Posted on 10/07/2008 8:14:19 PM PDT by cdchik123
WASHINGTON (AP) - Republican presidential candidate John McCain is proposing a $300 billion program for the federal government to buy up bad home mortgages and allow homeowners to keep their houses.
(Excerpt) Read more at apnews.myway.com ...
“This would make me angrier than I already am. Basically, the default risk of the mortgages would be transferred from the banks and onto the backs of the taxpayers. Then any “windfall” from this toxic waste would be split with private equity firms?”
Somewhat. I think the private equity firms would put up SOME capital. But I suspect the taxpayers will be funding most of this (and obviously the Treasury is taking the initial risk, and private equity firms can then cherry-pick what they want to invest in).
“Paulson’s plan doesn’t even address the issue it was supposed to: getting banks to lend to each other again.”
Well I hear your point on foreclosure problems in some regions.
I personally bought my home through a short sale from a bank. The foreclosed owner was a speculator and I didn’t feel badly at all.
With regard to “banks lending to each other”, that problem only really started upon failure of Lehman Brothers. And there are a lot of side issues (for example, prime brokerage assets of Lehman’s clients which were intermingled with Lehman’s own assets and now stuck in bankruptcy court, credit default swap counterparty risk given lack of exchange system, etc) which are also affecting intra-bank lending.
Chopper Ben and Bazooka Hank have been lying the entire time throughout this crisis, thinking it necessary to avoid panic. We have panic anyway. As a result, they have zero credibility. It is back to the old, I know they are lying when their lips are moving.
I can’t help but feel we would be better off if they both were straight up and told the truth right off the bat and got a minor panic over with early. We would also be better off had that $700 billion gone straight toward recapitalizing select banks and let the rest fail. Or capitalizing new banks and letting the rest fail. Instead, they chose what seems to me to be a very ineffective way to recapitalize the banks. It won’t work.
Ditto....140 knee-jerk reaction posts without thought.
McCain’s mortgage buy out may be the only way to bring the aircraft out of the dive.
“I can’t believe I’m saying this, but... I think Hillary Clinton would be a better choice between these two dimwits.”
That is why I am so glad she got bumped off in the primaries. Too many conservatives have forgotten the h*ll the Clintons have put us through in the 1990s and they would have voted for her. They got “Clinton Amnesia”.
Now they have no choice but to vote against Obama and giving us a better chance to keep the White House.
No more Clintons!
Thanks for your support but it seems we are in a minority here.
I really do not understand all of the intricacies of the market forces (being only a lowly Mechanical Engineer) but it seems the root of the problems being experienced in the financial markets is the de-valuation of homes (albeit from unrealistically high prices). It would seem to reason that anything that could be done to stabilize the market would help. Minimizing the number of empty homes, I would think, would be a step in the right direction.
McCain haters is right. I hate all RINOs and McCain has been one from the start.
Just where do you think he got the nickname “Maverick”? He got it by abandoning the Republicans and crossing the isle to side with the Democrats so often.
McCain is no friend of Freepers, that is for sure. He is just the least objectionable candidate in the race. I’ll hold my nose and vote for the moderate Democrat (McCain) over the radical National Socialist Party candidate (Osama).
But I don’t have to like it. And I sure as hell don’t like the way McCain was shoved down our throats, and the way the Democrats and the MSM have been pushing him for the Republican nominee since 2000, so they can backstop their own Democratic candidate. Heads they win, tails they don’t lose. Pure and simple.
But all of this is moot, since voters vote their pocketbooks first and foremost and the crashing economy means the voters will blame the incumbent president and his party.
Bad economy ==> vote against Republicans ==> vote against McCain.
Simple as that. IT’s OVER.
Palin in 2012! A REAL Conservative.
A big part of the problem is that many purchases were not made by those kind of good people who actually put some equity into the home at closing.
In my area there were two major problems:
THE LOW INCOME BUYER:
Unqualified buyers were buying homes with no down payment and 100% financing at prices far above their ability to pay. Many of these homes were appraised a considerable amount above their actual value, even in the middle of the boom when all prices were rising. So the minute they signed the loan agreement they were significantly upside down on the home. When prices began to normalize their position worsened.
SCAMMERS, FLIPPERS & SPECULATORS:
Others were buying homes at grossly inflated appraised prices with zero down and getting 100% and even 110% mortgages. These people were walking out of the closing with $25,000-$50,000 or more in cash. Realtors were actually advertising deals like this.
I would like to see some stats to see how many underwater loans are performing and likely to continue performing. If a high number of loans fall into that category, then I would agree that we don't want to force banks to refinance the loans for the lower principal. However, if the vast majority of the underwater loans are going to go to foreclosure anyway, then we are better off to allow a refinance for borrowers who can pay the reduced loan back.
Banks might lose if they have to refinance some performing loans that would have continued to perform, but overall, the program might be better for solving the problem.
It deserves study, which is why I said not to reject it out of hand. I don't have enough info right now to say, and a problem is that with no transparency no one right now has such information. Banks have been hiding the full extent of their problems for a long time, and we need to start fixing the problem by determining its extent.
There’s nothing in the bill that forces a bank to sell their bad paper to Uncle Sugar...
In fact, the limitations on executive salaries gives banks an incentive to avoid selling, unless they are overwhelmed and going under anyway.
Here’s a little factoid for you: I’ve seen studies that say that having as few as two foreclosure sales in a neighborhood of 100+ houses negatively affects the value of all the other 98+ houses.
Oddly enough, this is an understatement. I bought a small home in a small town three years ago. I had been living overseas for seven years, and I had no credit in the US. We put more than 30% down, and had to pay a ferocious 10%ARM. When I recently went to refi, the original estimate was that my house had depreciated 20% because of a similar home which had recently sold 15 miles away. Mark to market in the housing industry is worse than you think, at least in Texas.
(I am not complaining, by the way. We still have equity and my credit is now solid, so the refi is in the works.)
McCain— six letter word for “Loser”.
Legally, they should be kicked out and have to earn a house like all the rest of us. Me, I have a $450k mortgage on a house that was worth $2.8m but is now probably $2.0m. Don't feel sorry for me, but I am not going to get any bank to lower my principal or rate. So there's nothing in this for me. I just think that kicking out the homeowner who want to stay, and who can afford to stay on terms that reflect current reality, would make a lot of sense, and help us recover faster.
Why not instead facilitate consolidation of the mortgage shares, so that then individuals could take properties, appraise them, and figure out what to do with them?
If the mortgage will be resold at the current value of the home, why not "sell" it to the existing homeowner which, in effect, would be the renegotiation that McCain stated.
Rewarding bad behavior will beget more bad behavior. Guaranteed.
Suppose someone were to offer you a deal: take a card from an honestly-shuffled deck. If it's a ten or higher, you win $100. Otherwise you lose $100. Would you be inclined to play that game? Would very many people.
Now suppose that the rule was changed a little: if you get a ten or higher, you still win $100, but if you don't then a $100 loss will be paid half by you and half by the government (i.e. taxpayers). Would you be inclined to play that game? Would very many people?
In the second game, who benefits from the taxpayer subsidy? Who loses by it? How much?
Bad idea that will never happen. I’m voting for Gov Palin anyway.
Pray for W, Gov Palin and Our Troops
The problem is not that he's from India. The problem is that he's from GS.
Yep, and some significant fraction of those will not be living in the house. It will have been a speculative "investment", in reality a bet that the cost of homes would continue to rise.
Great Post!
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