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Who Will Benefit From Obama's Mortgage Plan?

This woman thinks she deserves a bailout. Minta Garcia is a bus driver. She and her husband bought a $800,000 house they couldn't afford. Now they want the American taxpayers to fix their problem for them because the bank is about to begin foreclosure proceedings. Keep in mind as you watch the video that the bank will begin foreclosure proceedings only if you default on your loan, not because your home's value drops below your mortgage's value:

Yep, she bought a $800,000 house she couldn't afford, yet whose fault is it? The bank's for making it too easy for her to enter into the loan. We live in a Veruca Salt world.



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Comments (45)

I believe an unfortunate se... (Below threshold)
epador:

I believe an unfortunate series of events better epitomizes this current storyline.

The new "Amerika". <... (Below threshold)

The new "Amerika".

In order to reward this (at best) misguided woman we need to find several HONEST people who DO pay their bills and taxes and STEAL FROM THEM!!

Messages being sent to the youth of Amerika:
- Do NOT play by the rules
- Do NOT save your money
- Do NOT spend what you have wisely
- You are ENTITLED!!

One only need wonder what i... (Below threshold)
epador:

One only need wonder what ineffective (except towards all "responsible adults") disguise that greed and hunger for power will take in its quest to lay claim to the inheritance of all our children.

Certainly not a chimp disgu... (Below threshold)
epador:

Certainly not a chimp disguise.

Buying a house is too compl... (Below threshold)
Clay:

Buying a house is too complicated for the average American. Private property is the problem. Stop it. Now.

"Economists wonder if Obama... (Below threshold)

"Economists wonder if Obama's expected $50-$100 billion foreclosure plan will work."

Yeah, it will work. It will help sustain the real estate bubble for just a little bit longer, it will help boost inflation just a little bit more, and it will take us just a little bit closer to Obama's redistribution fantasy. I love it.
http://www.rightklik.net/

Come-on, it CAN'T be all ba... (Below threshold)
Marc:

Come-on, it CAN'T be all bad can it?

Oh, I spoke far too soon. has been put in charge.

If that isn't "stimulating" (to satirist bloggers and cartoonists everywhere) I fail to see what is.

Should read: Blabber-mouth ... (Below threshold)
Marc:

Should read: Blabber-mouth has been put in charge.

Sorry

I think what we need is a 2... (Below threshold)
COgirl:

I think what we need is a 2 for 1 split of the US dollar and all will be ok.

This mortgage plan is a real crock! I'm pissed because I feel like a real sap for paying my mortgage.

The LENDER made it too easy... (Below threshold)
JLawson:

The LENDER made it too easy? WTF? We just re-fied and and the lender spelled out upfront what we needed to pay, how much we were going to be paying, and gave us an amortization schedule to boot showing just how much the payment would be each month, divided into payment, principle, and escrow.

What happened, did she turn off her brain?

Did the moment the value dropped below the cost did they figure they didn't need to make the payment any more?

$800k - According to Bankrate.com her payment would have been running over $5300 a month (at 7%, their default value) not including escrow. Being a bus driver must pay pretty damn good!

first paragraph of a story ... (Below threshold)

first paragraph of a story currently up either the A/P or The Onion:
"Urging future restraint even as current spending soars, President Barack Obama pledged on Monday to dramatically slash the skyrocketing annual budget deficit as he started to dole out the record $787 billion economic stimulus package he signed last week."

if you guessed the A/P then you're right!! (if I was The Onion I'd be pissed!!)

It's easy to blame this wom... (Below threshold)
Mac Lorry:

It's easy to blame this women and her husband for burying more house than they could afford. Thing is, they didn't create the easy loan terms and they weren't wary enough to avoid getting caught by the downturn in the housing market. For all those who think they should have known the market was going to burst, I ask you how much did your 401(k) drop in the last year? The average is over 20%, but had you known the market was going to drop you could have moved your money into private or government bonds and avoided the loss; I did and my 401(k) actually grew.

It was the government that made easy loans possible with it's guarantees and it was the government that has kept interest rates artificially low for the last 20 years. Had the market not collapsed this couple could have either refinanced their home or sold it for a profit and used that money toward the purchase of a more affordable home. What have we become when we think two earner families with kids should be abandoned to forces they didn't create on their own?

If the home is foreclosed the bank will take at least a $125,000 loss and likely much more when you add in legal fees and costs to sell the property. Because the loan was likely guaranteed by the government that means tax payers make up the loss. We don't know the details, but it might be possible for this couple to stay in their home if they could refinance it. If so, then it's a win win for the couple and tax payers. Even if the mortgage is written down to the current market value it costs tax payers no more than if the property is foreclosed. I think it's both smart and fair for the government, who's policies created the problem in part, to facilitate solutions where that's possible.

Wow, Mac, that was a ration... (Below threshold)
Brian:

Wow, Mac, that was a rational, fact-based analysis, where your conclusion reflects the realities of the market, and focuses on the best available outcome rather than some theoretical nirvana of pure capitalism.

Be prepared to be labeled a socialist.

Except that people that def... (Below threshold)
ECM:

Except that people that default and get a refi deals end up re-defaulting at a 60% rate a mere 6 months later and, further out, around 90% so, basically, you're putting off the pain for another year or so which sounds like a brilliant plan (because postponing the inevitable has worked so well so far, right?)

well Mac Lorry (and Brina t... (Below threshold)

well Mac Lorry (and Brina too) your "rational, fact-based analysis" breaks down on very quickly...

First, comparing a home to a 401k...you don't LIVE in a 401k. In order for the comparison to have merit the "HOME" would have to be thought of as an "investment". In fact in your 2nd paragraph you recognized this in this sentence: "Had the market not collapsed this couple could have either refinanced their home or sold it for a profit and used that money toward the purchase of a more affordable home"

Therefore this was an INVESTMENT...not a "HOME". They gambled...and lost.

You also make them out to be VICTIMS of the evil "gummint":
"It was the government that made easy loans possible with it's guarantees and it was the government that has kept interest rates artificially low for the last 20 years."

so if the gummint had made it TOUGHER for these people, then they would have been prevented from shooting themselves in their financial feet...eh?

I'm ok with bailing these people out, provided they:
(a) are NEVER permitted to take out a loan of ANY kind the rest of their lives (they might get "hoodwinked" again...and we can't have THAT)
(b) if they ever sell the house then any and ALL profits from the sale go back to the U.S. Treasury (i.e.: ME!)

Justrand,... (Below threshold)
Mac Lorry:

Justrand,

Therefore this was an INVESTMENT...not a "HOME". They gambled...and lost.

Traditionally homes are investments as well as a place to live. Expecting the normal appreciation of a home is not a reckless gamble.

so if the gummint had made it TOUGHER for these people, then they would have been prevented from shooting themselves in their financial feet...eh?

It's true. The government guarantees home loans through the VA, FHA, and other programs. Without such guarantees no banker in their right mind would give anyone a home loan who didn't have 35% down, low debt, and a gross income greater than 3 times the mortgage payment. Promoting home ownership has been a policy of government since the end of WW2, and the system worked well for a long time.

The big problems was allowing montages to be converted into securities, which came about when Dick Army was still in Congress. That change allowed mortgage originators to pass the risk of subprime mortgages on to Wall Street investors while collating thousands of dollars in origination fees. The last straw was the ARM, which allowed people to get into homes they couldn't otherwise afford.

So you want to blame working people who got caught up in this. However, people with money who find themselves underwater in a mortgage simply buy another home at the now lower price, move in and then let the first home go into foreclosure. They take a hit on their credit rating for a while, but come out ahead compared to paying the original inflated price of the first home. So who are the real dead beats, the family that doesn't have the resources to escape or the family that can dump the loss into the laps of tax payers while moving to an even better home?

The value of real estate dr... (Below threshold)
lunacy:

The value of real estate dropping is always a possibility.

In what universe does a bus driver earn enough to buy an 800,000 dollar house? Even the 650,000 seems like a lot of house for a bus driver.

When I was growing up the rule of thumb was that your housing (mortgage or rent plus utilities) should not exceed one week's salary. Even at 650,000 and a 30 year note (excluding interest), her payments would be $1805 a month. The "salary wizard" at CNN says the median for a bus driver in the US is 18,446 a year. So, by my dad's ROT, she has 4 times the house she can afford. I'm guessing she probably drives more car than she can afford too. And she and her daughter probably have more cellphone than they can afford.

I'd like the gov't to loan all these people (who buy more house than they can afford) the funds to buy the building materials to split their 4000 square foot house into 2 2000 square foot semi-attached/duplex houses.

Should be...while ... (Below threshold)
Mac Lorry:

Should be

...while collecting thousands...

In what universe d... (Below threshold)
Mac Lorry:
In what universe does a bus driver earn enough to buy an 800,000 dollar house? Even the 650,000 seems like a lot of house for a bus driver.

The story doesn't say what Mr. Garcia does for a living, likely because the story would lose some of it's impact if they said he was a partner in a law firm, a plastic surgeon, or in some other highly paid profession.

