Fannie / Freddie Mortgage Principal Reduction Rumor...

[alkemyst]

You have no idea how upset and sick this makes me. Furious is not the word. Throwing and breaking things doesn't begin to approach it.

I have a house. It's almost identical to my neighbors - just a shape difference on the exterior sets us apart. Built within a month of eachother, by the same builder.

When I bought the house, I put 15 percent down. My neighbor put 1% down, got a second mortgage, built a 1800 square foot pole barn, bought a large 5th wheel camper, a new Chevy Silvarado, 3 4-wheelers for his kids, and installed a pool.

I've never missed a payment, and in fact have been putting more than the minimum in.

He's missed a ton of payments.

When I tried to refinance from my 5.5% down to the current rates (around 4.0%), I could not because I did not qualify for any of Obama's government assistance programs, and I'm upside down on my house despite my initial 15% down payment.

Not only did my neighbor get his refinance, but because of his distressed state he got a large part of the debt forgiven. He now has nearly the same equity in his house than I do because of improvements he made and the debt fogiven, AND he has a lower interest rate. His refinance lowered his payments so that he pays the same that I do.

FUCK. YOU. OBAMA.

You seem to know a lot about the finances of your neighbor...with the HAMP program you only got to bleed off principal as long as with a 2% interest rate (which adjusts up to whatever the current rate was at the time over 5 years) you can be at 31% debt to income. Also 2nd loans are not affected so if he had debt reduction there that was due to bankruptcy or another method.

 

[cKGunslinger]

FUCK. YOU. OBAMA.

LOL. Didn't McCain pretty much ran on the idea of mortgage bailouts and principle forgiveness for home-owners?

 

[Jhhnn]

Lots of people really don't get it, at all. Current efforts actually hold up housing prices, as will principal reduction scenarios.

There is a huge glut of empty housing on the market, getting bigger all the time. And the numbers don't reflect investors who rent out a place for less than their mortgage payment, or people who'd sell and move downscale to lower payments if they could.

So if it looks like your neighbor came out ahead and you didn't, that's not entirely true. The value of your home is supported by the fact that theirs isn't empty, adding to the over supply, forcing prices lower. If it looks like they're being rewarded for making poor choices, so are you, just in an indirect way.

Systemic failure and looting are the keys to understanding the current situation...

 

[MikeMike]

Lots of people really don't get it, at all. Current efforts actually hold up housing prices, as will principal reduction scenarios.

There is a huge glut of empty housing on the market, getting bigger all the time. And the numbers don't reflect investors who rent out a place for less than their mortgage payment, or people who'd sell and move downscale to lower payments if they could.

So if it looks like your neighbor came out ahead and you didn't, that's not entirely true. The value of your home is supported by the fact that theirs isn't empty, adding to the over supply, forcing prices lower. If it looks like they're being rewarded for making poor choices, so are you, just in an indirect way.

Systemic failure and looting are the keys to understanding the current situation...

uh... the housing industry is in for a huge reverse bubble...

if we ever get back on track, there aren't enough homes, houses, etc available and the housing market will go insane until we get enough built.

 

[MotF Bane]

LOL. Didn't McCain pretty much ran on the idea of mortgage bailouts and principle forgiveness for home-owners?

For one, McCain isn't the President, so what he ran on is more or less irrelevant.
For two, Pulsar said nothing about wanting McCain instead.

 

[MotF Bane]

Lots of people really don't get it, at all. Current efforts actually hold up housing prices, as will principal reduction scenarios.

There is a huge glut of empty housing on the market, getting bigger all the time. And the numbers don't reflect investors who rent out a place for less than their mortgage payment, or people who'd sell and move downscale to lower payments if they could.

So if it looks like your neighbor came out ahead and you didn't, that's not entirely true. The value of your home is supported by the fact that theirs isn't empty, adding to the over supply, forcing prices lower. If it looks like they're being rewarded for making poor choices, so are you, just in an indirect way.

Systemic failure and looting are the keys to understanding the current situation...

Yes, it is true, you likely know that, so quit dancing around it.

 

[MikeMike]

Yes, it is true, you likely know that, so quit dancing around it.

and having a rich class, benefits the poor because technically, they need to donate items for tax write offs... so the poor benefit from having a rich class...

 

[Pulsar]

and having a rich class, benefits the poor because technically, they need to donate items for tax write offs... so the poor benefit from having a rich class...

Huh? Make bad analogies much?

