Bailing Out The Homeowner

Ground&Pound · 10-09-2008, 08:20 PM

In a competitive environment (capitalism) there are winners and losers.

Somewhere along the way, we lost the ability to stomach losers.

It seems that everyone has to be a winner in America these days.

I'm not sure if that's a good thing or a bad thing?

ODH · 10-09-2008, 08:23 PM

Originally Posted by leglace

Spider, what I was gatting at is that even those buyers who bought a house that was a bit more than they could afford at the time. The rapid drop of their home value hurt them well beyond that.

Example: Homeowner A buys a house for $400,000. He could really only afford $320,000, but the loan servicer plays with his numbers a bit and gets him approved. He is carrying an additional $80,000 more than he could handle. But he continues to make payments. His house value drops to $200,000 because of foreclosures in the neighborhood. He is now buried $200,000.00 vs the $80,000 he was willing to to work harder to pay. He has no chance of getting out of his house at all without foreclosure.
In that instance, the rapid decline in housing values buried him further than he did initially. Thats all I am saying. In what has transpired, there are those to blame. The Fed has some blame as well as bad lending practices. And then there is the individual who gambled. The gov't is pretty much saying, since we probably have 50% of the blame for the housing crisis (some say more), we are proposing to rescue people out from underneath. Sure this is very drastic. However, I would vote for this 10x over rescuing greedy executives who gambled on their employees.

This only hurts the homeowner if he decides to sell. If he was making ends meets and making monthly payments, he should be able to ride out the drop in housing values. I realize a layoff or even a minor unforseen event could result in inability to pay and that is why most of us borrow within our means.

ODH · 10-09-2008, 08:25 PM

Originally Posted by Ground&Pound

In a competitive environment (capitalism) there are winners and losers.

Somewhere along the way, we lost the ability to stomach losers.

It seems that everyone has to be a winner in America these days.

I'm not sure if that's a good thing or a bad thing?

My understanding of capitalism is that there has to be boom and bust periods. We seem to be unwilling to accept the natural cycle and want the boom to go on forever.

ODH · 10-09-2008, 08:34 PM

Originally Posted by leglace

For those who want to say, F'm let them lose their home and let the banks sell their bad debt to China, think again. Even if you do not need to be bailed out, you still need this to happen sooner than later. Your home value is plummetting. If you need to move for work, good luck selling your house. This bill would free real estate to start circulating once again, and would immediately have apositive impact on home values. Sure it will not be as high as it was in 05/06, but it will be better.

The easy money available for mortgages and speculation artificially drove up
housing prices. This was a boon to everyone who already had some equity in the home. I made buying a house for the first time much harder, hence the ARM and other questionable loans were needed to buy which further drove up the market.

Homes will sell just not at the price you want.
Also, if I have to move I will be easier for me to afford a house in my new location because housing prices have dropped. Again the people who will get hurt are the ones who bought houses they could not afford at the peak of the market and the banks that made the questionable loans.

The artificially high housing market is still unfair to the first time home buyer.
Real Estate prices were going up 20-30% per year in some markets, these need to return to a reasonable level. No government bailout will or should continue to prop up these prices. My hope is that the bailout will allow home prices to fall in a controlled manner in such a way that it does not hurt the "innocent bystander". Whether this is done by bailing out the homeowner or the banks, I just want the most effective solution.

leglace · 10-09-2008, 09:33 PM

The problem is not accepting less money. Its being buried underneath over $100,000 in debt. Most people insist on putting down the minimum 3-5%. After home values dropped 33%, they are buried beyond their means. So many people are buried here that home sales are next to impossibe because people are just stuck, period. The gear is jammed. And that gear has a domino effect into the homebuilding industry, which I am in, into every conceivable industry. We need to unjamb that gear.

ArmyFan · 10-09-2008, 10:20 PM

Originally Posted by BonnieJ2

Me too! I would have loved to have a house with a separate dining room, a garage and my very own bathroom, but silly me, I went with the affordable one.

I'd be in favor of the government renegotiating with those homeowners so they can get a fixed rate loan and a monthly payment they can afford. It would just be a 60 year loan instead of a 30 year one, or whatever length it needed to be to pay it off. If at some time in the future, prices rebound, they can sell it off and get a house they really can afford.

I like this too.. extend the term of the deal but don't adjust the principle. They borrowed $X, they need to pay back $X (with interest).

Bailing Out The Homeowner

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