of the foreclosures are non-owner occupied "flippers". We definitely should not be bailing out these people who simply made poor investment decisions.
"Defaults in non-owner occupied houses are driving defaults in four of the states with the fastest rising default rates in the nation, according to a report released Thursday by the Mortgage Bankers Association."
http://money.cnn.com/2007/08/30/real_estate/flippers_fuel_foreclosures/index.htm
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Originally posted by Mickey1992
No, people with crappy credit who probably should not have gotten the mortgage in the first place would not qualify for the FHA guarantee. Did you not read the article?
Here is the definition of...
"Subprime Loan
What does it Mean? A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment."
http://www.investopedia.com/terms/s/subprimeloan.asp
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Originally posted by Hortlund
You seem much more intent on hyperbole and pointless libertarian grandstanding.
..says the fellow who has so far posted nothing by ridicule, ad hominem in this thread.
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Originally posted by Sixpence
There does not have to be a bail out, just rewrite the loans so they are fixed low rates and the handsomehunkes will be able to pay the loan.
The problem is, the idiots bought more house than they could ever afford and the mortgage companies let them do it. You really think the average Joe can afford a $300k house? Nope but that didn't stop them from buying them. So even if you put them in a "real loan" that's low intrest it will still cost more than the intrest only BS.
Everyone is at fault in this, the buyers for being idiots, the banks for being stupid and the govt for not stepping in and setting up more regulations to stop this kind of thing from happening.
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I better find that rosary .. I agree with Thrawn and crockett :)
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Funny. We bought our appropriately sized house with 40 percent down from the boom sale of my small city condo, got a good flat rate, refinanced for a better one, 15 year mortgage, no credit card debt, sensible spending & cars, more money in the bank than actually should be there, living comfortably within our means. All these big McMansions popping up. Always tempting. But then I would have had to do some stupid things.
DUH!
Use my tax dollars to pay for your lack of common sense?
1. If you are sub prime, guess what, maybe its not time for a house YET. Maybe you should worry about figuring out how this whole financial responsibility thing works.
2. An ARM? Guess what. Here's a big dot-com bubble insight for ya. There's no free ride folks. You don't get a payment the same as mine for twice the house without them making it up somewhere. Guess what, 8 or 12 percent interest (or more) can be a reality. Not ALL that long ago either.
This does start to seem like one big economic house of cards.
Charon
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Originally posted by rpm
Dallas/Ft.Worth is pretty much the epicenter of the foreclosure zone. The majority of these have been McMansions. If these idiots would stop living beyond their means and the bigger idiot lenders quit making those loans there wouldn't be a problem.
You know, I don't understand that either. I was shopping for real estate last year in Texas and Dallas/Ft Worth was one of the areas I looked at.
Houses were dirt cheap there, so I can't understand why that was among the highest in foreclosures. I looked at a hell of a nice house was 3/2/2 with a screened in porch a cement in ground pool fenced in backyard that butted up to a school. House was $99k.. Here the same house would easily be $300k.
I just don't get the issues in Dallas a friend of mine just moved there and he had no issue at all getting a good paying job. So what is the deal there, because just for the life of me can't understand why Dallas is so bad off on the forclosure lists.
The houses are damn cheap there so I had thought of investing there but just not sure what is going on. Is it lack of jobs?
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It's not the $99K houses being foreclosed. It the Republican voting idiots who should have bought the $99K house but chose the $450K McMansion instead. (The Bush/Cheney '04 sign in front of anything less would have been offensive.)
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Originally posted by Hortlund
You seem much more intent on hyperbole and pointless libertarian grandstanding.
Originally posted by Thrawn
..says the fellow who has so far posted nothing by ridicule, ad hominem in this thread.
Wow, Hortlund nailed ya.
I'm forever amazed how a Canadian is so, so mesmerized by the issues of the USA which won't affect him in the least. Further, had you actually *read* the article, you'd see this isn't a free handout.
Your veiled dislike of the USA/President once again jumps out. Do be sure to bash your country in here sometime. Fair is fair, eh?
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Originally posted by LePaul
Wow, Hortlund nailed ya.
I'm forever amazed how a Canadian is so, so mesmerized by the issues of the USA which won't affect him in the least. Further, had you actually *read* the article, you'd see this isn't a free handout.
