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Bailing Out Homeowners
Does anyone know what this actually means? At first blush, I'm oppossed, but if anyone else has better info, I'm all ears (or eyes rather). I admit that I am woefully ignorant when it comes to this issue, but here is why my first inclination to bail out homeowners is negative (warning, some of my reasons are selfish and I will probably sound like a brat):
- Many homeowners got into mortgages that they could not afford, and either they knew this or they were incrediably stupid (I admit that some people got into these mortgages b/c of fruad...I don't mind helping those who were duped, e.g. the elderly). I don't feel as if I should have to pay these people for their stupidity and/or get-rich-quick failed mentality.
- My husband and I could have gotten ourselves into a risky mortgage too, but we didn't b/c that would have been dumb. Instead we are saving until we can buy responsibly. I feel as we are the ants and everyone else is the grasshopper, only in this fable, the grasshopper gets to win.
- Should I run out right now and buy a home and default so that I can be part of this rescue too?
- My student loans put a real damper on everything. WTF! Where is my f*cking government handout?!
- Finally, what happens to thousands of people who have already lost their homes? Are they just screwed? What about all the people who did the right thing and got into realistic mortgages/houses? Do they get anything for their good foresight?
Again, I'm a little bitter this morning. And my rationale is all completely selfish. At the same time, if I'm being asked to commit tax dollars to this plan, with NO personal benefit whatsoever, I feel I am entitled to a little bitterness.
I am open to hearing that I am wrong.
Re: Bailing Out Homeowners
I'm like 99% sure you're being facetious, but my head is super foggy right now, so my first thought was "you can do that??"
By "lobby" I mean call their office and talk to the 20 year old intern and give them a piece of my mind. Lol.
And I just did it. I feel better now.
I understand feeling bitter. I of course will only admit it on this board. The people complaining about greedy people on E08 get no break from me though.
As someone who just called my mortgage company and realized that I will not be able to refinance I understand your pain. I have a fixed rate mortgage but I can definitely get a better rate now. I have great credit, I have used the same mortgage company for three different properties, and there is nothing I can do because of falling home prices. This won't change our lifestyle or our ability to make our mortgage, but it is disheartening that my options are limited. Also when new people start moving into our neighborhood at the lower price, I will be bitter and feel like I am overpaying. I don't condone people walking away from their mortgages, but in brief moments sometimes I understand why they do.
"As of page 2 this might be the most boring argument ever. It's making me long for Rape Day." - Mouse
But, but...what about the people who have already defaulted and lost their homes?
And I don't really want to invest in people who couldn't make the mortgage payments to begin with. In other words, I have no faith that this population will all of sudden do the right thing financially (when they have probably made poor financial choices their entire lives!) and make payments on their new government subsidized loans.
Actually, what it comes down to is this, I don't think everyone is entitled to have a home that they own and I don't really think that the government should be subsidizing some people into homeownership. Ouch. I know I sound harsh. But I think renting is underrated needlessly maligned.
I think you answered your own question. If you're already foreclosed on, you're screwed. If not, you may still be helped. Most of these people have been paying these high payments for awhile now, trying to *not* get foreclosed on. I think if certain individuals have been paying 12-15% for a couple of years in order to keep their homes, why do you think think they would be less likely to pay 8-10% and keep up with it long term? The alternative is they keep paying the higher rate, which increases the chance of more foreclosures, which will end up cost US the taxpayers more money in the long run. By punishing them, you punish yourself.
"As of page 2 this might be the most boring argument ever. It's making me long for Rape Day." - Mouse
Well if it comes in the form of a check, sure. I don't think a homeowner bailout would mean they'd get cash (I certainly hope not). Tacking on overdue payments to the end of the mortgage and reducing the interest rate would put more money in these people's hands each month, but they're still *paying for their own home*, not getting off the hook for anything.
"As of page 2 this might be the most boring argument ever. It's making me long for Rape Day." - Mouse
But I don't see how I am punishing myself by denying them relief from a situation they stupidly put themselves into? Their alternative is renting. Again, I don't think everyone deserves to live in a home that they own (or are buying). I'm not sure that I buy the 90's and 2000's mantra that more homeowners make a for a more stable society. I think I read somewhere that Sweden is like at 80 percent rental?
