posted
The issue for me, Lyhrawn, is that I wish the government would decide the next thing. We've done agriculture booms and busts, we've done information technology, and we've done real estate. I wish, if we are going to go through a general industry bail out, the government would guide a bit and steer the capital towards energy and technology innovation, as opposed to letting real estate continue to hold so much sway.
Posts: 5600 | Registered: Jul 2001
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"I wish, if we are going to go through a general industry bail out, the government would guide a bit and steer the capital towards energy and technology innovation, as opposed to letting real estate continue to hold so much sway. "
I can get behind that.
Posts: 3354 | Registered: May 2005
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quote:Originally posted by Irami Osei-Frimpong: The DOW is going to plunge, it was inflated to begin with. If we are going to bail out the housing market, I want it to come with strings-- and the sketch of a planned economy(just a sketch)-- and if that means the upper third of the entire world is going to be a little poorer for a while until we work it out, then so be it.
I share your sentiment but doubt it has any practical application. If the affects of this could be limited to the top 1/3 of the world's population, then yes I say we should take the hit. The point is that it won't be limited to the top one third. Any economic down turn tends to hit the poor hardest and I doubt this will be an exception.
Posts: 12591 | Registered: Jan 2000
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posted
I still think that while a bailout plan could make good economic sense, there's no way that Congress is going to pass something that does it well. It's going to cost more than it needs to, profit people it shouldn't, and create even more political bickering.
Posts: 1261 | Registered: Apr 2004
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posted
" If the affects of this could be limited to the top 1/3 of the world's population, then yes I say we should take the hit. The point is that it won't be limited to the top one third. Any economic down turn tends to hit the poor hardest and I doubt this will be an exception."
I fail to see how financing speculators' bidding up the price of oil to above $150 per barrel could possibly help the lower 2/3rds.
Posts: 8501 | Registered: Jul 2001
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quote:The idea of keeping people in their homes when they never should have gotten those homes to begin with is abhorrent to me. Let them get kicked out, as they should be, but don't leave the on the street, help them get into a house they CAN afford.
What if they can't afford a house? Sure, a lot of the subprime thing was to put middle income people in McMansions, but to a lot of people it was an opportunity to do right by honest people who weren't able to escape poverty. Home ownership can go a long way in that department.
Posts: 3735 | Registered: Mar 2002
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I wonder how one would really go about analyzing that kind of claim. The top 1/3 would really only cover North America, Europe, Australia, and some other outliers scattered around the world such as Singapore, Hong Kong, some places in the Caribbean and such.
The lower 2/3rds would include the roughly two billion in China and India, Africa, and a patchwork of the rest.
Granted, there are a lot of outliers, but my first rough estimate is that, yes, this will indeed level out the playing field. The developed world may well fall behind in growth and the developing world in India and China may very well catch up.
On the other hand, the growth in much of China at least is somewhat dependent on exports to the developing world. A real collapse in demand would crush the very newly industrialized peasants that have just moved out of poverty.
So I dunno. But I think it is safe to say that none of the posters here should be "amazingly" keen on a collapse in the top 1/3rd, because as a group we're probably concentrated in like the top 1/4th or even 1/5th.
Posts: 7593 | Registered: Sep 2006
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Since when are we propping up oil speculators -- this bailout is aimed at mortgage brokers and bankers.
I'd first like to note that I have always favored a bottom up solution to this problem that would have started by finding ways to help homeowners avoid foreclosure -- but people find it so repugnant to reward ordinary people who made bad financial decisions that this isn't even on the table. Instead we are looking at top down solutions that reward the uber rich who made not only bad but deliberately deceptive financial decisions and leaving the ordinary tax payers holding the bag.
If you don't understand how a wall street collapse will end up hurting the poorest people the most you don't understand economics. If companies fail, people loose their jobs. If the rich stop hiring nannies and maids and butler, stop buying cars and ipods and designer cloths amd so on, all the people who were employed making cars and cleaning houses, loose their jobs. And so while the rich end up cutting back on the luxuries in their lives, the poor end up unable to pay the rent and feed their kids.
