Skip to comments.Help Paying Mortgages Elicits Anger
Posted on 04/03/2010 9:12:34 AM PDT by C19fan
The angry comments flooded in after the federal government announced it was expanding its program to assist unemployed homeowners, as well as borrowers who owe more on their mortgages than their homes are now worth.
Why, some asked on The New York Times Web site, should we have to pay for the mistakes of homeowners who lived far beyond their means when credit was easy to get? Shouldnt they pay for their own mistakes?
(Excerpt) Read more at nytimes.com ...
“Free” housing and healthcare is just the beginning. Maybe that goofy woman who was interviewed after obaminations election was right. Pretty soon it will be “free” cars and gas for everyone who doesn’t work or pay taxes, too. Of course food and water will be stictly doled out only to those who continue to vote for socialism—everyone else will be flushed down the turds’ toilets.
75% of the 5 - 7 million mortgages that are 6 months delinquent right now were originally packaged as prime.
(See WaPo article: http://www.washingtonpost.com/wp-dyn/content/article/2010/03/11/AR2010031104866.html )
By the early 2000s, the average prime loan did not fit the traditional definition of a prime mortgage: 20% down payment, fully documented income, fixed rate, low debt-ratio.
Back then, a down payment was not called an investment, it was an obstacle to home ownership. Nobody wanted to put 20% down. They wanted to “invest” that money in the stock market and borrow as much as possible so that they could maximize their mortgage interest deduction on their tax returns.
A 2008 study of 4 million foreclosures found that low or no down payment is the #1 common denominator in foreclosed mortgages... 51% of the 4 million foreclosures in that 2008 study were originally packaged as prime loans.
We have almost 12 TRILLION dollars in outstanding residential mortgage debt (that does not include apartments or commercial, 12 trillion is just 1 - 4 family residential mortgages). Half of that 12 trillion was originated in 8 short years from 2000 - 2008.
When a person can grasp the fact that the vast majority of 6 Trillion dollars in mortgages that were done during that 8 year period when the market was OVER-PRICED were technically non-prime loans (even though they may have been called prime), then they will understand the scope of this problem and they will realize that this new program as well as all of the others programs cannot fix it.
Not to mention the fact that millions of jobs were tied to the (now extinct) housing boom... and those jobs are not coming back any time soon. Another multi-billion-dollar-tax-payer-funded-band-aid is not going to make a material difference.
The only answer is to let them go into foreclosure (or short sale) and let someone who who has a job and can afford the payment buy them at the true market value.
The chances of the gummint doing that? Zero.
Prolonging the pain and creating yet another moral hazard is all they are doing.
Maybe this lady wasn’t a crazy as we thought!
I really resent doing the right thing but yet having to bailout those who didn’t! Has it ever occured to the government that many people who bought hmes should’ve never been given creidt in the first place and 6 months down the road will be in the exact same boat again? Home ownerships is a priviledge not a right!
As a single mother, with no child support and sure as heck NO government subsidies, I managed to pay off a 12% mortgage.
This is the worst kind of socialist nonsense. Most of the bad mortgages were given to people who should NEVER have gotten them in the first place, and now we get to bail them out again.
Not trying to start a fight, just a discussion. I am in the same boat you are. I've always lived within my means, and put 20% down on the house I bought in mid 2008.
Personally, I think most of these mortgage mulligans are going to fail, and the renegociation of the principal has me steaming.
Wow! Not sure whether to cry or laugh although my first instinct was to laugh but as you mentioned maybe the joke will be on us.
My family has sold Real Estate since the early 70's. The truth is that the likelihood of someone getting behind again is not just a one time thing. Usually the sequence is that they do it over and over until they finally lose it. Like I said originally not everyone is meant to own a home, it is a responsiblity many just can't manage
I am in a tough spot on this one. I dont agree with paying for other peoples homes, but then I am unemployed and have been for more then a year thanks to this administrations anti-business, anti-recovery policies. I am collecting unemployment insurance, but am pushed further and further into the red every month - my nest egg is going up in smoke. If I can offset this trend, even for a few months, I cant say no. But in the words of our Dear Leader, “Let me be clear” - I want a job, NOT a handout!!! I would ask if Washington is listening, but we all know the answer to that, dont we?
I have no moral right to assert that my hard times — whether due to my poor choices or to circumstances beyond my control — are anybody’s problem but my own.
Bank of America has such rules for their Country Wide mods..
It's really about taxpayers subsidizing the balance sheets of the banks. Everything from TARP to ObamaCare to ignoring illegal immigration is about subsidizing the balance sheets of the banks, for if they were forced to disclose their true financial conditions to the world, Great Depression II would fall upon us like a hurricane. They are going to play "Let's Pretend" for as long as they can and hope for some inflationary miracle to bail the well-connected insiders out. Japan tried this, and they are still waiting...
The idea that this helps more homeowners down the road is a total canard. The health of the real estate market is two-pronged: 1) Supply of homes, and 2) Supply of credit.
Keeping people in their homes may keep home inventory from increasing, but it does not improve it, either. And that’s where credit supply comes in. Without a vibrant mortgage loan market, inventory will be net positive regardless of how many homeowners get to stay in their homes.
What this altruism doesn’t factor in, however, is that we are creating a culture of unaccountability - of risk without consequence - of subordination to the mercy of bureaucrats and criminals and political gangsters in Washington, D.C. Contrary to the economists’ beliefs, the price will be paid one way or another. If it doesn’t come out of the banks pockets with all the defaulted loans, it will come out of all of our pockets as the Golden Age of Taxation descends upon the Republic formerly known as the United States of America.
