mortgage aid plan

[dmarc117]

http://news.yahoo.com/s/nm/20071130/us_nm/...using_hazard_dc

 

this aid plan looks to freeze some arms for 2-5 years. huddle lawyers, is there a possible case here for homeowners that took out fixed rate mortgages at higher rates? ex.....i wouldve taken the teaser(lower) rate had i known the govt was going to freeze it for 5 years.

[Avernus]

this sounds like a load of crap....

 

but then again, I'm going off what you just said....

 

:clicks link after posting:

 

 

edit:....yeah, they are doing what I thought...

 

the people who are a cancer to the market are rewarded with a 'get out of jail free' card...

 

way to go

Edited December 1, 2007 by Avernus

[Chavez]

http://news.yahoo.com/s/nm/20071130/us_nm/...using_hazard_dc

 

this aid plan looks to freeze some arms for 2-5 years. huddle lawyers, is there a possible case here for homeowners that took out fixed rate mortgages at higher rates? ex.....i wouldve taken the teaser(lower) rate had i known the govt was going to freeze it for 5 years.

No worse than locking into a fixed-rate right before rates drop. It's a risk you take in the mortgage game.

[dmarc117]

this sounds like a load of crap....

 

but then again, I'm going off what you just said....

 

:clicks link after posting:

edit:....yeah, they are doing what I thought...

 

the people who are a cancer to the market are rewarded with a 'get out of jail free' card...

 

way to go

 

 

we talk about this all day at work. if you let these people die, the housing market really hits the skids. if you help them, does it raise a moral hazard that uncle sam will bail you out when you over extend yourself?

Edited December 1, 2007 by dmarc117

[dmarc117]

No worse than locking into a fixed-rate right before rates drop. It's a risk you take in the mortgage game.

 

good point.

[Avernus]

we talk about this all day at work. if you let these people die, the housing market really hits the skids. if you help them, does it raise a moral hazard that uncle sam will bail you out when you over extend yourself?

 

it's like putting a murderer into the crazy house for killing a large group of people and getting off on the insanity plea...

 

of course with the way things have been and where we are headed...this may be a lose-lose situation anyways...

[Chavez]

yeah, they are doing what I thought...

 

the people who are a cancer to the market are rewarded with a 'get out of jail free' card...

 

way to go

 

Bailing out badly mismanaged large corporations is done without a second thought, but are we going to get all prickly when the gov't steps in to help the consumer?

 

I agree it's a person's own fault for not being aware, but then again, who can you trust to teach you how to read TILA forms and such? These people aren't necessarily "getting out of jail FREE" - they still have to pay their mortgages; they just don't have to worry about ARMs adjusting their payments upwards out of their budget. It isn't as if banks LOSE tons of money on mortgages - with the bulk of the interest up front (standard fixed takes you half the life of the mortgage to pay off 1/4th of the principal) and people doing a re-fi every 2-3 years (think fees - legit ones plus crap like yield spread premium), they'll do fine even without ARMs adjusting upwards.

[dmarc117]

Bailing out badly mismanaged large corporations is done without a second thought, but are we going to get all prickly when the gov't steps in to help the consumer?

 

I agree it's a person's own fault for not being aware, but then again, who can you trust to teach you how to read TILA forms and such? These people aren't necessarily "getting out of jail FREE" - they still have to pay their mortgages; they just don't have to worry about ARMs adjusting their payments upwards out of their budget. It isn't as if banks LOSE tons of money on mortgages - with the bulk of the interest up front (standard fixed takes you half the life of the mortgage to pay off 1/4th of the principal) and people doing a re-fi every 2-3 years (think fees - legit ones plus crap like yield spread premium), they'll do fine even without ARMs adjusting upwards.

 

one issue is that some of these mortgages have been sold to various investors that expected a higher rate of return when the rates were to rise. they get screwed. banks get screwed, i think. do these teaser rates even pay the bills for them? some rates were below the fed funds rate i think. but i guess its better than a foreclosure. plus all the talk today was that we all will be paying for this in the long run. banks will now price in a little more of a spread to make up some of the losses. thus higher mortgage rates for us.