Posts: 12591 | Registered: Jan 2000
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quote:The idea of keeping people in their homes when they never should have gotten those homes to begin with is abhorrent to me. Let them get kicked out, as they should be, but don't leave the on the street, help them get into a house they CAN afford.
What if they can't afford a house? Sure, a lot of the subprime thing was to put middle income people in McMansions, but to a lot of people it was an opportunity to do right by honest people who weren't able to escape poverty. Home ownership can go a long way in that department.
So you want to use this program to backdoor discounted homes for the poor? I'm not necessarily saying I'm for or against the idea, I'm just curious as to your stance. Who decides who shouldn't own the home they own? Or do we just let everyone keep their house? How do you separate out the ones who would be in a shelter right now from the ones who would just be in a smaller house that is actually within their means?
If you could actually prove that someone absolutely couldn't afford a house and they were already living in a modest house, I'd probably be in favor of keeping them in that home, as it would probably be better for the city, as they'd keep collecting property taxes with someone in the home than with it being a bank owned empty property, and the bank itself would probably still get more money over the life of the loan even with say a 20% discount.
But sorting out the needy from the greedy would I think be an impossible task.
Posts: 21898 | Registered: Nov 2004
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"Since when are we propping up oil speculators -- this bailout is aimed at mortgage brokers and bankers."
And precisely where do you think the speculators got the cheap money to gamble with? Note that oil prices have dropped nearly 50% since the credit crunch began. Credit is credit, and the paper profits generated by the financial institutions' Ponzi scheme hadda go somewhere as the pool of new mortgage borrowers dried up: cheap money for speculators to jack up food and commodity prices, to hyperinflate farmland prices. Since food and fuel costs affect the poorest the most, revamping that gambling fever by bailing out the financial-sector will hurt the poorest the most.
posted
50%? Wasn't the highwater mark of oil prices around $150? And didn't the price just fall to $96? I don't know the exact price drop in percent terms there, but it's probably what, 35%?
And haven't there been some pretty huge contributing factors to the price of oil? You could argue I think that the tension with and poor performance of government backed stocks and the volatility in the market led to people all piling on the oil bandwagon. Calming down the markets and increasing interest rates could get people to back off oil and put their money elsewhere. Maybe not, but I'm nowhere near convinced that this bailout will spike oil prices again.
Posts: 21898 | Registered: Nov 2004
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Yeah, caught me thinking backwards from ~$100to$150 of the 50%rise due to speculation insteada the ~150to$100 of the 33%fall caused by speculators having their lines of credit cut off. Personally I think the influx of speculators started to severely distort the oil market much earlier -- say at $70 per barrel -- and the rapid run-up after $90 per barrel (as massive numbers of pension and mutual fund managers began pouring in on "a sure thing") was commented upon only after people started hurting enough to reduce gasoline purchases.
Bailing out the home purchasers having trouble making their ballooning payments by freezing their interest payments to the initial rates would solve the problem. Unsophisticated investors (typical home buyers) got in with eg 6% interest payments by signing contracts that ballooned their payments to eg 24% after eg 2years, along with verbal promises from sophisticated investors (mortgage lenders) that they could refinance at eg 6or7% when the two years was up. And those sophisticated lenders once again proved that "a verbal contract is worth the paper it's written on." Jacking up mortgage payments from eg 40% of the borrower's income to 160% of the borrower's income. Now those sophisticated lenders are pretending to be poor little naifs, while running a massive media campaign branding the new homeowners as crafty bandits who should be punished (for trusting the lenders).
Bailing out the banks directly would just allow them to continue making foreclosures to prop up fake paper valuations that generate fake HIGH profits through false accounting about what a mortgage bond is really*worth, creating even more cheap money for speculators to gamble with.
