Obama's Mortgage Plan - AM I WRONG ON THIS????

[War-Horse]

The only way to right this ship is for these homes to go into foreclosure.  This way, they will be set at market value and be bought by people who can afford them.

We are not doing these people any favors by keeping them in these homes that they cannot afford.

Why not reset the price to market values and see if the original occupants can keep the house ,buy qualifying on the 30% of income level?   This would prevent a glut of more homes on the market, and verified income is the way to go.

The only people removed are those that exceed 30% of income.  And the neighborhood returns to ACTUAL VALUES IN THE REAL WORLD.

[Soul Crusher]

Why not reset the price to market values and see if the original occupants can keep the house ,buy qualifying on the 30% of income level?   This would prevent a glut of more homes on the market, and verified income is the way to go.

The only people removed are those that exceed 30% of income.  And the neighborhood returns to ACTUAL VALUES IN THE REAL WORLD.

What about the poor slob who just payed off his mortgage who lives next door?

[Straw Man]

 

The price of hiomes used to be dictated by personal incomes and had an average of 2-4 times yearly salary.

Then, it became based on what a person could borrow, not their income. 

 

I've worked in in lending/banking/real estate for over 20 years and both of these quotes are jibberish

the price of home was never "dictated" by personal income. 

saying it was based on what a person could borrow and not their income is nonsensical.

Qualifying for a loan used to require a down payment of at least 20% (that was slowly eroded to 0).

Qualifying for a loan used to require verification of income, source of down payment, and employment with a whole list of requirements on what is acceptable employment i.e. two years in the same line of work, etc.. (this slowly eroded to stated income for self employed and then stated income for wage earners to no income/no asset verification and no requirement to show employment)

Qualifying for a loan used to require strict debt to income ratios (again this slowly eroded to higher ratios and then simply no calculation of debt ratios).

The whole reason these credit guidelines became diluted was because of the deregulation of commodities which allowed the financial wizards on Wall Street to create a whole new class of unregulated securities which provided the cash to make these riskier and riskier loans (and everyone loved their high yield junk while it was paying out big returns)

There is plenty of blame to go around to all parties starting (IMO) with the person applying for the loan but I really put most of the blame on Wall Street.  If you offer someone a loan with no requirement for down payment (or very little) and you throw out all traditional underwriting guidelines that were designed to protect lenders (and also to protect borrowers from their own stupidity and greed) then you (the banker) are most responsible.

I've had many mortgages in my life and, being self employed, I've always been very conservative on borrowing the smallest amount needed and always with fixed rates.   The difference is that I understand my own finances as well as the "product" that I'm buying (i.e the loan) and unfortunately the average person does not have that level of understanding (though they could with some simple research).   

I primarily blame Wall Street because they're the one's who changed the guidelines and underwrote these riskier and riskier loans.   The retail borrower is to blame for being gullible and greedy but if it weren't for a source of funds their greed and gullibility would have been a moot point

[War-Horse]

What about the poor slob who just payed off his mortgage who lives next door?

Then hes lucky enough to not have to worry about this.   Putting a monetary value on a home is a dreamland anyway.   What does he care if the neighbors say hey you lost value......he says it wasnt real value anyway.

If the roof doesnt leak and hes debt free...hes miles ahead and he knows it.

[Straw Man]

What about the poor slob who just payed off his mortgage who lives next door?

that's part of the point of the bailout.

people who did nothing wrong will be hurt by massive foreclosures and the resulting devaluation of property.

we've got a huge frigging mess on our hands and anything they do is not going do much good (IMO).

There are many people who bought homes that they had no possible way of paying for and their is no "fix" for those people.    The plan proposed by Obama appears to be targeted toward people with the highest probability of actually being able to make the payments and keep the property.  There is no help for speculators or people who are so underwater and already in default.   

My bottom line is that it's better to try something (and have a reasonable plan) than just to do nothing at all and let everyone get hurt even more

[Straw Man]

I'm impressed with how quickly this administration gets info out on the interenet.

 http://www.whitehouse.gov/blog/09/02/18/9-million-plus/

[Soul Crusher]

There is plenty of blame to go around to all parties starting (IMO) with the person applying for the loan but I really put most of the blame on Wall Street.  If you offer someone a loan with no requirement for down payment (or very little) and you throw out all traditional underwriting guidelines that were designed to protect lenders (and also to protect borrowers from their own stupidity and greed) then you (the banker) are most responsible.

