Pop Quiz: Including Homeowners in the Bailout?
Do you think homeowner relief from foreclosure should be included in the mortgage bailout package? ( polls)
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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
The banks bought the paper for sure, but it is the brokers and appraisers who bent the rules. They need to go to jail.
I feel compelled to disagree with much of the above comments. The banks (Main Street and Wall Street) took incerdibly irresponsible financial risks. The instruments got so complicated and layered that some of the best financial minds can’t figure out just how much bad risk there is in any of them. Yet here comes the government, like a sponge, to clean up all that bad risk and take it off of the banks’ books. Whew. Glad that’s over with, now the markets can return to normal.
Once that’s done, however, foreclosures on mortgages backed by these instruments will now be executed, in effect, to repay the government. Our need, as taxpayers, to be reimbursed will be the force that is driving the foreclosures. We can argue ad nauseum about how many people took on too much risk versus how many were mislead about the loan terms. There is no question it was the wild west for a while. But these homeowners were no more irresponsible than the financial sector. And there is no question about the human cost. So if we are going to get the treasury into the business of ameliorating irresponsible risk, we shouldn’t leave the at risk homeowners out. To do otherwise seems a bit morally dubious.
I know you finance guys will take big issue with me and tell me I don’t understand the markets. etc., but that’s the way I see it.
That’s the thing though, these mortgage packages weren’t technically fraudulent – at least not any more than the people who very willingly lied on their applications. Besides, I’m guessing an ARM with 5% down can work for quite a few people, e.g. law- and med- school students.
Anyone who signed up for an ARM with 5% down was a volunteer.
I vote No for buyouts, but for criminal charges against the bankers who knowingly sold these fraudulent mortgage packages.
“Even when you try and explain these very basic things to them, and even do their math and research for them (my brother and his wife), and even when you explain to them that there is no magic in the world of finance… they still go and take out a neg-am mortgage.”
Which is exactly why these industries need to be more tightly regulated.
Everyone hates to say this, but a large enough percentage of the American public is stupid enough or lazy enough to get into the biggest financial commitment of their lives without understanding what they have done.
About a year before I ever heard the word “subprime”, my sister called me because she and her husband were getting this “great chance” to get a no-money-down mortgage that would be less than their monthly rent (which was pretty cheap).
My parents thought it sounded great and were pressuring her to do it, but she was really confused and worried.
The more she told me about it, the fishier and fishier it sounded. I convinced her it was a bad deal and that she should wait until she had enough money saved for a big down payment. If she’d taken it, she would have bought a no money down property in 2006, and if she didn’t ask me for advice, she probably would have taken it.
My sister and her husband are fairly smart people, but like so many other people, they are ignorant about finance and can only really understand “monthly payment”.
There is no reward for being frugal and not buying. no bailout, no handouts, no tax deductions for mortgage interest. No reward except peace of mind.
This is so difficult. TownhouseLady, I have very similar sentiments. Where is MY reward for NOT buying because I just couldn’t afford it (in my world, “affording it” means 20% down, a 30-year fixed term mortgage, and the ability to be a responsible homeowner — and have a life — beyond paying the mortgage) and refused to enter into a “funny money” mortgage. At the same time, I have one friend who made a series of foolish decisions and is now 85K in credit card debt — AFTER selling her house. Another friend who wants to move but can’t because she can’t sell her house. Another friend who can just make the payments on her house but can’t afford the new property taxes. When I talk to these friends, my heart breaks. But when I pull back and look at the larger picture, 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. I survived growing up in this city and going to public school in the ’70s, I feel confident I can ride this out too.
Good luck everyone.
Nice and thoughtful response, BrooklynIsHome. Unfortunately, it doesn’t change the fact that this mess was created as much by our irresponsible action as it was by the current administration’s blatant incompetence. I really can’t feel bad for people who made a 30-year or so long commitment but got too lazy to open up Excel and check their math. Even when you try and explain these very basic things to them, and even do their math and research for them (my brother and his wife), and even when you explain to them that there is no magic in the world of finance… they still go and take out a neg-am mortgage.
No, bailouts will just encourage the same type of behavior that got them into this mess.
I agree with all your points suburbandude except I don’t have sympathy for people who do “not understand a variable rate mortgage.” Anyone who has the privelage to buy a house and get a mortgage should do their due diligence and read the fine print. I guess the only people I feel bad for are those who suddenly lost their jobs and ended up in a situation where their house would not sell but I imagine this is not the demographic we are really looking at.