"under water" houses

[Robert]

Regarding the mortgage/banking/credit/bailout crisis, I hear a lot of talk about many homeowners being "under water" (owing more than the home is worth).

At the risk of turing this into a political forum, I will say that I have yet to hear a compelling enough reason why it matters whether people are "under water" and why they deserve some sort of bail out.

First, unless someone held a gun to the buyer's head, the buyer signed the mortgage paperwork. Did they not? If we go around changing mortgage agreements, what good is a contract? If everything is negotiable, even after the signature is dry, why on earth would anyone be in the morgtage business? At some point, a deal is a deal and both sides have to live up to it. Right?

Second, who is to blame if the home buyer didn't take into account things like balloon payments, major medical expenses, college tuition for the kids, car payments, job stability, insurance, etc when the paperwork was signed? The homeowner, that's who. At some point you have to be responsible for your own finances. Tough.

Third, why are we rewarding greedy, short-term thinking by giving all these people a "get out of mortgage jail free" card by cleaning up the messes (with my money, no less) they caused ? IF YOU'RE GOING TO GAMBLE, THEN YOU ASSUME THE RISKS AND THE REWARDS. NOT JUST THE REWARDS. The way I understand it, we're actually helping those who took the biggest risks and who owe the largest amounts and are the most underwater. Isn't that backwards from the way it should be?

Fourth, why is it a "free market" when the price of things go up, but the same "free market" forces suddenly don't always apply when demand falls? When it's a boom market, demand causes prices to rise and rise very quickly. But when the boom ends, prices seldom fall all the way back. For example, a $100,000 house in 2000 probably doubled and possibly tripled by 2006. But since then, it's fallen only 40% max. So a $300,000 house in 2006 would still be what, $180,000 now? A very nice return, even if it's not the peak price. Even if it "only" doubled it would still be worth at least $120,000, which is a 20% increase in 8+ years. A good but not stellar return, but still much higher than most stock portfolios right now I would say. The losses seem to me to be overrated.

Fifth, what is the ideal "end state" for the housing market, assuming all the bailouts work? The home owner/seller, real estate people, mortgage people, bankers, tax collectors, builders/contractors/furnishing sellers and governments all want housing prices to increase. The home buyer is the only one who doesn't want increasing prices, and that's only for as long as he's in the market to buy one. I think that what most of the above people want is a return to the days of about 2005 when prices were on a healthy increase, doubling every few years. But that's short sighted, is it not? That's how we got where we are, is it not? Wouldn't a much slower, steadier pace be better? I would say that very few people in the business are for a long (10 years?), drawn-out period of slow but positive increase. They want it all "now".

Sixth, why is the government now in the business of ensuring everyone's success? Why does the government feel compelled to fill in the gap on someone's investment? And where does it end? If I lost $50 on a horse at the racetrack, do I get a bailout? I mean, I didn't intend for my horse to come in 4th place. I'm a victim. Where's my bailout?

Seventh, and my original point, is why does the "I'm underwater on my house so I'm going to walk away" argument/threat work for homeowners but not for new car owners? EVERYONE WHO EVER BOUGHT A NEW CAR WAS UNDER WATER ON THAT CAR THE MOMENT THEY DROVE IT OFF THE LOT! I can't say I know anyone who stopped paying for their new car beacuse they owed more than it's worth.

I'm against the idea of any gov't bailout. I just don't buy it (no pun intended). I would like to hear more people in leadership positions (in business and in government) say that too.

And I think that we're overdue for a recession, and the sooner we just take our lumps and get over it the better we'll all be. I don't want to be 10 trillion dollars in debt.

On the other hand, I'm no economist, so I may not know about which I speak. There are are a lot of people in dire straits right now, and it may not be their fault. Many have never been in a bad financial situation before, so this is shocking and scary to them. Hunger is a terrible thing. And the job situtation is only going to get worse in the near term. Not to mention the international situation. That truly scares me. I'm not sure what to do.

Rant over.

What say you?

[Dick]

Robert, I agree with you, and here is A solution:
I have been in that situation where I lost a house, because I couldn't keep up the payments. Fired, Quit, layed off, or what=ever!
In each case, the "family" who live in said house have to find another house in which to live. That costs money. First, AND last month's rent. Security/cleaning deposit, and the actual cost of moving all the belongings from one place to another.
1. If one has been fairly consistant with the payments, why not re-nogociate the mortgage, and stay where you are? Things usually improve, or at least get back to normal, and the payments keep going to the bank, (or who-ever). This one will see that there was a second chance to get his act together, and do just that! No "Bail-out" required.