Both parties gambled on the homes always appreciating in value.  

Wall Street did not care because the figured if the borrower defaulted they would get back an appreciating asset.

The borrowers gambled thinking worst case scenario was that they could flip the property for more than they paid for it or refi later at a lower fixed rate.

Both lost that gamble.

Dont even get me started on the appraisers who always "appraise to contract."  WHAT A SCAM THAT WAS!

    

[War-Horse]

that's part of the point of the bailout.

people who did nothing wrong will be hurt by massive foreclosures and the resulting devaluation of property.

we've got a huge frigging mess on our hands and anything they do is not going do much good (IMO).

There are many people who bought homes that they had no possible way of paying for and their is no "fix" for those people.    The plan proposed by Obama appears to be targeted toward people with the highest probability of actually being able to make the payments and keep the property.  There is no help for speculators or people who are so underwater and already in default.   

My bottom line is that it's better to try something (and have a reasonable plan) than just to do nothing at all and let everyone get hurt even more

But shouldnt most people have known well enough that their home values were not really that ridiculous number??    My parents property went from 250k to 600k in about 2 years.   I asked them why not take out some equity??   They said that the point of owning a home is to live in it....not live on it.

Its dropped back to 300k and they dont even give a shit about it........thats the real world.

[Soul Crusher]

The problem also is that many people took out money from homes to buy cars and tv's.

[Straw Man]

The average consumer needs to be protected from himself.

the aquisition of debt is different from "buying" any other type of product.

The person giving the money MUST be more responsible than the person borrowing the money

[War-Horse]

The problem also is that many people took out money from homes to buy cars and tv's.

Yes, i say that in my posts.   But you and straw are saying that the good guy that bought his house 20 yrs ago and didnt play into the trap of overmortgaging it shouldnt have to see his values fall.......my point is all who ive talked to dont care.   They say they knew it was a scam and its reward enough to not be involved in this mess anyway.

My parents are a good example.....the reward is the peace of stable, real pricing.

[Soul Crusher]

This is where the banks should not be bailed out. 

They did not sit with these mortgages!

They sold them off to other banks, who were equally reckless in not doing their due diligence before buying these loans.

Even worse than that, many of these bad loans were bundled with good loans to make the overall "security" look better than is actually was and did so within a time frame when most loans do not go into default.

I have ZERO sympathy for the banks because they robbed each other and helped create this disaster.

The people who took these loans were real suckers, but not malicious in the same way the banks were.  They are not blameless, but just another coal in the fire.

[Straw Man]

Yes, i say that in my posts.   But you and straw are saying that the good guy that bought his house 20 yrs ago and didnt play into the trap of overmortgaging it shouldnt have to see his values fall.......my point is all who ive talked to dont care.   They say they knew it was a scam and its reward enough to not be involved in this mess anyway.  My parents are a good example.....the reward is the peace of stable, real pricing.

WarHorse - I'm not really saying that they shouldn't have to see their values fall.   I think my part (which I could have made more clear) is that the whole system is so fragile right now and massive devaluation would be a very bad thing for everyone. It would be better to try to identify the people who have the best chance of staying in the home and trying to help them rather than just do nothing.

Look at it going forward.   We need some price stability in order to attract new buyers into the market and we need it for the benefit of existing homeowners too.     

[Butterbean]

People should walk away from their homes. 

People that can afford them?  Why?  And where should they then go?

I hope the whole fiat financial system collapses!

It looks quite possible.  What type of system would be your ideal?

"Borrowing" from a bank is a complete FRAUD - you are borrowing nothing.

They money you "borrowed" from the bank to purchase your house was created from your credit.  Banks don't loan money, they create it with your personal credit and labor as the asset behind the loan account.

Why does the bank have the priviledge to collect interest when you are the one providing the asset (credit and labor) needed to create the loan.

