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Where does the slippery slope end? Disgraceful.

This is why people like Rick Santelli get so outraged. Our government keeps pushing the envelope and moving the goalposts, helping the irresponsible and punishing the responsible. This is wrong on so many levels. At what point have we clearly crossed the line? I'd argue it happened a long time ago. This infuriates me. Why did I save up my money to pay off my second mortgage when I could've just had all of you stoopid tax payers make a 20% down payment for me?

http://www.nytimes.com/2009/04/29/b...agewanted=print

quote:

A New Plan to Help Modify Second Mortgages By EDMUND L. ANDREWS WASHINGTON � The Obama administration sought to expand its $50 billion plan to reduce home foreclosures, announcing a new program on Tuesday to help troubled homeowners modify second mortgages or piggyback loans. Under the new plan, the Treasury Department will offer cash incentives and subsidies to lenders who agree to substantially reduce the monthly payments on second mortgages or forgive those loans entirely. The goal of the plan is to plug a hole in the administration�s original program, which offered subsidies to lenders who agreed to modify the primary or first mortgages of homeowners who had fallen delinquent or were in danger of doing so. But millions of homebuyers took out second mortgages to buy houses with little or no down payment or to finance home improvements and other purchases. Those second-lien mortgages have to be renegotiated separately, a step that often complicates efforts to modify the primary loans. Analysts predict that at least 4 million homeowners will face foreclosure proceedings this year, up from about 2.2 million in 2008. Administration officials said about half of those people had second mortgages. Under the new plan, which will be financed out of the same $50 billion set aside in March from the Troubled Asset Relief Program for homeowner bailouts, mortgage lenders that sign up for the program will agree to an automatic formula for sharply reducing payments on the second mortgage for any customers who have modified their first mortgage. Under the original program, the Treasury offers cash incentives to lenders to reduce a borrower�s monthly payments to 38 percent of monthly income. The Treasury then shares half the cost of further reducing the payments to as low as 31 percent of the borrower�s monthly income. Under the new program, which officials said would not get under way for at least several weeks, participating mortgage lenders would agree in advance to automatically reduce the interest rates and possibly the outstanding loan amounts for a second mortgage as soon as the first mortgage had been modified. Lenders would be required to lower the interest rate to just 1 percent for any second mortgage in which the borrower was repaying principal as well as interest. On interest-only loans, the lender would have to reduce the rate to 2 percent. If the lender on the first mortgage agreed to forgive some of the principal loan amount, the second-tier lender would have to forgive the same share of its loan as well. To induce mortgage lenders to participate, the Treasury is offering lenders a $500 cash incentive for each second loan they modify and additional payments of $250 a year for three years if the borrower stays current. The Treasury will also share the lenders� cost of reducing the monthly payments. It remains unclear whether mortgage companies will be attracted to the new offer. The second-tier lenders would be making much deeper concessions to borrowers than the first-tier lenders. But holders of second mortgages are already junior to holders of first mortgages. In foreclosures and distressed sales of homes that have dropped in value, many holders of second mortgages recoup little or none of their money.

Most people could have told you that taking out a second mortgage was a bad idea.

In principle I'm against consumer bailouts because it provide bad incentives, however, given that consumer purchases make up a huge part of the ecomony shit like this may be somewhat necessary. As long as consumers fear losing their homes they aren't spending money. My workload came to an abrupt stop a few months ago because businesses stopped discetionary spending on structuring tax advice because net income is down all over the place. As long as people fear losing their house they will cut spending. Unfortunately, all of our fortunes are indirectly tied together. I don't like the plan either, but in this recession the irresponsible are taking down the responsible. we may need to support the irresponsible to limit the damage.

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Originally posted by jerZ07002 In principle I'm against consumer bailouts because it provide bad incentives, however, given that consumer purchases make up a huge part of the ecomony shit like this may be somewhat necessary. As long as consumers fear losing their homes they aren't spending money. My workload came to an abrupt stop a few months ago because businesses stopped discetionary spending on structuring tax advice because net income is down all over the place. As long as people fear losing their house they will cut spending. Unfortunately, all of our fortunes are indirectly tied together. I don't like the plan either, but in this recession the irresponsible are taking down the responsible. we may need to support the irresponsible to limit the damage.