Your veiled dislike of the USA/President once again jumps out. Do be sure to bash your country in here sometime. Fair is fair, eh?
Notwithstanding your fairly obvious jingoism in suggesting that a non-american can't have an opinion on this, I suppose you missed the effect this issue has been having on global markets in the last few weeks?
That said, I'm pretty sure that Thrawn isn't anti-american, just anti-stupid, which is probably why he gets such a rise out of mooks like you and Hortlund.
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Originally posted by Kaw1000
All comes down to greed!! greed by the seller of the loans and greed from the folks that bought the loans!
(http://www.americanrhetoric.com/images/michaeldouglaswallstreetcolor.JPG)
"Greed is good... greed works"
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The problem is not the price but the variable rate mortgage that is the problem. The credit crunch, force house notes higher, what was affordable to someone even subprime can easily increase by 50%. Higher rates, tighter credit and the house equity dries up, you cannot refinace against a cheaper house to pay a higher note. Uncle Ben needs to drive the Fed Rate lower by at least 50 pts. Money is tight, credit is tighter and it the subprimes on variable could get a per cent or two break this slump will go away.
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Originally posted by crockett
The problem is, the idiots bought more house than they could ever afford and the mortgage companies let them do it. You really think the average Joe can afford a $300k house? Nope but that didn't stop them from buying them. So even if you put them in a "real loan" that's low intrest it will still cost more than the intrest only BS.
Everyone is at fault in this, the buyers for being idiots, the banks for being stupid and the govt for not stepping in and setting up more regulations to stop this kind of thing from happening.
You're partly right, Crockett. Only...The real problem is that the average Joe can't afford an average house, anymore.
I'll use my own home as an example: It's a 3/2, 1450 sqf., built in '82, I bought it in '96, for $84,500.
Now, Due to the unrestricted market, this same house, on a 1/4 acre tract lot in a nice neighborhood, hit a High-point value of $312,000. In an area with a median income of $11-15 dollars an hour.
Figure the payments' on 312k, even with a 7% fixed, like my own. How the hell is someone gonna afford even an average house?
Plus, keep in mind that Rents' go up with mortgage payments. 2-bedroom apartments that at one time rented for $450 are now $1,000+ a month. So, there's alot of incentive to buy.
On a different tack, I don't think that the Fed realizes' how much money they will be using in any kind of bailout. Hell, Ameriquest closed it's doors' today, and Citigroup bought they're assets. When you have big lenders going under like that, you know that the market slump is in the Billions, and maybe Trillions, range.
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Originally posted by Stott
The problem is not the price but the variable rate mortgage that is the problem. The credit crunch, force house notes higher, what was affordable to someone even subprime can easily increase by 50%. Higher rates, tighter credit and the house equity dries up, you cannot refinace against a cheaper house to pay a higher note. Uncle Ben needs to drive the Fed Rate lower by at least 50 pts. Money is tight, credit is tighter and it the subprimes on variable could get a per cent or two break this slump will go away.
That's almost right, but not quite, as well.
The real problem was the ridiculous loan schemes' that allowed people to actually buy houses' for 200-300K$ more than what they could actually afford. It was caused by things like Zero-principal loans(where all you ever pay is the interest, never on the principal), Seedy refinance deals' that let people get a lower interest rate, but only if they took out all of they're equity...The real culprits' were the Financial companies' themselves, and the Gov't. for not doing a damn thing to regulate it.
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Originally posted by Mickey1992
So you think it is a good idea for American homeowners to live beyond their means with a mortgage they should not have been approved for, coupled with maxed-out credit cards?
They have to. Understand this: the moment they stop, the western world will hit a huge recession.
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Dont forget Home Equity. I've seen people have homes soar in value, so they dip into their Home Equity and quickly over-spend. The borrowers make it very easy to borrow more and more. It takes wise credit discipline, and living within ones means, to avoid such temptations. :)
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The Fed lent $2 billion to the four largest banks in the US about a week ago, using the discount window. Those loans are used as reserves (back to the Fed) to allow them to lend 10X ($200 billion) to subsidiaries to cover losses.
They will have to borrow more to lend more to pay back the original.
Those banks are exposed to loans and credit given to the holders of just the sub-prime debt. Their plan was to consolidate and sell that debt further down the food chain, but there is no market now.