Forgiving debt on houses makes no sense. This is, once again, taking money from people who work and pay their taxes and giving it to people overextended themselves and didn't plan ahead.

The banks get to keep getting interest, and these same irresponsible people will most likely dig themselves new holes and be back in this same position in a year or two.

You are postponing the inevitable, and confirm people's belief that there's no reason to worry about personal accountability and responsibility. Much like the insane extended fo unemployment benefits. What is it now, 2 years?

There are bankruptcy courts for a reason folks.

 

[IronWing]

uh... the housing industry is in for a huge reverse bubble...

if we ever get back on track, there aren't enough homes, houses, etc available and the housing market will go insane until we get enough built.

Here in Tucson, the builders are still building (at a slower rate of course). The mark up was so high during the bubble that the builders can build the same house now they did in 2006 and charge 40% less and still profit. This leaves the people who bought during the bubble super screwed as they have to compete on price with the builders if they want to sell.

Side note: And for new developments, the folks who bought during the bubble and are surrounded by empty lots, they get reamed again by HOA fees which are jacked up by the developers who control the empty lots to cover the fees not being collected on those empty lots.

 

[Zebo]

We need this. In fact we need a jubilee, a restart, a "restructuring" of all debt Americans can't pay - unfortunatly it won't happen. Banks outsourced your jobs and now will own your property when it drops to nothing and Americans can't pay. Bank got bailed out Americans hung out. (this excludes 33 percent; of homes that are paid for)

The economy CAN NOT recover with huge debt load, 55 trillion, and economy offshore because there is no wherewithal to pay it back nor ability to borrow again to make jobs.

 

[Bitek]

How much of this program is another method to aid the banks? Granted it will aid certain homeowners, maybe some communities, but there are a lot of banks still plagued with "non-performing" loans on their books. Can't this also be viewed as a way to staunch some of their bleeding? Don't forget that community-bank aid bill was just killed by the R's. Could this be an end run (among other things)?

I'd be supportive if it was an efficient use of the money, achieved its goals, and saved more tax$ in the long run. However, I like Obama, but I don't trust that little F Gietner and all his banker buddies, and Obama's been playing it way too cute politically, too safe, and not acting boldly and getting the job done. Hard to see this doesn't end up like C4C or some of the other horseshit programs they've pushed that ends up economically and politically feckless.

And to throw the e-peen out, my car is an 02 mazda w/ 165K, wife's was an 02 Subbie barebones w/ 160K, until the engine blew:thumbsdown:, and got replaced by a Mazda3:thumbsup: w/ 88K that we got on a steal (not even new you greedy bitches!) We had 20% down for our house, took < half of what the bank wanted to give in 2005, and our 30yr fixed mortgage is about 22% of our income. W00t mazdas for personal responsibility.

We are both professionals w/ good incomes, and we drive some of the shittier cars that pull into the daycare. A lot of other parents are driving MDXs, Tahoes, BWMs, etc. Most have similar jobs, so I have no idea wtf they are doing w/ their money, other than planning on not having any for retirement. Maybe we're just the suckers playing it straight. Seems the hot money is in being a bailed out banker or a bankrupted consumer.

 

[tk149]

Well just because it's worth the same as you paid doesn't equal smart and responsible.

Some still bought too much house, some are victims of job loss/pay reduction, some went in on bad faith (many neighborhoods were billed as no investors...however; those working those neighborhoods all had 'buddies').

Most that bought homes between 3 and 6 years ago are screwed even with the best of intentions and means.

In the last 3 years, some areas have corrected better than others. Those really hurt are the many condo/townhome buyers that have too many vacanies requiring all new buyers to pay cash. They have no way to sell except to a cash buyer and at that point the cash buyer may as well buy new which will be cheaper usually and warrantied.

Some people were smart enough to heed the warnings about buying into a housing bubble, did their own research, and realized the predictions were correct.

This rumored principal reduction has nothing to do with whether a person can afford their mortgage or not.

Keep in mind that the only people who are hurt by a lower home market value are those that MUST sell. Homeowners that are living in their homes and intend to stay there suffer no realized loss (except for the ability to take a HELOC or 2nd mortgage). This is nothing but buyer's remorse.

Now government might bail out these people at great cost to the smart/lucky homebuyers and the renters. How is that fair?

I take risks in the stock market everyday. If a stock loses value, I accept that risk. I don't expect the government to bail me out if I make a poor or unlucky decision.

