1 I'm so pissed I decided to rent a cheap craphole until I had a downpayment instead of going for the 4BR 3BA acreage north of the city.  *spit*

2

Where do we line up for that? :-P

3 Who knew the federal government had such power? They can modify contracts? I guess they own everything! Awesome!

4 And in most cases, will this be 38% of zero......?

5 My morgtage pmt, including escrow, is about 8.5% of my monthly gross income. I planned it that way so that I could do important shit like buy furniture occasionally, and buy cars, and afford a decent vacation now and then, and pay for kids to go to college. Now I find out that I'm a dumbass, cause no way is the govt gonna pick up my morgtage for me. I feel like such a douche.

6

I am a damn fool.  Why in the hell did  I limit myself to a house that I can afford if the Givernment is going to come back and modify the loans of all the irresponsible borrowers? 

Now not only do I have to pay my mortgage, but I guess I have to pay for that dude down the street's mortgage.  You know the guy.  The one that pulled $200k in equity out of his house for a new boat and new Escalade. 

  Responsibility is for suckers and fools.

 

7 I should buy a house I can't afford right now.
We're definitely in a "market failure" situation in which incentives are perverted and we're all in a game theoretical position where cheating (taking advantage of the perverse incentives) is the only rational play.

8 Watch O Reilly extol the praises of this crap.  Glen Beck and Rush are soo far superior to O Reilly.  He is starting to believe his own press.  Beck and Rush are the only two worth listening to.  Obama is beginning to seem like Zaphod from Hitchhikers Guide to the Galaxy. 

9 Sweet. How much is the rent on my apartment going down by?

What? Only assholes who 'bought' a house they couldn't afford in a million years get money from me? Oh, that's fair.

Fucking fuckers.

10

What's it gonna be like to live in a world where there are no negative consequences for stupid behaviors? Is it gonna be really great? Or is it gonna really suck? I can't decide.

But it reminds me of that line from some kid's movie, "In a world where everyone is special, no one is."

11 pendejo grande,

That was "The Incredibles".

12

38%? That's still way too high. You really shouldn't be paying more than 28% of your income on ALL housing costs if you want to be able to save a little and not live paycheck to paycheck. Heating/AC, maintenance, yard work, cable/phone/gas/etc. bills, property taxes, etc. - if you are at 38% just on your mortgage you are still going to struggle.

The Federal Government is going to make to complete mess of housing. There is no way they can estimate where the housing prices are going to settle out naturally - let alone with interference. Cram downs and mortgage modifications are going to be a disaster. How could it possibly be managed properly? No way.

What's worst is that honest, hard-working people who did the right thing and bought within their means are the ones that are going to be punished and given no help, and the idiots who bought houses they KNEW they couldn't afford are going to get our tax dollars to help them out. What bullshit. Makes me sick.

13 That which does not kill me, only postpones the inevitable.

14 The market in CA and FL is still vastly over-priced.

15 If the government does this, no one but the government will want to issue any more mortgages.

The WSJ had a good article last week about how just allowing bankruptcy judges to alter the terms of auto loans cost all borrowers an average of 2.5 percentage points on their loans.

16

Funny, I would have advocated that if I had been like, a loan officer or something. For goodness sakes! Don't let your payment exceed 97% of your gross income.

What if hypothetically my income is $100,000,000.00 a year? Are you saying I can't live on $250,000.00 a year so I can't have a $99,750,000.00 loan?

You sir, are a filthy liar and it's obvious you have know idea what your talking about and should be ignored.

17 Get off my Gulfstream!

18 47% don't pay taxes, now they don't have to pay their mortgages.

19

Say it with me now....PRINCIPAL REDUCTION.

That is the only thing that makes sense to most primary homeowners who are upside down due to no fault of our own. All these other loan mods are BULLSHIT.

20 how far down will this take the stock market?

think i'll just cash out what's left of my 401K and buy some guns and ammo.

21 Hurricane,

Say it with me: foreclosure.
That's the solution if people can't afford the things they tried to buy. This beggar-thy-neighbor shit stuff just makes everybody pay for some individual's mistake.

It's tough but it's the only answer that creates the incentive structure going forward.

22 Yeah, this deal won't benefit those of us who don't have a mortgage that consumes half our gross income.

But at least the deal doesn't include raising our mortgage payments. 

Yet.  (Geithner doesn't read this blog, does he?)

23 Maria B is interviewing the founder of starbucks and he is discussing his new strategy.  Well sure, it is no longer kewl to walk into the office carrying a cup of very expensive coffee. 

24 Today I sent out a registered letter to Wells Fargo with a cashiers check in it paying off my crib in full.  Once the new crank lab in the attic comes online, this dump is going to generating serious bank rather than costing me money.