Probably $300 billion worth of those loans are now sitting on balance sheets without a snowballs chance in hell of being sold and reducing the ability of all those institutions to lend.
The Fed accepted the bad loans as collateral for the loans to those banks. (note: there are no smilies available that are strong enough to highlight and emphasize this astounding point)
The calmness you see in the stock market and rosey GDP numbers are like looking at light from a distant star. Things are going get "interesting" after next quarter.
If a Fed chairman says he's willing to "do whatever it takes," you better batten down the hatches because there is a storm heading your way sooner or later. The difference between this storm others past is that the massive debt isn't owed to yourself; it's owed to foreign nations who have financed so much of the debt. You can get away with writing off some debt to yourself, but you can't do it to others.
Actually, it's all good news. The sooner the lights start to go on, the higher the chance there is that the debt increase will slow. Not likely, but a higher chance. It would be better to have a good old-fashioned recession like we haven't seen in 30 years sooner than later. Borrowing to put it off until later will only make it worse.
You can't grow your way out of this anymore. The overall debt load and unfunded obligations are too massive to not start fixing soon. We're (you're) only about 20 years away from reaping what has been sown.
Chew on this a little:
- 43% of Americans between the ages of 45 and 54 have no retirement account.
- The median amount in retirement accounts of those who have them is $2,000. The bulk of those having retirement accounts are government workers.
- The average American has no savings.
- 4.8 American workers now support each Social Security and Medicare recipient. In 20 years, there will be ony 2.8 workers to support each recipient.
- Between 1995 and today, the median household income has fallen 6% across the board in every state except Montana, Wyoming and North Dakota.
- The total debt (private, government and unfunded retirement, medical and other obligations) per person is now over $300,000 per person.
You should hear what the pessimists are saying.
Probably the worst job in America to be applying for now is to be the next President of the United States.
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Originally posted by Rolex
It would be better to have a good old-fashioned recession like we haven't seen in 30 years sooner than later. Borrowing to put it off until later will only make it worse.
depending on who's running the show here and world events, war may/should be used to avert that. I think the masses would go nuts with a deep recession quickly escalting into a full blown depression as Katrina showed us there are too many out there that can't tie their own shoes, forget about peace and order when they're tested.
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Originally posted by Sixpence
There does not have to be a bail out, just rewrite the loans so they are fixed low rates and the handsomehunkes will be able to pay the loan.
Nope, sorry... fixed low rates are for those of us who are responsible, pay our bills on time and don't buy things we cannot afford. When your making the largest purchase of your life you read the fine print and know what you are signing. If you are unable to comprehend it then you'll learn by your mistakes. There will not be a bailout, there will be some good bargains in the housing market though... assuming you have credit!:aok
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It better be a darn big war, because the little wars are killing us. ;)
I think you'll find that the theory that a war can prop up an economy was abandoned decades ago. Diverting capital from the private sector for more than three years for a "limited" engagement can give you a bump, but after that, all you're doing is adding more debt. Unless you acquire assets from the outcome. Flags have always followed businesses to acquire assets.
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Originally posted by FrodeMk3
The real problem is that the average Joe can't afford an average house, anymore.
I'll use my own home as an example: It's a 3/2, 1450 sqf., built in '82, I bought it in '96, for $84,500.
Now, Due to the unrestricted market, this same house, on a 1/4 acre tract lot in a nice neighborhood, hit a High-point value of $312,000. In an area with a median income of $11-15 dollars an hour.
Figure the payments' on 312k, even with a 7% fixed, like my own. How the hell is someone gonna afford even an average house?
Plus, keep in mind that Rents' go up with mortgage payments. 2-bedroom apartments that at one time rented for $450 are now $1,000+ a month. So, there's alot of incentive to buy.
[/b]
True.
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Originally posted by Rolex
It better be a darn big war, because the little wars are killing us. ;)
.... Unless you acquire assets from the outcome. Flags have always followed businesses to acquire assets.
I am afraid it would be and yes, no more freebies
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i wonder how many of the forclosers were "house flippers" that couldn't do the flip and got stuck with a house they could not sell?
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I guess I am just callous but...
the way I figure it is that my property (2 units) is worth about $600k or was.. maybe a little more... The property I want to retire to was all selling for maybe 400K
If mine goes down to 300K and the property I want all go down to 200K I am fine with that. Or.. I can just stay where I am for free till the dust settles.