This will end when the Chinese populace rises up and presents a threat to the State government - a threat much bigger than anything in Tiananmen Square. That's when China will decide the existential question trumps the international economic question, and then they dump their T's to pay for their own survival.
The downside of keeping people in those homes is that it keeps prices higher and hurts people that saved to buy a first home. If it hadn't been for this downturn (or return to reality) a lot of people would have been shut out of the housing market all together.
My parents bought homes they could afford and then laughed at the payments years later. What we have now is a bunch of people that won't ever be able to pay off their homes. Welcome to negative amortization.
That dependeds upon where one lives. In my part of the Midwest, land is relatively cheap and there aren't many Sierra Club members around to block development. Renting to save up for a down payment was and is still possible.
Because you are the class enemy, stupid!
Be glad they aren't putting you in boxcars - yet.
From Obama’s home state news:
As the housing boom dies out, land prices drop
After development bought the farm
April 4, 2010
By CINDY WOJDYLA CAIN email@example.com
PLAINFIELD — Michael Garrigan has seen the price of land plummet as much as 75 percent from a high of $110,000 an acre in the past couple of years.
Garrigan, who has been Plainfield’s village planner since 2002, almost can’t believe how quickly prices skyrocketed, then crashed during his eight-year tenure.
» Click to enlarge image
Two single-family homes stand surrounded by dozens of empty lots in the Playa Vista subdivision at 135th Street and Ridge Road in Plainfield.
“I’ve seen the boom and the bust,” he said.
From about 2002 through 2005, Plainfield was one of the fastest growing communities in the country. But the housing bubble burst and what some are calling The Great Recession sucked the life out of residential development in Will and Kendall counties, which were among the fastest growing counties in the nation.
“Now developers are having property foreclosed on,” Garrigan said. “That is unfortunately the new norm in this economy.”
And in the newest twist on the topsy-turvey real estate market, farmers who sold land to developers are now buying or leasing it back to plant crops.
Sell high, buy low
When the market was hot, Gus “Butch” Rousonelos, whose family has farmed in Plainfield since 1963, sold farmland for $92,000 an acre. More recently, he bought different land for $14,000 an acre.
The 160 acres he sold to Macom Corp. was part of the former Updike farm, south of 135th and east of Plainfield Road in Kendall County.
The 120 acres he purchased had been sold by another farmer to Lakewood Homes for the LaBancz subdivision, which would have been north of Route 126 and east of County Line Road in Will County.
“We were lucky,” he said of the timing. “It was fortunate for us, not so good for the developers. But they’re big boys.”
Rousonelos, who no longer farms the land he owns, said during a phone interview if he hadn’t sold when he did, “Instead of being in Sedona, Arizona, I’d be in Plainfield.”
Not all farmers were so lucky, he added.
“For the person who didn’t sell, but had the opportunity, they’ll be second-guessing themselves for life,” he said.
Rousonelos said he would buy back the Updike farm, but the bank that now owns the property still wants too much money per acre.
Garrigan cited the McMicken subdivision as an example of how far the market has reversed. Midway through the last decade, the 673-acre subdivision was zoned for 1,339 housing units, he said. The subdivision was going to be built in Kendall County on land south of 135th Street, north of 143rd Street and between Route 30 and Plainfield Road.
Now the land has been taken back by the bank and real estate signs posted along 143rd Street and Plainfield Road advertise the land is for sale, Garrigan said. Until it sells, the land will be farmed.
The LaBancz subdivision would have included about 300 homes to be built by Lakewood Homes, Garrigan said. But now that land, too has been taken back by the bank and is for sale.
Plainfield isn’t the only municipality to see housing developments stalled or foreclosed. Joliet, too, has similar issues, especially in the Kendall County portion of the city, said City Manager Tom Thanas.
Some planned subdivisions that were never developed can be resold to farmers, he said. But other parcels that were partially developed may have to sit and wait for the housing market to bounce back, Thanas said.
Mark Schneidewind, manager of the Will County Farm Bureau, sees a similar pattern happening in “pockets” all over the county. Farmland that was selling for an average of $45,000 to $65,000 an acre in some areas is now going for $5,000 to $7,000 a acre, he said.
At one time, county officials worried that too much farmland was disappearing to homes. But that worry has withered, Schneidewind said.
“It’s good to see the farmland staying and not being developed,” he said. “We need to keep our food system going and we’re doing that locally.”
Recently, Schneidewind said he heard of one developer in the eastern portion of the county who signed a three-year lease with a farmer to farm land previously set for development.
Developers who aren’t bankrupt and who haven’t had land foreclosed are holding tight, waiting for better times, Schneidewind said. But it might be a while before things get back to normal, he added.
“Will it pick back up? Yeah. But it will be 7-10 years before we see that turnaround,” he said.
Plainfield’s Garrigan said some projects in the village are moving forward — slowly.
“Nobody in their right mind things this is going to last forever,” he said. “... It’s by no means all doom and gloom.”
For instance, Gladstone is continuing to build homes in the Chatham development along 127th Street. And Cambridge Homes is continuing to build townhomes at Patriot Square north of downtown, he said.
But the slowdown has really hurt the village’s budget. Impact fees, which once brought in $8 million to village coffers, have mostly been eliminated and totaled only $35,000 last year, Garrigan said. And building permits dropped from a peak of around 1,500 in 2004 to 65 last year.
“That speaks for itself,” he said.
Municipalities aren’t the only ones suffering. Garrigan said he knows builders who bought lots for $100,000 or more to build a spec home. Now, the lots are worth much less.
“Are there builders, developers and homeowners underwater in Plainfield? Of course there are. That’s a terrible fact in today’s economy.”