So would you feel differently if someone who made $250,000 a year bought an $800,000 house, but then got laid off and couldn't afford it any more? In normal times people in that situation could sell the home for as much or more than they paid for it and then find less expensive housing. Were such people irresponsible for not predicting the economy would become the worst it's been since before WW2?

With the drop in home prices every foreclosure represents a loss to the mortgage holder, and with the bank bailout, to the tax payer. It's seems like tax payers would be willing to take less of a hit even if it meant some people get an undo benefit. I for one don't take any pleasure is seeing working people force out of their homes.

Dang, another one. Should ... (Below threshold)
Mac Lorry:

Dang, another one. Should be:

The big problems was allowing mortgages to be converted...

Mac, the story doesn't ment... (Below threshold)
Tim:

Mac, the story doesn't mention anyone getting laid off, just the fact that the house is worth less than the mortgage. Unless they had an ARM (really dumb, BTW - also not stated) then their mortgage payment STAYED THE SAME. They're not being foreclosed becaus the home's value went down, they're getting foreclosed because they couldn't pay what they originally agreed to when it was worth 800K.

If he was a partner in a la... (Below threshold)
lunacy:

If he was a partner in a law firm he could likely afford the mortgage.

Also, if Mr. got laid off they WOULD have included it in the story.

If Mr. got laid off he would collect unemployment for spell to either find another job or readjust his lifestyle to meet his expenses.

Nobody is forced out of their homes unless they fail to act. Sell the house and downsize. Accept that you made a bad investment. Accept that life isn't fair.

And no, I'm not sympathetic about the loss to the mortgage holder because the market changes. There is never any guarantee that your house value will increase. It happens to people all the time. A road get widened. A factory moves in. A mall closes.

Same goes for my 401K, or any other thing I buy with the possible intention of selling. Gold fluctuates. Gas fluctuates. Corn fluctuates.

Additionally, my view is that their is extreme overvaluation of property going on, base on what I'm not sure. There are studies to confirm this. But casual observation suggests that my home would be worth 8 times its value if it were in California instead of where it is.

So, she bought a house that was unrealistically value AND that she can't afford.

If you bought a car that was worth more than it was worth and you couldn't sell it for that value to break even, should I feel sorry for you?

If you bought stocks at too high a price and the market changes such that you can't make back your cost, should the gov't subsidize your bad luck?

AND, if you borrows money from Vinny to buy the stocks and you can't pay Vinny back, well....

Life's not fair.

Suck it up and learn something. Because that's probably the most valuable thing Mrs. Whatsername should get out of this experience.

And if what she and her daughter really do learn is Big Daddy Gov't will pick her up and dust her off our country and society will be in really bad shape.

Lunacy, if you're going to ... (Below threshold)
Brian:

Lunacy, if you're going to be consistent in your argument, then you also must be against bailing out the banks. Just let them all fail. Because they also took big gambles, and sold mortgages that they knew the homeowners couldn't afford.

That may be your position. But if you think we should bail out banks that took risks and lost, but not homeowners who took risks and lost, well that's just... lunacy.

Mac, the story doe... (Below threshold)
Mac Lorry:
Mac, the story doesn't mention anyone getting laid off...

That's true. I only mention being laid off as one way families who at one time could afford an $800,000 home now find themselves facing foreclosure. People don't need to do anything particularly reckless to end up in a similar situation.

Unless they had an ARM (really dumb, BTW - also not stated) then their mortgage payment STAYED THE SAME.

If so, then they must have lost much of their income, otherwise, they never would have been able to pay the mortgage and would have been in foreclosure before this. That fits my laid off scenario.

They're not being foreclosed becaus the home's value went down, they're getting foreclosed because they couldn't pay what they originally agreed to when it was worth 800K.

That's not entirely true. If they had an ARM or a balloon in a normal economy they could refinance the house as millions before them have done. It's because of the drop in the value of their home and the tight credit that they are not able to refinance.

We don't know all the details of this case and there may be no way out of it but to foreclose, which means tax payers will likely and ultimately take the loss. However, there are other cases where with refinancing and/or a mark down the family can keep their home and at no more cost to tax payers than a foreclosure. Wouldn't you agree that's a better outcome?

If he was a partne... (Below threshold)
Mac Lorry:
If he was a partner in a law firm he could likely afford the mortgage.

Maybe, but law firms only make big money when they are winning cases or working for a large client. Even being a partners in law firms is no guarantee of steady income.

Also, if Mr. got laid off they WOULD have included it in the story.

Why? They didn't say anything about Mr. Garcia in the story.

If Mr. got laid off he would collect unemployment for spell to either find another job or readjust his lifestyle to meet his expenses.