* A contract requiring that a borrower pay 160% of their income as interest is worth less than zilch, should be subtracted from profits.
posted
aspectre (or anyone), I've heard lots of people say why we need this bailout, and now I'm hearing you say why we don't, (I know you're not the only one.) and what will happen if we DO the bailout. But I'd like to hear what your prediction is if we DON'T have a bailout. What will happen for those of us at or near the bottom?
And someone said on the last page that they hope to be one of the ones to be able to finally get into a house they afford. That's what I hope, too. Will a bailout help or hurt those of us who are waiting until house prices fall enough that we can get a place?
Posts: 2880 | Registered: Jun 2004
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House prices will continue to fall even with the bailout though possibly it will stem that tide somewhat, but without the bailout you won't be able to get a loan unless you have near perfect credit, and even if you do, the interest rate will be higher than you'd like. The main purpose of the bailout, or at least, the main desired effect, is to free up the credit crunch going on.
So, while housing prices will totally bottom out without a bailout, and might not do so with one, it may not matter much if you can't secure a mortgage loan to buy that house, regardless of its price.
Posts: 21898 | Registered: Nov 2004
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It isn't clear that housing credit will have such a crunch. Loans will require somewhat more credit, but anyone who can meet the requirement of a conforming loan will have no problem getting a loan, since local banks aren't all that badly capitalized, and the FMs are still in business.
I don't think the bailout will have all that much impact either way on the long-term equilibrium of housing prices, really.
Posts: 15770 | Registered: Dec 2001
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quote:Originally posted by aspectre: "Since when are we propping up oil speculators -- this bailout is aimed at mortgage brokers and bankers."
And precisely where do you think the speculators got the cheap money to gamble with? Note that oil prices have dropped nearly 50% since the credit crunch began. Credit is credit, and the paper profits generated by the financial institutions' Ponzi scheme hadda go somewhere as the pool of new mortgage borrowers dried up: cheap money for speculators to jack up food and commodity prices, to hyperinflate farmland prices. Since food and fuel costs affect the poorest the most, revamping that gambling fever by bailing out the financial-sector will hurt the poorest the most.
Aspecte, While that's an interesting theory it doesn't fit the data at all. The credit crunch associated with implosion of these bad lending practices was well under way a year ago with several bank failures during the first quarter of 2008. Yet the price of oil continued climbing through mid-July. Right now oil prices, even with the dramatic drop in recent weeks, are still higher than they were at the beginning of the year. So while its very reasonable to conclude that the recent drop has been happening because of fears of a general economic collapse caused by the housing debacle, there really is no evidence that the skyrocketing oil prices this summer were caused by the availability of cheap easy money. Cheap easy money from these lending practice had dried up months before oil prices peaked.
Posts: 12591 | Registered: Jan 2000
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posted
Watching McCain continue to spin Palin's Pakistan comments is really quite amusing. He had an interview with Palin and himself with Katie Couric where she asked them about the Pakistan comment, and both of them blamed it on "gotcha journalism." Well, first of all, even if a journalist HAD asked the question, it wasn't a "gotcha" question, which I think has become an overused term for any line of questioning that forces an actual ANSWER out of the candidate. But the point is that it was a regular voter, not a journalist who asked the question. McCain seemed to have the situation confused, not knowing where the event was (he thought it was at a pizza parlor, but was actually at a rather famous cheesesteak place (which is DELICIOUS)), and apparently what even happened.
Then, McCain attacked Joe Biden for comments he made in a nearly identical situation, where Biden made comments about "clean" coal on a rope line off the cuff, exactly the same way that Palin had. Lovely double standard.
THEN, McCain was asked again about the issue by CNN's John Roberts.
quote:McCain, in the interview, suggested that Palin was responding to a general question about whether or not a McCain administration would go after terrorists.
However, Rovito, who had asked Palin two previous questions about her thoughts on Pakistan and Waziristan, asked the governor specifically: “So we do cross border, like from Afghanistan to Pakistan, you think?”
