May 7, 2008
JustQuotes: Barney Frank’s Housing Bill Reduced To Political Rubble?
“As the House prepared to vote on a housing-relief bill offered by Democratic leaders, President Bush on Wednesday told the lawmakers, in effect, not to bother. “I will veto the bill that’s moving through the House today if it makes it to my desk,” the president said at the White House, after meeting with Republican House leaders."
“Under the [Frank] bill, lenders would be required to reduce the principal balances for borrowers at risk of default. The troubled loans, typically with high, adjustable interest rates, would then be refinanced into more affordable 30-year fix-rate loans insured by the Federal Housing Administration. The new loans would be limited to 90 percent of a property’s value, based on an updated appraisal, and the government would retain a stake in any future sale of the property.
The Bush administration prefers a more limited expansion of federally insured mortgages and has argued that housing relief can be accomplished by the Federal Housing Administration without new legislation.
The president on Wednesday repeated his opposition to a bill “that will reward speculators and lenders” who have suffered because of their own foolishness.”
∙ Bush Vows to Veto Housing-Relief Bill in House [New York Times]
First Published: May 7, 2008 2:25 PM
Comments from "Plugged In" Readers
This is one of the few times in the past 7 years that I have agreed with our President.
Posted by: location at May 7, 2008 2:54 PM
that was truly a bullshit plan they were pushing through
Posted by: Spencer at May 7, 2008 2:59 PM
As they say, a contract is a contract is a contract.
If you start reneging on signed contracts, then the future contracts will not be worth the paper they're signed on and lenders will give less and less money and ask for more and more safety, throwing RE into a slow death spiral.
Agreed 100%. Shelve this monster of a plan.
Posted by: San FronziScheme at May 7, 2008 3:08 PM
Posted by: Foolio at May 7, 2008 3:23 PM
I guess if anyone got a 20% reduction to the principal, why not me? Anyone can threaten to walk away from the mortgage.
Posted by: view lover at May 7, 2008 3:33 PM
You all better vote for McCain then. Because if/after Obama takes office, this type of thing will sail through.
Posted by: Craig at May 7, 2008 4:00 PM
"You all better vote for McCain then. Because if/after Obama takes office, this type of thing will sail through."
Obama has no chance IMHO. Although I have always voted Democrat, it will be hard to do this year if Obama is the nominee. His economic policies will put the country in an even worse shape than we are already in. As a long time republican hateer, All i can say is at least McCain is moderate. The democrats seem to be bad at nominating electebalbe people. Even John Kerry was better than obama.
Posted by: Spencer at May 7, 2008 4:09 PM
Where do I sign up for a reduction in principal on my 30 year FRM or does the program only apply to reckless, low IQ, dead beats?
Posted by: DefaultFree at May 7, 2008 4:13 PM
hey Obama didn't propose a gas tax holiday, like McCain, and he didn't poo poo economists like Hilary.
Don't know about his bailout policy but so far he seems smarter economically then the other two (or at least less willing to pander)
Posted by: badlydrawnbear at May 7, 2008 4:45 PM
Damn, and I was just about to take out an interest only ARM for 725k. So much for my chance to be stupid... well, there will always be more chances for that.
Posted by: cachu at May 7, 2008 4:47 PM
For those interested here is Obama's policy regarding housing
Seems like the only thing really objectionable here is the ability of bankruptcy judges to modify Mortgages (although they can do the same thing for other creditors now and somehow the credit card companies have survived)
Posted by: badlydrawnbear at May 7, 2008 4:50 PM
@BDB: Why is modifying the terms of a mortgage in bankruptcy objectionable? As you say, it's one of many liabilities which can be so modified -- presumably it's not automatic or anything. This is the point of bankruptcy after all, isn't it?
I don't see anything there that's objectionable, unlike the gas tax holiday suggested by the other two clowns, which makes me want to throw up. Almost as bad as driving my single-occupancy prius in the carpool lane.
(I don't own a prius BTW :) )
Posted by: dub dub at May 7, 2008 4:59 PM
Dub Dub ... sorry should have been clearer, the mortgage mods by bankruptcy judges is the one thing that I see some on the socketsite boards would possibly find objectionable.
