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

___________________
There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.

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.

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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.

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.

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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.

___________________
There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.

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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.

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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.

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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.

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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.

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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).