Palin’s answer: "If that's what we have to do stop the terrorists from coming any further in, absolutely, we should.”
McCain’s final point was that his administration would never publicly declare a pending attack within Pakistan’s borders.
“What she said was that she was going to respond to terrorist attacks,” he told Roberts. “And I'm saying we're going to respond to terrorist attacks. I'm not going to announce that I'm going to attack Pakistan.”
So come to find that McCain and Obama agree! He just said he agrees with what has been Obama's position the ENTIRE TIME. I always thought that he just fundamentally opposed the idea of attacking Pakistan under any condition, but now we see that he IS okay with attacking Pakistan is there is actionable intelligence, and that he is ALSO misrepresenting Obama's position by apparently claiming that Obama thinks we should just attack Pakistan for some unstated reason when Obama has said all along that attacks on Pakistani territory would only come under a certain set of conditions.
It's too bad more people aren't interesting in what is happening with Pakistan and Afghanistan, as I suspect if they were then this would be getting more press coverage, but it's a fascinating evolution of positions and words from McCain.
Posts: 21898 | Registered: Nov 2004
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quote:Originally posted by Lyrhawn: So come to find that McCain and Obama agree! He just said he agrees with what has been Obama's position the ENTIRE TIME. I always thought that he just fundamentally opposed the idea of attacking Pakistan under any condition, but now we see that he IS okay with attacking Pakistan is there is actionable intelligence, and that he is ALSO misrepresenting Obama's position by apparently claiming that Obama thinks we should just attack Pakistan for some unstated reason when Obama has said all along that attacks on Pakistani territory would only come under a certain set of conditions.
Now, wait a minute. I thought that was obvious from the debate. Here's what McCain said:
quote:He [Obama] said that he would launch military strikes into Pakistan.
Now, you don't do that. You don't say that out loud. If you have to do things, you have to do things, and you work with the Pakistani government.
McCain didn't say that he was against attacking Pakistan if necessary, he said that it was unwise to make statements about it.
posted
I think McCain's totally right. I don't think we should ever let anyone else know our true intentions, be they enemies, friends, family or lovers. We should keep all our thoughts hidden. Say one thing to those we deal with, while always plotting and keeping other plans hidden from sight. That way, whenever we want to, we can spring a great big surprise on them. I feel all human interactions can benefit from this type of relationship. Think of the fun we can have!
Posts: 8741 | Registered: Apr 2001
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quote:McCain’s final point was that his administration would never publicly declare a pending attack within Pakistan’s borders.
“What she said was that she was going to respond to terrorist attacks,” he told Roberts. “And I'm saying we're going to respond to terrorist attacks. I'm not going to announce that I'm going to attack Pakistan.”
Who is he arguing with there? Obama has never said he'd declare the day before he attacked that he'd attack, he was just saying that if they had to go in, they'd go in, which is what McCain is saying.
It sounds like he's trying his damndest to parse words in a way that make Obama sound inexperienced when on the whole, it looks like they are lock step. It would appear his major sticking point is the announcement of when an attack would be made, but so far both of them have said they'd attack under hypothetical circumstances, so where is the difference? I think he's trying to paint it like Obama announced that if made president he'd for sure attack Pakistan, which isn't close to what he actually said.
He's making a big deal out of nothing.
Posts: 21898 | Registered: Nov 2004
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"McCain didn't say that he was against attacking Pakistan if necessary, he said that it was unwise to make statements about it."
Clearly he's learned his lesson after saying over and over that we'd attack Iraq, and then that we'd be attacking Iran.
Posts: 7790 | Registered: Aug 2000
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I suspect he'd say that this is different, as Pakistan is an "ally." And a nuclear ally at that.
It's only unwise if your target has the ability to hit you back with sufficient force as to give you pause.
Posts: 21898 | Registered: Nov 2004
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quote:So you want to use this program to backdoor discounted homes for the poor?