I have seen (on other housing discussions) the bankruptcy mods idea brought up before and some have objected to it for the reason outline by San FronziScheme at 3:08 PM above (not that I am saying he is actually objecting to it but that I have seen others claim something similar when discussing these mods)
Soooo, in my opinion that was the one point in Obama's plan that I have seen others jump up and down about in the past.
Posted by: badlydrawnbear at May 7, 2008 5:17 PM
In retrospect, the Ninja loans were not such a bad idea at the time: they were designed for a certain segment of the population, the well-off self employed crowd with the occasional windfall that could not document its income the same way salary people can.
But the sole fact that these loans did exist led to extensive abuse. When lenders had used up all their ammos on the good segments, they opened these loans to anyone. Fruit-pickers could buy 400K+ houses as long as they could prove they had a pulse.
Same thing with a law that would facilitate the decreasing of a mortgage amount. Buy a house you cannot afford on purpose, declare bankruptcy and see your liability decreased to an amount you can afford.
You get more house for less money. Didn't the legislators learn that the current problem comes from encouraging bad behaviour? Live within your means, save all you can and if you fail to understand that, be prepared to suffer the consequences.
This is a "panic button" law and I applaude its shelving.
Posted by: San FronziScheme at May 7, 2008 5:24 PM
its a contract between the owner and the lender. i have the right to ask the lender to reduce my mortgage or i walk away from the house trashing it to pieces. the bank has an option of working with me or tell me to go to hell. either way its between me and the lender.
How is this different from the "debt" relief solution where someone works with the credit card companies to reduce the debt and pay pennies on the dollar?
In the past one could not simply walk away from a credit card payment, but its totally possible with the house. I wonder who would have to pay the property taxes when the owner simply stops paying the mortgage?
At any rate, the government should not be involved in making regulations.
Posted by: misha at May 7, 2008 5:37 PM
But reducing the amount of the loan is one thing, reducing the rate is another. Right?
Posted by: fluj at May 7, 2008 5:37 PM
All politicians work for themselves. Bernie is trying to help friends who financed his campaigns. Check the list of contributers for Bernie..you will know..
As far as McCain/Obama/Clinton is concerned, I think all of them are same. I am a social democrat and a fiscal conservative(just to put it out there). I wasn't going to support McCain because of his war policy(thats the only issue). He is as much of a social democrat as hillary or Obama, but fiscally more responsible than both.
Seems like economy is taking over war for most of the americans now....
Posted by: SFwatcher at May 7, 2008 7:07 PM
How can someone as smart as Frank propose something so stupid; and how can someone as stupid as Bush suddenly be smart enough to threaten its veto?
Posted by: Debtpocalypse at May 7, 2008 7:37 PM
This is a bad plan Government should stay out of this.
As to modifying loan terms it is done quite often. Has no on here heard the term "work out"? Banks have a fiduciary responsibility to their shareholders; they are not in business to make moral point or uphold the “societal virtues” of adhering to a particular contract. If it makes more sense for a lender to modify a loan or even forgive principle they should do so.
Posted by: jimmythekid at May 7, 2008 7:48 PM
What amazes me is how little there was there, yet how much heat and vitriol was generated. We might yet see RTC II, but this was not that. This would have represented something like a few months in Iraq while mostly being about principal reduction for what are known to have been inflated prices. I'm not for this, but all the gloomy rhetoric about it rings false. The housing debacle cannot be bailed out, especially not with such a tiny bucket.
Blaming Obama for what Barney Frank does is kind of over the top. Boston politics never had anything quite like the Chicago machine system that Obama emerges from, and Volker who advises him isn't easily lured by foolishness.
Posted by: Mole Man at May 7, 2008 7:55 PM
Anyone noticed it's election year? Housing Bill, Gas Tax Holidays, Free Ice Cream, you name it.....
Posted by: anon at May 7, 2008 8:12 PM
Bush is probably not as stupid as he looks & sounds. He did, after all, become president somehow... try and think objectively (regardless of your political leanings) about the hurdles that someone would have to overcome to get that job.
Its a non-trivial process. Just ask John Kerry!