Unemployment benefits max out at about $600 per week depending on the state. That's only a fraction of the salary someone living in an $800,000 house likely makes when they are working.

Nobody is forced out of their homes unless they fail to act. Sell the house and downsize. Accept that you made a bad investment. Accept that life isn't fair.

People get forced out due to lay off, injury or illness all the time. The difference now is that the value of their homes has dropped. You can't sell a house without paying off the mortgage. If you owe $800,000 and the house is only worth $675,000 you have to come up with the other $125,000 plus the realtor's commission just to sell the house. If you don't have the money to lose you are forced into foreclosure and your credit takes a hit, which prevents you from getting a mortgage on a house you could otherwise afford.

So, she bought a house that was unrealistically value AND that she can't afford.

Maybe she and her husband did and so it goes into foreclosure. If it's a government guaranteed loan (VA, FHA) or if the mortgage is held by a bank the government has or will bailout, that means tax payers will take the hit for the difference between what's owed and what the house can be sold for. We may already be screwed in this particular case, but there are other cases where the government can intervene at little additional cost to the tax payer. Keeping such homes off the market is a benefit to the public in many ways.

If you bought a car that was worth more than it was worth and you couldn't sell it for that value to break even, should I feel sorry for you?

No, but if the government guaranteed the loan or bailed out the bank that holds the loan than my defaulting will cost tax payers money. That you should care about.

And if what she and her daughter really do learn is Big Daddy Gov't will pick her up and dust her off our country and society will be in really bad shape.

It was Big Daddy Gov't who's to blame, at least in part, for the mess Minta Garcia finds herself in. The goal is not to punish people like her, but to minimize the cost to the tax payer. It serves no one's financial interest to allow foreclosures if there's a way to let such people stay in their homes.

Mac, I see your economic an... (Below threshold)
epador:

Mac, I see your economic analysis in the short run. I still find it hard to swallow subsidizing these people.

I am in a home currently valued at about the mortgage and taxes due. Its been on the market as part of my divorce settlement for 1 1/2 years. My ex did not make serious efforts to cooperate with the realtor until she moved out (right before the bubble burst). I had to spend 6 weeks repainting, cleaning, repairing the place to make it marketable. The gutters hadn't even been cleared out for 18 months. At any rate, I can afford the house, but its twice the size I need. My ex is supposed to get one half the "profits" of selling the house (which she needs to continue with her education plans). I want to move to a better job situation, but I won't be able to pay for this house and even rent a new small place in some other locale.

Despite the fix we're all in (and assigning no blame), I have no intention of asking anyone for financial assistance. We'll take these problems and deal with them. Just as the folks who gambled on a big house with a sub-prime mortgage who got nailed a few years into the mortgage when the payments rose and the house value didn't. The only folks who deserve any taxpayer support to stay in their homes are the ones living in their first modest home that they really expected to be able to afford and due to job loss are in a pinch. I don't see how this family in an $800,000 home (that amount of money could easily house 4-5 families in what they might consider luxury compared to their rent-controlled apartments) can garner any sympathy from me or the average voter.

During the hard times in th... (Below threshold)
epador:

During the hard times in the past, it was not uncommon for folks in a large house to take on boarders to help make ends meet. Let the bus driver rent out a room or two in her large home to help make the mortgage payments.

You've got a lot of "ifs" t... (Below threshold)
lunacy:

You've got a lot of "ifs" there Mac.

IF Mrs. Garcia rents a room out...

IF Mrs. Garcia has an expensive car she can get rid of in lieu of a reliable clunker...

IF she ditches her cell phones, salon nails and HBO...

IF she gets another job or encourages her daughter to augment the family income...

IF she could eat more beans and rice...

maybe she could honestly keep her house until the value exceeds or evens out with her promissory.

These are all things people used to do to afford the things they wanted or needed.

These are things I have done to afford what I wanted or needed.

I was single mother, going to college, buying a foreclosure, renting out 2 rooms, working nights and weekends, tutoring on the side, raking leaves and mowing grass when I could, eating beans and rice, riding my bike to school or driving an old piece of shit that got good gas mileage.

If that was good enough for me and my young son, why isn't it good enough for Mrs. Garcia?

IF she can't manage to do any of these things she can always declare bankruptcy like millions of other people have who found themselves in bad situations.

IF bankruptcy is good enough for all those people why isn't it acceptable for Mrs. Garcia?

See, that's the problem we all have with this idea of propping up failed homeowners. There ARE remedies and alternatives. Remedies and alternatives that have been perfectly acceptable and workable remedies for millions of people throughout history and across the free world.

