Should We All Just Stop Paying the Mortgage?

By Paul Michael on 16 October 2008 (Updated 15 October 2013) 162 comments

I've been recovering from surgery recently, so that has given me the opportunity to do a lot of thinking on my sick bed. And with the recent turmoil in the economy, plus a focus on the housing market, I couldn't help a certain thought from bubbling up in my mind day after day. It's not responsible; it's not even fair; but I do have to wonder…should we all just stop paying the mortgage? (See also: How to Refinance Your Mortgage)

From what I understand, the $700 billion bailout plan has some provisions in it that will help struggling homeowners. John McCain also recently talked about using $300 billion of that money to "buy back" bad mortgages to help the struggling homeowner negotiate a decent, fixed rate. They may even renegotiate the cost of the mortgage, so you only pay what your home is now worth, not what you actually owe. Sounds great, right?

But it got me thinking…what about the people who did everything right? Take someone I know well — me. I bought my house almost seven years ago. I stayed well within my means and avoided any adjustable rates or sub-prime loans. I got myself a nice, traditional 30-year fixed mortgage at a good rate. I even got the homebuilder to pay the closing costs without rolling them into my loan.

Now, after being a homeowner for seven years, I am proud to say that I have NEVER missed a mortgage payment. Ever. Sure, times were tough on occasion. Sometimes I would pay the mortgage a few days late because there just wasn't enough cash in the bank. But the mortgage was paid, even if it meant staying home every night and eating Ramen occasionally.

What's more, I never used my home as a bank account. Even when the home was worth more than we paid for it (ahh, remember equity?) I never refinanced. I never got a home equity loan. I just stayed the course, knowing that after about five years my growing family would have some ready funds available to upgrade to a bigger home. (See also: Things You Should Know Before You Buy Your Second Home)

Well, all those plans were shattered. Now, my home is worth 15% less than I paid for it. I will be lucky if I break even when I sell it, considering the dreadful market and the associated costs involved in selling a house. My wife and I are even thinking of renting it out, and renting a bigger place for ourselves. With the market the way it is, we can rent a house twice the size of ours for the same price as the mortgage.

But here's the big question. Should we just stay in the house and stop paying the mortgage completely? An article I recently read by Peter Schiff seems to confirm my thinking. Let's look at the pros and cons. First, if we stop paying the mortgage we know we won't be kicked out. There will be a moratorium put on foreclosures, so we could quit paying our largest bill and put that money in the bank, ready to use to buy a new home.

Second, as we have now stopped paying our mortgage we would fall into the category of "struggling homeowner." Which means, ladies and gents, that the government will swoop in and help us out! Yep, as unfair as it sounds, we'll get help if we suddenly become irresponsible. My mortgage would be renegotiated, probably at a lower rate, and for the current price of my home. Plus, I'll have saved thousands on mortgage payments until that happens. It could take six months…that's around $10,000 we'll have saved.

The only downside I can see would be a tarnished credit rating. But so what? For the amount of money I'm saving, it seems well worth it. And I'll still keep my house. (See also: 10 Surprising Ways to Hurt Your Credit Score)

This is wrong. I will, no doubt, keep paying my mortgage. But I cannot help but be angered by this whole system. It is rewarding people who made bad, bad choices. No one forced anyone to buy a home way bigger than they could afford. No one put a gun to Joe Schmo's head and said "Hey, sign this, take a huge mortgage and do it with an adjustable, interest-only rate." And yet those guys, the ones who bit off way more than they could chew, are now going to get help. They get to keep their big house and pay a nice new low-rate mortgage. They don't even have to pay back the money they didn't pay on mortgage payments.

Now, there are exceptions to the rule. People who lost their jobs and couldn't pay the mortgage, they genuinely need the help. People who got sick and had massive medical bills to pay, fair enough. But for the average greedy speculator who bought too much house with no money down and a sharply rising interest rate…well, in my opinion, that person should have to live with the consequences. I have my own problems, as do many of you. But why should my hard-earned taxes bail out the irresponsible segment of our society? It's complete BS.

The one reason I've been given is that we need to help these people, or our home values will suffer. But the market has pretty-much bottomed out anyway. So, that's no consolation to me. No, I'm mad as hell and I just can't think of a better way to prove it than to stop paying my mortgage and get in on this nationwide handout. How about you?

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Guest's picture
jared

The situation is infuriating, but it'd be political suicide for any politician to actually allow people to fail. And there's no candidate who's preaching the virtues of personal responsibility so... don't look to the next president for lessons about how to avoid this kind of crap in the future.

Guest's picture
NG

Very interesting... Good read!

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Please click on the link below to fill out the questionnaire

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Guest's picture
Igloo

1. All those who can't pay apply for help.
2. Determine how much they can pay.
3. Issue a mortgage viability certificate for a mortgage tht reflects how much they ca actually afford.
4. They go and find a home that reflects that amount, somewhere else. If they want to stay where they are they must get the money from their savings or a private lender not a bank (family).
5. Everyone falls from above into a home that works financially.
6. All homes taken at appraised values of a specified date. say June 2006.
7. Result, no bailout, no foreclosures, no unpaid property taxes. no responsible people feeling burdened and unappreciated. People living within their means.

Guest's picture
david

I was just discussing this the other day with people: what is our incentive to do the right thing anymore?

If people are given the option to do the right thing or take the easy way and get free money, they will take the free money. Why wouldnt they? It seems that there will just be another bailout when they wear out this one.

It is a downward spiral, and there seem to be no consequences. If you cant pay for your house, maybe you shouldnt have it anymore.

Guest's picture
Steven Church

Go down to comment 144

Guest's picture
lucille

If some of these people living in McCastles end up with lower house payments than I have on our modest house (and mortgage) I will be seriously angry.

This whole idea is going to turn into a nasty mess if certain people are rewarded for bad behavior and get these luxury homes written down to the level of average homes in mortgage total and payments.

Guest's picture
dixie-chik

I would not make any decision on possibility that the government will help. Any homeowner bail out is speculative at best. From now until the end of January, any funds hot off the Treasury presses will go to bail out negligent lenders, investment bankers and Bush / Paulson cronies who developed the derivative Ponzi scheme.

Guest's picture
Debbie M

I'm less angry than you because I've heard stories of people who had done the right thing but then were talked into refinancing by bankers who didn't reveal the terms (except in the fine print). There are people who had decent 30-year-fixed mortgages and were told they should refinance to get lower payments without being told that the payment amount could change and that the number of years remaining on their mortgage would change.

But I'm still angry because it seems like the people who made these mortgages are not having to suffer--they repackaged them and sold them. The idiots who bought them are getting paid gigantic severance pay instead of being fired from the companies they failed. And yes, flippers also should not be helped.

Personally, I don't much care if home values suffer. I heard that the problem is that it's a lot harder to get credit now (which I personally also don't much care about--yes, people will have to use their own money to buy things). But that in turn means that industries that rely on credit (such as car dealerships) are going to be in big trouble, and thus there will be a lot of unemployment. I do care about unemployment, but that just makes me want to spend money on unemployment and maybe retraining, not buying crappy loans and kissing morons.

If it makes you feel better, I suspect that all these folks who are getting help (except the escaping CEOs) are probably having to deal with a lot of bureaucracy and not all the people who could use help are going to get it. I'd much rather be safe having done the right thing than trying to live just on the right side of the edge. So many more things can go wrong using the latter strategy.

Guest's picture
Guest

There are people who had decent 30-year-fixed mortgages and were told they should refinance to get lower payments without being told that the payment amount could change and that the number of years remaining on their mortgage would change.

I was a first time home buyer five years ago, and I refinanced since then. I was pitched all the same ideas, but it took very little effort on my part to educate myself regarding the basic difference between what I was being offered. I do not feel sorry for the people signing on the dotted line, and I consider them completely irresponsible. They should lose their house if they can't pay.

Guest's picture
Guest

They are loosing their houses. They are also keeping the mortgage payments until they get kicked out.

Guest's picture
Kelja

You have every right to be angry as hell. You did it the right way and got screwed - that's not supposed to be the American Way. But, I guess that's an idea long lost in the past.

I'm pissed as hell. I stayed out of the market knowing it was a bubble. I rented and will end up paying for all those homeowners who are upside down on their mortgages. No one's explained to me why this is fair.

I think after the election there will be a revolution. Dem's will steal a couple of states through transparent voter fraud. Ohio is shaping up as the best example.

Oh, well, I'll just bend over now.

Guest's picture
Khurt

The problem is that Americans assume they have a RIGHT to own a home. Why? I bought a home because we had kids and we could not find any 3 bedroom apartments to rent in the area we wanted to live. But ... I did not want to own a home. I never understood the American preoccupation with home ownership. It's not even a good investment over the short or long term. The mortgage is only one of the cost of home ownership. You have insurance, repairs cost, heating etc. Take the money saved by renting and save it and over time that money grows faster than the rate of appreciation on the house.

But no one wants to hear that ... they want to dream.

Guest's picture
Guest

I'm still furious about the REPUBLICAN voter fraud perpetrated in Florida in 2000 by GWB's brother and the Supreme Court. That is a bigger threat to democracy than a couple of applications signed by "Mickey Mouse".

Give me a break.

Guest's picture
Guest

bull

Guest's picture
Guest

Someone or some organization should take these hard learned lessons and focus on educating America's next generation about doing it a better way.

Guest's picture
Guest

There is no reason to educate anyone if they read before they sign. What people need to learn is to read before signing.

Paul Michael's picture

I was offered a refi deal 3 years ago, and I read everything. When I realized what I would be getting into, I told the representative to leave my home, politely of course. There is never an excuse for ignorance. Bottom line...it's up to you to sign, and read what you sign. This is your responsibility as an adult, and you can't cry foul later because you didn't do your homework.

Guest's picture
Guest

fuck you!

Guest's picture
Guest

fuck you!

Guest's picture
Roscoe

I completely agree! I just bought a house, responsibly, 30 y, fixed rate!

I pay the mortgage, but Why should we! I love the home, wouldn't trade it for anything, but now I get punished for being responsible.

They probably wouldn't let me renegotiate because we bought in July/aug of this year, and i really don't want to lose the house.

But after being screwed by the country, corporations, and banks the infamous 'they' expect me to be loyal!

At this point i hope the whole country goes down in flames. it would suck beyond all reason, but in the years after we would have responsibility and respect restored.

Guest's picture
Adam

I am watching from the sidelines on this as well (from up in Canada) and would be LIVID if the Gov't bailed out people who took on too much mortgage and too much credit.

I was listening to NPR the other week while driving through NY state and a woman called in with the same story - too much house, not worth the same, credit card debt so needed another mortgage to refinance and the radio announcers are siding with her saying 'it's not your fault... it's the evil bankers who prey on people like you'

WTF?!?

No one said that house values would go up for ever - it's your responsibility to know that when you apply for a mortgage.

I believe it's all down to entitlement and keeping up with the Jones. Where do these people get off thinking they 'deserve' a $400,000+ home when they make $40,000 a year?

For people who got into new mortgages without knowing the terms... it's their own fault.

Guest's picture
Guest

You know, nothing.
So shut up.

Guest's picture
MKB

You're not being punished - you just aren't able to take advantage of all the benefits offered to the less-responsible.

Me, neither. Like you, I bought a home before the peak of the bubble (in 2000), have never missed a payment, etc. I have been pre-paying my mortgage, which basically means that I've been throwing money away for eight years, equity-wise.

However, we are on track to own our home outright in another eight years. The value of the house doesn't matter for that - we will own it whatever its value is.

We won't be able to move into another house, which is particularly unfortunate for us, as my husband and I bought a large(ish) place thinking that we'd be starting a family... and now have decided not to have kids. We have 2000 sq ft, but need only slightly more than half that. Energy prices are rising, and we're afraid we won't be able to take out a home equity loan to pay for replacing the windows in our 100+-year-old house.

It sucks. We want to move, but realistically, we can't. But that's the way it is - the economy is a gamble, and owning property is, too. We lost.

Guest's picture
Guest

you could quit your job and get:

section 8 vouchers (for housing)
food stamps
welfare cash payments
WIC vouchers (for food for kids)
Medicaid
free pre-school (Head Start)
free methadone clinic services

You don't take advantage of these things either. Other than bigger dollar amounts, what is the difference?

You're responsible; irresponsible people will probably always make you angry.

Who's better off in the long run?

Guest's picture
Guest

you could quit your job and get:

section 8 vouchers (for housing)
food stamps
welfare cash payments
WIC vouchers (for food for kids)
Medicaid
free pre-school (Head Start)
free methadone clinic services

You don't take advantage of these things either. Other than bigger dollar amounts, what is the difference?

You're responsible; irresponsible people will probably always make you angry.

Who's better off in the long run?

Guest's picture
Guest

I fear the next wave of bailouts that WILL occur when the government is unable to pay for social security, medicare and other entitlement related services. I am pretty sure that govt will start taxing our 401(k) and Roth IRA's to pay for all this mess.

Guest's picture
Guest

You might wanna google garanteed retirement. The administration is already looking at the possibility of siezing all 401k's so they can distibute retirement funds. Its for your own good. By the way, did i mention they want to force all workers to pay into it?

Guest's picture
The DIving Belle

Yes, I am more than a bit put out -- as a single homeowner who bought two homes alone -- no handout from anyone -- this seems SO unfair

HOWEVER, I think we need to look at a slightly larger picture -- do we only do the right thing when someone is looking? Is it OK to knowingly cheat just because "everyone else is doing it"?

Does your word on an agreement mean nothing?

Guest's picture
Guest

One other thing to make sure when you buy a home is to be absolutely sure that there is no prepayment penalty. In some mortgages, they will charge you extra if you make additional payments each month.

When I bought my house, I made this clear to the real estate broker and right before signing the mortgage papers, I asked them to show me the line where it says that there is no prepayment penalty. Please make sure that is written into the mortgage contract.

Guest's picture
gt0163c

It's in situations such as this that I often have to remind myself of two things:
1. Half of the population is of below average intelligence.
2. The people I hang out with, are generally, well above the average.
Basically, for me and probably for eveyrone else reading this, most of the people of this nation and this world just really aren't very smart by comparison.
This is, of course, not an excuse and not really much of an explaination, but it does help to keep things in perspective and help me understand where at least some of all of this mess is coming from. Still doesn't make it any less wrong but it does make it half a bit easier to stomach.

Guest's picture

"...we're afraid we won't be able to take out a home equity loan to pay for replacing the windows..."

Stop pre-paying the mortgage and put that money into a savings account. Then you can use that to replace the windows instead of borrowing to replace them.

-Erica

Guest's picture
KATY

yes, we are responsible and didn't knowlingly take on more than we could pay for (a mortgage for a zillion dollar house we when we made $20,000!)...etc, etc.

we did the right thing and we got screwed. and we have to pay for these greedy *)*)*)*)&)(.

when do we get to screw them?

Guest's picture
jared

@MKB: Sorry, but if the government is taking my money away from me and giving it to other people because they made stupid decisions, then yes, I call that being punished for not making stupid mistakes.

@Guest: Those are different programs that address different problems. Who is responsible for and what causes poverty? That's a big question with no easy answer, and no easy solution. Why did a person agree to a mortgage so large that he/she couldn't afford it? Who is responsible for that person's decision? That's an easy question (or at least it should be.) You can't really lump all that into one category.

Guest's picture
Kevin

I'm livid too. I've been working my way through graduate school through this whole bubble and would have loved to live in a house for a number of reasons, and probably could have qualified for a subprime mortgage, but did the conservative thing and stayed in low-rent apartments. Other people made the aggressive choice, levereged themselves into very high risk-reward situations, and benefitted from the reward of living in lavish homes and having equity to spend as they chose. And I would accept that as part of the risk-reward nature of capitalism, except that now we've come to the "risk" part of the deal, and instead of the negative consequences affecting the people who took on the risk, it's being pushed on people like me through national debt and inflation. Meanwhile I'm still in a low-rent apartment and they're still in a lavish house.

If we're going to be a strict free market capitalist society, then we need to sit back let people sleep in the beds they've made, just like we let them profit from the winning bets. Or we could adopt the Scandinavian model of comprehensive, universal social programs that spread this kind of spending around in a consistent and roughly equitable way. But we need to choose one or the other, because these kinds of narrow, rush-job, emergency bailouts are unacceptable.

Guest's picture
Gabrielle

I absolutely agree.
I did entertain hopes of owning a home one day...
Don't see that happening now. Ah well.
I guess there's always RVs, right?
We can all become gypsies!

Guest's picture
Paul

it`s a pretty darn good time to buy a home. Granted, it may be a BETTER time LATER to buy a home than it is now, but the housing crash and credit crunch is presenting savvy renters(those who have done the right thing, lived within their means, kept their credit clean and saved up some money) with unprecedented opportunities to finally become homeowners instead of perpetual renters.

I`ve been renting for 30 years, and this horendous RE market(horrendous if you`re trying to SELL, and not-so-good if you`re trying to get a mortage so you can buy) finally tanked so low, that I was finally able to buy a home 4 months ago, without needing to apply for a mortgage - all I needed to do to acquire this property
was tap into an unsecureed line of credit for about $6k,
so, with any luck I`ll have that loan paid off in full
in about 3-4 more months, and will thus own this home free and clear with no debt.

If the market hadn`t been this bad, and if credit was
still flowing and available like it was a year or 2 ago,
the price of this home would have been far higher, and consequently out of my reach.

This is the proverbial silver lining in the clouds of gloom and doom in the housing and credit market - for those of you who are renters and aspire to own, your ship has come in. Some of y`all just need to recognize
that the ship may look different than you expected, may be smaller than you expected, and may even be docked in
a place you didn`t expect for it to land.

If you`re expecting a REO McMansion for $.20 cents on the dollar(with 100% financing available) to conveniently pop up in just the school district
you always hoped your kids could attend, and ring your doorbell to let you know it`s available, well, you`ll probably have to wait quite a bit longer, but if you`re willing to be flexible as to your expectations, and flexible as to your location, decent forclosures in decent areas can be had for as little as $10k, so instead of going out and buying that new Mini, or Hyundai
Triburon...(you know, ...the one you just HAD to have), go buy yourself a home instead.

You can`t live in a Hyundai, and a car depreciates, so why buy a new car when a home can be had for about the same price? Besides, I think the thrill of driving a new car off the lot, pales in comparison to being *finallY* be able to say things like "my driveway", "my garage", and "my backyard"(in the purest sense of the term) for the first time in one`s life, even if it`s just a small, old fixer-upper of a home.

Right now may not be the *best* time to buy, but it`s certainly a very good time to buy, IMHO.

Paul

Maggie Wells's picture

Yes, I'm not happy about the bailout either but hey my taxes go to pay to kill people in foreign countries and to teach children to just say no to biological imperatives they aren't going to say no to. So, money is always spent against my will.

I bought a mortgage 3 years ago. It's adjustable rate. But we also bought our house for cheap on an acre of land in an area that wasn't going to really drop that far. And it hasn't. And while we are shopping for a fixed, we are taking our time to get the best possible deal.  We've been told by our own mortgage company that we don't qualify for any of their hardship programs because we have never fallen behind! LOL. C'est la vie. If not this it would be something else.

I'll be happy with the day when we spend money on arts, grants for American students to go into math and science, and other things dear to my heart. I won't hold my breath. 

Margaret Garcia-Couoh

Guest's picture
Guest

Margaret Garcia-Couoh: Instead of killing people in foreign countries, maybe we should wait until they come over here like on 9/11. Maybe they can enjoy the arts and sex education before they get us first. Clinton tried the leave you alone and you'll leave us alone approach and that didn't work out too well.

Carrie Kirby's picture

Wow, are you sure your house is down 15% when you bought 7 years ago? You must have been in a very hot market, no?

 I wouldn't say we could know for sure that housing prices have bottomed out. Not at all.

And finally, I think if there is a bailout that helps people stay in their homes, it will be for the overall social good, whether it pisses people off or not. Will it benefit our society if say, 15 percent of homeowners are put out on the street? If we are walking around seeing one or two houses on every block with boarded up windows, getting broken into by squatters, if the banks are holding onto even more houses they can't unload? I'm nervous about the state of the country now, but at least we're not dealing with a massive wave of social unrest, homelessness and crime.

You will always be better off than people who need this kind of help, because you're smarter than they are. Be happy you're you and not them, no matter what they happen to be getting at the moment. 