Posted by: Jimmy (Bitter Renter) at May 7, 2008 8:29 PM
You're right: it's impossible for Bush to be as stupid as he either looks or sounds. Thanks for your insight.
What ice cream, and where do I get mine?
Posted by: Debtpocalypse at May 7, 2008 9:58 PM
Finally, a voice of common sense out of Washington. Who would have thought it was Bush?
I'm surprised our illustrious Democratic congressional leadership hasn't passed a bill mandating that housing prices can only go up and that the federal government will guarantee inflated housing prices forever and ever.
Posted by: Neezer at May 7, 2008 10:24 PM
From the comments this sounds like a hot bed of market fundamentalism. In the current crisis that's like spitting into the wind, or, more apropos, it's as accurate as a prediction from David Lereah.
Governments can and do intervene in market systems. There is no such thing as a market without constraints defined by and operated by governments. Law is not created by the natural functioning of markets. So get over your 'high dudgeon' and look at the specifics.
The merits of this proposal depend on the magnitude of the problem. Say, 15% of American mortgage holders are underwater in a year. It's possible the effects are so dire that without measures like this you folks would be in a bread line. Bernanke seems to think so. Who has a better sense of the stats, you, or Ben?
Posted by: dissent at May 7, 2008 10:26 PM
Who is more at fault, the fruit picker who bought the house for more than he should have when real estate always HAD gone up and you really could refinance if you needed to, or the guy who gave the fruit picker $400K, when real estate HAD gone up and the fruit picker would probably just refinance and you'd get your money back?
So both parties acted reasonably on the information they had at the time. The investors were more sophisticated, but they literally could not stop the ponzi scheme they created without taking the blame for killing it. But now there is a loss and who should bear that loss?
Under the deal the parties made at the time, the lender always bore the ultimate risk, because the law says you can walk away, but he had the threat of damaging the homeowner's credit rating AND losing the home. Thus, a homeowner very much underwater would walk, but a homeowner a little underwater would not.
That was the original deal, and the lender set the interest rate based on it, and all homeowners, past and future, get a lower interest rate because usually only a smaller fraction of homes are badly under water. The vast majority are not significantly underwater - enough to make it worth the damage to the homeowner's credit rating.
If you force such a lightly underwater buyer to keep the home and maintain the payments, then the loss is borne by the buyer, who is usually in their twenties, thirties or forties. Otherwise, the loss is borne by the lender, who are all, in the end, owned by individuals. Those individuals are frequently pension funds or investors, owned by people primarily in their fifties or sixties, because those people have frequently amassed the savings that they invest to ultimately get loaned out.
If you screw the older people, they have no time to make that money back. If you screw the buyers, they do. They have 40 years of living frugally to get back to where they would have been.
Furthermore, if you make it easy for the owners, they might be more inclined to be careless the next time. That in itself isn't a problem for anyone but that person, but again the cost of their irresponsible behavior is ultimately borne by the investor, so he would compensate by increasing the interest rate he needed to bear the now increased risk.
But only a fraction of the people would benefit, and everyone would pay. So people who would have acted prudently and responsibly have to pay more than they would have otherwise.
So, through no real fault of their own, society is better off if the marginally underwater homeowners stick with the deal they made. They can make the money back, and future home buyers won't have to pay more. People who really made a huge mistake get a pass on some of the cost of that mistake, which they can push onto the investors, who did not adequately protect themselves from such a loss.
And remember, someone would have to step up to fund the new loans. Who the hell would do that when everyone just got a get out of jail free card. This sounds as dumb as the "Super SIV", where the banks were supposed to throw all of their trash loans into one giant SIV and someone was supposed to be dumb enough to pay full price for a big box full of trash.
Similarly, these "homeowners", bad as they already were, weren't going to get a free pass from a new set of stupid investors: no one would refinance them on a wink and an implied promise of a government guarantee.
I pointed out that the investors were not going to take the conforming rate for conforming jumbo loans (when everyone just assumed that they would) and so far that program has been nearly a complete bust. Wait until the people who refinanced under THIS program got hit with a 19.2% interest rate on their "new" loans. A whole pool of people who wouldn't honor their promise. Wow, how much money can I hand them - sounds like a great group of people -- not! It wouldn't have helped a thing.