So why the hell, all of a sudden, should Mrs. Garcia get a break when the rest of us didn't?

AND worse, WHY should she get a break AT MY expense? I already paid my fncking dues. I still am!!!

L

Here, here Epador. I see we... (Below threshold)
lunacy:

Here, here Epador. I see we posted at nearly the same time.

What you say meshes with what I was thinking before I hit "submit".

I DON'T live in a house like the Garcia's. You could probably fit 3 or 4 of my homes in the Garcia's house. I live in a nice but modest (old and small) bungalow in a modest neighborhood. Small bedrooms, small closets, small kitchen, no central air (in the south). I added on recently but me, my husband, my son and my father did ALL THE WORK, from the foundation up and everything in between. We paid for materials as we went so as to avoid debt, which put us living in the living room for a spell and eating from a Foreman Grill. Increased the master bedroom and the kitchen. NOW, I have room for a washer and drier. Before the remodel I went to the laundry mat. For YEARS I went to the laundry mat. This summer or fall I hope to add central air. I don't want to go in debt for it though and the process will disrupt the household for a time. AND I'm debating whether my husband and I can manage the duct work ourselves to save money.

So, REALLY, why on Earth should I subsidize Mrs. Garcia's 3 and half baths that she can't afford when I only have one and half that I can afford?

From here comes a st... (Below threshold)
lunacy:


From here comes a story about how to buy a house.

http://tinyurl.com/df5sgf

------------------------
The upside of the foreclosure "crisis"
A quick anecdotal observation:

I am in the mortgage business. Yesterday, I met with a 42-year old single mother. She is raising 2 teenagers in a crappy studio apartment in a crappy neighborhood.

She makes just over $25,000 a year. According to the government, she is officially in "poverty".

She does not have an X-box, plasma screen TV, or microwave oven.

She DOES have (and pays for) health insurance for her and her children.

She is a LEGAL immigrant from Mexico who entered our country legally, assimalated, learned English, and became a US citizen.

She drives a 1996 Toyota Corolla.

She has paid every bill on time and has perfect credit.

Somehow, she saved $8,000...$25 here, $50 there...

This weekend she bought a cute little foreclosed home for herself and her two children. Purchase price? $145,000.

The home was purchased by the previous owners for $409,000.

How come we never ever hear these stories in the MSM? This woman is a true American and I bet the kids are well-behaved and doing well in school...
---------------------

Why should her taxes go to bail out Mrs. Garcia?

lunacy,Yo... (Below threshold)
Mac Lorry:

lunacy,

You've got a lot of "ifs" there Mac.

Yes, neither you nor I know enough about Minta Garcia and her husband to make specific arguments about that case. Thus, it's more a general discussion.

The point you seem to be missing is that taxpayers are already in this if the mortgage was guaranteed by the government through the VA or the FHA. Same is true if the mortgage holder has been or will be bailed out by the government. When an underwater mortgage, like the Garcia's have, is foreclosed taxpayers take the loss. That's you and me, like it or not we are already on the hook for this.

So why the hell, all of a sudden, should Mrs. Garcia get a break when the rest of us didn't?

I want to save taxpayers money rather than punish people. It seems you want to punish people rather than save taxpayers money. I want to prevent unnecessary foreclosures in order to keep all our home values from dropping even more and to keep our neighborhoods safe for families. You seem happy to let it all go to hell because you think you've paid your dues. As a veteran I'm here to tell you that you haven't paid your dues until you've put your very life on the line for this nation. Get over it and have some compassion for your neighbors.

Jesus, Mac. The veteran ca... (Below threshold)
Tim:

Jesus, Mac. The veteran card? I'm a vet. I have NO sympathy for this woman who admits she BOUGHT ABOVE HER MEANS. I don't want to punish her. I also do not want to reward her for her foolish choices. What lesson does that teach? Is she going to make better choices down the road if she knows they don't have consequences? Will I have to pay for those mistakes, too?

Mac, I see your ec... (Below threshold)
Mac Lorry:
Mac, I see your economic analysis in the short run. I still find it hard to swallow subsidizing these people.

Thing is, we most likely are already on the hook. When an underwater mortgage is foreclosed it's the taxpayers who ultimately take the loss. For the long-term, laws need to be changed to prevent a repeat. Problems with that is we had laws on the books from the depression era that would have prevented much of this mess, but they were repealed by 2003. As time goes by people will once again forget the hard lessons of this time and then repeat the mistakes. For now we should work to minimize the public cost and damage of the housing bubble's bursting.

Jesus, Mac. The ve... (Below threshold)
Mac Lorry:
Jesus, Mac. The veteran card? I'm a vet.