What program? The banks have been promoting sub-prime mortgages to the poor, the middle class and the rich. The poor generally didn't think they could afford to buy a house in the first place, but when presented with the opportunity, they took it. But that's in the past.
I'll return to your previous statement:
quote: The idea of keeping people in their homes when they never should have gotten those homes to begin with is abhorrent to me. Let them get kicked out, as they should be, but don't leave the on the street, help them get into a house they CAN afford.
Your statement seems to place the blame on the borrower, rather than the lender, and it doesn't take into account that losing the house on an upside-down loan wouldn't just put poor people in cheaper housing, it would bankrupt them, and ensure an additional cycle of poverty. Very likely it would put those people into the street. It's easy for the rich and the middle class to downgrade to smaller houses, and I hold them more responsible for their situation than I do for the poor.
Do I think that the bailout should be used as a program to get the poor into homeownership? Well certainly not going forward from this point. And I really don't know what the solution is. But I don't think that there is anyone that doesn't deserve a home, leastwise merely because they happen to be poor.
Posts: 3735 | Registered: Mar 2002
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I think there are many people who don't deserve specific homes they happen to be in, when the only way they got such homes is by signing loan agreements that would involve absurdly high monthly payments they stood no chance of making (but that wouldn't enter into effect for five years).
Posts: 15770 | Registered: Dec 2001
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posted
Apparently Jerry Falwell Jr. has decided to turn his university into one large McCain machine. They are pushing to register every student at their university in Virginia. Giving extra credit if students do so, and have canceled classes on election day and are busing students to the polls.
quote:"Liberty students have never been permitted to register locally in the past. The recent change in election law is giving Liberty University the chance to make history," Falwell stated in an e-mail addressed to faculty and staff. "Liberty University's 11,000 students and 4,000 faculty and staff could cause Liberty to become known as the university that elected a president!"
Since when does an entire university back a single candidate?
I can only imagine the uproar if some "liberal" university in Pennsylvania pushed every student to register in state and vote for Obama.
Posts: 8741 | Registered: Apr 2001
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posted
If this financial crisis has been caused by people not being able to pay their mortgages after their interest rate jumped, why not give people their original interest rate, freeze it there, and forget about the bailout?
Posts: 2880 | Registered: Jun 2004
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posted
In some cases, the original terms is that they pay interest-only. So, if the loan is frozen at that state, they never actually pay back any of the principle. That's bad for them because it means they will never, ever own their house - all they pay is interest and they will never build equity in the house.
In some cases, what they pay back isn't even all of the interest, so the longer the loan is frozen that way, the deeper in debt they will become with nothing to show for it.
Posts: 26077 | Registered: Mar 2000
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posted
I also agree with fugu - many people bought houses they couldn't afford at ruinous terms. WHY should I continue to rent to try to save for a home when my tax money is going to subsidize people in homes they couldn't afford?
You might as well kick them out and give the house to me. I'd agree to that plan much sooner. Renting isn't killing me, and it wouldn't kill them.
Posts: 26077 | Registered: Mar 2000
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posted
I agree somewhat. But also disagree. When you go into a bank to talk about a home loan the first thing they do is help you figure out “how much you can afford.” Now, yes, ideally everyone would know enough about finances to figure that out for themselves and not take the banker’s word for it. When we bought our last house the price range we set for ourselves was about half what the bank was willing to loan us. But I don’t think it’s unreasonable to expect that some people who aren’t particularly financially savvy are going to think “the banker says I can afford $x and he knows a lot more about this sort of thing that I do.” And when the banker says “We can do this type of mortgage, your payments will be $x for five years, after five years they will go up to $y, but if housing prices continue to rise as they have been you’ll have z thousand dollars of equity in your home and can refinance at a lower rate,” even with the caveat “if” in there, the person thinks, “well the bank is willing to make the loan, and they know a lot more about this than I do, so it must be a pretty safe risk.”