So the whole idea is stupid, inefficient, and unworkable. And those are its good points.
Posted by: tipster at May 7, 2008 10:27 PM
So this is Barney Rubble!?
*puts the Flinstones slash fiction down. Scratches head*
Posted by: vox at May 7, 2008 10:33 PM
If we don't limit the damage now, there is a much bigger bailout of Fannie Mae not too far down the road. Bush has royaly screwed us all with his "Ownership Society" and the other unwise fiscal moves he has made. It will be up to President Obama to have to clean it up. Unfortunately, we will all pay the pain in higher taxes and a lowered standard of living.
Posted by: NoeValleyJim at May 7, 2008 11:08 PM
As SFwatcher suggested, I checked out Barney Frank's top contributors: State Street, UBS, JP Morgan, and Fidelity. Yeah, he's only watching out for the little guy with this ridiculous scheme. This was one of Bush's better moves. Total gridlock in Washington is our only hope.
Posted by: FSBO at May 7, 2008 11:32 PM
What we really need is something like Roosevelt did in 1933 with the Home Owners Loan Corporation, which refied a bunch of homeowners in trouble and kept them in their homes, making payments. Read your history books.
I suspect we will have something similar again, before all is said and done with. This Frank bill is just a spit in the bucket.
Posted by: NoeValleyJim at May 7, 2008 11:48 PM
Moody's Economy.com estimates that one in roughly 12 American families with mortgages ... already owe more than the current value of their homes. They are said to be "underwater." The firm predicts that by early 2009 nearly one in four, or 12 million, homeowners will be underwater. Most will continue to pay mortgages on time. Many won't, and are at risk of losing their homes. ...
No one in Washington wants to help the "speculators" who bought homes they don't live in or those who lent to them. And there's broad agreement that those who bought more house than they'll ever be able to afford are going to lose out. The debate revolves around the "preventable foreclosures."
The Treasury's approach is to cajole and prod mortgage servicers to cut interest rates or extend repayment times. ... Messrs. Frank and Bernanke say that's not enough.
Mr. Frank would offer lenders and eligible borrowers a deal: If the lender agrees to cut the debt so the homeowner owes no more than 90% of the house's current value, and the Federal Housing Administration ... determines the homeowner can afford a new loan, then the lender gets rid of the mortgage and the FHA insures a new mortgage for the remaining balance.
The lender takes a hit, but gets rid of the risk that ... the borrower will default on a new loan; the government picks up that risk. To create a cushion for the FHA, the lender has to chip in another 5% of the property's current value. The homeowner has to surrender some profits, if any, to the government when the house is sold. (NYTimes)
This sounds pretty reasonable to me.
Remember: Moody's says one fourth of homeowners may be underwater in a year.
Posted by: dissent at May 8, 2008 9:40 AM
tipster says So both parties acted reasonably on the information they had at the time.
No way. This was a morass of fraud and stupidity from end to end. Risk was poorly handled throughout. By the time this is done much of what had become common will be made illegal and enforced with accounting standards and serious punishments.
Posted by: Mole Man at May 8, 2008 9:44 AM
Ah yes, "Remember Moody's," the company (among others) that so accurately rated the risk of subprime mortgage backed securities in the first place.
The discussion of mortgage pool "Subprime XYZ" is particularly choice.
Posted by: Dede at May 8, 2008 9:56 AM
"Moody's says one fourth of homeowners may be underwater in a year."
And this affects me how? Seriously, why is this a national issue suddenly? I suspect 95% of Americans are underwater in their cars. Yet they still seem to pay their car loans. Shelter and transportation are both basic needs.
The home values of yesteryear were an illusion, folks. Plain and simple. That perceived wealth never existed. Any attempt to try and support those prices would either need to a) create phantom wealth from somewhere and pump it into another bubble, or b) steal existing wealth from other sources (i.e. prudent savers like me and many of you). Each option is a bad idea and just slows/delays an inevitable correction.
Not to mention the redefault rate on loans that have been worked tends to run higher than initial default rates. So you cut 10-20% of somebody's loan balance, and then what? Prices magically stop falling? Better hope so, otherwise they default again in year when prices fall another 10%. What do you do then?
