Congress to Aid 2.2 Million Sub-Prime Borrowers

[dullard]

Here is a link with some people's viewpoints on the issue. Not just random people, but economists, reporters, and one politician. I'll summarize it for those who don't want to read a long page:

Person 1) When the borrowers failed, foreclose. But when the lender has a systematic problem with many borrowers, renegotiate.
Person 2) Don't help borrowers.
Person 3) End prepayment fees so these people can refinance without getting futher in the hole.
Person 4) Investors who bought the bad loans should pay, but borrowers who are bailed out should give up future profits if they do profit when selling the house.
Person 5) Keep the government out.

Now that we have some real ideas from people with some form of power, keep the thread going.

 

[dullard]

While this isn't a sub-prime story, I still think it is a good read.

Borrower fault: took out too much debt.
Lender fault: um, the borrower WAS a mortgage broker so it is his fault.

Problem #1: Bought $175,000 house six years ago, took $200,000 equity loan on that house, took another $200,000 line of credit on that house. So basically, they had the opportunity to borrow up to $575,000 on this house. A house that just a few years ago was worth only 30% of that $575,000 number.

Problem #2: Rate wasn't fixed, it was interest only and adjustable.

Problem #3: Mortgage broker lost his job.

Result: Couldn't afford all the loans and were forced to sell. The result really wasn't that bad, given the potential, but it highlights the problems. Borrowers try to borrow to much. Lenders gladly lend too much. And neither side looks longer term at higher rates and the possibility of lost income/other expenses.

 

[mercanucaribe]

Funny how I don't see anyone bitching about the government bailing out corporations.

http://www.businessweek.com/magazine/content/01_41/b3752735.htm

 

[dullard]

Originally posted by: mercanucaribe
Funny how I don't see anyone bitching about the government bailing out corporations.

This probably WILL end up being nothing but the government bailing out corporations.

 

[sdifox]

Originally posted by: mugs

Originally posted by: mrzed

Originally posted by: Vic

Originally posted by: mrzed

Who loses? Who is bailed out? Not the poor person because they don't actually own anything. It is the lender, who owns $400,000 of bad debt that is being bailed out.

I agree in part with your point, that irresponsible lending practices are to blame and the lenders should (and no doubt will) take the brunt. I disagree with your emotional claim however of the "poor person" buying a $400k home with 0% down. Subprime lending is still subject to the same disclosure laws and regulations as all other residential lending. The borrower still has to sign at closing until their arm falls off. If a person can sign documents 200 times without bothering themselves to read or understand what they signed, I have no sympathy for them.

I was using poor person somewhat facetiously, as this thread has been all about the potential bailout of the poor, whereas I think the proposed bailout would be for the over-extended (and stupid, to some degree), and the institutions greedy and shortsighted enough to lend to them.

I have only slightly more sympathy for the debtors than the lenders in this circumstance. Both should know better, but for the first, it is their responsibility, for the second, it is also their job. In absolute terms, I have little sympathy for either.

Only a few people mentioned poor people. I don't know about others, but I assumed most of the people with these mortgages are middle class.

No, most people whit that kind of mortgage are dumbass class.

 

[Auryg]

Originally posted by: mercanucaribe
Funny how I don't see anyone bitching about the government bailing out corporations.

http://www.businessweek.com/magazine/content/01_41/b3752735.htm

Corporations employ people.

 

[mercanucaribe]

Originally posted by: Auryg

Originally posted by: mercanucaribe
Funny how I don't see anyone bitching about the government bailing out corporations.

http://www.businessweek.com/magazine/content/01_41/b3752735.htm

Corporations employ people.

Maybe those people should have worked harder.

 

[JS80]

Originally posted by: mercanucaribe

Originally posted by: Auryg

Originally posted by: mercanucaribe
Funny how I don't see anyone bitching about the government bailing out corporations.

http://www.businessweek.com/magazine/content/01_41/b3752735.htm

Corporations employ people.

Maybe those people should have worked harder.

Corporations aren't the ones that are going to take huge losses (aside from the subprime corps that will go broke and NOT get bailed out). It's MBS investors in the risky tranches that are going to get screwed. These investors are not corporations; they are often hedge funds, pension funds, etc.

 

[her209]

KB Home profits plunge, says no bottom yet

For its fiscal first quarter, ended Feb. 28, KB (down $0.24 to $47.55, Charts) said net profit fell to $27.5 million, or 34 cents per share, from $173.3 million, or $2.01 a year before.

:shocked: