Specific issue: Mortgage bailout

[Soph the vet]

According to the new rules I believe we can discuss this. Is home ownership a right or a privilege? My dh and I did not buy our first house until we were both 31 and could afford >20% down. Our mortgage was less than 25% of our income. We have never missed a payment and we are thankful it is our only debt. We are a one income family really because I only work 3-6 hours per week. Dh has a typical middle income wage.

I am upset that either through my tax dollars or through coming inflation due to the Fed printing money, I will be paying for mortgages that should never have been written.

Disclaimer: I am not talking about the catastrophic situation in which one spouse suddenly dies or becomes disabled and unable to work and now they can't make mortgage payments. I really believe the instance of that circumstance is the exception, not the rule. Most of these foreclosures are irresponsible financial decisions.

[Merry]

being a target for crime. We do need to do something to make it possible for the people to remain in their homes.

[TXMomof4]

We're quickly getting to the situation we were in in Iraq. No matter who is to blame for how we got here, now we have to figure out what to do. Obviously, no one agrees on the right course of action to fix this. There are two completely opposite sides, and a million in the middle.

 

I don't even know what I think about how to get out of the mess. Obviously, I don't even own a home, so it irritates me to have my tax money paying mortgages. On the other hand, I'm sure there are people who are innocent simply through their own ignorance and I don't want them homeless.

 

It just all makes me sick.

[Nestof3]

No, I don't think it is the gov't job to bail out mortgages. For one, no one should ever assume that houses always increase in value. Two, those who move frequently should really not buy a house if they cannot afford to be stuck with two mortgages.

 

For those who wanted a McMansion, they should have been smart enough to be able to afford it and also pay it down quickly. It seems the more money people make, they just keep buying bigger but not being smart about it. If you make a lot of money -- enough to make more than one mortgage payment, you really should be paying ahead on your mortgage. Don't people ever stop to look how much they will be paying on their mortgage when it's all said and done?

 

I do think much of the "crisis" is due to the "gimme more" mentality. Sure, there are some catastrophies, but we've seen only the gimme more in our personal interactions with people.

 

Also, people should never buy into those stupid pay no interest now and ARMs. When the rate was down, how many people paid ahead for the day the rates went up?

 

No, when we've spent our years being content in our sardine can, I don't see why I should be bailing people out who just had to have more -- more house, more car, more kids, whatever.

 

We got to a place where we could "afford" to buy more house. We would have had to take out a 30 year mortgage, but we could have done it. We'd love more space. But, we didn't want to count on the future -- assume anything. We would rather play it safe than sorry. So we stayed in our 1100 sq ft house. We didn't want to assume that his income would stay the same.

Edited March 10, 2009 by nestof3

[hsmamainva]

I also don't believe that we should bail out those who intentionally knew they couldn't afford the house that they bought. I don't believe they didn't know what they were getting into. They explain it to you, in black and white. They tell you your interest rate, loan payments, etc., right at the time, not to mention the fact that you signed your name on a hundred different papers.

 

This is directly impacting us, as my husband is self-employed. We've always received no doc / stated income mortgage loans. Those are now non-existent, because people were abusing them. There was an article in the Washington Post about a McDonald's employee, who made $35,000 a year, receiving a $500,000 mortgage via a stated income / no doc loan.

 

Because folks abused them, we can't get a mortgage, even with 20% down (which we have available). So we're staying in our current home until the situation changes, even though we would love to be able to move.

[Nestof3]

Kelly,

 

Can you not show your W-2 as documentation?

[hsmamainva]

Kelly,

 

Can you not show your W-2 as documentation?

 

He doesn't have a W-2. He's self-employed. He owns his own company. What we've always shown before was the business tax forms that we've filed. But now, they won't accept that as personal income because they see it as business income, if that makes sense.

 

There's a specific form number, but I don't remember what it is off the top of my head.

 

What he has to do now is to specifically draw a salary...which we could do, but they want to see 3 years of income now. So even if he starts to draw a specific salary, it'll take 3 years before we can get a mortgage, unless they return the stated income loans.

 

What they *should* have done, in my opinion, from the beginning, is that if you're saying you're self-employed, you should have to verify it, be it with a business license, contractors' license, etc. Then those who wanted a stated income loan to hide their true income wouldn't have been able to abuse it.

[Jumping In Puddles]

I am against it. It is rewarding bad decisions! I understand that some people were preyed upon... I guess this is a good lesson for them. It's your money, your future, do your research.

[Nestof3]

Kelly,

 

I sort of forget how we did things when my husband was a sole proprieter. Being incorporated is so much easier to us.

 

I cannot remember what we showed back when we refinanced to a 10-year mortgage.

 

I agree, because of so much abuse regarding stated income, it has made things difficult now. I wonder what a solution would be for self-employed people?

[Sahmqui]

Homeownership is a privilege. At this point, we need to have a solution because this crisis affects everyone, it puts us all in the red one way or another.

 

We came blog, email, post and blame, but the truth of the matter is everyone is to blame for this mess (IMO):

Government: for allow the banks to do this with no real regulation

Banks: for these mortgages that was to trap the buyer and make them richer

Consumers(of the un-traditional mortgages): for not having COMMON SENSE (never bite off more than you can chew) mortgaging million dollar homes when they could only afford a 300,000 dollar home

Parents/family/friends of these consumers: for not talking sense into these people and teaching them how to budget and do finances.

Adults: for not speaking up to end these credit and mortgage traps years ago(feeling that since you didn't apply for this then it doesn't affect me - will guess what- now it does)

The list goes on (we can post all day)....what we need to talk about is the best way to GET OUT OF THIS RUT and how we can PREVENT this from happening again.

 

Personally, I told DH six years ago that this was going to happen eventually because houses where overpriced IMO and loans (credit) was incredibly easy to obtain(rather you had bad credit or low income). Remember when you went shopping and the cashier constantly asked you to open a pre-approved account to get an instant 10-20% off...LMAO that day is gone.

 

Six years ago we I predicted this, it was because DH want to by a big overpriced home in a secluded pricey neigborhood for DS to grow up in basis on what he could make in the future and what the house would be worth down the road. He said a lender told him he could buy it now with a balloon payment at the end and a cheap payment for the first 5 years and he didn't have to prove his income and no money down. I told DH, I quote "have you lost your mind, if it sounds to good to be true it is". Why would you buy a home that you knew under old traditional lending they would never lend to you because you couldn't afford it. Think a 15 year fixed mortgage with 20% down and the payment with taxes and insurance was less than 25% of your income.

 

With the old traditional lend more than 65% of homeowners WOULD NOT be owners at all. It was hard saving up the down payment only to find that the house that you could afford (under the old traditional rules) was a fruit cup while your peers was living in "MTV Cribs". So I understand how some of these consumers got caught in the snares of the enemy (creditor) - parents didn't teach them better or talk about money with them at all. Maybe they had the American Virsus - the "I want it all and I want it NOW"

 

WE NEED TO RESOLVE THIS and have preventive method in play as well! The bottomline everyone knew in the eyes of the LAW - you signed your name to prove you knew. COMMON SENSE RULE - don't sign anything you don't understand - and they taught you that in school. Just my two cents!

Edited March 10, 2009 by Sahmqui
add my two cents

[Nestof3]

Parents/family/friends of these consumers: for not talking sense into these people and teaching them how to budget and do finances.

 

 

No, I am not to blame. My husband and I do not fall anywhere in your categories of who's to blame. We have taught our 18 year old financial principles.

 

Yes, we have tried to talk sense into some people we know, and they would hear nothing of it. No one wants you criticizing the way they handle their money.

 

Even in our church, people will teach on and on about being quiverfull, how to train children, and such, but no one wants to hear an honest to goodness message about money and its management.

[Julie in CA]

He doesn't have a W-2. He's self-employed. He owns his own company. What we've always shown before was the business tax forms that we've filed. But now, they won't accept that as personal income because they see it as business income, if that makes sense.

 

So you were not keeping the business and personal accounts separate?

[hsmamainva]

So you were not keeping the business and personal accounts separate?

 

Yes, we do, but he doesn't draw a specific salary, as in he doesn't make the same amount from month to month. Some months are better than others, as far as what we have in the way of profit. And some months are lower. That's why he doesn't want to draw a salary. If he has a bad month, then he'll have to pay himself out of the working capital and he doesn't want to do that.

[Jumping In Puddles]

I believe its a privilege, not a right to actually own a home. If you're interested, just look up "ownership society" and it's history with Britain, then the US. Very enlightening.

 

When we were in the process of buying our land last year, the first bank spent over an hour trying to cooly persuade us that an arm loan was the best for us. Very tricky, sounding very professional, yet so deceiving to the point of being liars. They told us no other bank would give us a different loan. Luckily the second bank gave us what we wanted. So I realize it takes two to tango, and many of these lenders were nothing more than despicable thieves looking for easy prey.

 

When my dh and I bought our house, we went with only my husbands income on our application. Sure, we could have gotten a bigger mortgage and a bigger house but my thinking was that someday I would like like to have children and stay home with them. I didn't want to have to base anything we did on 2 incomes. When we did have kids, and we wanted a home equity loan, we asked for 60,000 and they GAVE us 150,000!! No way! We called them back and said we wanted what we applied for and they had to resend us the paperwork.

 

Now if we were greedy, we could have taken some nice vacations or bought a lot of stuff with that money but we were <gasp> responsible.

 

If, like the OP said, if you lose everything because of an unseen medical disaster or death, that is TOTALLY different.

[Margaret in GA]

I think you're just banging your head against the wall when you fixate on who is to blame and who should or should not get a bailout. The fact is that we have to do something about it. My husband and I have been very fiscally responsible over the years... fixing up our own house when we had extra money and time, only mortgaging what we could afford, and of course all the while paying so much in taxes it would make your head spin. I'm as disgusted as the rest of the country about this problem. However, while I think home ownership is not a right, the fact is these homes are there. We have so many empty neighborhoods in our area (brand new houses) it would blow your mind. For years my husband and I kept asking each other "who are these houses for exactly?" Doesn't matter. The fact is, they are there. We can get angry (and should), but if all we do is punish the people responsible, we will inadvertently punish ourselves.

 

 

Margaret

[Sahmqui]

No, I am not to blame. My husband and I do not fall anywhere in your categories of who's to blame. We have taught our 18 year old financial principles.

 

Yes, we have tried to talk sense into some people we know, and they would hear nothing of it. No one wants you criticizing the way they handle their money.

 

Even in our church, people will teach on and on about being quiverfull, how to train children, and such, but no one wants to hear an honest to goodness message about money and its management.

I mean this in a general sense because stats show that 85% (wow) of parents in 2005 did not discuss money management with their children.

 

Also, I stated we as taxpayers need to speak up to our legislation about things that are wrong, immoral and unjust to make things right. The government is only as good as the people.

 

In this country, people (in general) lazily sit back and do nothing when somethings wrong, unjust, or immoral is happening under their nose. It is so easy to talk and not act and that is what millions of American do. TALK - with no action. I know this first hand because I have been "annoying"(per a congressman I didn't elect personally) the representatives of my state to make a law that force food companies to label the foods accurately with all ingredients because of my kids serve allegries to eggs, wheat, milk, etc (not an intolerance but a true hospitalization allergy). People talk but don't act. Just another two cents that I am adding to the pot :)

[msjones]

Homeownership is a privilege. At this point, we need to have a solution because this crisis affects everyone, it puts us all in the red one way or another.

 

We came blog, email, post and blame, but the truth of the matter is everyone is to blame for this mess (IMO):

Government: for allow the banks to do this with no real regulation

Banks: for these mortgages that was to trap the buyer and make them richer

Consumers(of the un-traditional mortgages): for not having COMMON SENSE (never bite off more than you can chew) mortgaging million dollar homes when they could only afford a 300,000 dollar home

Parents/family/friends of these consumers: for not talking sense into these people and teaching them how to budget and do finances.

Adults: for not speaking up to end these credit and mortgage traps years ago(feeling that since you didn't apply for this then it doesn't affect me - will guess what- now it does)

The list goes on (we can post all day)....what we need to talk about is the best way to GET OUT OF THIS RUT and how we can PREVENT this from happening again.

 

Personally, I told DH six years ago that this was going to happen eventually because houses where overpriced IMO and loans (credit) was incredibly easy to obtain(rather you had bad credit or low income). Remember when you went shopping and the cashier constantly asked you to open a pre-approved account to get an instant 10-20% off...LMAO that day is gone.

 

Six years ago we I predicted this, it was because DH want to by a big overpriced home in a secluded pricey neigborhood for DS to grow up in basis on what he could make in the future and what the house would be worth down the road. He said a lender told him he could buy it now with a balloon payment at the end and a cheap payment for the first 5 years and he didn't have to prove his income and no money down. I told DH, I quote "have you lost your mind, if it sounds to good to be true it is". Why would you buy a home that you knew under old traditional lending they would never lend to you because you couldn't afford it. Think a 15 year fixed mortgage with 20% down and the payment with taxes and insurance was less than 25% of your income.

 

With the old traditional lend more than 65% of homeowners WOULD NOT be owners at all. It was hard saving up the down payment only to find that the house that you could afford (under the old traditional rules) was a fruit cup while your peers was living in "MTV Cribs". So I understand how some of these consumers got caught in the snares of the enemy (creditor) - parents didn't teach them better or talk about money with them at all. Maybe they had the American Virsus - the "I want it all and I want it NOW"

 

WE NEED TO RESOLVE THIS and have preventive method in play as well! The bottomline everyone knew in the eyes of the LAW - you signed your name to prove you knew. COMMON SENSE RULE - don't sign anything you don't understand - and they taught you that in school. Just my two cents!

 

I see what you're getting at here, but my opinion is that the blame for the foreclosure crisis falls squarely on the banks. Unless I'm mistaken (and, please, let me know if I am), no one can walk into a bank and force the bank to give them an outrageous loan. The banks handed out the loans knowing that people didn't qualify according to any sensible standard. I don't see where the motives of the loan applicants are relevant. Whether they were greedy or ignorant or simply didn't have enough income, if they didn't qualify, the bank shouldn't have loaned them the money.

 

I don't see how any other individuals are responsible for the banks' decisions. What they should have said to the unqualified was, "no."

[Nestof3]

Also, I stated we as taxpayers need to speak up to our legislation about things that are wrong, immoral and unjust to make things right. The government is only as good as the people.

 

 

I hear what you're saying, but can anyone prove that there was a time parents did teach their children about finances? My dad's parents didn't teach him by words, but by example. He flopped majorly. My parents didn't teach me by either words or actions, and yet I haven't flopped.

 

Did parents ever really teach about these things?

 

Perhaps it is true that the gov't is only as good as the people, and we have a bunch of people unlike me living in this country, because I don't like the way our gov't is heading at all. I agree with very few legislations and haven't found a presidential candidate I would support. I do voice my opinion, I do vote, but clearly there are more people of the other sort or our gov't wouldn't be where it is today.

[Erica in PA]

According to the new rules I believe we can discuss this. Is home ownership a right or a privilege? My dh and I did not buy our first house until we were both 31 and could afford >20% down. Our mortgage was less than 25% of our income. We have never missed a payment and we are thankful it is our only debt. We are a one income family really because I only work 3-6 hours per week. Dh has a typical middle income wage.

I am upset that either through my tax dollars or through coming inflation due to the Fed printing money, I will be paying for mortgages that should never have been written.

Disclaimer: I am not talking about the catastrophic situation in which one spouse suddenly dies or becomes disabled and unable to work and now they can't make mortgage payments. I really believe the instance of that circumstance is the exception, not the rule. Most of these foreclosures are irresponsible financial decisions.

 

I don't think everyone can afford to be a homeowner, but our culture began sending the message in the 90s that everyone *should* be able to own a home. Our family cannot afford to own a home, so we rent. I am so glad that we didn't get caught up in the hype and take on a mortgage that we could not afford-- we'd probably be one of those families who are facing foreclosure right now.

 

Homeownership is not a right. One can live a full, happy life in a rented apartment or home. There are some really nice benefits to owning a home, but you need to have a certain level of income and stability to maintain it responsibly. If you don't have that, you have no business taking on a mortgage, even if a bank would give it to you.

[Soph the vet]

I see what you're getting at here, but my opinion is that the blame for the foreclosure crisis falls squarely on the banks. Unless I'm mistaken (and, please, let me know if I am), no one can walk into a bank and force the bank to give them an outrageous loan. The banks handed out the loans knowing that people didn't qualify according to any sensible standard. I don't see where the motives of the loan applicants are relevant. Whether they were greedy or ignorant or simply didn't have enough income, if they didn't qualify, the bank shouldn't have loaned them the money.

 

I don't see how any other individuals are responsible for the banks' decisions. What they should have said to the unqualified was, "no."

 

If the buck stopped with the banks I could agree with what you have said. However, the government is also responsible for forcing banks to make loans that should never have been made going back to the Community Reinvestment Act in 1977.