25 If they have been living in their house without paying for the last 2-3 months and have lost their job and are on welfare or unemployment benefits, I guess they only have to pay 38% of what they are earning now. I guess that would make their housepayment between 300-500 dollars a month. Where can I get a house for this price? Hell, where the fuck can I rent a house for this price? This is total bullshit! All of us that pay our mortgages are screwed! Which includes pretty much the entire middleclass and up! FUCK YOU OBAMA! And all your dem buddies!

26 My thing is - lowering the interest rates, putting off the principle till the end of the loan - atrocious as it is, isn't as bad as actually paying off the principle for these people.

In other words, deciding they only have to pay, say, 100,000 on a 400,000 house, or whatever.

They have said they aren't going into "details" about this whole plan.  My suspicion about the "details" is that they are going to do just that - pay off half the houses FOR these people.

What do you think?

27

Entropy - I know you're being facetious and all, but that's not what your entire loan would be...that would be the total of your mortgage payments for the year.  Your total loan would probably be 10x larger.

And do you think you'd be able to score that 97%-income house in a land where property taxes would be less than the other 3%?

28 So if they do reduce these loans, what happens 10 years down the road when (hopefully) the housing market has somewhat recovered and beneficiaries of this policy want to sell? Will the people who bought homes they couldn't afford get to benefit even more by selling them at a premium compared to their government-reduced mortgages?

29 If they are going to give handouts to these irresponsible people then I demand that at least the goverment allow me to refinance my mortgage, at lets say, 4% with no points and 50% of normal closing costs.  Hell since I'm dreaming lets make it 2.5% no points , all closing costs paid and a coupon for a lifetime supply of skittles. and rice a roni . 

30 If they're going to pay off some big chunk of bad loans, I'm going to need to buy some expensive crib quick and start defaulting on it right away.

31 Pendejo (#5): I think you are misinterpreting what Obie wants: he wants everyone to pay 31%-38% for their homes.  So, if you are only paying 8.5%, you are not doing your patriotic part.  Your mortgage payment will thus increase four-fold so that your percentage is more in line with what Our Maximum Leader wants from you.  The extra goes towards the houses of those more patriotic than you.  Shared sacrifice and all that . . .

32 I agree with Hurricane, lower the principal by Government action.

Actually, if you can hold off on doing this now; I'd like to make some deals with some people to deliberately buy their property at inflated rates.  I bet dad would sell me the family home for a mil. 

Once it gets reassessed down to 200K I can have the loan principle cut and we can share the profits.  400K each for no work but printing and signing a few contracts?  Better than robbing the bank myself, bank robbers usually only get 30-40K tops.

That was the goal right?  Legal, Government sponsored bank robbery.  What a great idea, this'll surely benefit the economy and all of mankind.

33

Yay! Everyone is on welfare!

And won't it be great when the gubmint moves in that ghetto family--all thirteen of them!--right next door to you! Feel the excitement! Feel the diversity! Feel the knife cutting right through you and yours' throats!

 

34

"So if they do reduce these loans, what happens 10 years down the road when (hopefully) the housing market has somewhat recovered and beneficiaries of this policy want to sell? Will the people who bought homes they couldn't afford get to benefit even more by selling them at a premium compared to their government-reduced mortgages?"

Hopefully there will be some sort of correction in the markets as well as just "fixing" these overinflated mortgages that reflected amazingly overinflated house values.  Wereas, if you cut the principal of the morgage in 1/4, then you also cut the appraised value of the property in 1/4, to keep it all fair and even.

I dunno.  It's always amazed me to watch these "house-flipper" programs on HGTV, where you'll have people in the Seattle suburbs buying 1,000 square-foot crackerbox crapholes for $400K, and then slapping down some new tile, replacing the appliances, putting up some paint to mask the rotted-out walls, and then sell the lot for $750K.  Maybe it's just because I've only ever known TX property values.  That same $400K craphole out here would be lucky to draw $60K.  And a $750K house would be a 3,500 square foot complete custom house on a lakefront lot off of Possum Kingdom.

35 I'd be happy as hell if the Feds dropped my interest rate from 6.0 to 5.0 on my 29-more-years fixed. I don't see it happening, but it would be nice.

36 Today, such a deal, I have the Taj Mahal for sale; cash only, please, and I will move it to the location of your choice. Don't be left out again. HUD-qualified.

37 Remind me again, what are the Incentives to NOT overextend or overspend now?

38 Maybe this is a stupid question, but why are we "modifying the loans" at all?  I'd rather we NOT take more money away from failing banks that are failing because of stupid government policies in the first place. 

As much as it turns my stomach, I'd rather that the government set up some sort of fund where a homeowner can come in and apply for a few months's assistance to either cover what they can't pay each month or help to unload a house they can't afford to pay for.  It sets a bad precedent for the government to modify a contract agreed upon by two parties, no matter how stupid the contract.