I don't know how you are gonna get housing down to 100k (affordable) again tho when fees that are driven by the EPA for water and sewer expansion of facilities can run 10-20K off the top.
Any good sized shop I would build for my hot rods and tinkering in would be 50-70K yet... I see homes for sale with those shops on em and I don't know how they even got built for what the house is selling for now.
The cities are taking a 10-20k hit on the developer for each unit before he even breaks ground.
200k may be the bottom of the barrel for a conventional home in the future.
lazs
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Originally posted by Chairboy
A very soviet solution. Simply take control of the private companies. It's one step away from nationalization.
Who would take control of the company? I am talking about the company doing it. If you know the borrower can't make the payments on a bad loan, why not make it a good loan and at least make 7%?
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Originally posted by T0J0
Not good news because I live here but a report stated that Sarasota Florida was the actual anchor point for the housing market meltdown from a university think tank or whatever.
Not like it really matters either way.
I remember having a realtor tell me how wonderful the interest only mortgage
was and why not live in a better house for less money.. I looked at her and
thought she was nuts, even for someone that casually reads market news and guidlines could have seen this coming drunk...
It will work itself out over time, enjoy the short sales while they last, Im working on one now that is fantastic $150 4\2\2200sf with salt canal access built in 2006
in Fort Myers Fl. to sit on for a few years.
Wise advice given to be even before I started looking for a house
Rule #1 when buying a house.
NEVER listen to Realtors for mortgage advice.
They are out to increase THEIR bottom line.
The more expensive the house you buy. The larger their bottom line
Hence if given a choice between a $200,000 house and a $400,000 house.
Which house is it they will want you to buy?
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Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.
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Originally posted by lazs2
I guess I am just callous but...
the way I figure it is that my property (2 units) is worth about $600k or was.. maybe a little more... The property I want to retire to was all selling for maybe 400K
If mine goes down to 300K and the property I want all go down to 200K I am fine with that. Or.. I can just stay where I am for free till the dust settles.
I don't know how you are gonna get housing down to 100k (affordable) again tho when fees that are driven by the EPA for water and sewer expansion of facilities can run 10-20K off the top.
Any good sized shop I would build for my hot rods and tinkering in would be 50-70K yet... I see homes for sale with those shops on em and I don't know how they even got built for what the house is selling for now.
The cities are taking a 10-20k hit on the developer for each unit before he even breaks ground.
200k may be the bottom of the barrel for a conventional home in the future.
lazs
Those fees' won't be the same everywhere, Lasz. I think what the real problem is, and what's kept prices from going right back down, is that no-one want's to sell for less than they bought. And that's what it's coming down to. Developers' will want to get homes selling again, so they will drop the prices on new construction first. Of course, the private seller will have to drop prices if they wish to sell they're homes. Which in turn will bring on the market decline.
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Originally posted by Sixpence
Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.
because they got the high interest in the first place due to their bad credit rating or bit off more of a house then they can now chew as greedy materialism flooded their tiny minds. Are you saying they should be given a break because they had/have poor credit and/or took a risky deal and lost? That would only be fair if mortages across the board were all offered lower interest rates relative to the break they give the high risk poor credit loans. I'd like to see my 6.6% fixed loan say drop to 4.5 or lower...or only the losers who got us into this mess given a break...
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Originally posted by Eagler
because they got the high interest in the first place due to their bad credit rating or bit off more of a house then they can now chew as greedy materialism flooded their tiny minds. Are you saying they should be given a break because they had/have poor credit and/or took a risky deal and lost? That would only be fair if mortages across the board were all offered lower interest rates relative to the break they give the high risk poor credit loans. I'd like to see my 6.6% fixed loan say drop to 4.5 or lower...or only the losers who got us into this mess given a break...
What I am saying is that if I am a mortgage company, and people are defaulting on loans that have had a high interest kick in, why would I let the loan fail? I would be stuck with a house that I am going to get pennies on the dollar for at auction.
Would it not be in my best interest to rewrite the loan so the rate stays fixed that the borrower can afford and make my money back plus interest? Or do I want to be stuck with a house I don't want?
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Originally posted by Sixpence
Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.
