These are the 5 most recent foreclosure notices in my area--may or may not be a representative sample but interesting to look at in light of John McCain's proposal to buy up all the troubled mortgages and adjust the terms so that the homeowners could afford them.

In the first two cases, it looks like the homeowners did cash out refinances and can no longer afford the payments. The first one borrowed 400k more than the original purchase, the second one 300k. Do you want the government to reduce the principal amount owed on those loans so they can afford them?

In the last two cases, the loans are at 5.75% and 4.625%. If they can't afford the payments at those rates, what could they afford? Zero interest loans maybe? Who thinks the government should be subsidizing housing for people who bought more house than they could afford? What kind of conservative would propose a program like this?

11035 Briarlynn Court, Fairfax Station, VA 22039
Purchased 10/98 for $725k, mortgage balance 1.125M at 6.875%

12502 Old Yates Ford Road, Clifton, VA 20124
Purchased 01/2000 for $312k, mortgage balance 608k at 6.75%

9105 Forest Shadow Way Fairfax Station, VA
Purchased 8/04 for 759k, mortgage balance 590k

9401 LARKDALE TERRACE Fairfax Station, VA 22039
Purchased 01/05 for 835k, mortgage balance 675k at 5.75%

6856 Compton Heights Circle, Clifton, VA 20124
Purchased 7/01 for 400k, mortgage balance 283k @ 4.625%

Well certainly a lot of people will still fail due to job loss etc, however the ARM is what will hurt many others. Lock the rates for a few years; I'd be for that.

It looks like the person on Compton Heights must have had a bad circumstance, like high medical bills, a divorce or a death in the family. That one is kind of sad.

The rest, though, you are right. People used their homes as piggy banks and got caught not being able to pay back the debt.

Regarding locking the ARMs, that doesn't help the situation. Yes, people might be able to stay in their homes. The problem is, the lenders have all calculated the adjustments into their balance sheets. If they don't get the adjustments, their debt will balloon even more, which will just fuel the crisis.

Something has to be done. But McCain's plan is socialism. Not only that, it is selective socialism. Who gets the help and who doesn't? I've been responsible. I have about $150K in home equity. However, a few years ago I had $350K. Is John McCain going to give me that $350K? Or is he just going to bailout out the people next to me who bought at the top of the market and now can't make the payments?

McCain changed his plan on Wednesday morning. McCain now wants the Fed to pay full price for mortgages and real estate.

I really do think he smokes cracks.

And then renegotiate the mortgage with them at the lower rate. Yes, the Fed has now become the bank of last resort.

Funny to hear you folks here suddenly down on the fruition of socialism in your time. You should be happy, because this is what it brings about.

WashingToneLocian Wrote:
-------------------------------------------------------
> The rest, though, you are right. People used their
> homes as piggy banks and got caught not being able
> to pay back the debt.
>
> Regarding locking the ARMs, that doesn't help the
> situation. Yes, people might be able to stay in
> their homes. The problem is, the lenders have all
> calculated the adjustments into their balance
> sheets. If they don't get the adjustments, their
> debt will balloon even more, which will just fuel
> the crisis.

This is why I have advocated a solution that is not as expensive as what any candidate is proposing and is fair to both responsible and irresponsible (sorry, "victimized") Americans. Give a tax credit up to $6,000 for closing costs to any homeowner that refinances their loan to a current market 30-year fixed rate. If teaser rates are killing people otherwise able to afford a home loan, this is a low-cost way of getting a fixed-rate loan and keeping the house. If you are a responsible American and can benefit from rates today that may be lower than what you are paying, you can benefit too and slide into a re-amortized 30-year loan at a lower rate with your closing costs more or less covered. If you can't refinance at a fixed rate and still afford the loan, then you couldn't afford the house anyway and those can proceed to foreclosure.

Any proposal that lowers principal for people who couldn't afford houses they are in is extremely offensive to those of us that bought within our means. Allowing people to keep bigger houses than they could afford is the government condoning theft (yes, theft, possessing property you could never afford that wasn't a gift) and discouraging responsible financing.



Edited 1 time(s). Last edit at 10/09/2008 12:29PM by pgens.

Pgens, the problem is that the folks can't even afford the house at the current rate. And if they vacate the house, it adds to the problem. While I don't like it either, the result if you don't do something to stabilize home prices is even worse. Many of our jurisdictions base their taxes on assessments - if they drop 50% overnight, then you will see more than just a wave of lay-offs... it will keep going.

Remember one of the ways they got out of the Great Depression was by buying up all the property (the Fed did) and then later reselling it at a profit.

Unfortunately we are all in this mess, good or bad, and while we may want it to go away, we can either pay now while we still have stability, or wait and see just how bad it really can get. I am conservative but it scares the crap out of me thinking what will happen if the bottom falls out. During the S&L crisis I knew a lot of folks who lost everything, and they didn't do anything wrong - but entire communities were affected, maybe not at first as they watched banks fold up, but later when people stopped spending money you saw all the other businesses fold up too. They have to stop the bleeding somehow - maybe this will work, maybe not. The amount of money tied up in this mess dwarfs the S&L crisis by magnitudes - and unfortunately the Commercial banks in this country are the money creation engine. Just this time they created it so much of it out of thin air, we really don't know where the air stops and reality begins.

