Posted on 12/07/2007 9:44:43 AM PST by goldstategop
When Casey Johnson and his wife moved to San Diego County three years ago, they couldn't find a home in their price range. So they did what they thought was the sensible thing.
Rather than over-leverage themselves with a risky mortgage, the couple rented an apartment in La Jolla and waited patiently for the housing market to drift back to earth, hoping they hadn't missed their chance to become homeowners.
The value of a rate freeze Graphic The value of a rate freeze click to enlarge
But now the government-brokered plan unveiled Thursday by President Bush to ease terms on some sub-prime mortgages feels like a "slap in the face," Johnson said.
Many people who prudently sat out the housing bubble -- or resisted the urge to cash out their home equity to help finance their standard of living -- share that visceral reaction. In part, they resent on principle the rush to help a segment of society that may not have acted so responsibly. But they also fear that any effort to prevent foreclosures could keep home prices from falling to an affordable level.
"I try to do the right thing, which is to have a down payment and a job and to be fiscally responsible, and it basically looks like it's not going to pan out if this sub-prime bailout goes through," said Johnson, a 34-year-old biologist at the Salk Institute.
(Excerpt) Read more at latimes.com ...
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
exactly. I am in the same position in Long Beach.
Do the right thing and get screwed by the GOV.
“delay the eventual day of reckoning when property values finally settle at their natural levels, keeping many would-be buyers locked out of the market in the meantime.”
I’m not worried. I’m sure Hillary or Obama has a plan to give huge tax credits to offset rent for those of us who are young professionals eager but now unable to become homeowners.
I’d love to know the average value of the homes being bailed out.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Once again, the gov’t rewards stupidity and penalizes responsibility.
Nor does it, nor can it, address the stupidity of home buyers failure to fully understand the mortgages offered BEFORE putting ink to paper.
I wholeheartedly agree with this man. I cannot believe the houses people "thought" they could afford. The husband manages an auto parts store, the wife is a secretary for the school board, and they have three kids-- but hey! They can afford a 3500 square foot house with five bedrooms, media room, finished basement and "teen suite."
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
The “Invisible Hand” does not take kindly to being interferred with.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
You buy one you can afford, and you take that into consideration before entering into a legally binding contract. I like to think that if I earn more money, I can buy things that others cannot. Expensive homes are not an entitlement, they are a LUXURY ITEM.
All we need is lower rates to get back to normal. Much lower rates like after 2001.
The Fed raised the rates back up and now the entire banking system is froze up.
The public will benefit from the plan negotiated with the banks by not having bank distress and roiling of the markets. The banks undoubtedly developed the plan and allowed the President the plum of making it a policy of the government and removing the blame that might come from stockholders.
The people with bad loans are being given a 5 year window to solve their problem by refinancing or selling. The cost to the banks will be minimal compared to the cost of foreclosure and the resulting aquisition of realestate.
Those who experienced rate rises and foreclosure in 2007 are not saved. They must either bear the rate increase, refinance, selll out or be forclosed.
By the end of 2008 it will all be over except for those terminally stupid and unwilling to act to save themselves.
Stop and think about who’s really being bailed out here. It’s not the over-leveraged, credit challenged homeowner who could walk away and probably not lose any money. It’s the idiot mortgage brokers with their ‘no credit bad credit no problem’ pitch and their practice of lending money to anyone with a pulse, and the major banks who bought the mortgages who are being bailed out. They’re petrified at the idea of reposessing all those homes in a plummiting housing market and are desperate for the governemnt to save them.
Oh, so nothing will change at all?
Sorry, but it’s election time and those guys all want to be re elected. Doing it on the backs of working America.... sound familiar. If that’s the best way to get or keep office, then you don’t need to hold office.... Republican OR Democrat....Enough!
The “losers” being bailed out are the banks and lenders. Any one individual would recover from such a hit, but if the banks are left collecting only pennies on the dollar in a full scale foreclosure boom, they’d be screwed for good.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Class warfare comes in many disguises, FRiend. Those of a conservative bent are not necessarily immune to the divisiveness sown by the communist LA Slimes, any more than their sycophant leftist peanut gallery is.
Just lower the rates already ! We have already rationalized dollar damage because 'it's good for exports'.
The Fed will do it in small increments endangering our banking system in the process.