Yes, it was a bit over the top, but the "single mom" card was being played to justify imposing suffering on others even when doing so costs taxpayers money.

I have NO sympathy for this woman who admits she BOUGHT ABOVE HER MEANS.

You don't need sympathy, only the desire to minimize the costs to taxpayers. I've explained how that works in many posts above. And we don't know if there's anyway to prevent the foreclosure in the specific case cited because we don't know what the husband does.

I also do not want to reward her for her foolish choices.

Nor do I, but neither do I want to spend taxpayers money just to teach her a lesson.

if she knows they don't have consequences? Will I have to pay for those mistakes, too?

We need to change laws so that we don't get into this fix again.

FY, Mac. You may be a vet b... (Below threshold)
lunacy:

FY, Mac. You may be a vet but you don't know my life's story.

"Get over it and have some compassion for your neighbors."

And FY for this one too. I DO have compassion for my neighbors.

But
A. Compassion doesn't require me to carry them.

B. You could argue, in fact, that compassion would expect that I allow her to learn to carry herself.

C. Where's your compassion for those of us who think our neighbors should carry their own weight as best they can?

D. Where's your compassion for those who want to buy homes in a realistic marketplace?

My compassion rests with the lady who saved 8,000 to buy a 145,000 home. And I have little for the dumbass who paid 400,000 for that same home.

Let the market drop to what it ought to be. Maybe more families will be able to afford reasonable, realistically priced housing within their means, like the single mother in the story above.

Is your big issue with this is that maybe you are one of those people that paid too much for their home? If so I'm sorry, but hey, when you think about bailing out my mutual fund I'll think about bailing out your mortgage.

Best argument thread I've e... (Below threshold)
Bruce Henry:

Best argument thread I've ever read on Wizbang. Lunacy, epador, and especially Mac Lorry: you guys are good.

FY, Mac. You may b... (Below threshold)
Mac Lorry:
FY, Mac. You may be a vet but you don't know my life's story.

Nothing you have been through in your life justifies your attitude or your foul language.

Compassion doesn't require me to carry them.

Yet single moms benefit from head of household status on their income taxes. Not only do they pay less taxes, they even qualify for earned income credit. Single moms take advantage of every tax break they can, all paid for by others who have compassion on single moms like you were.

You could argue, in fact, that compassion would expect that I allow her to learn to carry herself.

An you could apply that to your own situation when you were a single mom.

Where's your compassion for those of us who think our neighbors should carry their own weight as best they can?

When the income tax code is changed to treat all people the same regardless of their age, disability, marital status, and the number of kids they have then you might have a point. Until then it's simply uninformed.

Where's your compassion for those who want to buy homes in a realistic marketplace?

People are doing that now. There are some real bargains out their.

Is your big issue with this is that maybe you are one of those people that paid too much for their home?

Not at all. I could pay off ALL my debt today with just what's in my checking account. Not going to do that simply because of cash flow issues and various tax advantages. My reason in this is to save taxpayers money; mostly for taxpayers like me who carry much of the burden for single moms and others. Every foreclosure of a government guaranteed loan or one issued by a bailed out bank costs taxpayers money. Every neighborhood with lots of foreclosed homes is at risk for increased crime from gangs going around stripping them of recyclable materials. Sometimes these high-on-drugs criminals mistakenly enter an occupied home. Is that the kind of neighborhood you want to live in? You should at least have compassion on single moms who find themselves in such neighborhoods through no fault of their own.

If so I'm sorry, but hey, when you think about bailing out my mutual fund I'll think about bailing out your mortgage.

I saw this coming and got out of stocks and into bonds before the downturn. I actually made money in my 401(k) last year.

Look Mac, I don't have a pr... (Below threshold)
lunacy:

Look Mac, I don't have a problem with people going through hard times. That's why I put the caveat "as best we can" (our neighbors should carry their own weight as best they can).

And we can continue to talk about my personal situation or your own. As for me, I don't recall ever earning enough "over the counter" to file taxes while I was in school and so I don't remember getting earned income credit. Maybe I did. That was a very long time ago. I remember putting my son on the free lunch program when I got my first teaching job. Funny that, my teacher's salary was low enough to qualify for free lunches. But that is the only time I asked for assistance from the state. Other times I've waited tables at seedy clubs and earned a lot of money in tips which I did not report. So, yeah, you could say I cheated the state. Didn't seem like it at the time though, me being dirt poor and all.

I understand sometimes people do need more. I understand "down on your luck".

But this entire argument was based on a specific scenario: A lady who bought above her means.