And I am not convinced that these people would keep up with the lower mortgage payments. What drove them to buy a house that they couldn't afford in the first place? None of the personal financial mismangement issues that led them to get into an ARM or led them to buy a house with SS appliances and granite countertops will have changed. I might be more comfortable with a homeowner bailout if the benefited homeowners were required to attend financial management courses as a condition of the benefit.
I think foreclosures en masse are definitely more harmful to taxpayers than the individuals who are foreclosing. They'll go on their merry way and rent for the next 7-10 years, then buy again. But dumping more of those assets onto the federal government will cost us all more in taxes (won't it? if not, correct me).
I think most people in danger of foreclosure who COULD sell their homes and opt to rent would do so. I would guess if you get to that point, there are simply no buyers or the value of your home is far below what you owe, and you can't make up the difference.
Again we're back to the debate of whether getting an ARM and not understanding the terms = greedy. Also when I was reading a lot about loans when I was house searching, I mostly read about people who wanted to buy their first home and weren't trying to get anything fancy, necessarily. They believed if they waited, prices would continue to shoot up and they'd never own a home. And the pro-renting argument works until a person becomes elderly and their fixed income may not allow for the current rates, which will continue to rise. I think you'd be a complete fool to try to rent for life.
"As of page 2 this might be the most boring argument ever. It's making me long for Rape Day." - Mouse
What she said.
The federal government through Fannie and Freddie own almost, if not more than, half of the mortgages in this country. Yes, this will cause us taxpayers a lot of heartache. However, this bailout will only increase the government's exposure to residential mortgages by removing it from financial companies' balance sheets.
I don't understand your point about "dumping assets on the federal government"? Do you mean that the federal government will buy all the foreclosed homes? Is someone actually proposing this? Gahd, I hope not.
As for people buying responsibly and just trying to get their first home...I have no doubt that there are many people who were responsible. But I have no doubt (and boy is this an issue in CA) that people were buying extravegantly and way, way, way beyond their means. Just look the types of homes that are short sales...
I understand the point married is making, that foreclosures will affect property values for neighbors, but this is really only a temporary problem. Once the market corrects, unstable people get out, stable people get in, prices will stabilize.
I agree that renting is not a perfect solution, but I prefer the government policies on the rental market (e.g. rent controlled markets and government subsidies) than the government playing a hand in the real estate market.
I understand the point married is making, that foreclosures will affect property values for neighbors, but this is really only a temporary problem. Once the market corrects, unstable people get out, stable people get in, prices will stabilize.
Prices will stabilize but at what level? If the number of foreclosures continues to rise and housing prices continue to fall the price point in which the market stabilizes is still a concern.
Think about it this way, for the people who did it the "right" way, most of them put a lot of the liquid assets into their downpayment. While increased equity is never guaranteed, the thought of having to pay tens of thousands of dollars just to get out of your home in the event you need to sale is depressing. It is easy to say wait it out until the market stabilizes even if that takes 20 years, but in reality that creates a lot of problems for people who bought smart and tried to buy within their means and are now stuck.
I sort of say the same thing in your thread above, but...
I don't deny that this situation is not without flaws and that some people will lose something (either equity or etc.) but I still don't understand why tax payers must subsidize this loss? Buying a house is usually your biggest investment and biggest asset which means that there is some inherent risk with the purchase. I just don't see why the government needs to shoulder the risk?
I don't think the government should shoulder the entire loss of the effected homeowners. But if some kind of limited bailout that saves at least a portion of the potential foreclosures (using certain qualifications, and no up-front cash given), we might be able to limit the equity losses of responsible homeowners while also limiting further gov't debt. I don't disagree with punishing people who made bad choices, but I do if it means a more catastrophic ripple effect.
I don't understand your point about "dumping assets on the federal government"? Do you mean that the federal government will buy all the foreclosed homes? Is someone actually proposing this? Gahd, I hope not.
If the gov't owns the mortgages and an owner defaults, doesn't the gov't then own the asset? That's what I was talking about.
"As of page 2 this might be the most boring argument ever. It's making me long for Rape Day." - Mouse
You are right Fenton, if the gov't owns the mortgage and the owner defaults that asset will then be federal property.