So yes, there are people in homes they can’t afford. And no, they don’t “deserve” to be in those particular homes. But neither do they deserve to go bankrupt while the people who they trusted to “know more” are cushioned from the consequences.
Posts: 9866 | Registered: Apr 2002
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posted
Katarain: because that isn't the problem. The problem is that far too many assets are priced to depend on those higher payments, and they aren't coming in. It doesn't matter if you keep a lot of people paying on their mortgages if what they're paying is squat.
dkw: that's part of the reason I support a gov't agency buying up troubled mortgages of certain types/meeting certain criteria, then instead of foreclosure when the family can't make payments, converting the mortgages to rental properties for the family still in them.
At the same time, this is one of the biggest financial decisions of a person's life, so I expect a certain amount of personal judgment. Particularly as for many people to get such high terms there are well-documented cases of financial documentation coming back from the mortgage broker with additional assets and income listed for the person to sign. Anyone who either doesn't look over that paperwork, or knowingly signs a lie, doesn't garner much sympathy from me. And for those who made not a single misrepresentation but still got a house beyond what they can pay, there isn't always going to be an option. Keeping everyone in houses beyond their means will be horrendously expensive for the country as a whole, and is abrogating far too much personal responsibility from the people involved. I'm fine with also starting civil proceedings on the behalf of such people against mortgage brokers where there are documented cases of misleading assurances about ability to refinance, though.
I also support repealing the bankruptcy 'reform', which makes bankruptcy at least less painful.
Posts: 15770 | Registered: Dec 2001
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posted
What about adding to the bailout a walk-away clause for homeowners? If you’re in over your head the bank buys back your home for whatever you still owe on it. If you do have any equity you lose it, but no foreclosure and no bankruptcy. And for people who are really on the edge a 60 day grace period before you have to move out during which you can put the money you would have spent on the mortgage payment into the deposits for rent and utilities at an apartment.
I’m not thinking of this as a permanent change, but as an option that’s open for maybe six months, to extend the bailout to the people at the bottom of the financial totem pole as well as the top.
Edit, as this was posted at the same time as fugu's: when I bought my first house with two friends the bankers and realtors were surprised (and seemed rather annoyed) that we read every word of every paper before we signed it. Less so when Bob and I bought the house that we're currently trying to sell, but the folks running the closing certainly seem to expect that you'll just take their word for what's in each document and sign at every place they point to.
Posts: 9866 | Registered: Apr 2002
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posted
Notably because the value of the mortgages is typically far less than what are owed on them, given the changes in property values. Especially as most of the people in trouble on mortgages right now have absolutely no equity (and often didn't have any to start with, much less after the valuation dropped).
That means that every mortgage bought back by the bank is at a net loss, putting the country in even more of a credit & capital hole, and there are a lot of distressed mortgages. And the ones feeling the pain the most, unlike now, would be the local banks that are still managing to do brisk business in personal and commercial lending. It wouldn't extend the bailout to those at the bottom, it would wipe out a good chunk of the bailout's ability to get the economy back on track (or, if there isn't a bailout bill, put the economy even further in the hole).
This is assuming the bank can even come close to selling it, which is unlikely. Foreclosed houses (which these effectively are) are much harder to sell than non-foreclosed houses.
Now, if the bank owned the mortgage, the real effect would at least be lower, but the particular problem right now is that banks don't own the mortgages, and every mortgage-backed security has trigger clauses if mortgage payments are no longer forthcoming
There might be something that could be worked out along those lines, but it would probably require the gov't purchase the houses and considerable complicated details surrounding the trigger clauses.
I should point out that walking away right now does not entail bankruptcy at all, only the foreclosure hit on one's credit history, and I think you'll find people such as rental agencies will be remarkably understanding about that particular credit mark. I don't think such a credit hit is an overly large price to pay for the option to walk away, and it seems to be enough of a wall to prevent an outright stampede, though I suspect a lot of that is more social stigma.