Not to mention the adverse incentive created by any such program. Nearly every homeowner would petition to have their mortgage reduced on these grounds, which would push prices even lower. If the Dems take the White House and this thing has a chance of passing next year, I'll gladly pay $800K for a condo (with minimum cash down) and then lobby to have my loan balance shaved to $640K a few weeks later. Then I'll sell it for $750K and cordially thank all of you for putting your tax dollars in my pocket, while I play the victim in front of the camera. What a country!
Posted by: Dude at May 8, 2008 10:28 AM
"Moody's says one fourth of homeowners may be underwater in a year."
And this affects me how? Seriously, why is this a national issue suddenly? I suspect 95% of Americans are underwater in their cars. Yet they still seem to pay their car loans. Shelter and transportation are both basic needs.
Sorry, I assumed someone posting here would know something about real estate.
Mortgages are non-recourse. Car loans are not. Look it up.
I know it's challenging to grapple with the complex ways of our economy, especially it's inter-connected nature. But an ideological "we're all on our own, or should be" rant is an inadequate response. Reality matters. Ideological short cuts need to be discarded.
When a home goes into foreclosure, the negative effects extend beyond individual families losing their homes to surrounding neighbors and the wider community. Published research by Immergluck and Smith (2006) indicates that a foreclosure on a home lowered the price of other nearby single-family homes, on average, by 0.9 percent. They also reported that the downward pressure on housing prices extended to houses that sold within two years of the foreclosure. Further, Immergluck and Smith found this negative impact was cumulative; that is, each additional foreclosure on the block lowered values an additional 0.9 percent. The impact was even higher in lower-income neighborhoods, where each foreclosure dropped home values by an average of 1.44 percent.
Of course that's just a taste of the ramifications of a tsunami of foreclosures.
Posted by: dissent at May 8, 2008 1:24 PM
Purchase money mortgages are non-recourse in California, but I don't think that's the case nationwide. Refis and "equity liberation" loans are recourse even here.
People are walking away from their mortgages because property values have fallen, not because they can't pay them. It's called a "ruthless default" in industry parlance - maybe you should look that up. Renegotiating loans will not solve the problem. Ask Jose Canseco if you don't believe me.
Unless Barney & team have a plan to keep home prices artificially inflated in perpetuity, any plan like this is a huge waste of time and will just delay the inevitable at taxpayer expense.
Posted by: Dude at May 8, 2008 1:57 PM
Are you people serious? Bush has common sense? You are not for this bill? Everyone in the next 2 years I predict will lose 50% in their homes. Why? Because over half of all mortgages were ARMs. That means the you are calling half of the country stupid because they bought a house with an ARM. Foreclosures are going to skyrocket in the next 2 years and we will see how much common sense you people think you have when you lost 50% of your home's value. They only reason Bush doesn't want the housing bill to pass is because it makes Republicans look bad and Democrats good and he knows if it passes the economy will recover because of it and that means Democrats will look even better. There is no common sense here, just the same political games that are being played that are deystroying are country.
Posted by: Jim at May 8, 2008 3:10 PM
Lower-priced market rate housing is a GOOD thing. Is everyone else crazy? Why do we need to prop up housing prices? Whether housing costs come down by foreclosure or other market forces, I couldn't care less, as long as they come down. "Saving" the housing market is a short-term gain in exchange for long-term economic pain and a lower standard of living. Are we going to be happier when the average American is paying 50% gross income for housing? How are people going to enjoy life, take vacations/tour the world, save for retirement, or anything else when we engineer permanently higher housing costs?
Posted by: Rudolf Lightcap at May 8, 2008 3:32 PM
I agree with you Rudolph that prices coming down is good in a way. It's good if you don't own a home yet. But for people who have saved and invested so much money into their home and then have that money wiped out is an insult. Foreclosure is not the way to bring down home prices, people's credit will be ruined at basically no real fault of their own. This bill will prevent the credit from being ruined, and give people a choice to either sell or remain in the home. This prevents banks from having to sell homes to the greedy investors that put homeowners in this situation in the first place. If you read the bill the home is refinanced at 85% of the home APPRAISED value. That means housing prices are not going to go up because of this bill. The prices will simply stablize. And that will be when the homeowner or lender voluntarily agree to participate, which could be another year or two after this bill passes. After housing prices bottom out. Say 50% of the value.