2. This is the one who is always late, and/or behind in the payments. This one got in over his head, and will never get out. Foreclosure is the only option. A change in attitude is necessary! In this case, this one will end up on welfare, (as long as there is such a thing, and they don't require 40 hours a week of active participation in something that helps themselves, or others, to qualify. No "bailout"!
There are those who will agree, and others who don't. I have been on both sides of the fence! It took a while, but I learned. I won't be the only one who has this story to tell, with some exceptions. There are always some of both sides, and for those who are in this situation, the time is NOW to get your act together, and prove to yourself that you can do just that! It won't be easy! But when you have done what needs to be done, you will be proud of yourseelf. Welcome aboard!
Dick

[smed]

Simple answer: look at the party/leaders running the government.

Not-so-simple answer: wahhhh! gimme gimme gimme!

[Robert]

Dick and Smed and everyone else... I admit I don't know what the right thing to do is. And I apologize/recant because I haven't yet been in that position (thank God), so maybe I need to give everyone a break on this.

[fiddle-fart]

No I agree with you Robert, and throwing money onto a fire, does not put it out.

[Dick]

I look at it this way: Before man came to this planet, Mother nature took care of the "bad stuff", with fire,and water. When we got here, there were green, healthy forests, as far as the eye could see. Then man began to "control" the fire and water, and the rain forests, and forests elsewhere began to disappear. Now look at what we have . A world that is sick, and growing sicker by the second! Maybe if we just let the fire burn, maybe it will remove some of the "badstuff", and give the rest a chance? Stimilus plan? 50 years ago when I lost my job, and lost my house, I learned a lesson: Credit is bad! Use it in an emergency, not for every nickel and dime purchase!. Obama, in case you read this, you might find out the hard way, that some of us have to carry the load; but not ALL of it!
Dick

[garylcsr]

I think instead of giving the auto makers billions of dollars they or he should have given each AMERICAN CITIZEN a chunk and let us put it where it needs to go. who knows more than the American people what we need or don't need. why bail out a car manufacturer that is going to pick up and move to Mexico sooner or later anyway

[GarryN]

when you allow people to buy homes with very little money down, you are always going to be flirting with the cost/ value threshold. The car purchase is a good example. No one brings that up because being without a car is not as newsworthy as being without a home. People are in a panic right now. But if your house is not worth as much as the amount of the loan, just be patient, the value will rise eventually.

[garylcsr]

I'm not with you on that one Garry
I spent 13 years active duty (ARMY) and i paid zero down on my home. and my home is valued today at 2 1/2 times what i paid for it just 6 short years ago. I paid 89K for it. I am in mid town or just about in the city a mile away anyway i have 2/3's of an acre in Tucson AZ. 3bd 2 bath totally fenced and a corner lot.
our trouble now is not that we let too many get loans that couldn't afford them but that we let all the illegals get home loans and they had no chance of paying the loan.here in Tucson now we have thousands of homes sitting empty because when this new law popped up about taking the work away from the illegals they all packed up what they could get in their car truck or whatever and went back home.
Bush done that.
now don't think i am against the Mexicans or whoever is here that is not from here but my family came here the legal way and went by the book. you don't see that no more. it is a me me me world now and we are in the middle of it.
and don't even get me started on the SSI SSA and welfare for the illegals. sis you know that over 25 billion a year is taken from out social security just to pay the medical bills for the illegals? most of it is so they can have their anchor baby's here and get all the benefits.
some of you will not agree with this. but it is my opinion only.
hopefully we wont get into a heated argument but rather a very enlightening conversation.
sorry if i peed on some of your breakfast bowls that's not my intention. but someone had to say it.
just think
10-20 years from now we will have to all speak Spanish in order to buy bread.
kind of reminds me of my first tour in Germany lol I had to point to the things i wanted cause i didn't have a clue how to say it
but I was in a different country than my own i I respected the people enough to learn their language. why should they learn mine to communicate with me. and you know what the respected me more for trying than they would have if i made them change their ways to fit my needs and that is exactly what we are doing here today.
OK i am done but i could go on for hours.
My fathers father and all his brothers faut to make this country what it is and we need to fight to keep it that way or we are disrespecting them and all the gave their lives so we could buy or point at that loaf of bread