I don't think there should be gov't policy to bail out people who want to live beyond their means. I don't think people who live beyond their means are a good investment. It seems to me that they'll be likely to repeat the mistake. Especially since they have little incentive not to. Stats seem to indicate that defaulters will repeat. And I bet they bail on other bills too.

You haven't convinced me that the taxpayers will be out more money by letting Mrs. Garcia foreclose and the bank reselling than by the gov't subsidizing Mrs. Garcia's refinancing. You may be right. But I'm not convinced at this point.

Most disturbing in this conversation is that you seem convinced she (and others like her) will foreclose. As if that is a foregone conclusion. I think there are alternatives. I mentioned a few; solutions that were once common and without shame. Sadly, we as a society have decided that we are above those solutions. More's the pity in that. It has made us weak.

Perhaps if we helped Mrs. Garcia and others like her to muster the resolve to keep her house through her own efforts we would all be better off including her.

And if she can't then who's to say she will be able to pay when she is rescued to a lower mortgage rate? As I mentioned above, it sounded to me like even the value of the house today is more than she can afford. If that's the case than there is no point intervening for her. She simply has too much house for her pocketbook. Will we continue to intervene for her when she can't pay in the future?

The only foregone conclusion I can make out of this mess is that if our gov't encourages people like Mrs. Garcia to NOT find ways to pay their bills than we will be creating more of the same.

In fact, I wouldn't be surprised if people didn't deliberately start defaulting on their mortgages because they think the gov't will help them get a better deal.

I meant to say that we obvi... (Below threshold)
lunacy:

I meant to say that we obviously are never going to agree on this.

I'm not convinced that our tax burden will be worse. You could be right but you haven't persuaded me.

And I have to admit that I'm a bit over exposed to abuse of the system in my current job. I recently got assigned as a project manager to a health care grant with the local housing board. Old folks and preventive medicine. Good idea if it works. The old folks are great. THEY deserve a break.

But the waste, corruption and foul priorities of the housing board and their staff is appalling. It is only surpassed by a vast number of the younger residents. I have a hard time working for this organization. If ever there was an argument against government waste it would be this organization.

And the young folk who make use of the housing board, lordy. I'm sure it's not all but by my observation it is a huge majority who simply ravage the system and return nothing. They have no intention of producing anything except more users of the system. Their kids have the same mentality. Many will literally expect you to give them something because they happen to see you with one. So many gimmes. You cannot walk past them with, say, a coke or chewing a piece of gum without the gimmes. And these children aren't doing without material goods. They are well dressed, well nourished. They do without mother's attention though. Very young children out on their own in the yard for very long periods of time. Mom doesn't work so why doesn't she supervise them? Interact with them? Baby daddy doesn't likely work either. He lives there but off the record. I can't count the number of times I want to jackslap those young ladies for walking 5 or 10 steps in front of their toddlers, through a parking lot or across the street while talking on the cell phone. No hand holding in traffic. Not even watching to see that the child hasn't fallen down. What is she doing with a cell phone anyway?

And yeah, we built that society with our handouts. We made it too easy to become a taker. We made it too easy to stay a taker. It's sad, really.

We should be moving away from creating takers, users and abusers.

lunacy, B... (Below threshold)
Mac Lorry:

lunacy,

But this entire argument was based on a specific scenario: A lady who bought above her means.

An I have stated we don't know enough specifics to make that determination. And no, I'm not saying we should rescue homeowners who are in way over their heads and facing foreclose. What I am saying is we should rescue those who can afford their home with a better interest rate and/or a mark down to market price. That costs taxpayers nothing more than letting it go into foreclosure would cost.

And I have to admit that I'm a bit over exposed to abuse of the system in my current job.

That and what followed explains a lot. I agree with much of your sentiment concerning those who have made a career of being on welfare. Where we part ways is when working people get into financial problems because they believed the hype some banker was telling them and expected the housing market to continue it's upward trend.

Had the housing bubble not burst, Minta Garcia and her husband could have sold their $800,000 home for maybe $950,000 depending on the location and how long they owned it. They could have walked away with their credit intact and maybe enough for a down payment on a smaller home. As it is they will walk away with nothing and a bad credit rating that will prevent them form getting any mortgage for the next sever years even if they have a large down payment and want a home they could readily afford. Their banker gets all his money back at taxpayers expense and no black mark against his name. If nothing else, bankers who issued such mortgages should face a similar seven years out of the mortgage business.

You are exactly right about... (Below threshold)
lunacy:

You are exactly right about where we part ways.

Mrs. Minta and her husband made a foolish mistake. Normally people experience consequences for making such a mistake. No one held a gun to their head and made them sign the paper work.