[Soph the vet]

I don't think everyone can afford to be a homeowner, but our culture began sending the message in the 90s that everyone *should* be able to own a home. Our family cannot afford to own a home, so we rent. I am so glad that we didn't get caught up in the hype and take on a mortgage that we could not afford-- we'd probably be one of those families who are facing foreclosure right now.

 

Homeownership is not a right. One can live a full, happy life in a rented apartment or home. There are some really nice benefits to owning a home, but you need to have a certain level of income and stability to maintain it responsibly. If you don't have that, you have no business taking on a mortgage, even if a bank would give it to you.

Well said.

[Sahmqui]

... "who are these houses for exactly?" Doesn't matter. The fact is, they are there. We can get angry (and should), but if all we do is punish the people responsible, we will inadvertently punish ourselves.

 

 

Margaret

 

I said the exact same thing with builder constantly building homes start at $500,000 and more with job rates and salaries the same. I ask DH "Where do these people come from and work that are buying these homes. Look around now and the build has ceased. There are tons of unfinished neighborhood, houses, and new builder homes that are bank owned.

 

I don't agree with releasing money so that we can get back to business because again we will get no where. The question remains "Who are these homes for", not for these people how signed there name on these crazy mortgages(no money down, no proof of income, etc). Yes, release money so they can get another un-traditional mortgage and buy up the surplus - NOT. However this crisis will not stop if there are not measures put in place to prevent people with the "I want it all and I want it now" on credit mentality, to get back to buying these homes they can not afford.

 

And I agree that we are punishing ourselves by doing nothing. BTW-I do not include people who lost a job, became disable, medical expenses, etc. I do believe these people need us to act fast to help them, but I am against helping the greedy get back to their "status" that they were living (because it was under false pretenses).

Edited March 10, 2009 by Sahmqui

[msjones]

If the buck stopped with the banks I could agree with what you have said. However, the government is also responsible for forcing banks to make loans that should never have been made going back to the Community Reinvestment Act in 1977.

 

Good point. That may have gotten the ball rolling, but, nonetheless, the banks were making a LOT of money off of many, many of the loans -- not all of which were part of the Community Reinvestment Act.

[Jackie in NE]

If the buck stopped with the banks I could agree with what you have said. However, the government is also responsible for forcing banks to make loans that should never have been made going back to the Community Reinvestment Act in 1977.

 

Soph, This is the crux of the entire issue. As a former banker, I dealt with the Community Reinvestment Act. The banks always hated it. But they had to abide by it. However the Clinton Administration put new teeth into the Act and actually told banks that if they didn't make x number of what we now call "sub-prime" loans, the administration would not approve that bank's request to open new branches. This is a big deal to a bank, so the banks began to comply. The reason for the Clinton Administration doing this, I think, was so that more people could own homes. But to get back to your original question.... is home ownership a right or a privilege? It is a privilege, imo, that is reserved for those people who have the financial means to afford it.

 

Once the banks started approving these sub-prime loans, it started a ball rolling that turned into a snowball. Easier credit meant more demand for housing. More demand for housing meant more pressure on developers to build bigger projects. This had a ripple effect through the entire building business, driving prices higher.

 

The banks, on the other hand, had portfolios full of sub-prime loans that would only perform if they kept them at interest only payment levels. These loans were severely under-collateralized and would not be able to stand even a modest downturn in housing prices. So the banks developed new investment instruments where they bundled these sub-prime loans and sold them to investors (the public). The ROI (return on investment) of these intruments looked great as long as people were making their payments. But once a few of these loans began going bad, the whole house of cards fell down.

 

Back in the day, a person applying for a mortgage loan had to have at least 20% down payment, and sufficient disposable income to weather a storm, so-to-speak. Those guidelines were there for a reason. In the case of a slight recession, the banks (and Freddie and Fannie) still had OK loans on their books, and so didn't have to increase their "bad loan reserves". But all those sound lending practices went out the window..... and now we're paying for it.... literally.

 

Government should have stayed out of the banking business. They totally caused this mess. Now people are BEGGING governments to fix it. Good luck.

 

How does that song go? "The lure of easy money has a very strong appeal".

[lionfamily1999]

If I had my druthers, the bail out money would have gone to the people who were losing their homes in the first place. IOW, I would not have bailed out the banks at all.

 

Why?

 

Well, if our economy is going to collapse because of these mortgage/faux insurance/bad investment issues and we have to do something to stop it, then I would've rather started with fixing the foundation, the borrowers, than attempting to fix the sky light.

 

I have sympathy for the people that signed these loans. They were handed a couple of pounds of paper, paper that other experts couldn't have translated into English for them, along with a smile and a 'hey, we got your back.' They trusted these institutions and the people representing them. The thought, I'm sure, was 'why would they make me a loan they know I can't pay back. It's as much in their best interest as my own, for this loan to work out.'

 

As for the banks... I have nothing to say that wouldn't get me booted. Let that suffice ;)

[AuntieM]

They didn't teach me to be irresponsible, either, I just took to that naturally. :glare:

 

The consequences of my irresponsible youth are what led me to the position I am currently in, a very responsible homeowner who makes sacrifices every year, every day, to ensure that I and my family live within our means. It's not always fun, but it always gives me peace, because I know from whence I come.

 

A blanket bailout would (IMO) be very, very wrong and probably ineffective in the long run. If we were talking about a huge number of people becoming murderers, so many that the court system would be overwhelmed, would we just say, "Okay, we're just gonna bury the bodies and start fresh, but - tsk! tsk! - don't let it happen again!"? Yes, that's a ridiculous analogy, but it sums up my feelings about the issue.

 

I agree it's a big problem that needs a solid solution. But I think the most effective correction will be long and painful (ie, a natural, free market correction). Unfortunately, the best fix probably would be one that won't be tolerated by our immediate gratification society. (And I *do* understand that mindset, because I crawled out of that hole myself.)