[Dick]

Gary, you said what a lot of us think! I have the same scenario, here at home. when I met tha gal who was to become my wife, ( of 55 years, in Feb, 2010), I told her I wanted top learn spnish, then i would help her learn Inglish. That is the way i think. The "American" way is when one goes to a foreign country, they are "obligated" to speak inglish, "'cause we don't skeak theirs"! BS! They hae THEIR country, like we have OUR country, so if you go there, then it behooves one to learmn a little of their language, in order to get around. the same obligation is in place here. We have, ( and do abide by their laws and regualtions re entry)so why not them? The ones that are still here, all receive help, and so are staying. Cut the assistance, evety cent! then you will see the costs go down for the legal residents, regardless of race, or nationality. Yes, Gary, I have no doubt we will speak Spanish, as the "official" languiage, in the not too distant future. I am already prepared for that. I just wionder if they will allow "dual-citizenship"??? Hasta luego!
Dick

[fiddle-fart]

Hey all,
I worked in the lumber side of building house and talked to alot of builders.
back in 2002 we had a down turn in the housing markets which left a whole bunch of builders paying interest on those houses.
most of them lost everything and moved onto other ventures outside of the housing market. when the market picked back up, there were more builders building houses that didn't know which end of a nail that goes in first( it goes on the other side of the house)
People wanted more, the Jones next door was to be surpassed.
I remember several times, home owners wanted a bigger deck then next door, but all they had in the house was mattresses on the floor, no furniture( they rented when they threw a party)
I live in the country with several acres(to grow my own food) and saw this coming back in '02
I paid off my house ( 15 yr. FIXED RATE @ 4.5%) I could have kept it but the good old 8 ball kept saying "try again later"
paid off my cards and saved, saved, saved...........

I, myself don't think its all over with... it's going to get worse

Mike

[eagames]

Past slowdowns were different, it's not the year of bad car sales it's the year many US manufacturers went under.

Greedy banks giving loans to risky buyers drove up prices, when they failed it drove down prices and made many recently bought houses be under the water. The gov could have printed money for the bailouts (bad enough). Instead the gov sells bonds to China (much worse) so it pushed the inflation out a few years but they'll need to print more money when the bonds come due. Not only is it bigger inflation than just printing money but it's taking from this country to give to China.

The inflation is on the way, house interest was in the teens when Carter was running the show. As they print more money inflation will be high. The last housing ARM bubble broke when house rates were relatively low. As soon as the gov stops holding interest low by giving money away the rate will be like Carters rates and the next housing chaos will be here.

Now the elite news reporter cheerlead about "little green shoots" and "jobless recovery".
Like Mike said "it's going to get worse".

[Dick]

I agree! Been there, suffered that!
I thought it was great, ( for the foreigner) when the interest rates were 139.6/anum, on short term loans.. That was when the exchange ratye was 3000:1. Ever hear of a one day loan? that happened in Mexico. I wonder how bad it is going to get here? Not Pessimistic, just reading the signs.....
Dick

[coppercoins]

I am not certain about anything in the future, but common sense does dictate that when you print more money than you can back, your money becomes worthless...and that's what I see our country doing.

[GarryN]

I definitely agree with your point Garylscr, there definitely has been an increase in mortgage fraud, I am a certified fraud examiner and I read about all the schemes out there and have heard a talk given at the ACFE conference in 2008 by a guy who was convicted of mortgage fraud. Then you listen to the House hunting programs on HGTV and people in their 20s with little job experience and who knows what their salaries are, are getting approved for 300K loans. Its unreal. HGTV isnt going to go back and check up on how many of these people still own these homes.

Then this health care program is a disaster waiting to happen and Obama is paying for it already, his approval rating was reported today at 59%, down from 65%. Tell me, what employer is going to provide a health care plan when there is a public plan out there that the employer doesnt have to contribute to? No dumb reporter asks these idiot politicians that question. My brother-in-law is an emergency room doctor in Illinois, and his hospital is reeling because Illinois wont pay its share of Medicare/ Medicaid bills. Hasn't paid them for years. He said few employers will offer a plan anymore. We will go to socialized medicine. Thats where this is going.