Had they sold their house, in your whatif scenario, they'd really being passing their mistake on to someone else equally as foolish who would likely get buyer's remorse when his or her value became far less than their pay out.

I agree with you that bankers should suffer consequences also. Maybe moreso.

But I still feel that in the long run it will be good if the housing market settles into a more realistic valuation scheme. And if people learn from this era and put more effort into saving and less effort into credit, and above all, live within their means.

So, there. I'm done.

Mrs. Minta and her... (Below threshold)
Mac Lorry:
Mrs. Minta and her husband made a foolish mistake. Normally people experience consequences for making such a mistake.

Yes it was foolish to believe what the professional's were telling them and foolish not being astute enough to predict the economic crises. That's the same foolish mistakes millions made in their retirement accounts. Minta and her husband will experience consequences, both the loss of their home and the hit to their credit score that will prevent them from getting any mortgage for seven years. By your own standard the loss in your mutual fund was the result of your own foolish mistakes.

Had they sold their house, in your whatif scenario, they'd really being passing their mistake on to someone else equally as foolish who would likely get buyer's remorse when his or her value became far less than their pay out.

Everyone who purchased a home in the last 3 years likely has buyer's remorse as they see the value of their home drop, but most of those who can afford their home don't allow it to go into foreclosure. It may be hard for you to believe, but there are people who can afford an $800,000 mortgage.

But I still feel that in the long run it will be good if the housing market settles into a more realistic valuation scheme.

It will regardless of the plan to help those facing foreclosure. The cause of the bubble was the subprime mortgage and without them the housing market will continue to decline, like past where it was 10 and maybe even 15 years ago.

I bought a house I could af... (Below threshold)
Timothy:

I bought a house I could afford. A simple $100,000 mortgage. It is an easy mortgage to pay... in a good economy. Still, I have never missed a payment.

In October I lost my job, and now I can't find work. (Everybody gives jobs to friends and family members around here.) Another person in the household is working 40-70 hours a week retail just to pay the bills, until things turn around.It is excruciating for them.

Meanwhile, the value of my home has dropped by 60%. So, what are people like me supposed to do? Just be utterly indentured? Angry? Constantly worry about becoming homeless?

What I ask is: Are we just going to deny the program entirely because we're afraid of irresponsible people cheating the system? Well, I certainly don't want that, either. But we're focusing on the negative side. And there can be rules made to control this, I think.

We just need some help. I will need it to keep this meager home, if no jobs can be found. Like many in my position, I'm struggling every month, one at a time. Wages are stagnant, jobs are lost... but mortgage and insurance keep going up... while houses' value drops. It's ridiculous.

What offends me most, I suppose, is the prospect that I might be lumped in with financially irresponsible people like the one described in the article. It has happened already... people always blame the individual in this culture. "Should have worked harder" "should have planned for the future" etc. Well, such anti-rhetoric ...it is getting old. And it's not true of many, not at all.

Timothy,The mortga... (Below threshold)
Mac Lorry:

Timothy,

The mortgage bailout is intended to help people like you. People who are in difficulty because of the twin problems of unemployment and dropping home prices. Unfortunately, it's up to you to aggressively go after the help you need while there's still money available to help you.

I would start by contacting the offices of both your federal and state senators and representatives to get the information you need to start the process. Bureaucrats may try to turn you away as that's the easiest solution for them, but don't accept "NO" for an answer. Sadly, but true, it's the squeaky constituent who gets the money.

Here's the thing. I'm will... (Below threshold)
My thoughts:

Here's the thing. I'm willing to help Minta Garcia -- PROVIDED she's also willing to help out this country and do what's right. So let's assume that the mansion (and I consider a 800,000 house a mansion) is 6,000 square feet. Most people would agree that a family of four only needs 1,000 square feet. So I think the government should allow her to designate 5,000 square feet of her home as "Section Eight Property" so that she could accept government vouchers and allow homeless and unemployed people receiving housing assistance to live with her. That would cover her mortgage (800 dollars per family times five families) and allow her to experience the feeling of giving back to her community -- just as We would do if we paid her mortgage. Why should we have all the joy of paying into the system? Minta could do her part, and it would really broaden her children's horizons (they're probably pretty pampered, living in a mansion and all) to be exposed to homeless men and women, those recovering from drug abuse and alcoholism and so forth. Her American dream could include being a helping, contributing member of American society -- and it could provide assistance with getting the homeless off the street. On a cold day in the Washington suburbs, I'm sure Minta must lie awake at night worrying about these people -- and now she'll have an opportunity to help. It warms my heart just thinking of it. Go, Minta!@




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