Mistakes are supposed to hurt, so you learn not to make them anymore.

39 Once again, government is doing its best to make it attractive to be a fuck-up.

40 This is going to completely freeze the housing market.  As a qualified buyer who has been sitting on the sidelines, there is NO way I will make whole a seller who bought without knowing 1.) whether their mortgage has been adjusted so the "last sale" in the tax records is wrong; 2.) what the reduced outstanding principal on their mortgage is.  It's unlikely this reduction will be publicly disclosed until the tax assessment cycle catches up with the principal reductions and/or the sales prices reflect the lower market prices.  In many jurisdictions, the assessed tax value reflects sales data from several prior years.  Watch sales drop through the floor if this passes. 

41

You know how we used to brow beat other countries who continually tried to make 2 + 2 = 5 in their economic polices?  Good times.

Say it with me now....PRINCIPAL REDUCTION.

That is the only thing that makes sense to most primary homeowners who are upside down due to no fault of our own.

Hurricane...where to start...if you signed up for an interest only loan, it is your fault.  If not, I'm unsure how the rest of the polity owe you a break on an investment. 

42 I've been so fucking stupid. I've kept my house payments below 25% of my gross monthly income when I could have been living large in the knowledge that Bambi would rescue me.

The fact that banks actually granted mortgages which would generate payments in excess of 40% of monthly income bothers me. It would bother the banks too, if they were actually forced to suck on the bad loan.

43 Instaed of modifying mortgages, just let the mortgage holders (banks, or wherever the paper is) own the houses and rent them back to those who live in them at affordable rents. No complexity about renegotiation of mortgages, establshment of honest values for the houses (and the Banks' or other holders balance sheets), and opportunity to employee a bunch of people (maybe the guys who used to be mortgage brokers) as property management specialists. Whatever solution is found, it is going to have to involve real people looking at every case   very manpower intensiv work, but unavoidable. So far, we seem to be seeking solutions that avoid such nitty gritty, but such solutions are not to be found.

44

The fact that banks actually granted mortgages which would generate payments in excess of 40% of monthly income bothers me.

This is the crux of the matter.  Fannie and Freddie piled these things up and the banks tunred them into exotic paper knowing than, in the end, the USG would have to step in if things got too rough.  Well, it got too rough and here we are.  I'd like to thank Hank Paulson and his fraternity buddies for being either the smartest criminals in history or the worst example of dumbass banking in history.

45

Say it with me now....PRINCIPAL REDUCTION.

That is the only thing that makes sense to most primary homeowners who are upside down due to no fault of our own. All these other loan mods are BULLSHIT.

Posted by: Hurricane at February 17, 2009 03:36 PM (CjTZ9)

Say it with me now...SCREW YOU.

Why exactly do I or anyone else owe you or another in your situation one red fucking cent?

You made your deal, now live with it. I didn't do anything to get you in the mess you and others or in so don't come fucking telling me I need to pay up.

The idea that the government and your fellow citizens have to come to your rescue is BULLSHIT.

46

Why don't they let the banks collect rent while they try to sell these houses to qualified buyers?  The new owner could continue to collect rent or kick the fuckers out and live in it.

The banks are going to lose money no matter what gets done.  This could reduce their loses.  It also gives many responsible buyers the chance to buy a home at decent price instead of the artificially inflated prices that kept many people out of the market for the past 10 years while irresponsible borrowers were driving up the prices.

47 "reducing payments" will not fix the housing decline.  All that does is string out your 30 year mortgage into (a) a 50+ year one, or (b) one that jacks the payments back up in 10 or 15 years.  Either option is just kicking the problem down the road... and since the markets are all about predicting future values, the immediate effect on housing values will still be zero.  You have to arrest the decline in house values.  The only way to do that is to change the supply/demand ratio, either by subsidizing purchases (eg, tax credit for buying houses to stimulate demand) or cutting the supply (eg, burn down houses).

48

wooga at February 17, 2009 05:05 PM (2p0e3)

The decline you speak of is the markets way of resetting the correct value instead of the inflated values that got us into this mess in the first place. I'd rather not repeat that scenario.  We need the correction and its going to hurt. As someone said before, the banks should take the house and the residents can become renters again.  Hopefully they learned their lesson.  

49 "...administration officials are tight-lipped about details"

Yeah, too fucking bad they weren't concerned about mortgage details several years ago.  Right Barney?  Maxine?  Dodd?

Assholes.

50

A lot of these mortgages were not originally high LTV or high debt to income ratio loans.  But when the value of the houses falls by 20-30%, suddenly they are.  It isn't any individual homeowner's fault that he bought a house he could afford at the time and then the market tanked and he is now upside down.  Most of these houses were bought in the last 5-6 years so there is a lot of mortgage left on them.  And if banks have to foreclose on all those houses, the houses will be vacant for a long time and off the local tax rolls, in addition to being targets for theft and general blight.  There are "externalities" to allowing massive foreclosures.  The lender, the homeowner, and the community are generally better off if the loans can be modified either through principal reduction or stretching out the payments and dropping the monthly payment. 