I blog at www.shopliftingwithpermission.com.

Guest's picture
Todd Eddy

Ironically I'm moving out and getting my first condo. In all this turmoil I haven't really had an issue getting pre-approved for a mortgage aside from not having much to put down. But I have an excellent credit score, getting a good deal on a place, and have gone into "lock down" in preperation (cutting down the amount I'm putting into paying off credit cards, not shoveling money into savings, etc). After a few months I'll get a sense of how much money I can put where again.

That said, this whole bailout thing has furiated me. I was without a job for over a year, unemployment only went so far. no one helped me out, I plowed through it and working on paying off my credit cards I lived off of for that year... that was 6 years ago. Maybe I should stop paying those, have the government go "here, take this money and don't do it again" and problem solved! Of course, like other financially responsible people I'm not going to do that. but this whole helping people that messed up and punishing the people that did good is rediculous. and one look at the stock market and you can see how well it's been helping.

Guest's picture
Guest

I don't understand why anyone is angry?

Welcome to the New American world of socialism. What's the big problem? When you pull down that lever on November 4th, if you vote for Obama plan on being angry for the next 4 years. Wait till you working folks with a job see your payroll taxes increase so you can share your wealth with those folks who don't work.

Yeah! Life in these here United States are going to be real good.

Hammer and sickle anyone?

Ha ha ha ha!

Andrea Karim's picture

And once again, a commenter who has no idea what communism actually is.

Also, make sure to vote for McCain. He wants the government to buy these bad mortgages. That will be MUCH better for free market capitalism.

EPIC fail, Guest. You are welcome to try again.

Paul, I feel your pain. I actually don't know what my house is worth right now, and am kind of afraid to find out. I'm thinking of renting out half of it to give me a little more breathing room over the next few months.

Guest's picture
wildgift

Ralph Nader said something to the effect that we've taken on all the burdens and responsibilities of socialism, but have received none of the benefits. We're spending hundreds of billions of dollars, but we don't yet have easy access to health care. There's no guarantee that if you study hard, you'll be able to attend college, because it's getting expensive.

This is a form of socialism, but it's not the one that the average person wants. We want socialism like we have with the police, firefighters, public libraries, and public parks. These things are all socialist in the way they are funded and administered, and I daresay 90% Americans are okay with it. And when the public system isn't working right, as with public education, there's support for reforms... but not widespread support for vouchers to fund private schools.

If we're having problems with housing and mortgages, maybe the socialist solution would be the way to go.

The socialist solution would be to allow the borrower to default, and then take ownership of the house. The owner could be allowed to rent the house, and also pay a small premium to pay back the bailout -- it would be socialized, public housing. Later, if the resident finds they can afford to buy the house again, they could purchase it.

Guest's picture
Guest

You are right on target.

If Obama is elected, this type of government will be standard operating procedure. After all - it's only "fair" to "spread the wealth" since we are home owners, not because of hard work and sacrifice, but because we happen to be more "fortunate" than others.

Paul Michael's picture

...it's McCain who initially presented the mortgage bailout plan, in the 2nd debate I believe.  Which I found odd as it goes against the GOP party line.

And Carrie, Colorado was way overpriced. That, plus the silly mortgage deals, meant that house prices skyrocketed here really quickly and then plummeted.  We got hit pretty hard, but  things look to have hit the low and are bouncing back.  

Guest's picture
Teaspoon

"Welcome to the New American world of socialism. What's the big problem? When you pull down that lever on November 4th, if you vote for Obama plan on being angry for the next 4 years. Wait till you working folks with a job see your payroll taxes increase so you can share your wealth with those folks who don't work."

*sigh*

The financial, which could certainly be called socialistic in many respects, is happening under a Republican administration, with strong support from congressional Republicans (and Democrats). John McCain has proposed buying up bad mortgages. And yet, somehow, Obama is the socialist?

My husband and I are both educated, and we both work. We will not see an increase in payroll taxes under an Obama presidency because we, like most Americans, make less than $250,000 per year. (Having said that, I'll be happier with where the tax money I do pay goes under an Obama presidency than under a Bush/McCain presidency, since less of my money will be spent on the Iraq debacle.)

Guest's picture
terpette

Actually, it was the Clinton administration that mandated that mortgage lenders create the high-risk subprime loans that are now defaulting. President Clinton beefed up the Community Reinvestment Act, a Carter Administration law designed to encourage minority home ownership. This created the risky subprime loans.

Don't believe me? Go to the NY Times archives and search for this article: New York Times, September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending, By Steven A. Holmes

The changes to the Community Redevelopment Act put new regulations into place that forced lenders into high-risk areas. In areas where sound business practices had previously governed lending standards, lenders now had no choice other than to lower their standards and make loans that they would not have been approved only a few years earlier. The alternative was to face stiff government fines.

I'm not even a Bush fan -- I just think that it's wrong to put blame where the blame isn't due. Yes, it is happening under the Bush administration, but he was certainly NOT NOT NOT the one who started it.

Guest's picture
Kelja

If you truly believe Obama won't raise your taxes, you live in a alternative Universe.

Don't believe a politician's words; look at their record.

Guest's picture
Guest

Most Americans make about 50 thousand or less and a couple 100. If your at 200s, then cry me a river.

Guest's picture

If you can't beat them, join them? I would rather keep my good credit, vote for Obama, and wait for a change.

Paul Michael's picture

can give you a rough idea Andrea, but it's not great. If you add in any upgrades, do your own comps, you can get close. But an appraiser is always better.

Guest's picture
mama4jc

Just wanted to clarify who really started this whole subprime mortgage busines: http://query.nytimes.com/gst/fullpage.html?res=9c0DE7DB153EF933A0575AC0A... (Hint: the Clinton administration). I know the Republicans inherited this mess and didn't really heed the warnings of some Congresspeople. But just wanted to set the record straight. Thanks!

Guest's picture

First, I'm sorry, Paul. While I chose to rent and not buy during the bubble, despite being offered a 7-figure loan on no documented income (!!!!), I am infuriated by the irresponsibility of the homeowners who did take similar offers and are now getting bailed out.

We have ceased to have a free market because the government insists on putting an artificial floor in place. Econ 101: supply and demand. We need to get back to the appropriate point where the two meet. If the government continues to intervene like this, I think it will only extend buyers' unwillingness to get into real estate, and further exacerbate the recession.

Obviously this is a multifactorial problem with no easy solution, and I don't think transferring homes from people to banks will be any good.

What I would love to see is a requirement for foreclosure "victims" to provide free shelter for the homeless, women and children, and others who are turned away from conventional shelters due to lack of space. There's no such thing as a free lunch, and if you can't pay up for your house, you should work off your debt to the government.

That way our government can put the bailout money into social security, medicare, and other programs that will support taxpayers and our society as a whole.

Guest's picture
dixie-chik

Why are so many people scapegoating homeowners who can't pay their mortgages? Last time I looked, they are not yet - and may never - get meaningful assistance.