Ideology meeets reality. I take a different view (flame suit on). This is a quadruple win if it works, and it has a good chance to work.
Winners:
1. The people in trouble on their mortgages. (Yes, in most cases they don’t deserve the break.)
2. The lenders holding the troubled loans. They have done the math. A lower return due to the freeze is better than the return after forecloure and resale of the properties.
3. Everyone who owns real estate. Property values will not suffer as much due to this program, as foreclosures and inventory of distressed homes will be lower going forward.
4. Everyone with a job in America. The economy will benefit from less upheaval due to the freeze.
Losers:
Perhaps all of the above, later. This is probably just a delaying action. Large scale and long-term real esate problems are coming by 2011-2012 anyway.
All in all, a worthwhile trade. There is no evidence that the upcoming problems will be worse due to the freeze. I like having some more time to prepare for what’s coming. The freeze is nothing compared to what you will see aroune 2012-2015.
The Fed raised the rates back up and now the entire banking system is froze up.
Around 2001 was the period of abnormal rates. The Fed was practically giving money away by lending it at below the inflation rate. I would say that now is closer to the reasonable rate.
The banking system is freezing because they banks lent out 100% of the bubble value of houses to people who couldn't afford it on houses that are worth less now. The investors had to admit that the backing for their loans are not worth nearly as much as they claimed. The only ways to fix that are to let the bubble deflate, which will cause some investors and banks to lose money and some people who overbought to lose their houses, or to reinflate the housing bubble with cheap money which will only delay the day of reckoning some.
If the housing bubble is reinflated, the current investors and banks who got us into this trouble will get smart and bail out leaving new investors holding the bag.
“All we need is lower rates to get back to normal. Much lower rates like after 2001.”
That’s exactly what caused the current problems.
Thet should raise rates, not lower them.
Your low rates aren’t normal.
My wife and moved from Long Beach in 1999. We couldn’t afford a bigger house in the El Dorado Park area where we wanted to live, so we moved to Oxnard and got a bigger house for less money.
It amazes me how many people seem to think that they have a right to buy a house in the area where they grew up, instead of moving to where one can afford to buy.
A friend of mine was offered a job in CA erning $100,000.00/year. That salary is amazing here in the midwest but she knew that she would have to make big sacrifices in CA to support herself, husband and 3 kids....
It is crazy, how do hard working families survive?
Can't do it because we you don't know where it will end there is some risk of deflationary meltdown, ie the next President will have a fireside chat 'the only thing to fear, is fear itself'.
.... so nothing will change at all?.....
There will be change for some. It will be distasteful, but not mortal. The cost of living may rise, but it will not rise to the point of death.
Those with AR loans they can’t afford will be forced to act. They will receive strong pressure from the lender to act. They will be given an opportunity to refinance by various new, longer term mortgage instruments. Real, capable loan officers will study the individual situations to develop a solution. It may be that there is no solution. Then there will be financial death.
There should be no change for most of us. Detrimental change resulting from severe disruption of the banking business should be eliminated. The economy should continue to prosper.
GW Bush was also a “front runner”, if you remember.
See my tagline for a definition of “front runner”
The government is not your friend. You’d have to be a fool to depend on them to save your butt. And would you really like to be beholden to them once they do?
Plus, even with the limitations this program has, I’d wager that many people that qualify will not have the responsibility keep their homes. “Look Honey! No rate reset for 5 years! Let’s go Beemer shopping!”
I’m not a Bush fan, but I think he split the baby on this one. The government isn’t bailing anyone out. Private companies are taking less profit in order to keep from sustaining some losses. All Bush did was suggest the plan. He didn’t force anyone to go along.
Plus, the plan he suggested has so many restrictions that only a small number of the people in trouble will get to take advantage of the offer.
By doing this, he sidetracked any real government bail out the Democrats might come up with. In this case he took issue away from the Democrats, but unlike in so many other areas, he didn’t really give them anything. I think he deserves a lot of credit for the way he handled this.
That is reckless in the current situation. Our system relies upon continuous credit expansion.
The Fed will lower rates anyway, in steps, but it could be too late. Get it over with in one chunk.
BTW I am not saying that we should relax lending standards.
Oxnard? You can’t possibly commute.. do you?