I know this argument. I question the degree to which we are continually rationalizing taking things a step further. Before this is all said and done we're going to see the government forgiving everyone who used their house as an ATM and took out a HELOC. i.e. the taxpayer is going to be forced to swallow all of the HPA that we saw from 2002-2007. This goes beyond people simply buying a bigger house than they could reasonably afford. This now embraces those people who were in a house and decided to pull out equity to buy fancy sports cars, vacations, remodel, etc. This doesn't just mean people who were "taken advantage of," rather this is now going to include a lot more people who "took advantage of" and are now going to get off scott free. I've been able to rationalize a lot, but this, to me, is simply a bridge way too far.

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Originally posted by Shakka I know this argument. I question the degree to which we are continually rationalizing taking things a step further. Before this is all said and done we're going to see the government forgiving everyone who used their house as an ATM and took out a HELOC. i.e. the taxpayer is going to be forced to swallow all of the HPA that we saw from 2002-2007. This goes beyond people simply buying a bigger house than they could reasonably afford. This now embraces those people who were in a house and decided to pull out equity to buy fancy sports cars, vacations, remodel, etc. This doesn't just mean people who were "taken advantage of," rather this is now going to include a lot more people who "took advantage of" and are now going to get off scott free. I've been able to rationalize a lot, but this, to me, is simply a bridge way too far.

oh definitely! I used the word "may" because i don't really support the plan. Even though I'm not a supporter, I understand the purpose of the plan. I was just throwing out a different point of view.

I actually think we need to eliminate from the tax code the incentives for consumers to take out debt to finance their activities. I don't deal with individual taxes frequently, but I know interest is deductible for the first and second home, and if a person has their debt discharged on their primary residence that foregiven loan is not considered income (i.e., normally if you have debt forgiven it is included as income because you are received income without the obligation to pay back the money. There is an except for the cancellation of debt on a primary house so that if your mortgage is forgiven you do not include that amount in income). So, not only does the government give people the incentive to take out too much debt, but the government also provides the incentive for people to walk away from mortgages when they can't afford the mortgage anymore.

I'm actually in the beginning stages of writing an article on an issue related to this.

quote:

Originally posted by Shakka I know this argument. I question the degree to which we are continually rationalizing taking things a step further. Before this is all said and done we're going to see the government forgiving everyone who used their house as an ATM and took out a HELOC. i.e. the taxpayer is going to be forced to swallow all of the HPA that we saw from 2002-2007. This goes beyond people simply buying a bigger house than they could reasonably afford. This now embraces those people who were in a house and decided to pull out equity to buy fancy sports cars, vacations, remodel, etc. This doesn't just mean people who were "taken advantage of," rather this is now going to include a lot more people who "took advantage of" and are now going to get off scott free. I've been able to rationalize a lot, but this, to me, is simply a bridge way too far.

So we do nothing then?

We have millions lose their houses and then what? They aren't working anymore after that, they are in debt still, they wont spend. You say we just ignore them.

Give them a few years and you wouldn't be able to. It will be your head on a stake after they have turned violent.

quote:

Originally posted by Joss Weatherby So we do nothing then? We have millions lose their houses and then what? They aren't working anymore after that, they are in debt still, they wont spend. You say we just ignore them. Give them a few years and you wouldn't be able to. It will be your head on a stake after they have turned violent.

Nonsense! Idealism rules the world - people would never, ever resort to petty violence when they have been kicked out of their homes, fired from their jobs, and need to feed their families! It's simply unthinkable.

quote:

Originally posted by Joss Weatherby So we do nothing then? We have millions lose their houses and then what? They aren't working anymore after that, they are in debt still, they wont spend. You say we just ignore them. Give them a few years and you wouldn't be able to. It will be your head on a stake after they have turned violent.

