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 ...
Nope. This is about artificially stabilizing property tax income.
Why? Because, from the Austrian to Hill, the political class recognizes that all hell will break loose when the market plunges and counties refuse to adjust valuation.
“and it basically looks like it’s not going to pan out if this sub-prime bailout goes through”
Why?
Home values have fallen in most areas so he gets to buy a home at a lower value.
Besides the subprime people are just getting their rates frozen at the initial rates.
Those initial rates are 2%-3% higher than a normal loan anyway.
I fail to see to how this “hurts” anyone. The rates will stay at 8.500% instead of doing to 10.500% and then 12.500%
Some people just love to bitch and complain no matter what the issue, or their level of knowledge on the subject.
We are pretty close on our thinking. One difference may be this: I think we are in for a long deflationary period from around 2010 through around 2020, while you are looking for a shorter downturn. I hope you are right and I am wrong.
My husband is a stay-at-home Dad! We have one in Kindergarten.
A dad’s work is never done. ;)
Take a look at what is really happening before you let the MSM and Democrats spin it for you.
###
Bush mortgage plan could help some
BY TAMI LUHBY
A few hundred thousand homeowners will likely find relief in the Bush administration’s plan to freeze interest rates, but more than a million struggling borrowers won’t.
(snip)
Industry observers, however, said the proposal will only help a handful of borrowers in trouble because of its strict eligibility criteria. Estimates range from 7 percent of subprime borrowers, or about 145,000 people, to 12 percent, or about 240,000 people. On top of that, servicers’ participation in the program is voluntary. And, investors who bought securities based on subprime mortgages, may not sit back quietly after learning their interest payments won’t rise anytime soon.
(snip)
“This is a small portion of the estimated 2 million borrowers looking at foreclosure over the next couple of years,” said Keith Ernst, senior policy counsel at the Center for Responsible Lending, which expects the plan to help 7 percent of homeowners with subprime mortgages.
Bush’s midday press conference came hours after the Mortgage Bankers Association released a report showing mortgage delinquencies rose to a 20-year high in the third quarter.
The percentage of borrowers — both prime and subprime — who are more than 30 days late on a payment rose to 5.59 percent, or 2.5 million loans. The share of delinquent subprime borrowers climbed to 16.31 percent, or 977,000 loans.
http://www.newsday.com/business/ny-bzbush1206,0,243815,print.story?coll=ny-homegarden-utility
###
If this helps the high estimate of loans eligible, it’s only 240,000 houses nation wide out of a pool of 2.5 million loans in trouble.
Pulling 240,000 houses out of the national pool of available houses isn’t going to keep prices from falling, especially with a pool of 2.5 million loans in trouble. At most, it will slow the decline in pricing very slightly.
But in some areas prices aren’t going to fall. They weren’t going to fall in those markets if Bush did nothing.
Keep socking away cash and watch your local market closely. Even in places where prices aren’t dropping, they won’t be increasing as fast and there are deals in every market if you have cash, good credit, and can move fast to do a deal.
"Your attitude has been noticed, you know. Oh yes, it has been noticed."
Excellent, Smithers.
I’ve got three. 4th grade, 1st grade, and 3 y.o.
I am just curious why you feel their will be a longer downturn?
That gov’ment cheese is some pretty good stuff.
I agree.
This is a good strategy. I paid cash for my basement refinish, saved cash to do it and because of that was also far more involved on the negotiations with contractors shaving off at least 25% of quotes while still preserving quality. Good thing I did this, my bank shut me out in July of raising the business LOC, even though management hit our bookings (credit crunched) promised to increase the LOC. This put a $100k cash shortage on the business at the worst possible time, right smack in the middle of summer! I had to live off of credit for four months and work 15 hours a day. So yes, using credit for emergencies only is wise and the learning from this painful experience will not be forgotten.
Neither shall the painful experience my middle class friends are experiencing be easily forgotten either. Let’s just hope they don’t vote in Hillary as some are talking about, looking for the government to bail them out of their fiscal irresponsibility. Truth is, this entire economy has been fueled by easy credit although I give the President credit for tax breaks which also fueled economic expansion.
Since Lyndon Johnson and the “war on Poverty” and Welfare” for queens of baby production, we taxpayers have been subsidizing life’s losers.
I, for one, am darn sick and tired of doing so. I don’t have to imagine very hard to know how much better my life could have been if I wasn’t saddled with the losers who learned nothing better than how to work the system and suck more and more money out of my pocket, which I have worked for since I was 16. I am now 68, and I never got a bailout on a single thing. When family members helped me, I paid them back, with interest.
I was raised to never have less than 6 months worth of living expenses cash in reserve for emergancies and have lived by that my entire life.
MORTGAGE MELTDOWN
Interest rate 'freeze' - the real story is fraud Bankers pay lip service to families while scurrying to avert suits, prison
Sean Olender
Sunday, December 9, 2007
New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.
Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.
But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.
I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."
Despite Thursday's ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?
The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.
The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply - period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.
Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?
So what's coming then? SS collapse ?
House prices are as high as they are solely because of the firehose of funny-money being forced into real estate lending.
Turn off the water, and the prices will go back to reality. Then people will be able to afford houses.
But the bankers with visions of collecting 7% on $600,000 from everyone in the country, will have to find other places to invest.
And the idiots who paid 4 times what the places are worth, will not be millionaires purely on spigot-speculation.
It is easy to solve all of this. But those about to lose don't want to solve all of this, they want to revive the silliness, find a flock of greater fools, and get out alive before it all goes smash.
That it would all still go smash, and that the next lot would think exactly the same and scream for government bailouts exactly the same, well, who wants reality anyway?
I can't believe there are grown ups in positions of responsibility in this country. In finance or in government. It is like seven year olds are running everything. Just insane.
The government's only question in the matter is whether to let them destroy the financial system in the process, and the answer is a solid "no". So to the wall they go. End of story.
The collateral was fraudulently represented, ie inflated appraisals, overstated income, etc.
If these contracts are unenforceable then the bond market is dead, except for Treasuries of course.
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.