The current Wall Street crisis was not caused by 1) Barney Frank, 2) Democrats forcing Fannie and Freddie to give liars loans, 3) poor people not being able to pay their mortgages.

So what might have caused the massive meltdown of our credit markets? A little gift from our old buddy Sen. Phil Gramm, the insanely hard to value, unregulated market in Credit Default Swaps. A Time Magazine article from March 2008 warned that the credit swap market was going to meltdown because people were investing in CD swaps. These are somewhat like insurance policies that back up other securities such as municipal bonds, corporate bonds or debt backed securities--without having any connection with the underlying security.

US Stock Market=approx. $22 trillion, Mortage market = only $7.1 trillion Swaps market????? more than $45 trillion. Gee, which of these is more likely to have been able to swamp the entire US economy? The biggish $7 trillion wave or the HUGE $45 Trillion tsunami?

h/t Firedoglake

http://tinyurl.com/4627p9

Guest's picture
Cindy

From wikipedia, "worldwide CDS market at $58 trillion"... US is around $17 trillion instead of the reported $45 trillion in your response.

Guest's picture
Wilson

There's nothing wrong with not paying your mortgage. If your house only fell 15%, it won't be financially beneficial without some government handout that lets you remain in your home. If you'll qualify for a handout, you might as well take it since the government is the reason your house was overpriced 7 years ago.

Guest's picture
DAB

The government isn't exactly taking our tax money and giving it to irresponsible people. The government would basically become the mortgage "bank" for those troubled mortgages -- and would allow the owners to refinance in a way that they can repay the loan. Overall, the government (meaning: us) would make money off this plan (if it buys the mortgages off the banks at their current worth and not the original worth), and far fewer people would be out on the street and throwing the economy (and your own housing values) deeper into a hole.

If someone was able to refinance their mortgage when the value of their home went up, why shouldn't people also be allowed to refinance when the value of the home has gone down? And, yes, it would be good if this were expanded for everyone -- but it's less a bailout for irresponsible buyers (other than letting them stay in their homes instead of becoming homeless) than it is a bailout for the mortgage banks who now want those mortgages off their books.

Guest's picture
Guest

I was just talking about this to my Mom. Talking about how thankful I am that I am smart and not greedy. Smart enough to do the research when we were getting our mortgage and to buy a house we could afford on one income (knowing I wanted to quit work when we had kids). Not everybody has the same kind of "money education" as others do growing up and usually end up making very bad financial decisions.

Granted, I am not condoning these decisions. They were greed-based. People don't want starter homes anymore. They want their dream home from the get go.

But, I am still thankful that I am not losing my home or anywhere near losing my home. I think the bailout is a stupid idea that will fix nothing, but I still feel better off and thankful that I am not stressed to the max everyday about where I'm going to live or how I'm going to afford the basics for my family.

Guest's picture
Bridgie

Just in the NYT today: Home Prices Seem Far From Bottom.

And if you think that letting people get foreclosed on and laid off just to "punish them" for their mistakes is going to help that housing market one bit, you're sadly mistaken.

I do understand the outrage - I'm a renter who hasn't been irresponsible and yet my tax dollars are going for these ridiculous bailouts - but SOMETHING has to be done or pretty soon nobody is going to be able to afford to buy any houses at all and the price of your home will hit zero. There are now houses in Detroit selling for under $9k - $9K! - because everybody is so flat-busted broke and nobody wants to move there because everybody is so flat-busted broke. And if you live in the suburbs, with more foreclosures in your neighborhood you could soon be looking at similar levels of crime & home abandonment.

Guest's picture
JB

I did everything right, as well. As a single working woman, when I bought my first home, I stayed well within the guidelines that your housing should cost no greater than one-fourth of your monthly income. I paid on time. I bought a modest home in a modest neighborhood. Then, I experienced a series of unfair circumstances.

First, I was laid off indefinitely from a field that thrives in a good economy and tanks in a bad one (do the math: it equals no job opportunities). Then, I became the 24/7 caretaker for my elderly parents. Then, they died, and I got stuck with not one but TWO extra homes via inheritance. In a good economy, this would be a blessing! But in a tough housing market, they become the three Albatrosses.

One was subdivided into three properties. I put my first home on the market as I was living in the mortgage-free parental home to take care of them (thank God). I now had FOUR properties on the market in this economy, no job, and limited savings.

Lot 2 sold. Lot 3 is finally pending. Lot 1 with house has had offers fall through and suffered a fire (minimal damage, thank God). My own home? In foreclosure, but I'm working on stopping the process. Jobs? Stagnant. I say this knowing it contradicts my commitment to positive thinking and my Law of Attraction Intentions, but let's be real. If I can get myself "rescued", PLEASE. Send it my way. If things shift and withholding my mortgage payments would benefit me, I might consider it.

I did everything right. This wasn't supposed to happen.

Guest's picture
Khurt

Get into a field that does well even in a bad economy.

Sell all FOUR properties for what they are worth not what you want to get for them.

Where is the statement of "promise" that you were given at birth that if you did "everything right" it would all work out? Where is your written and signed "life guarantee"?

Guest's picture

So who is going to get away with fraud?

The bankers who illegally loaned to people who couldn't afford to repay the loans?

Or the people who in good faith believed in themselves and thought they could afford the payments and kept trying until they couldn't make the payments anymore?

"Most people" you accuse "most people" of being fraudulent. I disagree, I think most people are trying hard and believe in themselves and wanted to own a home for their families.

"Some people" commit fraud, and you don't think that your bank account with 10K in it would be taken into account when you put a hand out? It would, and you wouldn't get a hand out, they would accuse you rightly of fraud and might even sue you for trying to defraud the system.

Guest's picture
Khurt

I also bought my home 7 years ago but .... mine is worth almost double what I paid; based on what homes here have sold for recently. I'm in a town home. Home prices are not all down everywhere.

Guest's picture
Ac

1. List your house for rent and let it be very reasonable
2. Move out to an apt., when you have a lessee (it would help if he is not the mafiosi)
3. STOP making the mortgage payments
4. ???
5. Profit!

Guest's picture
Marc I

So I decided to deal with my anger through comedy. See how this whole financial situation is explained by the movie "Animal House"

http://watchingmarcitz.wordpress.com/the-financial-bailout-according-to-...

Guest's picture
Robert

Absolutely!!! Remember last week when congress decided to use 850 billion of your new tax dollars to bail out wallstreet criminals???? It's time for payback. If you bought a house in the past 8 years, stop paying the mortgage. Sit in your home until you get evicted. Trust me, you'll need the savings to weather the next financial storm brewing on the horizon. Don't worry about a place to live either. There is going to be a huge glut of rentals available at great prices in the future. Then again, you might want to use those savings to buy a forclosure in the future for 10 cents on the dollar. The way things are going right now, your savings may be enough to buy that forclosure without another mortgage. Imagine that. A new home in the near future without a mortgage and it's yours!!!