I have a buddy who is a Home Builder.  More and more his buyers are unable to secure a loan from a bank and they are paying him directly.  So far so good as far as I know.  I'd be interested in your thoughts on this.

[War-Horse]

WarHorse - I'm not really saying that they shouldn't have to see their values fall.   I think my part (which I could have made more clear) is that the whole system is so fragile right now and massive devaluation would be a very bad thing for everyone. It would be better to try to identify the people who have the best chance of staying in the home and trying to help them rather than just do nothing.

Look at it going forward.   We need some price stability in order to attract new buyers into the market and we need it for the benefit of existing homeowners too.     

Agreed.    And if the price can stabilize on realistic incomes of americans, then we will feel some pain but feel relief at the end.

[Soul Crusher]

Agreed.    And if the price can stabilize on realistic incomes of americans, then we will feel some pain but feel relief at the end.

That is why we need to let things just collapse. 

I say to all my friends:

"Can an average salary afford an average home??"

Until that is the case, prices need to drop, especially with the increasing property tax burden. 

[War-Horse]

People that can afford them?  Why?  And where should they then go?


It looks quite possible.  What type of system would be your ideal?


I have a buddy who is a Home Builder.  More and more his buyers are unable to secure a loan from a bank and they are paying him directly.  So far so good as far as I know.  I'd be interested in your thoughts on this.

Stella.   Each neighborhood will have a realistic value that can vary.   If a bum bought a house that is 100% of his income, then he'll have to move over for a wealthiar person to purchase.

A better way than fiat money is money based upon actual intrinsic value...like gold used to be.   But i think thats why the world is going to come together to pool resources  (NWO) which i dont care for.

People cant qualify for your friends homes because the banks are hoarding the money.....this is why it will probably be nationilized soon..

[Soul Crusher]

Banks are hoarding money because Commercial Real Estate is about to make subprime look like nothing.

[Straw Man]

That is why we need to let things just collapse. 

I say to all my friends:

"Can an average salary afford an average home??"

Until that is the case, prices need to drop, especially with the increasing property tax burden. 

IMO - the do nothing approach would be the worst choice.

The reality is that not everyone can afford to buy a house and that's just the way it is.

Property values have nothing to do with income.  Like any other asset value it's based on supply and demand.

Easy credit artificially boosted demand and created the asset bubble but letting prices crash without making any effort to create some price stability would be the worst choice (IMO)

[War-Horse]

Banks are hoarding money because Commercial Real Estate is about to make subprime look like nothing.

Yes.  its a mess for everyone.   Do you see nationalization coming?   Its already started with the big bailouts, its gonna get worse.

Thats why when you guys scream communism, i ask what else is a solution.   Im hoping full regulation doesnt happen on the govt's part.....that would be socialism.   But partial help could be a fix and its not total communism.

[Straw Man]

Banks are hoarding money because Commercial Real Estate is about to make subprime look like nothing.

There is definitely a huge problem looming in commercial real estate

All the more reason why we need to do something to try to create stability in the banking and real estate system.

[Straw Man]

Yes.  its a mess for everyone.   Do you see nationalization coming?   Its already started with the big bailouts, its gonna get worse.

Thats why when you guys scream communism, i ask what else is a solution.   Im hoping full regulation doesnt happen on the govt's part.....that would be socialism.   But partial help could be a fix and its not total communism.

we don't need communism or socialism and that would be much worse

we need some combination of government intervention but utlimately the private sector will prevail.

There is a lot of money sitting in cash that will start to trickle back in at the first signs of asset stability.  Once someone dips their feet in the water and does OK others will follow along

[Soul Crusher]

There is definitely a huge problem looming in commercial real estate

All the more reason why we need to do something to try to create stability in the banking and real estate system.

I think we are too far gone for that.  

[Straw Man]

I think we are too far gone for that.  

so just do nothing?

that's not really a tenable position for a president

that was basically Bush's approach which is what led to the panicked attempt at a bank bailout

[Soul Crusher]

Like Peter Schiff says - the collapse is the cure, not the problem.  there are worse things thaan banks going out of business.

GWB actively promoted these liar loans and erasing of bank standards his whole presidency.