 

Still looking for my Financially Responsible Citizen Tax Credit.... but certainly not holding my breath.

[msjones]

Soph, This is the crux of the entire issue. As a former banker, I dealt with the Community Reinvestment Act. The banks always hated it. But they had to abide by it. However the Clinton Administration put new teeth into the Act and actually told banks that if they didn't make x number of what we now call "sub-prime" loans, the administration would not approve that bank's request to open new branches. This is a big deal to a bank, so the banks began to comply. The reason for the Clinton Administration doing this, I think, was so that more people could own homes. But to get back to your original question.... is home ownership a right or a privilege? It is a privilege, imo, that is reserved for those people who have the financial means to afford it.

 

Once the banks started approving these sub-prime loans, it started a ball rolling that turned into a snowball. Easier credit meant more demand for housing. More demand for housing meant more pressure on developers to build bigger projects. This had a ripple effect through the entire building business, driving prices higher.

 

The banks, on the other hand, had portfolios full of sub-prime loans that would only perform if they kept them at interest only payment levels. These loans were severely under-collateralized and would not be able to stand even a modest downturn in housing prices. So the banks developed new investment instruments where they bundled these sub-prime loans and sold them to investors (the public). The ROI (return on investment) of these intruments looked great as long as people were making their payments. But once a few of these loans began going bad, the whole house of cards fell down.

 

Back in the day, a person applying for a mortgage loan had to have at least 20% down payment, and sufficient disposable income to weather a storm, so-to-speak. Those guidelines were there for a reason. In the case of a slight recession, the banks (and Freddie and Fannie) still had OK loans on their books, and so didn't have to increase their "bad loan reserves". But all those sound lending practices went out the window..... and now we're paying for it.... literally.

 

Government should have stayed out of the banking business. They totally caused this mess. Now people are BEGGING governments to fix it. Good luck.

 

How does that song go? "The lure of easy money has a very strong appeal".

 

This is excellent and helpful information. You've changed my perspective. Thank you.

[rafiki]

.

[Soph the vet]

does not solve the underlying problems that created this mess.

How true this is. From what I understand we (whoever "we" are) are right back to encouraging Freddie and Fannie to continue whatever they were doing before. You are right. The bailout does not equal reform, that is for sure. The gov is enabling, IMO.

[RebeccaC]

If the buck stopped with the banks I could agree with what you have said. However, the government is also responsible for forcing banks to make loans that should never have been made going back to the Community Reinvestment Act in 1977.

 

 

So if the government is in part responsible for the mess it should be in on the clean up. Everyone who voted in a congressman or a senator or a president who back all of the legislation that made this mess possible is also responsible. Gov for the people by the people..... Every one who saw it coming had a responsibility to write their law makers and ask then to review the laws and do something. It is for this reason that I do not get the we the tax payer are having to bail out the folks who made bad financial choices or hit hard times rant. The tax payers voted into office the folks who wrote and passed the legislation that created this mess. Without that legislation banks probably would not have made the loans in the first place. So I think that not only is the gov, banks, and sub prime mortgage home owners complicite but every one who is eligible to vote is, unless the votee knows that they did not vote in anyone who passed or signed into law the legislation that made this mess possible.

 

I see home ownership as a privilege, however what the grove did by forcing or putting extreme pressure on banks to make sub prime loans and particularly Barney Frank (who push and authored a good bit of the legislation) was to try and move it from a privilege to a right. It was the Federal government not the banks that created this mess. There is no way the folks making poor choices could have created this mess unless you view the poor choices as not loans but poor voting choices. If it is viewed as poor voting choices then the majority of Americans are responsible to some degree. Should some banks fail, yes, but part of their failure is the fault of the government and the government is what it is because people vote in the folks who make up the government.

 

Our city has quite a few homes that are in or have been foreclosed on. Yesterday we counted the boarded up houses between our house and JFS house and there are way too many. There is only 3 miles between our houses and there was more than a half a dozen boarded up and many more with for sale by bank signs out in front. It is easy to be up set about it, I suppose, if you live in an area that is not hard hit but it is a whole nother ball of wax when your city, neighborhood is getting hit hard and your home value is sliding because of it.

 

I suppose I should add that I do not think the government is responible enough or capable to clean up what they created. Kind of like asking the fox to clean up the chicken feathers after it has raided the hen house.

Edited March 10, 2009 by RebeccaC

[newbie]

I can understand the bad loans and mortgage cos. should be responsible ,as in closing doors like in the eighties w/savings and loans. But the homeowners should get help, foreclosures and bankruptcies are not the answer.

 

If people can get extended unemployment, why cant homeowners get a lil help w/mortgages. The two new breaks dont cover everyone.

 

I think a lrg. part in Ca. is the mrkt fell out, we bought high and the mkt. crashed, that was our mistake. Its like stocks. If we would have waited six mos. we would be in better shape.

 

But, noone during that time or now can see the future. I wish, but no. Now we have to figure out a way to fix it, not point fingers.

[rafiki]

.

[BakersDozen]

Still looking for my Financially Responsible Citizen Tax Credit.... but certainly not holding my breath.

YEAH! I'm all for putting the billions of bailout $ to those who were responsible and would handle the $ well! Reward those who used their heads, listened to the warnings that were rampant, refinanced to a fixed rate, didn't buy more than we could handle (not even the lovely home on an acre with FIVE toilets!!! 5 toilets...sigh).

 

Love the analogy about the fox and the chickens...very accurate indeed.

 

FWIW, we annoyed our representatives to no end as did most of our friends with absolutely nothing to show for it. The message we were given was, "You don't understand all that is involved...this is the best thing to do." Nothing makes me feel more helpless than talking to my representative and finding out he represents the people not.at.all. :glare:

[Colleen]

Home ownership certainly isn't a right, but it's assumed by much of our culture to be better than the alternative. Even using the "right vs. privilege" terminology is revealing. It implies, imo, that renting is some how "less than". I think we inaccurately assume that the only people who would possibly consider renting are in lesser financial straits and/or transitory. Aside from major metropolitan areas, there's often stigma about renting. Just recently on this board, there was some discussion of how other countries compare to the United States. Mention was made several times that most people in country X or country Y (developed, western European nations) don't even own their own homes. As if that in and of itself is The Standard to Be Matched.

[elegantlion]

Home ownership certainly isn't a right, but it's assumed by much of our culture to be better than the alternative. Even using the "right vs. privilege" terminology is revealing. It implies, imo, that renting is some how "less than". I think we inaccurately assume that the only people who would possibly consider renting are in lesser financial straits and/or transitory. Aside from major metropolitan areas, there's often stigma about renting. Just recently on this board, there was some discussion of how other countries compare to the United States. Mention was made several times that most people in country X or country Y (developed, western European nations) don't even own their own homes. As if that in and of itself is The Standard to Be Matched.

 

Great point. Certainly, imo, owning your home was a sign of success in 90s. True or not that was the perceived opinion in our circles.

 

I also wonder if the transient nature of our society has created some of this. Where we used to live home ownership was viewed by some as a right once you moved to a city even if you knew you'd get transferred in less than two years. My husband and I used to be amazed at the amount of brand new homes for sale because of transfers.

 

My SIL is German and her family has several homes that have been in their family for many generations. I don't know if that is typical European mindset, but if my BIL and her moved to Germany, they'd have a home to move to.

[Nestof3]

Jackie,

 

I passed this along to a former banker and current VP:

 

Horse crap. The vast majority of sub-prime mortgage loans were underwritten not by banks, but rather by independent mortgage companies not subject to CRA.

Edited March 10, 2009 by nestof3

[RebeccaC]

Banks (and credit cards) make money or they wouldn't be in business. A car salesman is always going to try to sell you more, because he makes more. They typically ask you what you want your monthly payments to be, then play with the numbers so you are there, no matter how much in the long run you're actually paying for that car. It was quite similar with mortgages. As consumers it's our responsibility to educate ourselves prior to purchasing.

 

The housing market is a mess, however no one was complaining when the market was inflated and people were selling, making a nice profit. Is it fair that those who have paid their mortgage on time and did their homework are unable to get the same lower interest rate without paying closing costs?

 

 

This has nothing to do with fair it has to do with who we hired by voting to run our government. Life is not fair. Our government is the mess it is because most of those who paid their mortgages on time voted in people who passed and signed bad legislation, and then looked the other way by not paying attention to what was being passed, and when it came time to pay the dues on what the legislation did to the banks, the economy, and their fellow countrymen want to claim we made wise choices when purchasing our mortgages and...... which has nothing to do with the current crisis, it is the poor choices they may have made when voting that has created this whole mess. The buck stops with the voters, especially the voters of MA who continue to vote in Barney Frank. It is the poor voting choices that got us where we are. I am a voter and therefore I am to some degree complicate as are all those of voting age when this legislation was being passed and working it's devastation on our economy.

[Jennifer in NH]

It is not a right. It is a privilige. plus, this may sound horrible to some but quite honestly, one person's forclosure is another person's buying opportunity. It is ashame to keep house values artificially high. At this time if we sold our home we would lose money...so, we are not selling right now. The market will come back..it always does....If Joe X decied to buy a house he could not afford...he got to live there...It is really no different than renting, in my opinion. it is ashame if Joe X can stay with other people's money, making it harder for Sue Firsttimehomebuyer to get a good deal on a home.

That is my 2 cents.

[RebeccaC]

Home ownership certainly isn't a right, but it's assumed by much of our culture to be better than the alternative. Even using the "right vs. privilege" terminology is revealing. It implies, imo, that renting is some how "less than". I think we inaccurately assume that the only people who would possibly consider renting are in lesser financial straits and/or transitory. Aside from major metropolitan areas, there's often stigma about renting. Just recently on this board, there was some discussion of how other countries compare to the United States. Mention was made several times that most people in country X or country Y (developed, western European nations) don't even own their own homes. As if that in and of itself is The Standard to Be Matched.

 

 

You are right on this! Most of the time it is cheaper to own than it is to rent. I know a few folks who are stuck with a sub prime loans due to loss of income because of 9/11, they work in the airline industry, and they can not afford to pay rent in the Chicago area nor can they afford their mortgages or to transfer out of O'hare. We watch as friend after friend/co-worker looses their house and usually their marriage. American Airlines did not go bankrupt but a whole lot of their employees did to keep the company from going under. Folks who before 9/11 made good choices when it came to their finances and who of no fault of their own lost 1/2 to 2/3rds of their income. Some took sub prime loans out on their houses, which were not Mc Mansions, to pay their property taxes, to send a kid to school, to pay medical debt, fix a car, fix their roof which was leaking badly, ect........ The folks we know are not pilots but mechanics, baggage crew, fuelers, ect... Working Joe's who put in 15 or more years with AA before 9/11, most without college degrees, who used to make a living wage and could not find jobs after 9/11 that would have matched their pre-9/11 incomes. Folks who moved from middle class to working class through no fault of their own.

 

We know an AA couple with 6 and 10 year old kids who lost their home a year ago and found a condo to rent, came home one day to find out the condo they were renting was foreclosed on and over night they lost the place they were renting and their deposit. Until they could raise the money for another deposit they were living in their van for quite awhile. They managed to get another house to rent in a not so nice area and guess what that was also foreclosed on and they lost that deposit and....... He is drinking now and they are headed for a divorce. What happened to them, 9/11 and just trying to keep their heads above water for the years since they gave up income to keep AA afloat and then this current crisis. Folks who made good choices before they began to live out the concept that life is not fair and really had very few choices they could really make.