It is a bit short-sighted to think just because some of us are ok in our homes and mortgages that the problems all these other folks face will not ultimately hurt everyone - that is one of the biggest lessons they learned from the GD.



Edited 1 time(s). Last edit at 10/09/2008 12:45PM by Registered Voter.

You cannot stabilize home prices at above market values. They will eventually settle in at fair market prices no matter what the government does. McCain's plan may even make the problem worse.

So better they do nothing then?

Any plan may make the problem worse, but one thing for sure, the more people out of their homes means more homes on the market. That is for sure a bad thing right now, no matter who holds the paper. It is better for folks to stay in and pay some kind of mortgage then to make it one more problem. I don't like it either, but I can see where it leads if you just keep letting it happen.

If you think the feds buying properties is a smart way to go then fine, but have them buy up already-processed foreclosures that are bank sales and NOT mortgages of people who should be foreclosing. The feds can then offer 5% above asking price for any property on the market over 30 days, which will prop up the housing prices in the neighborhood. That will get properties off the streets and support higher housing prices.

In that scenario housing prices are supported and adequate consequences for irresponsibility are still there.

By the way, current conditions in our area are not as bad as in other areas. Over the last couple of months in the worst-hit areas of the "Ring of Fire" (Manassas to Herndon) many houses are getting their (albeit reduced) asking prices and selling within a week. Speculators that caused problems before are now starting to feel a nearing bottom in prices and are snapping them up.

Second edit: McCain's plan ISN'T NEW. Treasury ALREADY HAS the obscene authority to REDUCE PRINCIPAL on loans with the new bailout bill. It is bad enough ANY candidate would support such an absurd and unfair practice, but to be ignorant that such a facility is ALREADY THERE just shows ignorance. I thought McCain was "at the table" deep in the negotiations of this? Why does he not know this?



Edited 2 time(s). Last edit at 10/09/2008 01:02PM by pgens.

He already acknowledged the authority was there, he just wanted them to focus on that, rather than helping out the banks themselves. If they buy the paper from the banks, it makes the banks better, but the homeowners still lose. By focusing on the homeowners it is an attempt to help the folks at the bottom rather than the lenders.

It was just a way to focus directly on the problem folks, rather than have the Fed also buy up all the other loans backed by stocks.

Also as a note, the idea is to not put any MORE houses into the foreclosure market. Arguably you will probably lose less money renegotiating with the current homeowner, then all the attendant costs to allow them to go into foreclosure.

We are already hearing that sales are up in some communities - and it is not consumers buying the homes, it is the new breed of speculators already trying to profit off of it. That is something else they are trying to stop. It is almost like the whole issue with breast implants using silicone. The doctors put them in, and then when the whole issue came up from contamination those same doctors charged folks again to remove and replace them.

Registered Voter Wrote:
-------------------------------------------------------
> Also as a note, the idea is to not put any MORE
> houses into the foreclosure market. Arguably you
> will probably lose less money renegotiating with
> the current homeowner, then all the attendant
> costs to allow them to go into foreclosure.

"Arguably probably lose less money" does not sway my opinion that those who couldn't afford houses should not benefit from their "mistakes" any more than "Wall Street CEOs" should benefit from taxpayer bailouts. It's still theft and wrongdoing, just at opposite ends of the root cause.

People can renegotiate to a 40yr/50yr loan. Time is what's needed for the recovery and they can get out. RV, Socialism isn't "evil" in as much as capitalism isn't "evil". They each have their strengths and weakness. More then likely it would be beneficial to pull the best of both.

Wow.. 50 years.

Only way to keep housing prices "up". I forsee multigenerational families buying a house (you pass your mortgage on to your kids). Either that or a huge readjustment of the housing market or wages (lol @ the latter). My parents in 1980 purchased a house for 50k in the DC metro area. She was making 40k at the time. 2 yrs ago, that same house was 450k. Had she continued working, she'd probably would be at 120k (at best). Wages haven't kept up; Something's got to give.

Introducing a longer mortgage term is probably one of the better ways to deal with this. That way people can afford to stay in their homes with a lower payment and try to build up enough equity to one day come out ahead. If you lower the principle balance of the loan then you've enabled people to sell who might otherwise hang tight for a while.

Yeah, if they offer that I would be ok with that - just not sure whether that versus a lowered interest rate makes more sense. Why not renegotiate with the same principal at 30 years and offer a rate of 3%? Of course, no one would ever refinance unless they moved..

Can I have a 3% rate too? As long as fraud or predatory lending wasn't involved I think the homeowner has to absorb the loss. Extending the loan doesn't compensate people for the losses it just enables them to stay in their homes by making the payments more manageable.