Edited December 1, 2007 by dmarc117

[Avernus]

Bailing out badly mismanaged large corporations is done without a second thought, but are we going to get all prickly when the gov't steps in to help the consumer?

 

I agree it's a person's own fault for not being aware, but then again, who can you trust to teach you how to read TILA forms and such? These people aren't necessarily "getting out of jail FREE" - they still have to pay their mortgages; they just don't have to worry about ARMs adjusting their payments upwards out of their budget. It isn't as if banks LOSE tons of money on mortgages - with the bulk of the interest up front (standard fixed takes you half the life of the mortgage to pay off 1/4th of the principal) and people doing a re-fi every 2-3 years (think fees - legit ones plus crap like yield spread premium), they'll do fine even without ARMs adjusting upwards.

 

but covering up a flaw with a new flaw isn't solving the problem...

 

but then again, there may not be a way to solve the problem...

 

no matter what, someone is going to get screwed and it may be for the better of the real estate markets..

[dmarc117]

http://biz.yahoo.com/ap/071130/subprime_bush.html

 

"This is the first time that the Bush administration is working towards a solution that meets the magnitude of the problem," said Sen. Charles Schumer, D-N.Y. But he said "the $64,000 dollar question" will be if investors will go along with the proposal.

 

Critics said companies could face lawsuits if they permit modifications that are not in the best interest of investors. Supporters, however, argue investors would stand to benefit because they would avoid the cost of a foreclosure -- estimated to be around $50,000 per loan.

 

The Rev. Jesse Jackson said the administration's plan did not go far enough. He said his Rainbow/PUSH Coalition will stage protest marches on Wall Street in New York and 50 other cities around the country on Dec. 10 to prod the government to play a bigger role similar to what was done during the savings and loan crisis of the early 1990s.

[CaP'N GRuNGe]

Obviously the answer is to beg Dubai to come in and buy everyone out.

Edited December 1, 2007 by CaP'N GRuNGe

[Avernus]

Obviously the answer is to beg Dubai to come in and buy everyone out.

 

I am moving to Dubai soon....

 

they are the new Manhattan...

 

[Ursa Majoris]

These people aren't necessarily "getting out of jail FREE" - they still have to pay their mortgages; they just don't have to worry about ARMs adjusting their payments upwards out of their budget.

So the people without the wit to know what they're doing continue paying at 2-3% while those of us who DID know what we were doing, paid attention and re-fied at the right time continue to pay 5% fixed rate?

 

Presumably all this is really going to do is put off the day when the ARM higher rate kicks in.

[wiegie]

I've been busy and haven't been able to follow this much, but is the plan really to say to people, "You were greedy AND stupid... so we are going to help you out"?

 

what a crock

[Chavez]

one issue is that some of these mortgages have been sold to various investors that expected a higher rate of return when the rates were to rise. they get screwed. banks get screwed, i think. do these teaser rates even pay the bills for them? some rates were below the fed funds rate i think. but i guess its better than a foreclosure. plus all the talk today was that we all will be paying for this in the long run. banks will now price in a little more of a spread to make up some of the losses. thus higher mortgage rates for us.

The article isn't clear if it locks in the teaser rate (I've seen teaser rates that last for, oh, two days) or if it will correct ARMs that have increased into negative amortization loans, or any of the other possible permutations of an ARM mortgage.

 

As far as "ARMs won't increase" it SOUNDS good but there's certainly a tremendous amount of subtlety that may be missed in the Big Dumb Solution.

[Chavez]

So the people without the wit to know what they're doing continue paying at 2-3% while those of us who DID know what we were doing, paid attention and re-fied at the right time continue to pay 5% fixed rate?

 

Presumably all this is really going to do is put off the day when the ARM higher rate kicks in.

Would you rather the bottom fell out of the real estate market when a wave of foreclosures hit?

 

I really think that while the homeowners who signed the ARMs certainly hold some blame for not educating themselves on what they were getting into, I can't say that banks/mortgage companies are blameless - they put people into mortgages that, for a large part, they didn't understand.