Posted by: Jim at May 8, 2008 4:44 PM
House passed the bill but without even enough votes to overturn the promised veto by the President.
Posted by: Michael at May 8, 2008 4:58 PM
Rudolf, why lower priced market rate housing is a good thing? Lower prices will simply increase the demand and that in turn will bring the prices up agian. Everyone i know who bought to make money sold at the peak or near peak. Just like sharks they wait for panic to escalate [similar to post 9/11 panic] to buy for cheap and sell for high. Middle class will get screwed one way or another. People who make honest living will get punished for their desire to live in a home.
I am not saying the housing prices should be controlled by anyone, but if there is a way to regulate the housing market I would suspect it would be done by lenders. What happened to issuing loans upto 3x family income? If no one can affort a house the prices should and will come down, but as long as there is a sucker who can get access to funds to buy a house - buy the house.
This country has wierd definition of credit. what happened to the old fashion cash and budget?
we are simply doomed. and that is all we pass on to next generation. at least i will be fotunate to witness the fall of the great empire. its sad.
Posted by: misha at May 8, 2008 5:02 PM
Jim, I understand your comments on the mechanics of the bill, but the main problem I have is that I just disagree with the overall intention of the legislation. It is one of the many plans I have seen that call for giving risk to the taxpayer, demolishing the housing supply, mandating easier credit terms, Super SIVs, etc. all in the name of maintaining higher housing costs. I believe that high housing costs are a bad thing, and that "stabilized" high housing costs should not be considered a public good. This shouldn't be so controversial.
I have sympathy for those who didn't speculate and are going to lose equity in their houses. The next decade or two will not be kind to many. However, at the same time, anyone who paid any attention to basic investment advice knew that relying on one single family house(!) to pay for one’s retirement was risky and that one should diversify his or her investments. If the market continues to correct, making housing costs lower, these people will be forced to work longer in life and scale back their retirement plans. I don’t like to say it was their fault, but at the same time putting all their money into housing was a mistake and ultimately you should be responsible for your actions. This is the "short-term pain" I was referring to. Symptoms of this come in the form of foreclosures and credit problems for some and lower standards of living and delayed retirements for others. As this current generation helped create the mess, I feel it only makes sense for them to reap what they have sown instead of guaranteeing a lower standard of living for all future generations (I referred to this as "long-term economic pain") in the form of higher housing costs and/or higher taxes.
Misha, I don't quite understand your economic theory - prices should stay high because if they are ever low they will just be high again? We should keep the bad outcome because there's a chance the bad outcome could happen again otherwise? I'm not as pessimistic as you about the inevitably of high housing costs for the nation. I think the lessons learned about debt and savings during the Great Depression helped control speculation and greed in later years. Maybe those lessons wore off with time as those who lived through that time died off and that's why we are in our current conundrum.
By the way, the 3x income lending standard may come back as sentiment among lenders swings that way. The main impediment in the way of strict lending standards returning is Congress and the real estate industry - bills such as Frank's seek to find ways to keep median housing prices high using government sponsored lenders and thus many multiples above the median wage.
Posted by: Rudolf Lightcap at May 8, 2008 6:22 PM
There was certainly a huge misallocation of capital throughout the current housing runup and repairing that error is going to cause some discomfort to many. But just letting the housing bubble bring down the wider economy is not really in anyone's best interest, except for the possibility of a few vulture investors, like misha alluded to.
Spreading out the pain over a decade or more will allow people to adjust their lives more easily and even more efficiently than just forcing 10M foreclosed homes on the market all at once. People can find jobs closer to home, start driving smaller cars, and cut costs in other ways to make ends meet. In fact, it is probably more fair to try and keep people in their homes and mortgages: they are the ones who signed the deeds, we should try to get them to pay the consequences as much as possible. If we make the consequences too harsh, or impossible, people will only walk away, since they will have no other choice.