My ARM is scheduled to reset next week at LIBOR plus 450 basis points. Is this a competitive rate on a 50-year mortgage on a nice nest located in a tree next to a peanut factory? I paid $8.50 for it in 2005 with 0% down. My life expectancy is less than 10 years! I feel like the fox lender guy is pulling my tail.

Mr. Squirrel Wrote:
-------------------------------------------------------
> My ARM is scheduled to reset next week at LIBOR
> plus 450 basis points. Is this a competitive rate
> on a 50-year mortgage on a nice nest located in a
> tree next to a peanut factory? I paid $8.50 for
> it in 2005 with 0% down. My life expectancy is
> less than 10 years! I feel like the fox lender
> guy is pulling my tail.

All lies! You probably have four or five places in several trees. All squirrels think about are themselves. You want us to give you free ACORNS now? No way!

While us birds are barely getting by saving every seed your jumping from feeder to feeder eating as much as you want. Shame on you!

Registered Voter Wrote:
-------------------------------------------------------
> Yeah, if they offer that I would be ok with that -
> just not sure whether that versus a lowered
> interest rate makes more sense. Why not
> renegotiate with the same principal at 30 years
> and offer a rate of 3%? Of course, no one would
> ever refinance unless they moved..


I could actually stomach lower than 3% as long as principal is not reduced. We need to maintain a system where people have to pay back what they borrow and have severe consequences for not doing so.

The truth of the matter is no one...including Mr RV has any idea whether this rehashed proposal will do any good or not. All it is is an attempt by McSame to appear relevant...the calvary coming in to rescue us. In reality all it is is another example of his erratic behavior.



Edited 1 time(s). Last edit at 10/10/2008 10:15AM by Vince(1).

Nobody with a background in business, economics or finance seems to think McCain's plan makes any sense. It rewards the bad behavior of banks and homeowners who were too stupid or too crooked to own a home in the first place at the expense of the American taxpayers. It also does nothing to deal with the real problem, which is the bogus mortgage securities and the credit default swaps that are clogging up the global financial system.

You know, these same people with business backgrounds got us into this mess too.

The point is, they need to limit the damage at this point. If these other folks have a plan that makes sense lets hear it. It is great to criticize from the rear - let's see them all get together and put up a plan.

The bottom line is, letting more houses go onto the market only exacerbates the problem. The stock issue is a symptom of that due to the loss in value of the homes that backed all this crap up. Either stabilize the home values or let the whole lot of it fall into the shitter. And I guarantee you, the only ones that will come out of this are the rich people you all are so quick to criticize here. If you own a home with a decent mortgage but have no job, you will be in just a bad of shape as the guy that has a job but can't pay his mortgage...

So pick your poison I guess. Who cares who appears relevant or not. You all will sit and argue about right and wrong til the house burns down around your heads taking you with it. Show me that Obama has put forth ANY plan to deal with the issue that is different than what is already out there.

Registered Voter Wrote:
-------------------------------------------------------
> Show me that Obama
> has put forth ANY plan to deal with the issue that
> is different than what is already out there.

But the "McCain Plan" is already law. What good is promoting a plan he would push to implement if it was already signed into law a week prior to the debate? He might as well have said "I propose we have a standing army" or a cabinet position for labor issue. Already there.

Actually he put forward a more focused variation of the way it could be used - the original intent of the bill was more focused on the banks.

In any case, avoid the issue of Obama putting forth ANY plan. You want to fault McCain for at least emphasizing a plan. But if you are going to continue to just complain about him, you don't really get the problem. Looks like DOW < 8000 right around the corner.

McSame and the republican party = the problem.

Registered Voter Wrote:
-------------------------------------------------------
> Actually he put forward a more focused variation
> of the way it could be used - the original intent
> of the bill was more focused on the banks.

Perhaps the bill in general, but the specific ability to adjust Treasury-purchased mortgages once in hand is there. At that point the bank doesn't own the mortgage, you and I do.

Obama has to live with the current legislation, so in that sense he still inherits the plan.

What was discouraging during the last debate was the first question put to the candidates was what to do about the current economic troubles. McCain went on about energy and the cost of fuel on families. While a factor, it is much less so than it was a few months ago when everyone was gagging at $4+/gallon fuel costs. Now it's credit market freezing and the inability of companies to (theoretically) make payroll, though with all the talk of that I know of no one personally who has been laid off for that reason. That is probably due to our area of the country though. Oil prices have cratered and we'll be seeing under-3$ gas soon enough. While still high, focusing on that as what is killing average American families is incorrect. He should have said that with declining oil prices and their definite _dis_incentive moving forward for pursuing alternative energy sources that he would use the Peoples' money to make sure those efforts don't go away because of cheaper oil.

But what was discouraging is that I don't get the sense that either candidate has a true intellectual grasp of the current economic challenges or their root causes, and by no means am I saying one candidate is better than the other in that regard. My criticism of McCain here is specifically in putting forth "new ideas" during a national debate when those ideas were already signed into law. Someone who "suspended" his campaign to focus on the bailout bill should have had a clear understanding of what was in the eventual bill.



Edited 1 time(s). Last edit at 10/10/2008 10:00PM by pgens.