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syz's avatar

It’s a murky situation without a simple answer, IMO. I absolutely do not think that irresponsible people who took on ridiculous amounts of debt that they had no hope of maintaining should be bailed out. But what happens to my home value when 3 or 4 houses in my neighborhood are foreclosed on and sitting empty? I don’t know what the answer should be.

But the slimeballs that made those loans? The ones who absolutely knew better? They should be tarred and feathered.

robmandu's avatar

I’d be a lot happier if someone would talk about how they’re actually fixing the problems that caused the mess in the first place.

Bri_L's avatar

@robmandu I second that.

SuperMouse's avatar

When the market is on fire there are unscrupulous lenders and loan reps who will come right out and lie to get people into loans and homes they may not be able to afford. Should people who were lied to and consequently got in over their head’s have some recourse? Yes, I think they should. There is also a group of people out there who were told the truth about their adjustable rate loan but were also told that as soon as the rate began to adjust upward they could use their equity and refi again, then do it again and again. For these people things are more murky. Then for the speculators who brought properties merely to restore and flip but who got caught in the downward spiral, things are murkier still.

It is a very difficult situation with lots of twists and turns. What it comes down to to me is exactly what romandu pointed out, unless we fix the system that let this happen we are just putting a band-aid on a gunshot wound.

Harp's avatar

It irks me as much as it does anybody to subsidize someone else’s bad judgment or greed. Our sense of justice wants to see them punished. But if housing values tank because the housing market becomes flooded with foreclosed properties, and the credit system gets further paralyzed by a cascade of defaults, then everybody takes the hit eventually.

So it comes down to which is worse: seeing some idiots get away with their idiocy, or seeing the majority of people who’ve done everything right get the shaft.

Darwin's avatar

I’m jealous. I turned down an ARM because I hate to leave the future up in the air like that, and because I know what I can afford better than that silly loan officer, and then I went and paid my mortgage off early.

Can’t I get a little something, too?

Harp's avatar

@Darwin Here, have a lurve bailout

Snoopy's avatar

@Darwin I am right there w/ you….had a 7.25% fixed rate mortgage. Bought the house we could afford. Paid off the house, early, a few years ago.

Don’t I feel stupid.

Darwin's avatar

@Snoopy – I went for a 6.25% fixed rate mortgage, so at least I feel a little better.

@Harp – I’ll take what I can get!

Bri_L's avatar

when you go to a doctor they do their best to try and explain in terms you can understand why you need a surgery. At a certain point you have to trust them even if you can’t fully comprehend it. If that surgery wasn’t necessary and has an adverse affect leading to death no one is going to blame the patient.

At some point we go to other people, and have to trust that all their years of experience and schooling taught them things we may not understand or comprehend in a 10 minute session around a table.

Does that mean that everyone shouldn’t know better than to go in thinking they can afford a $1,200 monthly mortgage payment when they only make $650 twice a month? No because that is basic math.

But the people in charge of lending were predatory pricks who did what they needed to do to get the signature.

I don’t want to pay for any of this either. But it’s going to happen. Like robmandu said, I want to see how they are going to stop the whiny rich bank owners who are not losing their homes from pulling this again.

gooch's avatar

Against the bailout. People don’t plan for future hardships and they need to not bite off more than they can chew.

Snoopy's avatar

@Darwin LOL. Glad I could help! that was the lowest available rate at the time….hard to believe today, but it was….

@BriL I understand what you are saying….to a point.

However, I am constantly amazed at the people I read about in credit card debt or who are upside down on a home loan. At some point we all have to take responsibility and ownership of our actions. The people I do feel sorry for are the people who had a sudden unforseeable financial crisis (e.g. lost their job, significant medical expense, etc.) and this is what has caused them to lose their homes.

The people who chose an ARM mortgage, interest only mortgage, etc. I have a tougher time finding pity for…..

Perhaps in the future there will be laws restricting the amount of mortgage one is eligible for based on a verified check of income. An even better idea is the original lending institution being penalized in some way for any loans that they intiate that ultimately go in to default.

Bri_L's avatar

@Snoopy I would agree with what you wrote

galileogirl's avatar

The answer to predatory lenders and mortgage brokers is government REGULATION. In the past when bankers being responsible instead of greedy, a mortgage would never have been made for more than 2 1/2 times the borrower’s salary and a mortgage payment would never been more than 25% of the borrower’s monthly gross pay. What we need to do is get back to those guidelines by law if necessary.

Of course, we will have to look upon a home as a place to live instead of a surefire investment that will allow us to retire at 50. A home is just a home.

As far as what to do with the people who are in default or who want to walk away from an upside down mortgage, there are a number of options.
1. If the mortgage can be restructured at 75% of the principal with a fixed 5% mortgage and the 25% remainder of the principal would be paid by increasing the payment annually as the borrowers income increases, do it. If the house is sold at a loss, a % of that loss remains a personal debt of the seller.
2. Anyone who walks away from a mortgage while they can afford the payments will not be allowed to have another mortgage for 10 years.
3. All mortgage requests will be signed under penalty of perjury and any broker or borrower who lies about the information may be prosecuted.
4. Make it impossible to file for bankruptcy more than once except in cases like major illness or similar situations. If you just run up your credit, no second chances.

What we are already seeing is companies advertising that they can get bailouts for individuals. These organizations and individuals working for them MUST be licensed and subject to criminal penalties if they break regulations.

It doesn’t help any of us to allow everyone to walk away or be thrown out if there is any chance they can pay. Some of us are going to actually benefit. Before this crash, I would never been able to afford my own home because of inflated prices. Now I will be able to buy a home in my preferred area for half the former price at a monthly cost approx 70% of current rent.

Bri_L's avatar

@galileogirl – Great points. And I have wondered, what are the banks going to do with all the forclosed property? It has to be in the best interest of some of them to try and work with the people to keep some money coming in.

CMaz's avatar

It sounds good, but nothing but a shell game.
A creative process that puts the “government” money from the left pocket to the right pocket.

galileogirl's avatar

@Bri_L Maybe sell something to me!. I just got approved for a mortgage and after having given up hope years ago of ever owning my own home, at the age of 60+ I will be a 1st time homeowner. My mortgage+tax and ins will be 50=60% of my current rent.

CMaz's avatar

Wow, how much did you have to put down?

galileogirl's avatar

I am going to put down 20%. But since I have been very conservative, I have it. Actually if I had wanted to I could pay cash for a place. In the city where I will be buying, houses that where $300,000 in 2006–7 are now $140,000 and most of my savings are in tax-deferred retirement accounts. If I cashed them in now, I would pay a tax penalty but paying interest will reduce my current taxes until I retire and then I can pay it off.

CMaz's avatar

Very cool! Congrats!

Bri_L's avatar

@galileogirl – Congrats!!!

Skaggfacemutt's avatar

@Harp The housing market tanking and the market flooded with foreclosures is not a bad thing. Those that made stupid decisions will lose their house; greedy, dishonest mortgage companies will go out of business, and then those of us who refused to pay inflated prices for homes during the boom are rewarded by being able to purchase a foreclosed house at a fair market value now. It all sounds very fair to me. What irks me is that our STUPID government thought that all of the taxpayers should have to bear the financial burden collectively. Since when should I have to pay for the mistakes of other consumers when I myself chose not to make that same mistake. And it really makes no sense that I should “bail out” any financial institution that made millions by screwing the general public.

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