At the bank I worked for (just left in June), that was the approach they and other lenders were taking. Rather than go thru the entire (expensive) foreclosure process, it was wiser to get said clients into a fixed rate mortgage. The key being that customers having such issues need to talk to their lenders before things get really out of hand. Its one thing to ask when you are up to date but hurting versus several payments behind.
And it really depends on the bank. Most community banks will go thru hoops to keep the customer solvent.
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Originally posted by LePaul
At the bank I worked for (just left in June), that was the approach they and other lenders were taking. Rather than go thru the entire (expensive) foreclosure process, it was wiser to get said clients into a fixed rate mortgage. The key being that customers having such issues need to talk to their lenders before things get really out of hand. Its one thing to ask when you are up to date but hurting versus several payments behind.
And it really depends on the bank. Most community banks will go thru hoops to keep the customer solvent.
Well, I am just trying to use some common sense(forgive me).
Especially if I am a lawmaker and a company says to me, " I wrote loans that start at 7% and jump to 14% and now the borrower can't pay, you have to bail me out"
My answer would be, "well, then give them a fixed rate at 7% stupid"
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LOL Six...common sense? That is soo 80s :)
It just boils down to the points made by others. People who bought more than they could ever afford and people who really couldnt afford a home to begin with.
I think the President's plan is the best compromise, help those that have a good credit history. I think bailing out people who made bad decisions is a bad idea. That's akin to helping people who loose money at the Casinos.
Bad choices = consequences
There are options out there but buyers have to decide what to do. Sometimes loosing the house (sell, foreclose, etc) is in the best interest.
Much like common sense, people have to manage their credit and finaces carefully. Its a shame high schools dont teach such important financial values.
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Originally posted by LePaul
LOL Six...common sense? That is soo 80s :)
It just boils down to the points made by others. People who bought more than they could ever afford and people who really couldnt afford a home to begin with.
I think the President's plan is the best compromise, help those that have a good credit history. I think bailing out people who made bad decisions is a bad idea. That's akin to helping people who loose money at the Casinos.
Bad choices = consequences
There are options out there but buyers have to decide what to do. Sometimes loosing the house (sell, foreclose, etc) is in the best interest.
Much like common sense, people have to manage their credit and finaces carefully. Its a shame high schools dont teach such important financial values.
Well, that's the misconception, you're not bailing out the people who bought the house, they can always walk away, build their credit back up, and buy again. The lenders are the ones in trouble, and it threatens the economy as a whole.
My view is that you tell the lenders it's their mess and they have to clean it up.
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Lenders have no incentive to re-write mortgages. The mortgages were sold to others, then others, then packaged with other sub-prime mortgages and sold again. The holders are many times non-lending subsidiaries created as investment companies. The people being bailed out are the big lenders holding them in subsidiaries because they are still part of consolidated balance sheets and P&Ls.
The mortgages would have to be bought by lenders. Who is going to do that? A new mortgage, paying off the old and starting new, would only be done for credit-worthy borrowers. The lender, once again, has no interest in the old mortgage, so no incentive.
The Fed and government only care about the big lenders with exposure. The property or borrower is not even considered, except for political media consumption.
The incentive will come when loans default. Large packages of loans will be sold off with deep discounts and the deep-pocketed buyers can then re-sell the property or refinance with some new mechanism devised by their government brethren that will insure the lender. Even if the property drops 25% in value, the new lenders will make a killing.
Again, the borrower is insignificant. I don't get this preoccupation with the borrower getting some kind of bailout. The lenders will get bailed out. They are the ones who took the risks, not the borrower.
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Originally posted by Sixpence
Again, if you know the borrower cannot pay a bad loan, why not rewrite and make 7%? I am talking about the company, not the government.
Because the intrest has nothing to do with it.. People were buying houses at "intrest only" that means "nothing" is paid toward the principle. So that means if you get a normal loan a 200k house will cost you roughly $2k a month.
However if you get it intrest only it might only be $900-1200.(estimate). So they say, hey I can buy a 300k house and still only pay less than what a 200k house cost. I can live like the Jones and sell the house at a profit in a year.
That worked out for a lot of people for sometime as the market was going crazy. However it's like playing hot potatoes, you don't want to be the guy left holding the hot potato when there is no one left to take it. That's what is happening now.