Guest's picture
MadHacker

@dixie-chik, government already started mortgage switchovers last falls. $40B by the end of the year.

i am seriously considering getting as risky of a loan as I can and then stopping paying after 3 months. My family and I have lived very frugally over the past 8 years after being laid off in the dotcom and knowing how bad that can be. Now I see everyone who was irresponsible being rewarded. looks like we could have been living in a McMansion and now not even have to pay for it. i feel stupid for being honest and hard-working. the only thing stopping me is the tanking stock market because i figure if it keeps tanking then the government will not be able to sell t-bills so no longer be able to buy up bad mortgages. you know the people will never have to pay now that the mortgages are owned by the government. All they have to do is get some policitian to put a moratorium on foreclosures on houses with mortgages owned by the govenrment. Then the people will live in them for free.

We need to hurry up and get ourselves into a troubled homeowner program so the government can take over and we can live their for free forever. Plus, the government will be a good landlord as they have plenty of money to do repairs.

Guest's picture
Guest

I do not think we should NOT pay our mortgage.

BUT....how about our credit cards? What right does a card issuer have to increase your rate from 9% to 30% when you are late for the FIRST time in 8 years by a few days with your payment?

Guest's picture
AmyB

I agree, and THANK YOU for giving voice to what so many of us are feeling! I have never felt so betrayed by my own government. The idea that we would reward people for bad choices, protect them from investment risk they knowingly took on... it's an abomination.

This is precisely what Ayn Rand was getting at when John Galt pulled all the innovators and doers out of society and left the moochers to fend for themselves.

Forget McCain, forget Obama - we need a John Galt in 2008!

Guest's picture
Guest

Yes! We need a puerile simplistic libertarian solution! Too much thinkie-thinkie going on in government!

Guest's picture
Guest

This is an old story that sums up the only option that we have to help our children. Of course it involves our own personal sacrifice.

Call the farmer John Galt.

HERE was once a farmer who suffered much at the hands of a money-lender. Good harvests, or bad, the farmer was always poor, the money-lender rich. At last, when he hadn't a farthing left, the farmer went to the money-lender's house, and said, 'You can't squeeze water from a stone, and as you have nothing to get by me now, you might tell me the secret of becoming rich.'

Now this true story shows that a farmer once got the better of a money-lender; but only by losing one of his eyes!

http://www.digital.library.upenn.edu/women/steel/punjab/punjab-26.html

Guest's picture

We did the responsible thing too. We put down 20% on a modest home and got a fixed rate, 30-year mortgage. It ticks me off to no end that the speculators, real estate flippers, and the instant gratification, no-money-down crowd are getting bailed out. Sure, there's blame enough to go around to include the dishonest people who wrote out these irresponsible loans, but as you say, no one put a gun to anyone's head and made them take out a loan they couldn't afford.

It makes me sick. I'm going to keep paying my mortgage, along with the extra principle payments. Sure, it'd be nice to not have to pay off the rest of the mortgage, but we got where we are by doing the responsible, cautious, plodding thing. I'd rather *know* I paid off our debt fair and square, so that no one can touch us, than gamble on getting something for nothing.

Guest's picture
Guest

Loved the article. A lot of people are thinking this way. I too have a good fixed rate on a 30 year loan from when I purchased a very modest home at the end of 2002. This idea sounds great on paper, but so does communism. The reality is the plan will be a lot harder to "live". I wish those who choose to do this a lot luck. Good luck sleeping at night and good luck with Uncle Sam taking care of you. It has been my experience when Uncle Sam takes care of you, it normally does not go so well and certainly not very smoothly...think red tape, long lines, being placed on hold and being screwed over. One way or another the more goverment in your life, the more headaches you will have. When has the government ever run anything well or smoothly? It is actually probably less stressful just to work hard and pay your bills. In the end, what goes around comes around. And if not, at least I can sleep at night. All the money in the world is no good if you cannot sleep at night and be at peace. So fellow payors of other other people's irresponsibility, I say....Sleep Well my friends, Sleep well!

Guest's picture

I would encourage anyone, before they make any rash decisions, to become more informed about their options. First, read all your can about the current bill (from the dot govs themslves). Second, don't forget about the HopeNow program, and other like it, that help struggling homeowners.

RefiWerks
HopeNow
FHA Foreclosure Help

Guest's picture
Kelja

Screw the 'struggling' homeowners. Bail out your own sorry asses. I don't want to pay for your mistakes, miscalculations or even your SUV's.

Predatory lending, yes, there was that, but what happened to filling out documents honestly and reading what you sign?

What's happening today will lead to a new American Revolution. Or, maybe a new American Revolution, one that will shatter this nation. There are no modern Abraham Lincolns around.

Guest's picture
Kelja

meant to say either a Revolution or a Civil War. Either one will be painful.

Guest's picture
Guest

The article is spot on except for the part about the guy who lost his job. When you commit to a mortgage you should know there will be bumps along the 30 year road. Government has no business helping you. That's what friends and family are for! House prices going up or down shouldn't stop you from making payments - you made an agreement - follow through! Stop the effin bailout bs!

Linsey Knerl's picture

Is this really much different than those who took advantage of the U.S. bankruptcy system before its reform?  I can't tell you how many times I've heard that people would buy whatever they wanted (whether they could afford it or not) and just file bankruptcy later.  Who ended up paying for their spending?  The rest of us.  But that doesn't mean I'll ever just stop paying my bills.  

Karma, good stewardship, whatever you want to call it, being shortsighted on this won't do you any good in the long run.  Keep your head up, run a fair race, and you will be rewarded.  Maybe not in interest rates or cash, but in knowing that you paid your debt and kept your honor and credit in tact.  These things will all shake out in the end.  We have to believe this, or our country is a sad place, indeed. (Besides, what are we teaching our kids if we just roll over and give it up?)

Good discussion, Paul!

Linsey

Guest's picture
Guest

Linsey, I appreciate your comments. As someone else who has played by the rules, having purchased my home more than seven years ago, never having missed a payment or even been late on a payment, and having watched the value of my home plummet (yes, after seven years, it's worth less than I paid for it), it is too easy to get caught up in being angry. The fact is that I did make an agreement, and my payments haven't changed. I do believe in karma, even if other people thing I may be naive. Yes, I will be rewarded int he knowledge that I have paid my debt, kept my honor, and kept my good credit in tact. Thank you, again, for your comments.

Guest's picture
Guest

Income money declining, lack of jobs, lack of sales, with less work around more people will be in this situation soon. So many will be in trouble and it is not from signing into a mortage they could not afford. It is our economy that will make it so you will not be able to meet your mortgage or RENT obligations.