People who can't afford their mortgages RENT apartments. With declining real estate values, rental expenses should also decline somewhat. The problem isn't that people will become homeless, it is that people who had their 5 bedroom 3.5 bath McMansion foreclosed will have to move back into 2 bedroom 1 bath apartments, and those people don't want to revert back to a 'normal' lifestyle.' I don't want to support someone's excessive lifestyle choices. Fuck them! Not only have they screwed themselves, but they have also screwed people who didn't make bad choices.

I have no sympathy for someone who extended himself too far taking out a mortgage 4 or 5 times greater than his annual income, with interest payments exceeding 40-50 percent his after tax income. I have sympathy for the modest worker who lost his job because the excesses of the irresponsible lead to an inflated economy and a sharp correction.

quote:

Originally posted by jerZ07002 People who can't afford their mortgages RENT apartments. With declining real estate values, rental expenses should also decline somewhat. The problem isn't that people will become homeless, it is that people who had their 5 bedroom 3.5 bath McMansion foreclosed will have to move back into 2 bedroom 1 bath apartments, and those people don't want to revert back to a 'normal' lifestyle.' I don't want to support someone's excessive lifestyle choices. Fuck them! Not only have they screwed themselves, but they have also screwed people who didn't make bad choices. I have no sympathy for someone who extended himself too far taking out a mortgage 4 times greater than his annual income. I have sympathy for the modest worker who lost his job because the excesses of the irresponsible lead to an inflated economy and a sharp correction.

There are also a lot of people that bought very reasonable houses that they couldn't afford in the first place. Not everyone being kicked out of their homes are people that were living beyond a normal persons means.

It doesn't negate the fact that they will end up being either bankrupt and hurting the economy, homeless and in debt (try renting when you are 80-100k in the hole), or somehow renting but still in so much debt that they can not support their family.

quote:

Originally posted by Joss Weatherby There are also a lot of people that bought very reasonable houses that they couldn't afford in the first place. Not everyone being kicked out of their homes are people that were living beyond a normal persons means.

Re-read the headline article. This is about 2nd liens, not just your typical housing mania mumbo jumbo. This is not just the guy that got the aggressive 80/20 piggyback mortgage (guilty as charged, but I paid mine down). This includes that massive number of folks who drained every last dollar of equity in their houses to fund a lifestyle of excess and are now going to have that forgiven on your and my dime. I'm surprised there's not more outrage.

JerZ is right. The faulty assumption is far too often that someone who can't afford to stay in their house becomes homeless and you'll see them sleeping under a bridge. If you can't afford to own, you rent, you don't become a drag on society and have them fund your excess.

Not to mention this all continues to penalize the responsible guy who sat on the sidelines because he recognized the bubble and waited for his opportunity to buy a house at a reasonable price, but is continually thwarted by a government that wants us to believe that house price levels of 2007 represent the new baseline rather than the bubble price.

quote:

Originally posted by Joss Weatherby There are also a lot of people that bought very reasonable houses that they couldn't afford in the first place. Not everyone being kicked out of their homes are people that were living beyond a normal persons means.

if they couldn't afford the house, then by definition it wasn't reasonable. If no house is affordable then they need to rent. Not every person should own a home. Only people who can afford purchasing a home should be a home owner.

quote:

Originally posted by Joss Weatherby It doesn't negate the fact that they will end up being either bankrupt and hurting the economy, homeless and in debt (try renting when you are 80-100k in the hole), or somehow renting but still in so much debt that they can not support their family.

What's your point? If people in debt can't afford to rent then they certainly couldn't afford to purchase a home! Furthermore, if people are filing bankruptcy they can get some of their debt eliminated or at least modified. In my view, these people should be filing bankruptcy claims and not receiving government handouts. The bank and the borrower should be the only parties directly incurring the cost of their bad decisions. Keeping people in homes they couldn't afford shoudn't be an official government policy.

As to renting in debt, my student debt dwarfs that 80-100K number: try 220k in debt! Still, I manage to rent a modest 3 bedroom apartment in north jersey.