My home was just appraised, and is now worth 5% less than what I bought it for, but I'm not underwater on the mortgage, and I have a new job 90 miles away. Will government buy my home and bail me out?

 

[JD50]

Some people were smart enough to heed the warnings about buying into a housing bubble, did their own research, and realized the predictions were correct.

This rumored principal reduction has nothing to do with whether a person can afford their mortgage or not.

Keep in mind that the only people who are hurt by a lower home market value are those that MUST sell. Homeowners that are living in their homes and intend to stay there suffer no realized loss (except for the ability to take a HELOC or 2nd mortgage). This is nothing but buyer's remorse.

Now government might bail out these people at great cost to the smart/lucky homebuyers and the renters. How is that fair?

I take risks in the stock market everyday. If a stock loses value, I accept that risk. I don't expect the government to bail me out if I make a poor or unlucky decision.

My home was just appraised, and is now worth 5% less than what I bought it for, but I'm not underwater on the mortgage, and I have a new job 90 miles away. Will government buy my home and bail me out?

Wow, sounds like you're in the exact same situation as me, except my new job is about 130 miles away. I went and talked to the bank and because I have a 1st and a 2nd mortgage there's really nothing that they can do for me. I opened an unsecured line of credit so I can cover my loss when I sell the house. Where's my bail out?

 

[Robor]

Yep. Obama gonna pay fo ma house!

And you wonder why people call you a racist.

 

[alkemyst]

Some people were smart enough to heed the warnings about buying into a housing bubble, did their own research, and realized the predictions were correct.

The bubble was said to have peaked and stopped and that wasn't accurate either. Those that 'hit the prediction' just got lucky. Not everyone was fortunate enough to chose when they bought and most were not looking to flip a property so thought once things calmed down they'd still be ok. NO ONE knew values were going to fall like they did and come bundled with the unemployment/underemployment we have.

This rumored principal reduction has nothing to do with whether a person can afford their mortgage or not.

Well right sizing wouldn't be a terrible thing, but there are going to be rules on that. It's going to be limited to primary residence and I can almost guarantee one would have to have been living in it for the last 6 months (to hedge against those renting out their main home).

Keep in mind that the only people who are hurt by a lower home market value are those that MUST sell. Homeowners that are living in their homes and intend to stay there suffer no realized loss (except for the ability to take a HELOC or 2nd mortgage). This is nothing but buyer's remorse.

Well yes and no. There is the thing called worry and most are not spending money when they have doubts they may have to move. No one knows today when they will lose their jobs and most know that finding a job quickly means opening yourself up to relocation.

Now government might bail out these people at great cost to the smart/lucky homebuyers and the renters. How is that fair?

It's really not about what's fair to the individual though...it's what's fair to the overall economy in this. Some people became millionaires by dumb luck...many look at that as unfair too.

I take risks in the stock market everyday. If a stock loses value, I accept that risk. I don't expect the government to bail me out if I make a poor or unlucky decision.

sadly these are the typical words of a daytrader and at one time also got us in trouble. More than likely you do not have enough in the market that losing it all would put you on the street.

When someone loses their home that's what happens and the chain reactions are what they are trying to stop. Even if you don't bail out that guy, he may live right next door to you. Your property will now fall, your business will now hurt from him not buying anything, and the tax base shrinks.

I can't say I am not for starving out the poor though and the illegals.

My home was just appraised, and is now worth 5% less than what I bought it for, but I'm not underwater on the mortgage, and I have a new job 90 miles away. Will government buy my home and bail me out?

No, and it would be stupid to think so. A loss of $5, 10k, 20k is really not what this is targeting at all. It's those that have a $200k mortgage and a home now worth $100k.

 

[IGBT]

so the dead beats and stuck property flippers get a free pass. And more then likely they will continue the same behavior and end up in the same rut all over again. Your obama wants to reward reckless behavior. Your obama continues his hostility towards American society and liberty.

 

[alkemyst]

Well these programs are not designed for any flippers nor deadbeats.

Most people are oblivious to the qualifications because they are all bent out of shape.

This is why there really isn't any sense of community anymore and why we are so easily controlled.

 

[Jhhnn]

I take risks in the stock market everyday. If a stock loses value, I accept that risk. I don't expect the government to bail me out if I make a poor or unlucky decision.

Yeh, but you're not gambling several times your annual income on credit, either. Nor did you have GWB pumpin' sunshine up your skirt wrt the "Ownership Society".