 

Avoiding a wave of foreclosures is probably as much a bailout of the banks as it is for the consumers involved. I doubt Citi or Wells Fargo want to be sitting on billions of dollars of real estate that they can't make their money back on.

[dmarc117]

Would you rather the bottom fell out of the real estate market when a wave of foreclosures hit?

 

I really think that while the homeowners who signed the ARMs certainly hold some blame for not educating themselves on what they were getting S:into, I can't say that banks/mortgage companies are blameless - they put people into mortgages that, for a large part, they didn't understand.

 

Avoiding a wave of foreclosures is probably as much a bailout of the banks as it is for the consumers involved. I doubt Citi or Wells Fargo want to be sitting on billions of dollars of real estate that they can't make their money back on.

 

 

that is the problem.....my 1st thought is to let the home owners and mortgage banks all go to crap. but then that affects all of us with lower housing prices and higher mortgage rates. not an easy solution at all.

 

this was in the atl journall

 

INSIDER airs mortgage lenders’ dirty secrets

 

TO OUR READER The following is an email that we received in response to a column earlier this month. We pass this on to you for information only, and suggest that you come to your own conclusions:

 

I am writing in response to your column about the divorcing woman who, because of the mortgage crisis, had to turn to her parents for financial help. For fear of losing my job, I am sending this message from a computer at a public place using a fictitious e-mail address so it can’t be traced back to me. I hope you will print this for your readers, but if you don’t because of the way you are receiving this information, I certainly understand.

 

I don’t claim to be a financial genius, but I have worked in the underwriting department of a large mortgage loan company for the past 10 years. Based on what we were told to do when processing loan applications in the past, I can tell you that the reports you see on the news about bad loans are severely understated.

 

The gist of what we were told is that a large part of the American economy depends on the number of new housing starts, which, in turn, meant jobs for more people, which, in turn, means more taxes collected by the government. We were told that if new houses were not sold, there would be a downturn in the economy and, therefore, we should do everything possible to make sure loan applications were approved.

 

We were told that when people could not afford the mortgage payment on a regular 30-year mortgage, they should be pushed to apply for adjustable rate mortgages with interest-only payments for five years and then a balloon payment of principle. We were also told to push home equity loans and, in some instances, based on inflated internal appraisals done by a company controlled by our company, many of these new houses were financed for more than they were actually worth.

 

We were told that whether or not the homebuyer could make the payments was not our problem because our company would be selling these mortgages to investors and they, not our company, would assume the risk.

Based on these instructions, I know of thousands of loans that were doomed for foreclosure from the date of closing, even assuming no family disruption. But when there is a divorce, many, many people will not be able to save their homes because underwriting guidelines have now changed to what they should have been in the first place.

 

Like many in our industry, my bonuses have depended on the profitability of our company, so I have shared in the greed that overwhelmed so many mortgage companies in the past years. I have done well financially because of artificial lending guidelines, but with the severe downturn in the number of loans, many of my co-workers have been let go, and we have been told not to talk. I may be next. I hope you print this so your readers will know the truth about why they are having these problems – and why it’s just a matter of time before it all explodes.

[Ursa Majoris]

Would you rather the bottom fell out of the real estate market when a wave of foreclosures hit?

 

I really think that while the homeowners who signed the ARMs certainly hold some blame for not educating themselves on what they were getting into, I can't say that banks/mortgage companies are blameless - they put people into mortgages that, for a large part, they didn't understand.

 

Avoiding a wave of foreclosures is probably as much a bailout of the banks as it is for the consumers involved. I doubt Citi or Wells Fargo want to be sitting on billions of dollars of real estate that they can't make their money back on.

I can see how the bailout might make sense for the entire economy in the short term but in general I oppose bailouts in every form. Capitalism has a way of dealing with these things in the longer term. Fraudulent lending is a criminal offense that should be dealt with in the standard fashion - through the courts. Idiocy is not an excuse to have the government rush in to save people, using tax dollars of people who aren't idiots.

 

As for the bottom falling out of the housing market, from a selfish viewpoint it wouldn't affect me personally at all. I have a fixed rate and I haven't maxed out my equity by using my main asset as a piggy bank like so many have. I have no intention of moving for at least a decade.

