Posted on 02/24/2008 11:08:55 AM PST by Travis McGee
WASHINGTON — Over the last two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for “financial innovation.” But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives for an epic government rescue plan is suddenly coming into fashion. A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble. The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes. To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates. “We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted. In practice, taxpayers would almost certainly view such a move as a bailout.
(Excerpt) Read more at nytimes.com ...
"We're not about to go into a situation where (real estate) prices will go down. There is no evidence home prices are going to collapse."~~Alan Greenspan, May 21, 2006
“The damage from the subprime market has been largely contained. Fortunately, the financial system and the economy are strong enough to weather this storm.”~~Richard Fisher, Federal Reserve Bank of Dallas President, Apr 4, 2007
"All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."~~Fed Chairman Ben Bernanke, May 17, 2007
I think this is total bullshit. I saw homes in my neighborhood that were WAY out of any conceiveable budget being bought by families who can not possibly have believed they could afford them. I don’t care who wants to claim lenders were greedy and lied - no fricking way someone driving a beater car thinks they can live in a $450K house. The lawns were destroyed in one summer, landscaping died, some of the houses look years old instead of new. How the heck a brick home can look worn after just a short time is beyond me.
Um. Exactly where will it get the BILLIONS OF DOLLARS needed to do this, from a government that is already TRILLIONS of dollars in debt, especially since banks are already beyond their reserve requirements (and if they sell assets necessary to do this, then won't the assets have to be "marked to market" which, therefore, means they are in comparison to "marked to myth", worthless)?
“How the heck a brick home can look worn after just a short time is beyond me.”
Easy. No equity. The “owners” have ZERO invested. Nothing more than rental property....
The fact that this is being proposed by the Bank of America makes it all the more suspect to me.
They were about the first to jump on the bandwagon of giving bank accounts, free transfers of funds to Mexico, and loans to illegal intruders.
With as many persons involved in a no-proof-of-income loan, from the seller’s agent to the appraisers to the title companies and the builders, it would be hard to place blame.
If we really step back from it all, I think we would find that a great number of these loans have been sold to people under 30, who think that anything and everything they WANT is the same as what they NEED. There are 2+ generations of USA children out there who are losing their homes to adjustable loans and won’t sell the $50,000 boat they use once or twice a summer, and won’t EVER think of looking at a car as something they could drive for 7-10 years instead of 24 months.
They insist they have to have plasma HD tv sets costing $5000 and all the latest and greatest sound equipment in their homes and cars. Eating out-”entertainment”-I could go on and on.
I know a couple that is in trouble with their house. She recently quit her job, and is dragging her feet trying to get another closer to home. They own a boat they spent over $30,000 on, and I think it hasn’t been in the water more than 4 times in 2 summers. She says she wants to spend time with her totally spoiled child until it goes to kindergarten half days this fall. Then she cries about having to pay $30/day for child care. I ask her if she would watch any child for 10 hours a day for $3/hour, and she is horrified at the thought. But she expects someone else to do that.
She talks about just walking away from the house and going to another part of the country and renting and “starting over”. I cannot convince her that this will follow her for a number of years, and that she may never own her own home again. There are a large number of tax deductions this couple has with their current home. I cannot get her to look at her tax return and see how much less they would have in discretionary income if they bolt.
Spoiled kids raising more spoiled kids and not having a clue why or how they got into this mess.
Adults they know have tried to help them go over their expenses and teach them how to cut down, but they reject every offer given them on the topic.
I moved here to get away from white trash, not live next door to them.
A couple of weeks ago, a segment was on the nightly “news” show about a couple in the SE that was having a hard time making ends meet.
As best as I can remember: The two adult parents were both working and their combined income was $80,000 a year. They had 2 teen age sone.
That adds up to 2 exemptions, and with a house, I am going to think they are filing long form 1040 tax return. Let’s say that after income taxes at both the state and fed level they are taking home at least $60,000, to be very conservative.
Their adjustable house payment just went to $24,000 a YEAR on a house they bought for about $175,000. I think I heard the house was fairly new if not new.
$60,000 less $24,000 leaves $36,000 a year. That is $3,000 a month.
What in the world can they be spending money on if a family of 4 cannot make ends meet on $3000 a month?????
This country has gone so far off the rails, its not even funny. It seems our leadership are like brain dead zombies, falling all over themselves to make sure the irresponsible don’t suffer the consequences of their actions. And, once they get their bailout, the banks will be back to their newly learned tricks. Despite the FED cuts, consumer interest rates have gone up while CD rates have gone down.
Bet they got lots of credit card debt. $2K per month for a $175K mortgage is way out of wack too. Probably got a home equity loan or two or three.
Hate to say this, but if you have an HOA in place and they are not doing their job, I would sue the HOA (and offending party) for damages. The HOA document is a legally binding contract that is attached to your (and your neighbors’) deed.
A number of folks in my 2-3 year old neighborhood are trying to sell. Most bought at inflated prices, expecting to be able to sell at a profit if they couldn’t make the payments.
Most of the folks selling make perhaps half of what I do, have multiple ATVs and motor homes, and now want to be bailed out of foreclosure.
I probably don’t sound very sympathetic.
It reminds me of my Aunt’s comment about the people who bought her farm in Indiana 40 years ago...”I hope they sell drugs on the side, because there is no way to make enough money raising corn to pay the Bank!” And a couple of years later, I started hearing about ‘Farm Aid’.
I paid for my home- don’t want to pay for someone else’s.
Throw in a couple of car payments, a vacation or two a year, a few credit cards, and there you go - an easy $3,000 per month.....C
better get used to it...Barry Obama and his Congress are gonna require the rest of us who have saved, and paid our mortages early are gonna have to “help out” the unfortunate and disadvantaged.
Count on it.
Do you ever see the show Big Spender? Larry Winget goes in and finds out why people are in debt and shows them how to get out of it. He puts it in black and white why they are in trouble. I saw one where some couple made 2600/month but was spending 5-6000/ month. He went into one woman’s closet and found over 100K in clothing most of which still had the tags on it. She was getting $80/day spa treatments. They had multiple mortgages, took out “personal loans” and lines of credit. He tries to put these people on a budget, but they just won’t stop wasting money.
F the banks and F the borrowers who now can’t pay their mortgages....if they get a break.....I who have paid on time forever....should get one first!!!!
You can't cure "stupid". Bailing them out with a government rescue won't do the trick, either. They need to be confronted with and be responsible for their folly. Maybe then they'll learn, but I doubt it.
I'll bet they support either Obama or Hillary, right?
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