I could'nt agree more but it's not only the sub prime in forclosure while 30 % of sub prime are either late or in forclosure 5% of prime loans are also so they are the lions share its not the only source

 

The fact that a loan isn't subprime is not, in and of itself, an indication that the borrower didn't get in over his head. You could have a conforming mortgage and still find yourself upside-down if your property value fell sharply.

I have to wonder as I hear these foreclosure numbers though - how would I play the following scenario?

I'm struggling to get by. It's an election year. Politicians of all stripes are trying to outpander each other in order to prove how much they 'care.'

Maybe I keep struggling. Maybe I get a second job and try to stay on track. Maybe I accept that I borrowed the money, therefore my right to stay in my house is contingent on my ability to repay the money.

Or maybe I think that, instead of busting my ass to keep up with my mortgage, I'll start sticking some money in the mattress. Then I'll get good and late on my payments so I can have some of that bailout money while people around the country blindly accept that somehow a person has a right to stay in a home that he can't afford.

Maybe nobody anywhere thinks that way and I'm just a cynic, but I suspect that those foreclosure numbers will keep right on going up as long as a taxpayer bailout is being dangled in front of people as a trade for their votes. The people watching their home values fall are sure as hell not being helped by this shell game. I can tell you that much. When things start to go down, they need to hit a bottom. Then they can go back up. What we're doing now is prolonging the slide in an effort to artificially avoid the bottom. The market will dictate the bottom, no matter how long we try to pretend otherwise. Sometimes it's best to just rip off the bandaid in one motion instead of slowly pulling it off.

 

I got a solution....rent a place to live, it's cheaper than a mortage and less worries! :wink:

 

That is my point. If the government is going to step in and bail out lenders and borrowers alike, what incentive is there for the borrower to continue to pay back the loan? And what incentive do lenders have to make sure they write good business? Sounds like how the welfare system keeps people from working. :roll:

What will these bailouts consist of? If someone is 6 months behind on his mortgage payment and the government gets him caught up, won't he be in the same position 6 months from now?

Too many questions.

 

I just heard on the news this morning that the Feds went in and bought out all those bad loans. Much of this could have been avoided had these lenders been willing to either lower interest rates or at least offer the borrowers a fixed rate they could afford rather than a variable rate. I don't see why the government needs to step in and save these big banks or other big businesses when they get into financial difficulties. It is anti-capitalist. It goes against everything this country stand for when the government doesn't allow people to fail. We are guaranteed freedom in this country. We have the right to succeed or fail based upon our own efforts. We will now have to pay more taxes to bail these poor businessmen out. They thought they would make a killing in the sub prime markets by offering variable rates. My guess is that they wanted a lot of these borrowers to fail so that they could take over the properties and resell them at a profit. I don't think they expected the market to take a nose dive as it has the last year or so. Now the government is saving their investment.

 

The whole sub prime mess was cased by the greed of mortgage loan companies and Wall Street investment companies. They wrote "bad business," then through artful and creative innovation came up with a new derivative type investment vehicle that could be highly leveraged, bought, sold and traded. Of course when the "paper" begin to go bad, because of dubious nature of the loan orignation and the highly leveraged state of the "paper' the losses would multiply by a higher factor.
And Wall Street and the mortgage loan business are always crying, "free market" "let the markets work" and "we will police ourselves," but when the realization that the "shell game" is over the first ones in Washington begging for a gov't bailout are the people that caused the problem to begin with.
What began as maybe a $500 Billion hit to the taxpayers, could balloon into a $3 TRILLION dollar (depending on whose numbers you believe) hit in the pocket book for all Americans. This is a incredibly staggering amount to be added to a already staggering national debt.
Now it seems that multi million dollar CEOs of Fannie Mae and Freddie Mac have miscalculated their assets, and they both will fall into gov't receivership today or tomorrow.
The companies that began the problem have been bailed out, and are currently lobbying Washington to forstall any new regulations insisting they can "police themselves" and to just let the "free markets work."
It seems our whole economy is becoming "sub-prime."

 

Of course the entire economy is sub-prime. How many people do you know who actually live within their means? Everything they 'own' is financed and they make minimum payments on all of it.

Whatever happened to idea of working and saving for things that you want? Today everyone has the idea that they have to have everything they want RIGHT NOW!

 

I think that my capitalist free-market leanings are clear from what I have had to say, but on this point I think that there was one colossal failure on the part of the federal government. The banks can't renegotiate the loans largely because they don't own the loans. The lender packages them up and sells the derivative product to an investor, who then sells it to another investor, who then... you see where this is going.

This type of product has completely undermined the nature of the mortgage business. Derivatives in every financial sector are generally good ways to promote the flow of capital. When you're talking about trading secured interest in people's homes, however, it is a little different. The reason that the mortgage market works is that you must repay your loan for fear of being kicked out of your house. The lender must loan money judiciously for fear of not being repaid. In the recently failed system, the lender had long since sold off the risk for a tidy profit and the borrower has now been allowed to avoid the 'moral hazard,' thanks to cowardly politicians. Whoever wound up holding the paper was most likely leveraged far beyond the ability to settle for new terms on hundreds of thousands of defaulting loans. And thus, we have large banks going belly-up.

As much as "regulation" is a four-letter word to me, this should have been nixed right from the start. I say let the bodies hit the floor as far as foreclosures and failing banks are concerned. Those borrowers knew that you can't afford a $250,000 house when you make $20,000 a year. If they were stupid enough not to know this, then they should learn a lesson that they'll never forget. Those institutional investors knew what they were buying. If a no-name financial advisor from Detroit knew enough to keep his clients away from that stuff, I find it hard to believe that the board at Bear Stearns couldn't figure it out.

Going forward though, this kind of product has to be tightly regulated, if it's allowed at all. As long as we're going to promote home ownership as a society (which I'm not convinced we need to do), we have to preserve the hazard to the lender and the borrower. Otherwise the mortgage market as we've known it will be finished.

As for the feds taking over FMLC and SLMA, this is sheer ignorance of epic proportions. Repeat after me: NOBODY is "too big to fail." If they fail and the market collapses, people will be able to afford homes on a single income for the next fifty years, until they are convinced that they need to be taxed into a two-incomes-to-make-ends-meet situation again. What sucks for people holding the deeds right now would be wonderful for a generation of other people. Winners and losers, winners and losers. That's America. At least that's what America should be.

 

I have always had a problem with banks selling mortgages. I think that if a lender makes a mortgage, they should be required to keep it on their books. That was an advantage of the local Savings and Loans of yesteryear.

 

When we (taxpayers) get finished bailing out this mess, the next crisis to hit the financial institutions will be the massive credit card debt.
This will really be interesting to see if they bail out virtually every family in the USA.
But what a boom to the economy, imagine, if all of a sudden, with the click of a computer key, eveyones credit cards are "Zeroed" out. All free to begin racking up enormous debt all over again!!