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Originally posted by Shakka Not to mention this all continues to penalize the responsible guy who sat on the sidelines because he recognized the bubble and waited for his opportunity to buy a house at a reasonable price, but is continually thwarted by a government that wants us to believe that house price levels of 2007 represent the new baseline rather than the bubble price.

i definitely agree with this. More than any other group, this punishes responsible people in their late 20s and early 30s (the group that would be looking to purchase). I'm still waiting for condos in Hoboken NJ to fall to a reasonable price. I'm not sure I'll see that anytime soon considering the government is playing the same interest rate game that mortgage brokers played for so long (i.e., increasing real estate value by offering low interest rates).

I say let them foreclose. If you can't afford the house, then sell it, and start renting. It's not that hard.

quote:

Originally posted by Krypton I say let them foreclose. If you can't afford the house, then sell it, and start renting. It's not that hard.

i can't remember the last time we agreed on something.

ironically, we are both democrats (at least we vote democrat) and we don't support this populist plan.

I knew there was still hope for krypton. Underneath that big government pro-fed pro-keynesian, pro-corporate bailout, pro-stimulus facade is a tiny libertarian struggling to break free.

My criteria on government intervention is, 'does this or that pose a systemic risk to the overall economy if allowed to fail' and is in immimant risk of failure. I don't think mortgage foreclosures do that.

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Originally posted by Krypton My criteria on government intervention is, 'does this or that pose a systemic risk to the overall economy if allowed to fail' and is in immimant risk of failure. I don't think mortgage foreclosures do that.

At what point (percentage or whole number wise) would you consider foreclosures to be a systemic risk? After all, if a bank has a piece of real estate on its books, it is losing liquidity.

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Originally posted by jerZ07002 At what point (percentage or whole number wise) would you consider foreclosures to be a systemic risk? After all, if a bank has a piece of real estate on its books, it is losing liquidity.

but gaining liquidity from the Federal Reserve offsetting the deflation in real estate.

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Originally posted by Krypton but gaining liquidity from the Federal Reserve offsetting the deflation in real estate.

the banks will have a corresponding liability associated with the funds provided by the fed. that's not a long term soluation.

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Originally posted by jerZ07002 the banks will have a corresponding liability associated with the funds provided by the fed. that's not a long term soluation.

It's not supposed to be a long term solution. The banks took huge real estate risk and now they are paying for it. The government should be doing only what is needed to prevent a systemic collapse of the economy. You asked, 'what level of would real estate be a systemic risk?' Well, I believe there is no level at which real estate is a systemic risk.

quote:

Originally posted by Joss Weatherby There are also a lot of people that bought very reasonable houses that they couldn't afford in the first place. Not everyone being kicked out of their homes are people that were living beyond a normal persons means.

Is this a joke? I think you may need a class in reality

quote:

Originally posted by jerZ07002 People who can't afford their mortgages RENT apartments. With declining real estate values, rental expenses should also decline somewhat. The problem isn't that people will become homeless, it is that people who had their 5 bedroom 3.5 bath McMansion foreclosed will have to move back into 2 bedroom 1 bath apartments, and those people don't want to revert back to a 'normal' lifestyle.' I don't want to support someone's excessive lifestyle choices. Fuck them! Not only have they screwed themselves, but they have also screwed people who didn't make bad choices. I have no sympathy for someone who extended himself too far taking out a mortgage 4 or 5 times greater than his annual income, with interest payments exceeding 40-50 percent his after tax income. I have sympathy for the modest worker who lost his job because the excesses of the irresponsible lead to an inflated economy and a sharp correction.

You have no idea how infuriated listening to this BS makes me after paying more for rent in 2-3 months what most pay in a year pay for their mortgage. For 6 years. And for the record, I live in a crappy apartment, not some building with a gym & rooftop pool. But I'd be getting a nice handout if I were stupid enough to buy an apartment when costs were sky-high.

perhaps every state should require, and I mean REQUIRE their real state agents a.k.a pests to take more examinations and tests, it seems as if anyone can become a real state agent these days. Scary times we living...

That is all, people and their internet...

Estate.

quote:

Originally posted by winston perhaps every state should require, and I mean REQUIRE their real state agents a.k.a pests to take more examinations and tests, it seems as if anyone can become a real state agent these days. Scary times we living... That is all, people and their internet...

They do, it's called a real estate license. And real estate agents simply sell houses. They did not cause this housing crisis.

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