Why should we do this?
Okay, supposedly Bush is going to unveil a plan to work with the mortgage industry that would freeze introductory rates for five years. This would allow people to continue paying their lower payments instead of having it balloon to a higher percentage rate and payment. The problem is, many people can NOT afford the payments when it balloons and it causes them to lose the house to foreclosure.
My question is, why the hell are we helping stupid people?
Where is the personal responsibility anymore? Seriously? When people sign up for a loan, they have to read and understand what the hell it says. If it says that it will balloon in five years to a higher percentage, then you have to account for that. I don’t feel the least bit sorry for someone who signed up over their head for an ARM and then cannot afford to pay when the percentage spikes.
People having a mortgage they can barely pay, and then losing their job, those are the people I feel sorry for. I have to admit, if I lose my job I would be scrambling to pay the mortgage. So why is it they aren’t introducing legislation that will help those people? Instead they are helping people who KNEW that their payments were going to go up and now can’t pay. Or the people were too stupid to read the loan in the first place.
So this plan will help stupid people keep lower percentages and payments for five years. For five years these people are probably paying a much lower rate than I am on my fixed-rate mortgage. You see, I knew I couldn’t afford a balloon payment, so I logically went fixed. It was a higher rate, but I know I won’t have any surprises down the road. So stupid people get lower rates than me for five years even though I was the responsible one and got a mortgage I can actually afford.
No personal responsibility at all and our government is going to facilitate it. Pisses me off.
December 6, 2007 @ 11:43 am
John — we’re just suckers for getting houses we can afford.
My question is, who gets to keep the equity on the house?? I know the answer, but that’s the part that really bugs me.
If I took out an ARM when I bought my house I could have bought more house and the value of my house would now be that much higher — it’s not inconceivable that my extra equity could be close to $100,000 (about 10k/yr for 10 years)..
You know, I have some Whittman-Hart stock — do you think I could get a government bailout on that???? All I’m asking is the closing price from Dec 1 2000….
December 6, 2007 @ 11:45 am
Couldn’t agree more. I can argue about the government helping people in certain situations, but there’s a fine line between help and bailing out stupidity.
Had a similar talk about gambling at the last poker night. My friends talked about the temptations the riverboats provide to all the poor people who go in there thinking they’re going to hit it rich, only to lose their house payment. At what point are these people responsible for their own actions?
Mike
December 6, 2007 @ 11:56 am
Oh, we’re not doing it to HELP THE LITTLE (stupid) PEOPLE. We’re doing it to help the mortgage industry, and the home building industry, and the economy in general. Put on your cynical hat, John. Bush doesn’t give a rat’s ass that some people could lose their homes, he only cares that the foreclosures are driving down home prices and increasingly the mortgage companies can’t recover their costs.
It’s not about the people, John, it’s about big business. This is a Republican administration, they don’t DO “helping the people.”
My reaction, though, to bailing out the people AND the industry, is the same as yours. Screw ’em, they’re all morons. The banks are even dumber than the consumers, they have all the actuarial data that proves this shit doesn’t fly in the long term, and they ignored it in pursuit of short term profits. They deserve to lose money, and potentially go out of business.
December 6, 2007 @ 12:37 pm
Trust me Rob, I know. They are trying to save the banks and the mortgage lenders too, and I agree that this is a huge drain on our overall economy.
But I’m with you, the lenders were just as stupid as the people taking out the loans, and I’d love to see them go down in flames.
Unfortunately, now morons will continue to get lower rates than me AND keep their homes despite their own incompetence.
Drives me absolutely bat shit…
-Grey
December 6, 2007 @ 1:02 pm
My $.02 – I immediately thought this isn’t for the homeowners, it’s for the mortgage industry/economy/stock market. It makes sense from that standpoint, I guess, but yes, we also end up helping those that aren’t smart financially.
Second – seems similar to how the govt helps farmers with subsidies, how it bailed Chrysler out, etc. Maybe they should not allow the interest on these mortgages deductible, so they don’t get that benefit until the moratorium is over?
Third – Personal responsibility? Since when does the govt “enforce” that? Either from a financial or “moral” standpoint. Why should this be any different? Someone somewhere in govt will try and find a way around it – I’m just surprised its Bush, but he’s always been thought a big govt guy under the veneer.
December 6, 2007 @ 3:39 pm
It’s the scale of the problem that has everyone concerned.
There are projections that 2,000,000 homes might enter foreclosure in the next 18 months. That, on top of the existing inventory that is already completely stalled. So, there is an over supply of inventory, no liquidity in the system (i.e. no money to lend), falling home values, and millions of new homes potentially entering default. The fear is that there will be a large ripple effect that has the potential to tank the economy.
Also…I think this is a voluntary agreement between the largest 5-6 lenders – and it doesn’t involve any tax payer money. I don’t think the big lenders have any interest in absorbing 2 million properties and they would rather freeze the rates temporarily rather then inherit the homes.
