Mortgage "crisis" USA TODAY OPINION

[Army_of_One]

Everyone has pretty much chimed in on the mortgage subject but the bottom line is that if somone makes a stupid decision the tax payers shouldn't bail them out. A. They won't learn from it and 2. It's not fair to the people that DO make good decisions or have learned from their mistakes.

It would also be setting a bad precedent.

[Army_of_One]

U.S. Mortgage Foreclosures Rise as Owners `Give Up' (Update3)

By Kathleen M. Howley

March 6 (Bloomberg) -- U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said today.

New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the organization said in a report today.

``We're seeing people give up even before they get to the reset because they couldn't afford the home in the first place,'' said Jay Brinkmann, vice president of research and economics for the Washington-based trade group.

The Bush administration is urging lenders to avert foreclosures by modifying mortgage terms amid the worst housing slump in a quarter century. The Federal Reserve has slashed its benchmark interest rate twice this year to try to avert the first recession since 2001. The central bank yesterday said the net worth of U.S. households decreased by $532.9 billion during the fourth quarter as home values fell.

The share of all home loans with payments more than 30 days late, both prime and fixed-rate loans, rose to a seasonally adjusted 5.82 percent, the highest since 1985, the bankers' group said in today's report.

Buyers `Overstretched'

About 40 percent of all foreclosures are homeowners with prime or subprime loans who couldn't make their payments before the reset, Brinkmann estimated in an interview. Another 23 percent are borrowers who received some form of loan modification, typically a freezing or a reduction of their rate, and then default, he said

Forty-two percent of new foreclosures in the fourth quarter were people with adjustable-rate subprime mortgages, given to borrowers with limited or tainted credit records, according to the report. Those types of loans accounted for about 7 percent of all mortgages, the report said.

``It comes down to an overstretching of buyers to get into homes they couldn't afford and an overextending of credit by lenders who were more willing to take risk,'' Brinkmann said.

Another 20 percent of new foreclosures were prime adjustable-rate mortgages, which accounted for 15 percent of all home loans, according to the report.

[TexKan]

Well obviously it takes 2............ one to dish the crap to the buyer and a buyer to believe it. Again if they are going to bail the lender they should bail the buyer. It does the economy no good to have millions of homes forclosed and folks looking for shelter. The economy relies on the average worker just like it relies on the fat cat banker looking for a profit by extending credit to risky folks. Knowing the likelihood is they will default. It's not fair for the govt to help out the slime lender and abandon the buyer. It does no one any good.

[Detector]

[Made in the USA]

They can foreclose on them and give them all to those "poor Katrina victims"!

[TexKan]

Katrina folks still have thier rent and utilities paid for. If you want to be pizzed bout hand outs and bail outs.................. start lookin elsewhere. I figgure we sent billions to folks that will never invest in our country, nor will we ever see any return on our billions other than there will be healthy children in 3rd world countries while our own children are on the streets and hungry.

As I see it - I think it's BS................ there is nothing wrong with helping our own - whether others feel it's deserved or not.l Like I said no one - and I mean NO one - goes into buying a house with the goal of losing the home and everything they have worked for. It's not just laziness - it's life. I can remember a time when I couldn't even make a $250 house note cause I couldn't make enough to pay notes and insurance. So I moved out of my house for years and leased it. I still have my house but it certainly wasn't what I had in mind on the day I moved in.

[Outofdodge]

Originally Posted by Army_of_One

Everyone has pretty much chimed in on the mortgage subject but the bottom line is that if somone makes a stupid decision the tax payers shouldn't bail them out. A. They won't learn from it and 2. It's not fair to the people that DO make good decisions or have learned from their mistakes.

Or maybe you and the others are taking a narrow view of the situation and the macro economic risks associated with a failure to act. It was the Federal Reserve Bank's failure to act when the markets crashed that led to the great depression. Even with the subsequent actions of the Roosevelt administration it took six years and the industrial reaction to the Japanese laying waste to Pearl Harbor to climb out of it.

While it easy to point fingers at the people who took a chance to buy a house using little, no, or even negative equity during a time of cheap interest rates as now reaping what they sowed let's look around at the big picture.

