Biden's comment about adjusting mortgage principle

[Dumpy]

In almost all states your home is immune from bankruptcy. It's called homestead exemption.

In fact, before you go bankrupt, you sell everything and pay off as much of your mortgage as possible, since it's protected.

I just know it is true about my (current) state.

 

[AgentDrazenPetrovic]

Do the accounting.

The govt. just bought that bad loan for $500K and is selling it to the original owner for $250K.

Why not just buy down the guy's mortgage to $250K?

Either way it costs $250K to the govt. Either way the guy gets to own his home for $250K.

They shouldn't sell it to the original owner. They take the house and keep it at its full market value (say 400k or so). If they take over the loan, they can foreclose the house and own the property to sell on the open market.

 

[maxiep]

If they're going to spend $700B to bail out the banks, how about splitting that in $350B chunks and paying down mortgage balances at the same time?

Okay, what do we get for helping people lower their current payments? We at the very least should get a slug of equity and for all the time they don't pay us back, they essentially have to add what the IO payment would be over the equity. Given where LIBOR is going, that's not appealing for everyone.

 

[PapaG]

Did he say they were for paying them or for reducing them? I thought he said reduce.

Um, same thing, and you get to help pay for it. I want a return on this unwanted "investment".

 

[drexlersdad]

they should lose their house if they can't pay for it. a house is an investment.

the loan companies should just go bankrupt too then, whats the difference? they invested in exactly the same way.

 

[PapaG]

You're not buying a $500K house inflated by the bubble at this point.

Your "bubble" is known as the "market", and it flucuates depending on where you live.

Just admit that backing your plan means MY KIDS paying for the bad decisions of people who could never afford their homes outside of Fannie/Freddie buying up bad loans.

The whole scam is a class argument based upon financial reparations, yet noboby will say this.

 

[PapaG]

the loan companies should just go bankrupt too then, whats the difference? they invested in exactly the same way.

The "loan companies" were operating on an assumption that Fannie/Freddie would back the loan if it was written a certain way. The "loan companies" won't go bankrupt; they had no capital to begin with outside of the governement-backed Fannie/Freddie.

I'm not in a Fannie/Freddie loan, nor should I be based on my own financial decisions.

 

[rocketeer]

if i understand denny crane correctly(and i'm pretty sure that i do), he isn't saying that this should happen or that the bailout should occur.

but if we take it as a given that the bailout is going to occur instead of giving the money to the companies that made they loans, we should give the bailout money to the people to help them pay off their mortages and the money then obviously makes its way to the companies and people get to keep their houses.

of course the bailout is a bad idea and it shouldn't occur but if it had to, this idea is at least interesting.

 

[AgentDrazenPetrovic]

This is an adjunct, not an alternative I believe.

 

[Denny Crane]

if i understand denny crane correctly(and i'm pretty sure that i do), he isn't saying that this should happen or that the bailout should occur.

but if we take it as a given that the bailout is going to occur instead of giving the money to the companies that made they loans, we should give the bailout money to the people to help them pay off their mortages and the money then obviously makes its way to the companies and people get to keep their houses.

of course the bailout is a bad idea and it shouldn't occur but if it had to, this idea is at least interesting.

+1

The SAME amount of money makes its way to the companies, and the effect of the bubble bursting is mitigated for the entire market.

IF we're going to spend $700B on some sort of bailout, why shouldn't as much of that money actually help the taxpayers vs. going directly to the companies leaving the taxpayer barely able to pay for their homes and upside down so they can't sell them or earn equity in them over the long haul?

 

[Denny Crane]

The "loan companies" were operating on an assumption that Fannie/Freddie would back the loan if it was written a certain way. The "loan companies" won't go bankrupt; they had no capital to begin with outside of the governement-backed Fannie/Freddie.

I'm not in a Fannie/Freddie loan, nor should I be based on my own financial decisions.

You may or may not be in a Fannie/Freddie loan and not know it. Your mortgage could be and likely was sold to Fannie or Freddie. You still make your payments to the bank as if the bank owned the mortgage. You might not be able to tell.