The people over bought, because they could buy more house for the same money via intrest only, now they can't refinance because they can't actually afford to pay for the house.
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Originally posted by Rolex
Lenders have no incentive to re-write mortgages. The mortgages were sold to others, then others, then packaged with other sub-prime mortgages and sold again. The holders are many times non-lending subsidiaries created as investment companies. The people being bailed out are the big lenders holding them in subsidiaries because they are still part of consolidated balance sheets and P&Ls.
The mortgages would have to be bought by lenders. Who is going to do that? A new mortgage, paying off the old and starting new, would only be done for credit-worthy borrowers. The lender, once again, has no interest in the old mortgage, so no incentive.
The Fed and government only care about the big lenders with exposure. The property or borrower is not even considered, except for political media consumption.
The incentive will come when loans default. Large packages of loans will be sold off with deep discounts and the deep-pocketed buyers can then re-sell the property or refinance with some new mechanism devised by their government brethren that will insure the lender. Even if the property drops 25% in value, the new lenders will make a killing.
Again, the borrower is insignificant. I don't get this preoccupation with the borrower getting some kind of bailout. The lenders will get bailed out. They are the ones who took the risks, not the borrower.
Exactly.. the govt isn't going to do crapola to help the average Joe whom is losing his house. This bail out will be for big business, the govt could care less about the little guy.
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The mortgages would have to be bought by lenders. Who is going to do that? A new mortgage, paying off the old and starting new, would only be done for credit-worthy borrowers. The lender, once again, has no interest in the old mortgage, so no incentive.
What we really need is info on what percentage of existing loans going into default, are held by the credit-worthy.
If there's little left in the way of good-credit borrowers, then what Rolex has stated is most likely true-that gov't. will simply attempt to bail out the Lenders. Of course, how many of those lenders are/could be overseas? Such as Bear-stearns (Out of Germany? Correct me if I'm wrong.)
Also...The money for the bailout is ultimately coming from U.S. Taxpayers. What i'd like to know is, What is the total sum they are discussing?
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Originally posted by Rolex
Lenders have no incentive to re-write mortgages. The mortgages were sold to others, then others, then packaged with other sub-prime mortgages and sold again. The holders are many times non-lending subsidiaries created as investment companies. The people being bailed out are the big lenders holding them in subsidiaries because they are still part of consolidated balance sheets and P&Ls.
So let me get this straight, some financial genious bought these loans as an investment? There has to be more than meets the eye here, it isn't joe shmoe buying these as a day trader, it's someone responsible with investing someone else's money. Why would they buy these time bombs as an investment? That does not make alot of sense, only an idiot would do that.
The incentive will come when loans default. Large packages of loans will be sold off with deep discounts and the deep-pocketed buyers can then re-sell the property or refinance with some new mechanism devised by their government brethren that will insure the lender. Even if the property drops 25% in value, the new lenders will make a killing.
You are losing me here, there is no loan to sell off once it is defaulted, all that is left is the house that has been foreclosed on. No one is paying for the loan anymore, why would someone buy it? And most of these homes were sold overvalue because of the way the loan was written, and with a flooded market why would you want homes to take care of that you can't sell? You know, something about a ten foot pole?
Again, the borrower is insignificant. I don't get this preoccupation with the borrower getting some kind of bailout. The lenders will get bailed out. They are the ones who took the risks, not the borrower.
That's what I have stated. Why the thought is the borrower is being bailed is beyond me.
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Originally posted by crockett
Because the intrest has nothing to do with it.. People were buying houses at "intrest only" that means "nothing" is paid toward the principle. So that means if you get a normal loan a 200k house will cost you roughly $2k a month.
However if you get it intrest only it might only be $900-1200.(estimate). So they say, hey I can buy a 300k house and still only pay less than what a 200k house cost. I can live like the Jones and sell the house at a profit in a year.
That worked out for a lot of people for sometime as the market was going crazy. However it's like playing hot potatoes, you don't want to be the guy left holding the hot potato when there is no one left to take it. That's what is happening now.
The people over bought, because they could buy more house for the same money via intrest only, now they can't refinance because they can't actually afford to pay for the house.