 

I still think caveat emptor is a pretty good tenet.

[AtomicCEO]

I'm very suspcious of this plan because you are going to have to meet certain requirements to qualify for the bailout.

 

And because Bush is the one planning it, I have to assume that the help is going to go to people who don't deserve it in ways that will help the large corporations far more than the consumers. Call me a cynic, but fool me 100 times... I won't get fooled again.

[Avernus]

I can see how the bailout might make sense for the entire economy in the short term but in general I oppose bailouts in every form. Capitalism has a way of dealing with these things in the longer term. Fraudulent lending is a criminal offense that should be dealt with in the standard fashion - through the courts. Idiocy is not an excuse to have the government rush in to save people, using tax dollars of people who aren't idiots.

 

As for the bottom falling out of the housing market, from a selfish viewpoint it wouldn't affect me personally at all. I have a fixed rate and I haven't maxed out my equity by using my main asset as a piggy bank like so many have. I have no intention of moving for at least a decade.

 

I still think caveat emptor is a pretty good tenet.

 

the problem is...there is probably so much fraudulent lending going on that they just came up with a "quick fix"...

 

had they attacked the problem much earlier, when it could have been nipped in the bud....we may not be going through this...

 

I plan on moving in 2009 and plan on purchasing houses, fixing them up to make a profit....even though there is a lot of that going on....this affects my gameplan tremendously...

[detlef]

I can see how the bailout might make sense for the entire economy in the short term but in general I oppose bailouts in every form. Capitalism has a way of dealing with these things in the longer term. Fraudulent lending is a criminal offense that should be dealt with in the standard fashion - through the courts. Idiocy is not an excuse to have the government rush in to save people, using tax dollars of people who aren't idiots.

 

As for the bottom falling out of the housing market, from a selfish viewpoint it wouldn't affect me personally at all. I have a fixed rate and I haven't maxed out my equity by using my main asset as a piggy bank like so many have. I have no intention of moving for at least a decade.

 

I still think caveat emptor is a pretty good tenet.

I think I'm with Ursa on this. I say, "I think" so as not to put words into his mouth.

 

I'm in a fixed at a very low rate. We just dipped into the equity to help finance restaurant #2 but did not go over the 80% threshold. We also like our home and neighborhood and have no plans on moving anytime soon. Our mortgage payment amounts to less than 10% of our pre-tax income so we have absolutely nothing to worry about.

 

It's hard to predict what the trickle down of a massive hit to the real estate market would be to me, and I'm sure my livelihood would not be better off for it in the short term. That said, the area I live in has seen steady but not insane growth in housing prices and also enjoys a pretty good ratio of median income to cost of living. Thus, I'm sure there are restaurant owners in other parts of the country who'd be hit harder than me. I would bet that a very, very small percentage of my customers are in some crazy leveraged position with regards to their homes. With that in mind, the "tough" solution of letting the market take care of itself and punish the greedy and/or stupid would be what I would prefer.

 

I understand this is a selfish perspective, but what the hell. You should always think about how something affects you personally.

 

That said, and this is out of my expertise, but how bad would it be if they just allowed ARMs to go up to, but not exceed the current 30 year fixed rate? It still rewards the greedy and could cause resentment among those of us more fiscally conservative but not as much as allowing them to enjoy rates even lower than those who "did the right thing".

[darin3]

it's like putting a murderer into the crazy house for killing a large group of people and getting off on the insanity plea...

[Avernus]

 

well...the analogy may be a little extreme...

 

but that's what I do...

[dmarc117]

there were probably a bunch of fraudulant loans out there. but i think that people also need to read everything! you cant live in a $800,000 making 30k a year. my example may be a bit extreme, but if it looks too good it probably is.

[Ursa Majoris]

there were probably a bunch of fraudulant loans out there. but i think that people also need to read everything! you cant live in a $800,000 making 30k a year. my example may be a bit extreme, but if it looks too good it probably is.

Whatever happened to the mortgage as a percentage of income standard that lenders used to use?