Posts: 15770 | Registered: Dec 2001
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quote:Originally posted by fugu13: Notably because the value of the mortgages is typically far less than what are owed on them, given the changes in property values.
Quite.
For an illustration, I mentioned in my previous post the house that we’re trying to sell. We knew about six months in advance that we’d be moving this summer, so we consulted with a realtor and did a little research on average days on the market of similar houses in our town and decided when to list the house to have the best chance of selling it by the time we needed to move but not too much before then. We’d only been in the house three years, so we didn’t have a lot of equity, but I paid an extra $100-200 on the principle every month so we had some. We picked an asking price that our realtor assured us was “priced to sell” rather than trying to get out of the house what we’d put into it, including the $20,000 or so worth of repairs and upgrades. No offers. When it got close to the time we needed to move we dropped the price to what would just cover what we still owed plus the realtor’s commission. Still no offers. After we moved out we dropped the price to just cover what we still owed on the mortgage, knowing we’d have to pay the realtor’s fees out of pocket. Still no offers. Our realtor is now telling us that to sell it we would have to drop the price another 10-20 thousand dollars, which would mean we’d have to pay the bank that much in order to be able to close the sale. So we took the house off the market and contracted with a property manager to try to rent it.
Financially we’re okay for now. But Bob’s job is dependant on government contracts. If the property manager can’t find a renter and the government cuts spending so Bob’s boss can’t meet payroll we could be in trouble. And if that happens, we will likely let the bank foreclose rather than running up other debt in order to pay the mortgage.
And we weren’t part of the sub-prime lending problem. We have good credit and bought a house well within our means with a reasonable fixed-rate loan. We just got undercut because of needing to move at the same time that housing prices plummeted and the tightening of credit meant that the two people who expressed interest in the house couldn’t get financing.
quote:I should point out that walking away right now does not entail bankruptcy at all, only the foreclosure hit on one's credit history, and I think you'll find people such as rental agencies will be remarkably understanding about that particular credit mark. I don't think such a credit hit is an overly large price to pay for the option to walk away, and it seems to be enough of a wall to prevent an outright stampede, though I suspect a lot of that is more social stigma.
Bankruptcy becomes a factor when people start using credit cards to pay their other bills in order to keep making mortage payments in a desperate attempt not to default on their mortgages.
Posts: 9866 | Registered: Apr 2002
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posted
Yes, and probably won't be avoided if people have done that prior to walking away, even without a foreclosure. I don't think there's a good way to avoid that, only a responsibility to (re-) strengthen the bankruptcy safety net, and perhaps to educate people about if they can really afford their current mortgage and make them aware they can walk away if they can't.
Plus my aforementioned gov't agency buying up troubled mortages (through the securities backed by them) subject to particularly egregious loan terms almost certainly involving deception by the bank, then converting them into rental properties without foreclosures (similar to what you've suggested, but through the gov't, proceeding by unwinding the securities behind the mortgage first, and structured to prevent people having to leave their homes for a while if they aren't ready to quite yet).
Posts: 15770 | Registered: Dec 2001
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posted
How about if everyone steps down a level in housing? Family A is in a 500,000 house, so they step down to family B's 400,000 house. Family B steps down to family C's 300,000 house. Family C steps down to family D's 200,000 house. Family D steps down to family E's 100,000 house. Family E buys one of the many 50,000 houses on the market.
Yeah, I know that wouldn't work for many reasons.
My budget for buying a house is pretty small. I'd like to keep it around $50,000, but I can see going up to around $60,000. The houses in the price range are getting better, but still in mostly crummy condition. I'm hoping that as prices drop, we'll be able to get a nicer house for our money. I remember that around 10 years ago, my brother and his wife bought a cute little cottage for around $40,000. It was small, but had a living room, kitchen, three bedrooms, and 2 bathrooms. That would be nice.
Back before all this started, I probably could have qualified for a loan double that or more.
Posts: 2880 | Registered: Jun 2004
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quote:Family E buys one of the many 50,000 houses on the market.