51 Damn, they already spent over $9 trillion in bailouts, which is "only" a trillion short of all mortgages in the US.  They could have just f-ing paid off everybody's loan.  Then all that money that people put into their mortgage payment could be spent on other crap.

Of course then the banks wouldn't be collecting their multiple trillions in interest.

Instead, their just burying us in more debt and throwing money down the tubes to the banks.

Note: I'm not a f-ing economist, so don't get up in my grill about my bullshit take on this.  Also, I'm not saying this is what should be done, but as I sit back and watch the injustice of it all it's very tempting to go John Galt and just shut it down.

52

O needs to differentiate between the types of distressed homeowners out there: those that want to keep their house but can't refi due to declining prices and/or those that are facing foreclosure because they can't afford their payment no matter what.  Propping up the latter will only delay the inevitable and damage the market even further as it cancels out what makes a real "market" exist b/w buyer and seller.  For the former, what they could do is require the banks to assume that the past purchase price was market and then guarantee the difference b/w actual market (real price) and previous purchase price in terms of refinancing the balance. 

I'll agree with others here, if O injects the Feds into the residential market too much he'll destroy whatever recovery may have been on the way b/c unless they make the restrictions uber tight, everyone and their brother will try to find a way to qualify for the assistance.  I mean, why pay for your own house when the National Bank of O will do it for you?   

 

53 Lurching from one trillion dollar crisis to the next. SO what exactly did the giant porkulus waste of money do again?

54

"A lot of these mortgages were not originally high LTV or high debt to income ratio loans.  But when the value of the houses falls by 20-30%, suddenly they are.  It isn't any individual homeowner's fault that he bought a house he could afford at the time and then the market tanked and he is now upside down.  Most of these houses were bought in the last 5-6 years so there is a lot of mortgage left on them.  And if banks have to foreclose on all those houses, the houses will be vacant for a long time and off the local tax rolls, in addition to being targets for theft and general blight.  There are "externalities" to allowing massive foreclosures.  The lender, the homeowner, and the community are generally better off if the loans can be modified either through principal reduction or stretching out the payments and dropping the monthly payment."

I fail to see how simply being upside-down on your home somehow causes you imminent financial doom.  You're still making the same payments on it (assuming you're in a fixed mortgage), and unless you were looking to only own the house short-term anyway, and you're looking to sell now, you aren't taking any sort of hit on the fact that you're upside-down (not you specifially, just the generic "you" of someone who is upside-down).

People go upside-down on their cars all the time for the first several years of their financing period.  And unless you're the kind of idiot that likes to buy a car, and then sell it as soon as the next newer body-style comes out (in which case you should be leasing), then being upside-down for a while doesn't matter, because eventually you'll be right-side-up again, and odds are you're planning on owning the car for longer than it takes to pay it off anyway...

The only thing that being upside-down on your house should prevent you from doing is getting a home-equity loan / line of credit...  What am I missing?

55 The only thing that being upside-down on your house should prevent you from doing is getting a home-equity loan / line of credit...  What am I missing?

Highly negative equity also prevents you from moving, since selling requires you to pay off the mortgage with money you don't have.  Obviously, a new lender wouldn't be interested in transferring that negative equity to a new house in the form of something obscene like a 125% LTV mortgage.  In theory, your current lender wouldn't be any worse off doing something like that, but I don't think an arrangement like that is common.

56 The thing the really pisses me off are people who have owned houses for years that whine about being heavily underwater on the house they bought in 2005.  Now they want to be "made whole".  Funny that they never seem to offer to pay back the obscene profits they made on the old house they SOLD in 2005.

57 I'm going to email a picture of my house to him and ask him to pay my mortgage. I hope he likes it! I'm tired of my mortgage--every month I gotta pay it.

58

Lurching from one trillion dollar crisis to the next. SO what exactly did the giant porkulus waste of money do again?

It gave Liberal politicians an Earth-shuddering orgasm and a desire for more.

They're whores, ya know.

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60 (Geithner doesn't read this blog, does he?)

He does, but he uses the TurboTax browser. Filters out all the unimportant stuff.

61 If the government does this, no one but the government will want to issue any more mortgages. Bingo. Welcome to Corporate Fascism. And stagnation.

62 I sold my real estate mutual fund after he was elected. If the govt is running the housing industry, you don't want to be in it--unless you're connected (see Rezko, Tony).

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70  Don't let your payment exceed 97% of your gross income. Cause, well you know, you can't PAY that.

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