-Those people stretching to buy houses and qualifying at the time when housing prices were rising and interest rates were stable were helping drive the economy in spite of the other negative indicators that have been hashed and debated time and time again. People buying houses meant someone was making refrigerators, washers, dryers, stoves, carpet, flooring, hiring painters and carpenters, etc. In turn those people doing those tasks were supporting their local economy, including the people who service computer equipment, deliver the goods, and wait the table. Their bank deposits were being used to provide start up capital for small businesses which led to more jobs and wealth being created. If the housing market dries up as it appears to be happening, many major segments of the economy will slow down. Maybe the washing machine dealer has to lay people off or the painter gets fewer jobs. Either way the computer repair guy and the lady serving coffee suffer along with the person getting foreclosed on. They go on unemployment, medicaid, and food stamps. Who pays for that?

-The financial markets trade mortgages as investment vehicles and they become part of their portfolio. If the pool of mortgage money is finite, once bank A used up it's pool of money in home loans, it either has to wait for loans to get paid off or stop loaning money. By selling the loans to investors who would receive a periodic cash flow, the banks could replenish their cash flow to further fund other projects. If the pool of loans becomes tainted, like any other investment then no one wants to buy them and the price drops. If the price drops then the value of the market drops then the available capital starts to drop off. If the capital drops off then the local hospital can't get the money to expand cardiology and more people in SW Kansas end up dying in an airplane en route to Wichita. If people are going to Wichita anyway then they by pass their local hospital who soon has no need for an information service department or fewer high paying nurses and xray techs. They either have to move or .....go on the tax rolls.

-The current mortgage crisis has led to decrease in the amount of houses being purchased. That decrease in many areas of the country has lead to double digit declines in the value of the property owned by everyone. To the point that some people who did not stretch their finances to buy a house, are now in a similar situation because the value decline means they have less equity and in many cases, have mortgages in excess of their house value. And they did things the "responsible" way. So if Mr and Mrs Homeowner in that situation has a chance to obtain a new job or is unfortunate to work at the shut down washing machine plant and needs to move to find employment, they now face the fact that they can't move because they can't sell their home. They either have to walk away too, or stick it out and guess who suffers with them?

This situation isn't about people stretching to buy a home they shouldn't have in retrospect. It's about a bunch factors, many outside their control, that conspired to create a perfect storm that now threatens the stability of the economy at a time when it does not need another crack and it impacts people all the way to Dodge City in ways they can not see.

So thump the chests and get all holier than thou if you'd like. That giant sucking sound you hear next might be your job getting bounced by some dudes in Vegas and Miami who overspent five years ago. this isn't about bailing out bad decisions, it's about providing stability and confidence and protecting the flow of capital.

[Highwayman]

I don’t disagree with anything you said OoD, but I’m not thrilled about the idea of bailing out everyone that made bad decisions. I’ve seen cases were folks have taken out a second mortgage above the value of their house and walked with the cash filing bankruptcy on the way out. Any kind of bailout would encourage these types of people to rip off the taxpayers.

My beef is with realtors and mortgage brokers that prey on trusting folks by pushing a bad mortgage product in search of bigger commissions with no regard to the long term well being of the folks that they work for. Yeah, we can blame the lenders for making a bad loan available but a responsible realtor should be warning folks about them instead of selling them. Most folks rely on sound advice from their real estate “professional” and too many don’t get it.

It really is buyer beware and a lot of folks spend more time researching a new TV than they spend checking out a 30 year commitment that devours half their paycheck.

I do agree that it is going to hurt all of us but most of these folks shouldn’t get a total free ride either. There are some genuine hardship cases out there. Can they be sorted out on a case by case basis? Given all of the welfare fraud and Medicare fraud I don’t expect the government to be very efficient at it.

[jackknife]

I live in CA and I see many, many people that we call house poor. They bought when they couldn't afford it and now they are in trouble. Look, I don't like living in a 1 bedroom apartment. I don't like only having one car (actually don't always mind it since we live in a very pedestrian neighborhood) I don't like having my neighbors a mere 12 or 14 inches away but I like it better than living above my means. My husband and I work hard and we save more money than most. We just don't really believe is getting a few bucks and jumping up ahead in line. We believe in being happy where you are now and then earning your way up. I don't think it is awesome that others bad decisions are going to affect me when we do decide we want to buy.

The real estate business isn't easy but I'm not going to be a dummy and just jump into something. I don't think I need to pay for others that do.

[Made in the USA]