 

[Denny Crane]

BTW, the $700B plus pork deal passed the senate and passed the house just now.

 

[AgentDrazenPetrovic]

boo america.

 

[Denny Crane]

http://apnews.myway.com/article/20081008/D93M1JEG1.html

[FONT=Verdana,Sans-serif]McCain would buy bad homeowner mortgages[/FONT]

[FONT=Verdana,Sans-serif]Oct 7, 10:20 PM (ET)

[/FONT][FONT=Verdana,Sans-serif] <style>p {margin:12px 0px 0px 0px;}</style>WASHINGTON (AP) - Republican presidential candidate John McCain is proposing a $300 billion program for the federal government to buy up bad home mortgages and allow homeowners to keep their houses.

McCain said: "Until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy and we've got to get some trust and confidence back to America."

In an unusual step, McCain announced the plan during Tuesday's debate. He said that as president he would direct the federal government to purchase mortgages directly from homeowners and mortgage providers. The loans would be replaced with fixed-rate mortgages, ostensibly at a loss to the government.

"Is it expensive? Yes," McCain said.

[/FONT]

 

[¹²³]

This will probably cost McCain a few more votes.

 

[Denny Crane]

I'd think a $500-$1500 less mortgage payment is 12x better than a $500-$1500 tax cut.

 

[maxiep]

I'm disgusted. There is no longer accountability in this country. Call me heartless, call me cruel, but if you can't pay for the mortgage on your house, you deserve to be tossed from it.

 

[Dumpy]

I'm disgusted. There is no longer accountability in this country. Call me heartless, call me cruel, but if you can't pay for the mortgage on your house, you deserve to be tossed from it.

I'm of two minds. In most cases, I agree with you . . . however, there have been numerous instances of fraudulently inducing potential homeowners into morgages. Lenders just misrepresented or lied about all the fees that would be due, and how the rates might fluctuate. In some cases, the lenders and realtors worked in concert to mislead potential homebuyers into thinking they could afford more house than they could. In all or most of those cases, the victims were undereducated, probably a member of an at-risk group (minority, immigrant, elderly, disabled), and were reliant on the realtor and bank to provide fair and accurate information.

In those cases, the perpetrators of the fraud either have fled or have no assets. I really feel for those people who were duped into thinking that they were spending within their means. I believe that government should step in and help those people (although I understand that many conservatives believe that the government should never step in).

Problem is, I don't know how many homebuyers fall into that category. Probably not all that many, proportionately. But how could they be seperated out from those that knowingly bought more house than they could afford?

I mean, if you have some grandmother who calls a realtor and tells him/her, "I have a fixed monthly income of $X, I have $Y that I can spend on fees. Help me find an appropriate house for me to live in that I can afford," how can you advocate foreclosing on this person? [again, it's anecdotal, and I don't know how many such people exist]

I'd fully support taking a hardline against salesmen and bank tellers that fall into the other category: people who are fully aware of their financial condition, and the ramifications of the loan product they selected, but did so in order to live beyond their means.

 

[maxiep]

I'm of two minds. In most cases, I agree with you . . . however, there have been numerous instances of fraudulently inducing potential homeowners into morgages. Lenders just misrepresented or lied about all the fees that would be due, and how the rates might fluctuate. In some cases, the lenders and realtors worked in concert to mislead potential homebuyers into thinking they could afford more house than they could. In all or most of those cases, the victims were undereducated, probably a member of an at-risk group (minority, immigrant, elderly, disabled), and were reliant on the realtor and bank to provide fair and accurate information.

In those cases, the perpetrators of the fraud either have fled or have no assets. I really feel for those people who were duped into thinking that they were spending within their means. I believe that government should step in and help those people (although I understand that many conservatives believe that the government should never step in).

Problem is, I don't know how many homebuyers fall into that category. Probably not all that many, proportionately. But how could they be seperated out from those that knowingly bought more house than they could afford?

I mean, if you have some grandmother who calls a realtor and tells him/her, "I have a fixed monthly income of $X, I have $Y that I can spend on fees. Help me find an appropriate house for me to live in that I can afford," how can you advocate foreclosing on this person? [again, it's anecdotal, and I don't know how many such people exist]

I'd fully support taking a hardline against salesmen and bank tellers that fall into the other category: people who are fully aware of their financial condition, and the ramifications of the loan product they selected, but did so in order to live beyond their means.

At some point, caveat emptor has to rule the day. It's not like these people will have to live on the street. There are plenty of housing options--homeless shelters, public housing, Section 8 subsidized housing, etc.--to keep a roof over these people's head. Should we go after unscrupulous mortgage brokers and lenders? Sure. Should we let those people duped keep their homes if they can't afford them? No way.

 

[Real]

I'm disgusted. There is no longer accountability in this country. Call me heartless, call me cruel, but if you can't pay for the mortgage on your house, you deserve to be tossed from it.

Do you agree that it is everyone's fault? That is the deceptive tactics used by these companies and the people who fell for it?

 

[Dumpy]

At some point, caveat emptor has to rule the day. It's not like these people will have to live on the street. There are plenty of housing options--homeless shelters, public housing, Section 8 subsidized housing, etc.--to keep a roof over these people's head. Should we go after unscrupulous mortgage brokers and lenders? Sure. Should we let those people duped keep their homes if they can't afford them? No way.

"caveat emptor" would apply if the house was unihabitable for a reason that was not disclosed or would have been identified through a competent inspection. "caveat emptor" has no relevance in fraudualent misrepresentation of information from your own agent, or from a neutral, unbiased party (a lender).

 

[maxiep]

Do you agree that it is everyone's fault? That is the deceptive tactics used by these companies and the people who fell for it?

Yes. Every single person in this country needs to look in the mirror and say, "This mess is my fault".

 

[maxiep]

"caveat emptor" would apply if the house was unihabitable for a reason that was not disclosed or would have been identified through a competent inspection. "caveat emptor" has no relevance in fraudualent misrepresentation of information from your own agent, or from a neutral, unbiased party (a lender).

Sure it does. Mortgages are largely boilerplate documents, unless you're borrowing from a loan shark on the street corner. If you don't understand something, the last place you should look for advice is from someone who only gets paid if you sign on the dotted line.

The Constitution doesn't guarantee protection for the stupid and greedy.

 

[mook]

If the government sends the money to the homeowner, isn't it effectively artificially propping up the price of the home?

Let me explain.

Under the bailout: If the current homeowner forecloses and has to move out, the house gets sold on the open market. If lots of houses are sold simultaneously, suddenly there's a big glut of houses and few buyers, so house prices plummet. Suddenly the responsible person who was living within his means and renting sees a house that used to be worth $500k and is now available for $150k. He buys it using a responsible 30 year mortgage.

Under a mortgage buyout: The current homeowner stays where he is. He pats himself on the back for getting the government to buy half his house for him. When he eventually decides to sell, it's still a $500k house because there is no glut of cheap houses on the market, and there are lots of people who also have $500k houses and tons of equity. The responsible person who has been renting is still screwed (oh, and his taxes have helped pay for half of the $500k house.)

If I'm right, the mortgage buyout idea sucks. It's artificially raising the prices of houses, making it much harder for future generations and the poor to move into affordable housing.

I sympathize with homeowners who got stuck with a bad mortgage, but let the buyer beware. You spent too much money on a house, and you need to fail in order for the housing market to correct itself.

Look around. Housing prices are ridiculous. If you make less than $60k/year, it's tough to find anything affordable. We need a massive number of foreclosures to create a real glut of cheap houses in the marketplace. This will suck for the people foreclosed on, but for every "victim" there will be somebody else who can suddenly afford to buy a roof over his head.

 

[Dumpy]

Sure it does. Mortgages are largely boilerplate documents, unless you're borrowing from a loan shark on the street corner. If you don't understand something, the last place you should look for advice is from someone who only gets paid if you sign on the dotted line.

The Constitution doesn't guarantee protection for the stupid and greedy.

I guess we'll have to disagree. I understand your position.