All those empty houses are going to cause the banks major trouble, worse than they are already seeing. And if banks start having major trouble, then businesses will not be able to get loans and we risk a spiraling economic problem. Furthermore, even those who have been responsible and signed loans they could afford, are going to have to live in blighted neighborhoods, due to the presence of so many empty homes.
I don't know if the Barney bill is the best possible one, but it is working in the right direction.
Posted by: NoeValleyJim at May 8, 2008 6:44 PM
Obviously the housing crisis is not not effecting Misha, so she doesn't care. Or a least she thinks it's not going to effect her. Let's just get it out in the open. How much do you make a year Misha? What is the price of your home? Where do you live. What the rich doesn't realize is that it will effect them. I live in Las Vegas and work in Real Estate. And even the Million Dollar homes are losing 1/3 to half of value out here. Once you lose your retirement, your kid's college fund, etc. We will see how much you're beliefs me to you. I beleive that taxes are to help American citizens, not corporations. And the Bush / Reagan trickle down economics is B.S. How many jobs have been lost? And now we are continuing to bail out the banks and lenders, but not American citizens? Give me a break, you can shove your beliefs up your you know what?
Posted by: Jim at May 9, 2008 9:23 AM
Ahh yes I needed to diversify. That's what I should have done. I should have just kept renting because obviously buying a house is risky business. Even though everyone is told buying a house is the way to go. When I bought my house it was at the low end of housing prices. I could've rented a house for about the same as I bought my house. It's my first house and I have no equity in it. And instead of breaking even, which is why I bought it, I lost over $100,000 so far in value. I didn't think I was going to make money, I thought maybe I wouldn't be throwing away money on rent. And now I'm called a specualator, by Republicans. I'm a speculator for buying a home. Housing is a basic need. Maybe you have a lot of money to diversify Misha, but I don't. I was just buying a home so I would have a place to live.
Posted by: Jim at May 9, 2008 10:33 AM
Jim, if you bought it to live in, then you haven't lost anything yet. If you financed with an arm and bought with nothing down, then you did something you shouldn't have. I don't feel sorry for you at all.
Posted by: darnit at May 12, 2008 2:00 AM
I can't beleive I'm actually responding to this moron that says he/she doesn't feel sorry for me for buying a home with an ARM, but I have to because of the ignorance. First of all I think the statistic is like almost half of the United States bought homes with ARMS in the past few years. If money was put down, then that money would be lost. Thank God I didn't put my life savings into my home. Now I can just walk a way and lose nothing, other than a mark on my credit. Which is what everyone will do in the next couple years. Which in turn will make everone's home prices fall even more. So no, don't feel sorry for me. I feel sorry for everyone that actually has money invested in their homes. By the way I'm at interst only at 4.25%, basically I'm at a rental payment anyway. Since I lost $100K in value (almost 50%), there is no way I'm going to keep it, unless the $100K is written off by the lender. The Barney Frank bill does this for the seller and in turn guarantees the rest of the loan will be paid to the lender. If I could get the loan written down, I could at least sell it without a big loss and no ding on my credit. This is why the bill will not cost taxpayers $300 billion, but only a couple billion. I think that's less than what we spend for a day in Iraq. The bill is a good bill and will prevent the wave of foreclosures that will happen in the next couple years.
Posted by: Jim at June 13, 2008 10:33 AM
Jim, once your I/O teaser rate expires, you should just walk away. The lender tried to scam you with this loan package, so don't be a sucker. Even with the sky-high foreclosure rate, I'm actually stunned that so we haven't seen more recent buyers just bail on what is now a significantly underwater asset. That is the sensible move. You could rent an awfully nice place with the $100,000+ you'll be sticking the bank with.
Posted by: anon at June 13, 2008 10:43 AM
Also, I'm not missing my payments. I bought a home I could afford. If I would have bought this home with a 30 year fixed and put 15% down I would have lost my 15% down ($32,000) and still be in the situation I'm in now. My lender will agree to keep me at a lower fixed rate even after my ARM expires. I just don't think I will keep the home. I will take the credit ding, like alot of people will and go bank to renting. After this fiasco, who will ever trust the housing market again?
Posted by: Jim at June 13, 2008 10:52 AM
Posted by: paco at June 13, 2008 11:20 AM