Same story over and over by the responsible folks. We wanted to live in West LA... ended up near San Pedro with a horrible commute. You buy what you can afford where you can afford it and suck up the rest of lifes woes.
Only tangentially related to the topic of this thread, but it dawned on me a few days ago that in all the months of discussion on sub-prime mortgage problems, I haven’t heard a single word about “Private Mortgage Insurance”.
It was my understanding for the last three decades that anyone who didn’t have a 20% down payment had to buy PMI.
I would have thought that in this environment the PMI issuers would be losing their shirts, screaming Bloody Murder.
Since I haven’t heard said screaming, did the sub-prime mortgages not require PMI, compensating for it instead in the higher interest rates?
It will be interesting to see if this really saves anyone or if it just buys more time.
My take is that it may keep those who have been paying interest-only or better, but will not really help those "option" buyers who have been in a negative amortization situation. Those buyers STILL face a significant reset and may end up losing the home.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
This idioic “solution” is just giving the middle finger to the invisible hand.
Quit using credit and you will have twice as much.
Of all the employees that i’ve had over the years there were only maybe a dozen that had more than a pot to pee in and they were the ones that saved their money before they bought something.
Personally i’ve never borrowed a cent except for one home mortgage that has been paid off for more than 18 years, Even my airplane that I paid $64k cash for I had to save for years before I could affoed it.
Even my condo I paid cash for.
Being born in the depression and raised on the beliefe that other than a home if you don’t have the money you don’t need it.
It’s servrd me very well all of my life and thank my parents for my upbringing.
Personally I think a depression is the best thing that could happen and teach 3 generations of irresponsible people hoe to manage money.
This is exactly the kind of thing that makes Atlas’s shoulders itch.
I agree completely. Take the issue away from the Dems without creating a huge government bailout.
I was offered this type of mortgage two years ago and did not take it, instead going with the ‘traditional, old-fashioned, vanilla approach (according to my broker)’. Glad I did.
My knee-jerk reaction to the President of the USA getting involved in the mortgage situation was similar to the responses here and the thrust of the LAT article. However, upon further thought I conclude that the feds are gtetting involved only because they know that the underlying problems are much greater than they are telling us. In other words, to the extent that failure to act would result in not a recession but a full-blown depression comparable to that of 1929. I surmise it would result in the loss of several large banks, many large builders, and cascade down through the entire economy. There is an element of Presidential politics in this action relating to 2008 and GOP chances, too. This is not just a few Wall Street sharpies going down, and it is not about a few over-extended homeowners. It is strategic in nature, big enough to spook the government.
exactly right. We still rent here. I am earning more now, and I expected to be able to afford a home here soon, especially if prices soften, which they more than likely would have if not for this relief program.
Oh well, if I really wanted to own a house that bad, I would move back to Dallas.
From your article:
“When Casey Johnson and his wife moved to San Diego County three years ago, they couldn’t find a home in their price range. So they did what they thought was the sensible thing.
Rather than over-leverage themselves with a risky mortgage, the couple rented an apartment in La Jolla and waited patiently for the housing market to drift back to earth, hoping they hadn’t missed their chance to become homeowners.”
So it SEEMS that “...Casey Johnson and his wife...” gambled three years ago that housing prices would “..drift back to earth...” and it also seems that they LOST that gamble. Well, boo...hoo...
I guess the Johnsons never considered buying a “fixer-upper” that they could afford, investing some sweat-equity, and thereby building up (perhaps through fixing-up several houses, one after another) the large down-payment they would need to buy their “ultimate house”. Nope, for the Johnsons, it was either buy the “ultimate house” or sit in the E-Z-Boy and complain about the “unfairness” of it all.
Some people are just “above” doing any physical work, donchaknow. It’s soooo much easier to just sit around and whine, donchaknow?
But I am curious to know why you think it’s OK to “help” people who bet that home prices would go down but not OK to “help” people who thought housing prices would go up.
Or why it’s OK to “help” people who sit on their lazy behinds waiting and hoping for something “bad” to happen to others (because THAT would be “good” for them) but not OK to “help” people who have tried to better themselves by investing some “sweat equity” in their new homes?
I just have no sympathy for lazy, envious, do-nothing whiners.
I wonder why YOU do...
Hmmm....
Disgusting!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.