I''ll take exception to Alkemyst's remark about poor people and illegals, but he's right in other respects. The current wave of unemployment hits all qualifications and income groups, other than the investor class. Lots of professionals got caught in this mess, because advancement depends on mobility in no small way. What seems like a good choice of employers can turn ugly, fast- witness the different outcomes for people who worked for Bear Stearns and Goldman Sachs. They had zero input to corporate strategy and worked just as diligently in either group... GM vs Toyota or any number of other examples.

What Righties seem to want to do is assign moral value to getting caught in situations beyond individual control. One of the things many people believe, quite erroneously, is that bankers won't lend you more money than you can practically repay because bankers will protect their corporate employers. We saw that wasn't true at all in the runup to the crash. The nation's largest financial institutions teetered on collapse because of greed and poor judgement by people whose annual incomes are measured in tens or hundreds of millions. The best and the brightest were apparently in it only for themselves, and were willing to risk corporate collapse for the enormous rewards they received. They actually risked more, the economic well being of the whole country and beyond. They still won big, but the rest of us lost.

Something else that's not well understood is that we're not out of the woods, not by a longshot. The Treasury and the FRB can only do so much, and it's still up in the air as to whether or not it'll be enough to prevent further decline. I have my doubts. The new normal may be unemployment levels like we have today or even higher, and real estate prices even lower.

The price of real estate is dependent on one thing, primarily, and that's the availability and terms of credit. If banking were to collapse, much like it did in the early 1930's, then the value of real estate would collapse along with it. Why? Because we'd be talking about the cash price, what a property would fetch from a buyer with cash in hand. That price might be equal to a few years' payments at the previous credit based price, which would prompt huge numbers of strategic bankruptcies. Pick up a $250K house for $25K? Don't laugh, it's happened before. And the people smart enough or lucky enough to have made a killing on the way up, then become liquid prior to the crash will be in the best position to exploit it. Puttin' it to the rest of us in one end and then the other.

Near as I can tell, self righteous Righties appear to want just that, thinking it'll only happen to somebody else, not them... Which might well be true in normal circumstances, but these aren't normal circumstances, at all. It's kinda like thinking you'll be safe in the end of the house that isn't on fire atm... What we're experiencing is that kind of systemic collapse, so it's not very smart to try to deny that you really need the fire dept... Just let those guys burn- it's their own fault, right?

 

[Darwin333]

I think a big cause is the sudden ability of the average American to get 'credit' and the lack of financial education being taught in schools. (I am not sure when the credit lending really exploded but I think it falls in the time frame you mention)

I am not sure if you include this idea in the radical economic policies but there was an explosion of buying power without education as to the long term benifits/risks of the system. It became more and more acceptable to carry debt balances for everyday items like food, gas, entertainment etc which led to a, IMO, financially irresponsible mindset we seem to have as a society today

I am still torn as to how much responsibility the banks should have in terms of what they are willing to lend. Obviously they went to far but I still feel the majority of the blame rests on the people who let others decide what was financially acceptable for them to spend

Banks know what you can afford more than the vast majority of people do. After all that is their job, to price "risk". They are just as responsible for loaning money to people who couldn't afford it as those who took the loans.

If I loaned $100 to a crackhead today and bitched about not getting paid back would you think that we deserved at least equal blame (I should have known better than to loan a crackhead money but that still doesn't relieve the crackhead of their responsibility to make good on the agreement). It gets worse when you start loaning money to people that you know for a fact couldn't possibly pay you back even if they desired nothing more than to make good. IMO, that makes you more irresponsible than the person you loaned the money to.

 

[Darwin333]

LOL. Didn't McCain pretty much ran on the idea of mortgage bailouts and principle forgiveness for home-owners?

So ummm, fuck McCain too?

 

[Darwin333]

Lots of people really don't get it, at all. Current efforts actually hold up housing prices, as will principal reduction scenarios.

There is a huge glut of empty housing on the market, getting bigger all the time. And the numbers don't reflect investors who rent out a place for less than their mortgage payment, or people who'd sell and move downscale to lower payments if they could.

So if it looks like your neighbor came out ahead and you didn't, that's not entirely true. The value of your home is supported by the fact that theirs isn't empty, adding to the over supply, forcing prices lower. If it looks like they're being rewarded for making poor choices, so are you, just in an indirect way.