 

[Denny Crane]

If the government sends the money to the homeowner, isn't it effectively artificially propping up the price of the home?

Let me explain.

Under the bailout: If the current homeowner forecloses and has to move out, the house gets sold on the open market. If lots of houses are sold simultaneously, suddenly there's a big glut of houses and few buyers, so house prices plummet. Suddenly the responsible person who was living within his means and renting sees a house that used to be worth $500k and is now available for $150k. He buys it using a responsible 30 year mortgage.

Under a mortgage buyout: The current homeowner stays where he is. He pats himself on the back for getting the government to buy half his house for him. When he eventually decides to sell, it's still a $500k house because there is no glut of cheap houses on the market, and there are lots of people who also have $500k houses and tons of equity. The responsible person who has been renting is still screwed (oh, and his taxes have helped pay for half of the $500k house.)

If I'm right, the mortgage buyout idea sucks. It's artificially raising the prices of houses, making it much harder for future generations and the poor to move into affordable housing.

I sympathize with homeowners who got stuck with a bad mortgage, but let the buyer beware. You spent too much money on a house, and you need to fail in order for the housing market to correct itself.

Look around. Housing prices are ridiculous. If you make less than $60k/year, it's tough to find anything affordable. We need a massive number of foreclosures to create a real glut of cheap houses in the marketplace. This will suck for the people foreclosed on, but for every "victim" there will be somebody else who can suddenly afford to buy a roof over his head.

I think your logic is flawed.

The scenario is this. Guy buys a house for $500K/$400K mortgage, pays the mortgage payments no problem. Neighbor goes belly up, gives "$500K" house to the bank. Bank puts many houses in this situation on the market, glut. Fair market value (supply way > demand) drives price down to $200K. The "good" guy can't sell his house, because he would have to pay $200K just to clear the mortgage from the title. Not only is his $100K equity gone, he loses $200K out of pocket or he's stuck in his house forever. The bank gets $400K - $200K (sales price) from the bailout.

IF the govt. does the McCain plan, the bank puts many houses on the market, drives price down to $200K. Govt. would buy down the "good" guy's mortgage to $200K - $100K (down payment). He is made whole, can sell his house at fair market value ($200K) and walk away with most of his down payment (minus commissions and other fees). Bank gets the buydown amount of $200K. Same as first scenario, BUT the "good" guy gets cheaper mortgage payments (more disposable income!), bank gets the same money, and the housing market in the neighborhood now has a floor under it; prices for all houses should settle at $200K.

 

[Denny Crane]

Sure it does. Mortgages are largely boilerplate documents, unless you're borrowing from a loan shark on the street corner. If you don't understand something, the last place you should look for advice is from someone who only gets paid if you sign on the dotted line.

The Constitution doesn't guarantee protection for the stupid and greedy.

IF the govt. is going to spend $700B, why should it only go to the banks (big business) who screwed up and not the little guy?

How about a little even treatment here!

 

[maxiep]

IF the govt. is going to spend $700B, why should it only go to the banks (big business) who screwed up and not the little guy?

How about a little even treatment here!

Who do you think holds these products? They're in everyone's 401k. The bottom line is if you can't make your mortgage, then you lose your house and lose your equity. Sometimes in a capitalistic system, you need to fail.

 

[Denny Crane]

Who do you think holds these products? They're in everyone's 401k. The bottom line is if you can't make your mortgage, then you lose your house and lose your equity. Sometimes in a capitalistic system, you need to fail.

I don't think everyone's 401K holds mortgage papers. The numbers I've seen (correct me if I'm wrong) are that 75% or more of all mortgages are held by Freddie and Fannie.

Some 401Ks got screwed by the govt. takeover of those two (all the stock went to $0) if they held stock in them.

 

[maxiep]

I don't think everyone's 401K holds mortgage papers. The numbers I've seen (correct me if I'm wrong) are that 75% or more of all mortgages are held by Freddie and Fannie.

Some 401Ks got screwed by the govt. takeover of those two (all the stock went to $0) if they held stock in them.

And who owned Fannie and Freddie before the takeover?