December 6, 2007 @ 4:00 pm
I know Peyton (HI by the way) but it just irks me that people who didn’t plan wisely are going to get better rates than me for five years. All because they (and the banks they borrowed from) are inept.
So they get in over their head but get to keep low rates anyway, whereas I have higher rates because I was fiscally responsible. Does that make ANY sense at all? Not really…
Simply annoys me is all. Quite frankly those 2 million folks should lose their homes and the subprime market should tank. Maybe then someone (government, individuals etc.) would learn a lesson. We’re heading for a recession anyway, might as well hit the fast track…
But Nahhhh, this won’t teach anyone anything…
-Grey
December 6, 2007 @ 9:52 pm
I can agree with you to some extent. Of course people have gotten so used to the growth in the market that they probably felt they could easily refinance before the balloon payment hit. It is frustrating to watch people get rewarded for their short sightedness.
On the other hand…I’m not too upset to see the government do something to try to staunch the blood flow of mortgage foreclosures… better that than a full blown banking panic… last major one of those turned into the great depression.
And while I can feel sorry for the poor stupid individual home buyer who got caught up in a bad decision… I don’t have much sympathy for the house and condo flippers who’ve just been playing the market to make a killing on the real estate bubble.
– chuck –
December 6, 2007 @ 10:50 pm
John,
I’ve seen stats that indicate that approximately 10% of spam in the last several years consisted of mortgage offers. Think about that.
I don’t have stats to back this up, but based on anecdotal evidence it seems to me that mortgage spam has fallen off dramatically in the past year — just as the mortgage industry reached the brink of implosion. This is not a coincidence.
Now, please bear this one important fact in mind: Spammers are, by definition, criminals. This was true even before the CAN-SPAM act.
Connect the dots. Mortgages were being marketed and sold by criminals, or by people willing to knowingly pay criminals for their advertising service.
Now, do you think for a minute that this was the full extent of criminal activity in sales end of the mortgage industry? I sure don’t.
It had to go way beyond the sales end. The rest of the industry had to knew what was going on. Nobody was hiding it. Do you think that the officers of Citibank or you-name-it financial services co. weren’t getting mortgage spam in their personal email? Do you think they were unaware that they were participating in funding and earning short-term profits from criminal activity?
The way I see it, the entire mortgage and financial services industry was complicit in all of this, by virtue of writing loans that were sold by criminals, by securitizing those loans to spread the risk (a.k.a. insulating the sources of money from any direct knowledge of criminal activity, a.k.a. money laundering), and by successfully lobbying congress (a.k.a. bribery) first for more and more de-regulation, and then for substantial weakening of personal bankruptcy laws — thereby removing a legal tool from hundreds of thousands of individuals, many of whom would become desperate enough to believe the fraudulent pitches offered to them.
Make no mistake about it: the root of the problem in the mortgage industry was white-collar crime. Organized crime. Crime directed against the financially weak, and financially unsophisticated. There was fraud up and down the chain. It wasn’t crime at gunpoint or knife-point, but it was crime and it was rampant. I’ve got all the evidence I need of this just from looking at my spam archives and from plain old simple logic.
The way I see it, we ought not to be going around blaming crime victims for being too stupid to avoid being victims. Not even if they were stupid, which some of them no doubt were, should we shoulder them with the entire burden of recovery from the crime.
That’s why we should do this.
And we should also launch a massive investigation and throw a lot of people in jail, but I’m not going to hold my breath waiting for that to happen.
-rich
December 7, 2007 @ 7:54 am
The best part of this? More detailed reading indicates that Bush’s plan only freezes interest for loans meeting these two criteria: no payments have been missed; and the value of the loan does not exceed the value of the house.
So the “little people” – the ones who are in the most trouble? They’re NOT going to be helped. The people who will be helped are the ones who don’t need it, because they could refinance to a fixed rate with a longer term with the equity they have.
Classic Republican plan – it sticks up for the poor by helping the rich.
February 24, 2008 @ 9:56 pm
Let me tell you that the people that took the ARM weren’t stupid or didn’t know what they were getting into. When in the past have homes lost 30% to 40% of there value? Everyone counted on the increased value or building up equity and refinancing to a fixed loan. Who would after 30 years of housing increasing in value it would change. Bad timing is all.
February 25, 2008 @ 11:43 am
Bill, don’t agree at all. Granted, houses have lost some value, but here’s the thing. DON’T TAKE AN ARM IF YOU CANT MAKE THE BALLOON PAYMENT!
It’s that simple. If you wouldn’t be able to take the higher payment when it hits, don’t take the loan in the first place.
No matter how good a market is, you are never guaranteed the ability to sell, or even re-finance.
Trust me, I know people who didn’t know what they were getting into and panicked when the ARM came due as well. Mainly because they didn’t read all the paperwork.
I also know people who would flip houses who got screwed because they ASSUMED they would be able to sell too.
If you don’t pay attention or try to live outside your means, you get what you deserve. And for us to bail people out just because they didn’t live inside their means just pisses me off.
Personal responsibility. Is it fucking dead?
-Grey