*giggle* And moves to a state where there are $50,000 houses? A three bedroom, 2 bath house in Madison that isn't falling down but is still in the worst local neighborhood is, at minimum, $120K.
Posts: 37449 | Registered: May 1999
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posted
There's lots of $50,000 houses where I am. But I suppose they'll have to rent if they live somewhere else.
Posts: 2880 | Registered: Jun 2004
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I was telling my husband the other day that I think we should wipe out everyone's debt and assets and start everyone out with $500,000. He said, so go to communism? I said no, start out with communism, and then switch back to capitalism. Everyone starts over! It's a brilliant plan.
Posts: 2880 | Registered: Jun 2004
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Geez, $50,000 houses? I somehow wish that the Canadian housing market would get that bad then I could pick up a house on the cheap. Of course, if the housing market got that bad, the economy as a whole would probably be much suckier, and my job much more at risk...
Too bad, one cannot simply live in the US and commute to Canada Posts: 7593 | Registered: Sep 2006
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You can get a three bedroom, two bath in halfway decent shape in a pretty good neighborhood around here for $100K. If you take away a bathroom you could probably knock ten to twenty off that price. Even more if you aren't concerned about a basement (though almost every house has one around here). The price varies wildly by neighborhood, and the local property tax can make all the difference in the world.
I pass probably one to two hundred houses for sale on my short seven mile drive to work every day. I think on my block alone there are a dozen. I guess that isn't much of a surprise to anyone who has seen news reports on the housing market in Michigan, and in the Detroit area especially. A friend of the family, an elderly woman, just sold her house recently for $118K. It's in a great neighborhood, close proximity to the local downtown area, great schools, low crime, has a basement, three bedrooms and one bathroom. A couple years ago that would have been in the high $190s, if not in the low $200s. But she didn't have time to wait years and years for it to sell for what it would have years ago since she was moving down south.
Everything seems to be in the crapper around here lately. Business is tanking at the restaurant where I work, every third house is up for sale, and the prices of those homes are in freefall, and it seems like every time we make the national news it's either because the Big Three are about to collapse or because Detroit's mayor just broke another law. Add to that I think our unemployment is highest in the nation.
It's not good times in the Mitten at the moment.
Mucus -
Lots of people live in the US and commute to the US around here, and live in Canada and commute to here. I guess it helps to live by the bridge.
Posts: 21898 | Registered: Nov 2004
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On another note, in the backdrop to this financial crisis, Canadian, American, and European agencies have essentially outlawed the short-selling of certain financial stocks to reduce downward pressures on their stock prices. And each time one of these big crashes happens, margin calls occur and people have to sell their assets to meet them.
Meanwhile in China, they just *started* allowing short-selling and borrowing on margin in order to attract money to the market. *shrug*
Posts: 7593 | Registered: Sep 2006
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I paid under $50k for my house, but that was 20 years ago before home markets went insane.
Annoyingly, after two decades of paying a mortgage and refinancing to bring the percent down (and borrow another $10k) I finally have the balance down to... under $40k. Sigh.
Posts: 7790 | Registered: Aug 2000
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The ban on short selling is fear-mongering.
There's nothing wrong (and quite a bit right) with some leverage. The problem is with too much leverage. The single biggest mistake the gov't made that led to this disaster was probably back in 2004 to allow certain investment banks to use extremely high amounts of leverage. You might recognize some of the list: Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley.
Posts: 15770 | Registered: Dec 2001
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Didn't the US government also increase access to zero-down-payment mortgages in 2002 or thereabouts?
Posts: 10886 | Registered: Feb 2000
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I'm not sure I understand that point. As I understand it, the ban on short selling is to prevent massive short selling of a stock, which would drastically drive down its price. In a case where you are seeing panicked driven sell offs like that on Monday, wouldn't this be more than fear mongering?
Of course, it's likely I don't understand the situation that well.
Posts: 10177 | Registered: Apr 2001
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