Well, there were more loans than interest only, like some that started out with teaser rates, then jumped alot higher. They were told they could refinance later, but couldn't because they are sub prime(which is the reason they shouldn't be given the loan in the first place)
But the fact is they were given the loan, so it has to be dealt with, so why not give them the fixed rate so they don't default?
In the case of interest only, they have to get creative, stretch it out to forty years to lower the payment. They were creative enough to get these people into the loans, they can be creative enough to get themselves out of the mess they got themselves into.
If you or I make a bad investment, the government does not bail us out. If they can't fix it let them take the loss
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Tell the Govt to stay out of it. Le the chips fall where they fall. Housing prices will continue to fall, banks will take most of the loss as they are holding the mortgages. As property values fall, Taxes go down for all of us, instead of doubling every 7 years.
Long term, those same idiots can get into the same house for half what they were paying.
Everyone with a brain in their head knew the bubble was going to burst. Bubbles always do eventually. Banks will lose the most, but its not like peoples money is going to be lost. They've been saying for years that its all FDIC insured. So let the banks take the lost. So we lose a few banks.
Guess what, next time, they'll be smarter.
Take the punishment out of the equation and no one ever learns anything.
Homeowners don't learn to not buy more house than you can afford. Banks don't learn to lend money with nothing down on inflated prices.
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frode.. do you think the EPA will stop at kalifornia? I have dealt with em for years... 100 million for a wastewater facility for a town of 20k is nothing to them.. they feel that $150 a month sewer bill is "about right".
If the developer wants to build he has to help the city meet the EPA demands... which will only get worse. It costs twice as much to do anything where the EPA is concerned...
What we will get next is $100 a month storm water bills. Either the developer (and you) pay it up front for the facility or you pay it by the month for a bond... plus....
No matter how well you treat the water... by the time you finish the plant... it will no longer be in compliance. New development will have to take a big hit when it starts... and the circle jerk just keeps going.
lazs
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What we really need is info on what percentage of existing loans going into default, are held by the credit-worthy.
Non-subprime defaults will be about 3% this year, up from 0.9% last year. Without any wiggles in the economy, they will go up to 4% next year. I would plan on some significant wiggling, though.
If there's little left in the way of good-credit borrowers, then what Rolex has stated is most likely true-that gov't. will simply attempt to bail out the Lenders. Of course, how many of those lenders are/could be overseas? Such as Bear-stearns (Out of Germany? Correct me if I'm wrong.)
They are not lenders, they were buyers in the ether formerly known as the MBS market.
Also...The money for the bailout is ultimately coming from U.S. Taxpayers. What i'd like to know is, What is the total sum they are discussing?
The total written value of subprime mortgages is $1.4 trillion. How much is at risk? No one knows, but I'll start the bidding at $300 billlion. That's a nice round number. You could tape $100 bills end to end and have a ribbon of them going to the moon and back... over 50 times. Or a stack of $100 bill extending over 225 miles into space.
That's about $1,000 per person, but it will just be added to the debt your passing on to the kids, so I wouldn't worry about it. That's their problem. The current total debt is about $300,000 per person, so it's only another 0.3% more debt. See? It doesn't sound so bad now.
The easiest solution is to open the border and get more people. Double the population and the debt is only $150,000 per person. Get up to 1 billion people and the debt is only about $70,000 for every man, woman and child.
Subprime defaults will likely add at least 500,000 homes to the already overbuilt market next year.
The large lenders learned their lesson long ago. The lesson was that the Fed will never let them fail, no matter what they do. ;)
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stott hit the nail on the head. its the "adjustable rates" they are killing home buyers..not thier bad credit. what starts out as an affordable mortgage soon ballons into a payment thats far beyond the planned budget for the house. and it has a lot to to do with the lenders. thier get rich scheme is coming back to bite them in the ***.
wife and i bought a home. to get the 5.5 interest rate for the major part of the mortgage, they made us take out a second mortgage for the last 10 years on an adjustable rate. same time everyone else was biting. sure it sounded good but of course in 2 months it was allready climbing. we imediately put the 2nd mortgage on a interest free credit card . interest free for one year..remianing balance at end of the year was put on second balnce transfer. within a couple of yearts it was paid off saving thousands.
i dont blame these home owners at all.we all have a dream of owning a house. they were just suckered in. i've heard some lenders goin to jail for these adjutable rate loans. they were gaurenteed to fail.