Pop Quiz: Including Homeowners in the Bailout?
Do you think homeowner relief from foreclosure should be included in the mortgage bailout package? ( polls)
Need a Hand?
Your Next Project Starts with BrownstonerDo you think homeowner relief from foreclosure should be included in the mortgage bailout package? ( polls)
Need a Hand?
Your Next Project Starts with Brownstoner
“Does that mean I can pretend that I can’t pay my mortgage and get a better one?”
Yes.
Liars and cheats will definitely be able to get their hands on some of that $700,000,000,000.
Probably best to just start with that as a given and then go from there.
Efforts should certainly be made to verify income of people asking for help and it wouldn’t hurt to put some nasty penalty clauses in the refinance contract (e.g., penalties for selling in the next 5 years, make it very hard for the loans to be wiped out by bankruptcy, increased taxes on the property when it is sold, etc.), but, at the end of the day, someone will figure out a way to pocket some of the money.
Pretty much any time the govt. gives money away you can be sure that will happen.
NSR, I’m not sure how you’d go about doing something like that. Does that mean I can pretend that I can’t pay my mortgage and get a better one?
slopefarm — I hear you.
If the govt. is going to give the banks $700,000,000,000, the banks should be required to make good faith efforts to negotiate new deals with homeowners (assuming they bought the property as a primary home and would like to keep living there).
Giving the current homeowner a new mortgage (a sensible, fixed rate, 15 or 30 year mortgage) for something close to fair market value for the property is better for the bank, homeowner, and society than a foreclosure.
The bank may have to write off 20-30% of the original mortgage, but they’ll have the $700,000,000,000 to help ease the pain for them.
NSR,
Didn’t mean to scare you too much yesterday about homeownership on the other thread. You, too, can learn to flash and caulk. I hope circumstances and market conditions allow you to take the leap when you are ready (and that you find a house you like).
I agree there is nothing moral about the bailout. That’s my complaint. I know the markets, and all of us, by extension, need some form of emergency response, quickly and badly. But that also creates leverage for the government, which government would be remiss if it didn’t use for good. That leverage could be to exact reforms and it could be used to help people. So I think the debate is simply whether that leverage should be used to help prevent foreclosures. I think it should, for the reasons I set forth above. There were enough unsavory practices on the lenders’ side to make me willing to throw all homeowners facing foreclosure under this particular bus. Perhaps those that materially lied in their applications should be exempted. And perhaps the degree to which a given mortgage can be revised should be circumscribed. But I think it would help not only lots of individuals in need, but also the communities in which they live, if we could use the political leverage of the bailout to prevent some foreclosures.
I voted “not sure.” Maybe I should have voted “sometimes.”
If a homeowner was able to make payments at the “teaser rate” but is not able to at the new higher rate, banks should be forced to give a market-based rate appropriate for the riskiness of the borrower rather than foreclosing. IMO, teaser rates were extremely misleading, bordering on fradulent. Lenders should do the right thing now.
But if a homeowner is unable to make payments on even the introductory rate, then the bank should not be forced to make a deal with that deadbeat.
On the other hand, in some markets, it would be to the bank’s advantage to make a deal, even with borrowers tremendously overextended. It is not in the bank’s interest to own distressed properties in collapsed markets like some in Nevada and California. Banks may prefer to give 40-year terms or make other extraordinary concessions. During the Texas recession in the early 80s, banks pretty much stopped foreclosing for a few years. Once things got better, they started making deals and foreclosing again.
The other complicating factor is that many of these defaulting homeowners are now in a negative equity situation, whether or not they can afford the monthly mortgage payment. In some markets, even if the homeowner put down 20%, that 20% may have evaporated in these last months. Nobody wants to hold that bag.
That was an unfortunate typo northsloperenter. I was NOT trying to imply that you’d ranted. Sorry!!
I agree with you to a point Northsloperanter. I have seen my “smart” friends make very foolish decisions with regards to finance. Most of them only hear what’s pleasing to them. These are the same friends who continue to sink deeper into credit card debt because they think that if they continue to switch the debt from card to card (with the 0% interest for the first 6 months for balance transfer offers) that they’re getting over on the CC companies. Are they choosing to look the other way? In my opinion yes.
When we first went shopping for a mortgage the broker was VERY eager to sell us an exotic mortgage. We actually got pre-approved for double what we end up paying for our home. We were also offered the ARM’s, Interest First, and low/no-money down mortgages.
The difference was, before we even considered buying we did a LOT of research and realistic math. We could have been in a home YEARS before if we had bought into the sales pitch. We held off and saved and saved and then we saved some more (just in case). When we did buy we didn’t overextend ourselves. We bought in the Jersey City brownstone area rather than Brooklyn. Why? because even though the mortgage co. said we could afford it WE knew we couldn’t. I’m on the same page as I haz two toilets…
“I support only doing what is required to keep our economy from completely collapsing, punitive action against those who caused this crisis, and letting the rest of the cards fall where they may.”
AS far as I understand, the problem is that many homeowners can’t be helped – most troubled mortgages are the ones with adjustable rates and most of those were the sliced and diced ones, so can’t be put together again to lower interest rates etc.
slopefarm,
I agree that it doesn’t seem moral to bail out the bankers but not the homeowners, but there is nothing moral about this.
We are bailing out the bankers because otherwise we could be risking massive stock and bond losses (aka, pension and 401K losses) as well as a very severe economic downturn (with layoffs, lower tax revenue, 20 years of darkness, dogs and cats living together, etc. etc. etc.).
Basically, the finance industry built a big, giant, but shoddy dam up the river from where we live. The dam is starting to fall apart, and they can’t fix it.
We have two choices: go fix the dam for them or get flooded.