Guest's picture
Cheaplee

"I am mad as hell and I am not going to take it anymore" -Network

We have all been suckered into the belief that we do as our parents have done we'll be OK. That was fine when housing wasn't expensive, or in oversupply or jobs were centric to one area. Mobility, escalating costs and abundance has made me rethink whether an investment is even worth it. And every one is under the assumption that you can sell in 20 to 30 years. But will that be true for the area you are living in? Would it better to rent? Can investing the difference in renting versus buying accrue to more than what you can sell you house for in 30 years?

Yes you always need a place to hang your hat, and housing may get better, but if the economics are not there to begin with, why make those typical assumptions.

Guest's picture
Guest

I totally agree with you!! I am in Australia and we havn't had it hit us as bad as you in the US, but it is starting to happen and I have been worried about exactly the same thing, why should we pay any extra on our mortgage when the house may be worth less. Prices have already started to go down in Australia and like you we have done the right thing - we don't have credit and our only loan is our mortgage in which a quarter of it is equity we put up when we bought it, we may lose that yet.....sad days and not knowing what to do is frustrating. Good luck with you and yours:) Courtney.

Guest's picture
Andrea Abney

Hey, I'm a renter. I knew I couldn't afford a house, so I didn't buy one. Where's my free money?

Guest's picture
Guest

You are absolutely correct. And this is what happens when too much government destroys the values of a strong society. There was a time when we had debtors prisons. There was a time when society, your entire social circle, would shun you for such an event. But now we do it proudly and our social circle does not care. You just have to be careful. If you loan is owned by the government (e.g. fannie or freddie) then I would stop paying. But if your home is in a good area and it's value has not dropped too much then you might not get any help.

Guest's picture
fedwatcher

It is clear that the innocent, that is savers, are being punished, while the guilty extreme debtors, are being rewarded.

The only solace that the innocent renters have to look forward to is lower home prices.

The over-indebted homeowners can stop paying their mortgage, live rent free for 9 to 24 months and without any tax liability, buy again in 5 to 7 years. The really brilliant, are buying another house like the one they own at 50% off and then walking away from the overpriced house they had.

Yes, all of the ways to profit from this big time are in the hands of the guilty. And before the Great Depression of the 1930’s it was also so. Get use to it. Life is unfair. Mozillo is tanned, rested, and ready and you cannot make ends meet. Nothing new here.

If you vote for McCain, Nader, or Ron Paul expect more of the same. It is a contest between McCain and Obama. With Obama you have a chance. With McCain, you have 4 more years of minimal change but no earmarks! Your 401K cannot stand 4 more years!

The world economic order is being rewritten today in Paris. By the time we have elected a new congress and president, we will no longer or shortly be unable to write our international debts in dollars that we can print. No one trusts us anymore. Cut your spending, smile at your boss, pay down your debts, and get use to it. The age of free money via the home equity loan is over!

Guest's picture
Stewart

This web site is very insightful as to why renting makes way more financial sense than owning a home (read the left hand column very carefully):
http://patrick.net/housing/

I know it's nearly impossible to do, but unless you plan to go with the nuclear option i.e. not paying your mortgage, sell your house now or rent it out until you can sell.

One more thing: you might want to think twice about buying a home. We are a long way from the housing bottom, at least 2 years if not considerably longer. If you buy something now, be prepared to lose 20% value in the long run. That's not a good investment, especially if your putting that hard-earned 20% down on your property.

Welcome to the new reality of American Economics... the "Vow of Poverty" Edition.

Stewart

Guest's picture
Bob Mo

First, of all Anyone of you true Americans that have gotten that helping hand from Mommy or from who ever should not be opening you’re Big Ass Mouths.
(You can bet your sweet ass that I would miss a couple payments if it meant them re-writing my loan.) Let me see if I get this right, one you will let your credit be ruined and number two, I will be glad to help you pack and move if you loan is denied! Wake-Up
Same old dumped downed American to much Fox News (“if it means missing a few payments, some borrowers would deliberately miss mortgage payments to qualify for a cheaper mortgage.) Looks like I need to get together a few more movers and storage units lined-up for another good old American, (Once those incentives include guarantees of better rates, who in their right mind would struggle to pay on time?) Can this person even read a Newspaper? Rates are Up-Up and away better rates get real give you lender a call or maybe “Hope-Now” you know the little guy’s program with the funny walk that said repeatedly how Home-Ownership is at its all time high, come on you know the guy watching the store. Time to Crash-N-Burn American God help us all.
Singed 20%=Down now -$200,000.00 price drop so far and where is your newfound equity?

Guest's picture
Hestia

I'm in Australia and didn't understand what the "subprime" problem was until I watched this . It seems to me that the genuinely poor and working class really were decieved and taken advantage of just as DebbieM above described. It is those people who deserve the help and I should hope that assistance would be approved based on need rather than any other criteria. Greedy middle class speculators would have to miss out because they don't meet the criteria for hardship.

The wider economic problems are much larger than just the housing market and the bailout is only going to buy time anyway. It's not nearly enough to "fix" anything. It's barely even a bandaid. This is a defining moment in history not just for one generation but probably for the next one too.

Guest's picture
Guest

I did the right things as well. I saved a lot of my income, and put it into what I thought were safe investments. I have lost far more than most homeowners, even though I've avoided buying a house for so long as I thought prices were too high in my area - and I did not get any shelter in exchange for my loss.

No one will bail me out.

When people stop honoring their promises is where the greatest danger lies for our society. Your home is a place to stay. Your mortgages payments were presumably affordable when you took on the mortage, so the fact the house is worth less now is immaterial. It's the same house, the payments are the same - so nobody "screwed you over".

If you or people like you default on your promises, then this will break the trust between you and the banks, break the trust between banks and their customers, and the businesses that do business with them. This is what is happening now.

We have far more to lose than just money here. If the US cannot start new innovative businesses because banks will no longer lend money to anyone, or if we go through a depression because no one can trust another, things would be far worse.

In short, please don't do this.

Guest's picture
Hestia

Individuals not making their payments is naughty and mischevious. Governments and banks knowingly flooding economies with pretend money with no real world wealth is just evil and that is what has happened. It seems they've sold your future to China.

Guest's picture

Great post with some good ideas.
I guess it is infuriating when on one hand there is a cavalier attitude fueled by greed and on the other hand whimpish attitude when things don't work out!!
Once some one is caught in the position of too much debt and assets that are falling in value, it can be a very scary place. When I stand back and look at it from a country perspective, there is a massive slowdown required to get things back to somewhere normal because at a macro level the whole country has been living beyond its means and now has to tighten its belt so that the country's income can slowly become more than it's expenses. Once that happens, debt can be paid back.
At a household level this happens at completely different rates and the politicians have to try and appeal to every one to get re elected. Not a simple problem and it's going to fascinating to see how they go about doing this.

Guest's picture
Lynn

I understand everyone's anger or frustration about the new bailout or rescue plan. I just posted my blog with the issues of this plan from the point of view as a banker and my concerns over government ownership in my bank. http://wwwfreewebsite4unowcom.blogspot.com/. I am a consumer too but the thought of letting my personal credit report be damaged so I could possibly get a lower interest rate or lower the principal amount of my loan is not advisable.