Systemic failure and looting are the keys to understanding the current situation...

So you agree that housing prices are being artificially inflated? That didn't work out very well for us last time so what makes you think it will be any different this time?

The fact of the matter is the average home is still to expensive for the average household to afford. Spending an assload of money to keep them that way for a short period of time isn't doing our society a "favor".

 

[Darwin333]

One of the things many people believe, quite erroneously, is that bankers won't lend you more money than you can practically repay because bankers will protect their corporate employers.

That is bullshit unless they know for a fact that someone else will cover for them. They did and we did cover for them, there was and is no disincentive for them to make bad business decisions. They made trillions worth of bad decisions and a lot of them actually got rewarded for it. Why in the hell would I stop spending (or borrowing or loaning) stupidly if someone else is going to keep picking up the tab?

 

[Darwin333]

We need this. In fact we need a jubilee, a restart, a "restructuring" of all debt Americans can't pay - unfortunatly it won't happen. Banks outsourced your jobs and now will own your property when it drops to nothing and Americans can't pay. Bank got bailed out Americans hung out. (this excludes 33 percent; of homes that are paid for)

The economy CAN NOT recover with huge debt load, 55 trillion, and economy offshore because there is no wherewithal to pay it back nor ability to borrow again to make jobs.

I almost completely agree but IMO BOTH sides made a bad deal. The lender and the borrower, and both should be forced to feel the pain of their actions. We MUST get the bad debt out of the system or we are just using accounting gimmicks to pretend we are better but to actually reward one side while fucking the other side, all with more borrowed money... eventually the math catches up and its gonna hurt a whole lot worse then if we would have simply taken our medicine to begin with. We still gotta take the medicine, just a whole lot more of it to cure the problem.

What is really sad is that people don't realize this for what it really is. This was never intended to help your asshole neighbor who spent to much on toys or the idiot who bought a house that he couldn't afford with an interest only loan, this was and is to help the banks. Period. We have been conned folks and this is nothing more than a furthering of that con except they are pretending its designed to help the "regular folk".

They are pissing on your heads and telling you its raining and the vast majority of you are buying it (last comment not intended at you Zebo, just in general).

 

[Jhhnn]

I'll agree, Darwin333, that the average home is still too expensive for the average family to afford. OTOH, letting the situation deteriorate to the point where homebuying credit dries up completely or the qualifications become utterly onerous won't solve that problem. "average" families were being priced out of the homebuying market in many parts of the country before the bush bubble, anyway. Right now, it's important that people who have a decent chance of keeping their house be assisted in doing so, if only to preserve the lending institutions and credit availability. It may well save the taxpayers some money wrt the bailout of the GSE's. Otherwise, in a cash only market, the vast majority of Americans would be underwater and the impetus to default strategically would be huge.

I'll grant that the whole idea of the Greenspan Put was in place following the collapse of LTCM in 1998, but I don't think that affected bankers' behavior significantly. TBTF wasn't a sure thing, but bonuses totalling tens or hundreds of millions in a single year definitely were, enabled as they were by ratings agency capture and of the GSE's as well.

Whether the corporate entity of the bank itself survives or not is immaterial in the face of the huge rewards reaped by excessive risk taking. Here's a proposition for you- would you knowingly risk corporate failure for a $50M bonus, given that such risk was entirely legal and that you'd collect before the roof fell in?

For Wall St Execs, the answer was and always will be a resounding Yes! Yes I will! They'll ride their corporate steed right into the dirt for the right amount of money, every last time.

Which is the problem with too few banking entities with too many assets under the control of too few individuals. Would they act the same for a mere $5M bonus? Probably not... from their perspective, it's not enough to leave them set up for life, but $50M definitely is...

 

[Genx87]

Here in Tucson, the builders are still building (at a slower rate of course). The mark up was so high during the bubble that the builders can build the same house now they did in 2006 and charge 40% less and still profit. This leaves the people who bought during the bubble super screwed as they have to compete on price with the builders if they want to sell.

Side note: And for new developments, the folks who bought during the bubble and are surrounded by empty lots, they get reamed again by HOA fees which are jacked up by the developers who control the empty lots to cover the fees not being collected on those empty lots.

I'd be surprised at that. The material cost hasnt dropped 40% since 2006. My dads friend is a builder. The cost of building a house has remained pretty steady in MN at about 115-125\sq foot.

But what he and many other builders are doing is buying homes on auction because they cant build them that cheap.