Edited March 10, 2009 by RebeccaC

[Jackie in NE]

Jackie,

 

I passed this along to a former banker and current VP:

 

I STRONGLY disagree! It is true that mortgage companies are not subject to CRA, and it is true that mortgage companies made many, many sub-prime loans. But the banks did receive the pressure from the government to make these types of loans. (And I know this from personal experience). And once the banks and mortgage companies were able to bundle these and resell them, the snowball was rolling.

 

And my main point for bringing this up is to stress the fact that the federal government had a rather large hand in all of this happening. Did the banks and mortgage companies make a lot of money off of these loans? You bet. Did they make these loans based on a profit motive, while they threw sound lending practices out the window? Absolutely.

 

But my main point, which is that the federal government should stay out of the banking business, remains. It was a bad idea then, and it's a bad idea now.

[Margaret in GA]

This has nothing to do with fair it has to do with who we hired by voting to run our government. Life is not fair. Our government is the mess it is because most of those who paid their mortgages on time voted in people who passed and signed bad legislation, and then looked the other way by not paying attention to what was being passed, and when it came time to pay the dues on what the legislation did to the banks, the economy, and their fellow countrymen want to claim we made wise choices when purchasing our mortgages and...... which has nothing to do with the current crisis, it is the poor choices they may have made when voting that has created this whole mess. The buck stops with the voters, especially the voters of MA who continue to vote in Barney Frank. It is the poor voting choices that got us where we are. I am a voter and therefore I am to some degree complicate as are all those of voting age when this legislation was being passed and working it's devastation on our economy.

 

I think this is beginning to turn political. Personally, I feel there is plenty of blame to go around. From Bush's "ownership society" to greedy bankers, foolish investors who bought these worthless bundles, short-sighted builders, over-zealous realtors, and of course the home buyers themselves that never thought the value of their homes wouldn't continue to grow and grow. Let's stay out of the political realm.

 

Margaret

[Jackie in NE]

Home ownership certainly isn't a right, but it's assumed by much of our culture to be better than the alternative. Even using the "right vs. privilege" terminology is revealing. It implies, imo, that renting is some how "less than". I think we inaccurately assume that the only people who would possibly consider renting are in lesser financial straits and/or transitory. Aside from major metropolitan areas, there's often stigma about renting. Just recently on this board, there was some discussion of how other countries compare to the United States. Mention was made several times that most people in country X or country Y (developed, western European nations) don't even own their own homes. As if that in and of itself is The Standard to Be Matched.

 

I cannot remember the details of the program, but there was a guy on "talk of the nation" (NPR) a week or so ago, and he was suggesting that it made a lot more sense for people to rent, than to own. He cited reasons such as: our population moving often for jobs, financial risk associated with home ownership, time requirements to keep the property up, etc.

 

My reaction to this was negative. Home ownership has always been seen as the "easiest" way for people to gain wealth. By that I mean, that for decades, our society has operated on the premise that says: you save, you buy a home, you pay your mortgage, and in 30 years you have real estate that is paid for. Then you have something to leave to your children when you pass. This was a way for people to give their children a better start in life. I agree with this.

 

Of course people quit paying off their homes. They refinanced to pay for stuff, or for college, or medical bills, etc. That's a personal choice. But either way you look at it, owning a home *usually* means that you have something to fall back on, financially, or something to pass on to your children. That's why it's "The American Dream".

[Nestof3]

Jackie,

 

I honestly don't know heads or tails from this issue. I'm just quoting what my brother said. May I ask what your position in the bank was?

[Soph the vet]

I think this is beginning to turn political. Personally, I feel there is plenty of blame to go around. From Bush's "ownership society" to greedy bankers, foolish investors who bought these worthless bundles, short-sighted builders, over-zealous realtors, and of course the home buyers themselves that never thought the value of their homes wouldn't continue to grow and grow. Let's stay out of the political realm.

 

Margaret

It's allowed to be political according to the new rules. Rebecca is allowed to mention specific politicians according to the rules. I even mentioned the "new rules" in the OP as I knew the mortgage bailout question cannot be divorced from politics at its core. We were told by SWB to "woman up" and debate according to her new sticky today.

[RebeccaC]

I think this is beginning to turn political. Personally, I feel there is plenty of blame to go around. From Bush's "ownership society" to greedy bankers, foolish investors who bought these worthless bundles, short-sighted builders, over-zealous realtors, and of course the home buyers themselves that never thought the value of their homes wouldn't continue to grow and grow. Let's stay out of the political realm.

 

Margaret

 

 

I am not so sure this is political and I think I followed the new guide lines but maybe I am wrong. Every party on the hill is to blame but who sent them there? The voters did.

 

All of this was made possible by legislation that was signed into law. With out the law there would not have been the huge foundation for the, greedy bankers, foolish investors who bought these worthless bundles, short-sighted builders, over-zealous realtors, and of course the home buyers themselves that never thought the value of their homes wouldn't continue to grow and grow, to stand on. Who hires the law makers the voters do.

 

Your list and every ones list that I have seen leaves the voters off the list. They are expunged of all complicity by long lists of every one else to blame...... But the long and short of it is we the American people over 30 years have voted in all kinds of folks who helped to write, pass, sign bills and acts that created this mess and we have voted in folks who did nothing to change the laws to head of this mess.

Edited March 10, 2009 by RebeccaC

[eternalknot]

Is home ownership a right or a privilege?

 

A privilege.

 

I am upset that either through my tax dollars or through coming inflation due to the Fed printing money, I will be paying for mortgages that should never have been written.

 

Understandably so! There are many things my tax dollars fund that I'm not very fond of, but it is what it is. An old Japanese saying, shikata ga nai comes to mind. We are members of a larger society, and with that membership comes certain responsibilities (on an individual level that might be paying taxes, and on a social level that might be spending our tax monies in a way that won't benefit us individually or that makes poor sense to us individidually). As homeschoolers, we know this firsthand through the payment of school taxes that we don't always directly benefit from. IMO this bailout is the same thing, different scale.

 

Regarding a PP who mentioned American Airlines - she was spot on. Flight attendants took a paycut of more than 30%, and many of my colleagues are working crazy overtime to keep their insurance and homes - the bare minimum survival stuff, not luxurious trips or expensive cars! What used to be an 75-80 flight hour month for F/T is now a 110-120 flight hour month (not to be confused with actual on-duty hours, this is simply FLYING time) minimum just to maintain pre-9/11 earnings. In high COLA areas we have crewmembers and even ground crew spending nights at the airport or in their cars in employee parking because they have no where else to go. Many, many marriages affected which only worsen personal finances and exacerbate the financial problem for these families.

 

I live in a high income area, recently littered with McMansions among the older estate homes. Many of these modern monstrosities were bought by people with eyes bigger than their stomachs (er, incomes) and those are currently sitting empty at less than 2 years old. This area has a rental rate of less than 5%, so they aren't even being rented out. I agree with the sentiment of unfairness and disgust that this type of poor financial planning and instant gratification behavior is seemingly being rewarded via a mortgage bailout ... but I know too many people who are just regular Joes and Janes (like my colleagues at AA) who are truly the faces of who has been affected by this whole big deal. It isn't just the greedy keeping-up-with-the-Joneses types that are easy to point the finger towards.

 

At the end of the day, it's just money. I strive to value people moreso than I do money, even people I do not know in situations I would never approve of them getting into. This perspective is cultural, I think, and is rooted in my faith and ethnic background. I pay my taxes, and (aside from electing representatives that hopefully represent me) I then wash my hands of any attachment to what those taxes go to fund. I have to, else I'd drive myself insane with frustration and annoyances!

 

I often need to remind myself that I'm one small part of a larger society, and things won't always go the way I think they should - even though everyone's lives would be so much easier and better if they would just listen to me :tongue_smilie:!! I don't approve of salespeople rewarding rude behavior by customers, either but there are some things that just can't be justified to my satisfaction. And rather than expect them to be, I simply have to detach myself from the idea that I'm going to receive that satifactory justification. Easier said than done, but worth striving for.

[FO4UR]

I don't think we should bail out anybody. Let bad decisions reap their rewards, from the banks to the home buyer - let the "house of cards" fall where it will. I have little sympathy for the person who signed a mortgage without thinking through their personal budget. For those who have truly had a tragedy, been laid off, or the like -I do sympathize.

 

Somebody, with money, will buy up the foreclosed houses and failed businesses. Those people, with money, will likely be better stewards of it all. After all, when you pay money (that YOU earned) for a thing, you tend to be more cautious and make better decisions...whether we are talking about the homeowner or the CEO. (Why are we surprised that the same CEO's who needed bailing out are the ones frittering away the $ ????? - duh:001_huh: - back to topic)

 

Bailing out those who fail to be good stewards only *enables* bad decision-making. Bail-outs won't produce *long-term* health in the economy. For that, we need people who can afford the houses to buy them.

 

I don't fear that we can't pull ourselves up out of this w/o gov't help......unless we cripple ourselves with fear.

[Margaret in GA]

I am not so sure this is political and I think I followed the new guide lines but maybe I am wrong. Every party on the hill is to blame but who sent them there? The voters did.

 

All of this was made possible by legislation that was signed into law. With out the law there would not have been the huge foundation for the, greedy bankers, foolish investors who bought these worthless bundles, short-sighted builders, over-zealous realtors, and of course the home buyers themselves that never thought the value of their homes wouldn't continue to grow and grow, to stand on. Who hires the law makers the voters do.

 

Your list and every ones list that I have seen leaves the voters off the list. They are expunged of all complicity by long lists of every one else to blame...... But the long and short of it is we the American people over 30 years have voted in all kinds of folks who helped to write, pass, sign bills and acts that created this mess and we have voted in folks who did nothing to change the laws to head of this mess.

 

I think we're in agreement about greedy, corrupt politicians in general. I think singling out Barney Frank as the reason we're in this mess was a little partisan and definitely dishonest.

To be honest, I think voters aren't to blame as much as you say. All my choices the last few election cycles (both at the state and federal level) were terrible. I think all those candidates were chosen for me by the almighty dollar-- special interests and corporations. How on earth can we compete with that to put forth a candidate that can win the party's nomination without the backing of very powerful groups?

 

Margaret

[Jackie in NE]

Vice President and Commercial Lending Officer for a major regional bank.

[Nestof3]

Thanks Jackie. I wanted to mention that to my brother.

 

My husband mentioned what you said the other day to my dad, and he said that my brother didn't say anything about that gov't bill having anything to do with it.

 

That's why I passed what you said along to my dad who passed it along to my brother.

 

As far as my dad is concerned, my brother is the smartest person in the world, and he would never believe anything my husband or I said over what my brother says.

 

He did add this, though:

 

From the OCC –

 

http://www.occ.treas.gov/ftp/release/2008-136.htm

 

“Indeed, the lenders most prominently associated with subprime mortgage lending abuses and high rates of foreclosure are lenders not subject to CRA,†he added. “A recent study of 2006 Home Mortgage Disclosure Act data showed that banks subject to CRA and their affiliates originated or purchased only six percent of the reported high cost loans made to lower-income borrowers within their CRA assessment areas.â€

Edited March 10, 2009 by nestof3