Banks look at personal credit reports if they are making a loan to the individual or to a business owned by an individual. As a small business credit approval officer I do not recommend defaulting on your current mortgage to try and get a better deal on it.

Guest's picture

The author makes a lot of assumptions the governemtn will in fact create individual home owner assistance available directly to homeowners. The probelm with these assumptions is the financial recovery or bailout plan is in a constant state of flux. The governents efforts will be to first shore up any systemic risks to our banking system before addressing the unerlying issues which caused the financial crisis, primarly residential real estate loans.

Like so many commenators I agree the savings you would receive during the self impossed payment moritorium would not be worth the damage to ones credit. Borrowing has been relatively easy during the last decade but that has and will continue to change. People will be able to continue to borrow money soon but the underwriting on lending is going to change, and these changes will be impossed by lenders themselves but we also should anticipate congress placing more stringent regulations on lenders. This should result in lower loan to vaulue loans and more emphasis placed on the borrowers credit history.

I've owned my home for 15 years. I've never once been late on my mortgage. However I am one of those close to needing assistance. The potential assistance is not because I want to discount my mortgage but becuase I'm on the verge of not being able to pay my mortgage(s). I have a first mortgage and a Heloc. The first has been in place for 8 years (i refinanced to lower interest during the last recession) and a Heloc which is three years old. The Heloc was taken out not to start a business but to support a business (and my household) which started to develop problems when the capital markets shut down in early 2007.

Now as the capital markets have gone through a melt down, and in the process pulled the economy down into recession, my business has failed. With no business, no income, and no savings, its hard to make the large mortgage payment(s). This month is the end of the line for savings, and retirement account withdrawls (there is nothing left) so yeah, I might need some help while I turn things around financially.

If you want to read my story go here http://moneyfinanceswealth.blogspot.com

Guest's picture
AmyB

I feel for you, and am truly sorry that you've fallen on hard times, but supporting a personal business is a risk/reward scenario. If it does well, the rewards can be great - set your own hours, your own working environment, etc., but there are also certainly risks involved, such as the unpredictability of income, and it's not the responsibility of the American taxpayer to fix your HELOC problems. I've considered going into business for myself at times, but without amassed capital, and no desire to take out a loan that I might not be able to pay back, not to mention that I need a -predictable- paycheck, I continue in my little cubicle, corporate world. That's my choice, just like starting that business was yours.

That said, I have no problem with taxpayer dollars being used to aid struggling people, so long as there is sufficient, guaranteed collateral to back the deal. (Not that Wall Street seems to know what that is...) But there should not be handouts, and the public's investment should be repaid with interest.

The government should not be in the role of protecting people from risk they knowingly took on. Without consequences, risk-taking spirals completely out of control and the whole world suffers.

Guest's picture
Guest

I'm just glad we aren't bombarded with seven "refinance your mortgage now to take out a home equity loan!!" commercials every break on every TV show anymore.

Guest's picture
ECONOMISTA NON GRATA

"This is wrong. I will, no doubt, keep paying my mortgage. But I cannot help but be angered by this whole system."

This has nothing to do with it being wrong or right and bad or good. If the principal on your mortgage is higher than the value of your house by 20% or more, the rational choice is to walk away. It does not matter if you can make the payments or not, it is an irrational choice to service the debt on a property where the market value is lower than the principal of the mortgage and likely to diminish further. It is not a reasonable proposition to maintain a property where one does not have an equity stake.

This is not personal and should not be viewed as personal. It is a rational business decision. It has nothing to do with morality or virtue, simple and clear.

Adam Smith's secret hand giveth and it taketh away. The laws of economics demand that both lenders and borrowers be held accountable for their "frivolous" and "cavalier" conduct. This is just one part of the equation.

Best regards,

Econolicious

Guest's picture
Harrison

This is ridiculous, people not paying their mortgages is the reason why we got into this mess in the first place. I feel no sympathy for those who signed up for mortgages that they could not afford. Especially those who knew what they were doing yet signed up for 3 home loans so they could sell two of them for a profit of over $100,000 in the span of 3 months. This was the kind of outrage that got us into this mess in the first place, now there are people trying to get out of what they signed up for, either by looking for refinance options if those still exist or not paying and hoping the government will jump in and help them out with a bailout.

I am creating a web-forum to discuss everything in a centralized place. http://www.bailoutdisaster.com/
So that we have a place to discuss articles and news, please join.

Also I have my blog which is tracking articles related to all this mess.
http://www.tranharry.com/

Guest's picture
Guest

Harrison, You have no idea what you are talking about. I did not sign up for a mortgage I could not afford. I was doing just fine until IndyMac went under a group of investors, like George Soros took over. They bought IndyMac from the FDIC for 30 cents on the dollar and got a sweetheart deal where if they foreclosed on someone the Feds paid them 80% of the balance due under a loss share agreement even tho' the investors paid only .30 on the dollar of every loan. Once OneWest foreclosed, they took possession of the home, resold it and made 100% profit.

When the OneWest investors took over IndyMac they set about auditing each mortgage aggressively. In my case I was paying on time-no problem. My option ARM was to last 7 years and turn into a fixed with payments of $3,000 and set at whatever the going interest rate was at the end of 7 years but never above 7.5%.

The One West investors made an arbitrary decision to put me into a forced placed escrow account regardless of the fact my property taxes were not behind. Then the investors slapped some imaginary "shortfall" on me of $30k--it was never explained to me what the $30k was, plus One West wanted the shortfall paid off in 12 months. This caused my monthly interest only payment to spike up to $4800 per month.

I got the major runaround from these idiots at Onewest.

Long story short, I've self educated myself. OneWest does not own my note. They practiced shady business procedures. In CA there is a case pending called Marquette v OneWest for wrongful and possible illegal foreclosure on numerous homeowners.

I am hopeing OneWest gets slapped down so hard that the punitive damages will leave George Soros bankrupt.

Stop spewing mortgage company bullshit and learn the facts before you blame homeowners.

Guest's picture
Kelja

wildgift & others who heavily espouse socialism:

Please move somewhere where they embrace socialism.

Socialism is the death of the individual. The only ones who are for it are those that can't make it in a competitive society.

Please move.

Guest's picture
Cerena

Yeah! I'd move back to France or Sweden any day! At least my kids would get a great (college) education and won't come out in debt $100K like me...Europeans enjoy a much better quality of life. I'm really not sure what capitlism has to offer society any more having lived on both sides of the Atlantic. I tried reading Atlas Shrugged by Ayn Rand (Alan Greespan's long deceased economic guru) and I could not have been more bored...just couldn't bring myself to finish it. All in all Capitalism is built on a tormented greed (see:There will be Blood)...which is an unfortunate aspect of our human nature if left unbridled and to stew in an anti-social petri dish. Sorry, the government does play a vital role in our lives like it or not and America is like an adolesent finally growing up.