Bailing Out The American Dream
Several readers suggested possible bailouts as a topic. “I think this is going to be one angle that the politicians use to try to pass some type of FB bailout: ‘These are people who want to partake of the American dream, who have every right to, who really with a bit more work and a bit more financial planning could get there in a safe way, but who are lured - even seduced - by many of these lenders to go ahead and make this commitment too early, at a point before they’re ready,’ he said.”
A reply, “We can all agree there should be no bailout. There is still the question of who should bear the most brunt of the damage: 1. The ignoramus borrower who is blinded by stupidity. 2. The conniving lender who is plotting with stupidity.”
Another said, “GREAT topic. Include thoughts on likelihood, precedent, possible mechanisms for doing so, and probable ways of preventing such an event from occurring.”
One said, “Absolutely agree this is THE main concern for most of us. Will the FBs or lenders get bailed out, how and at whose expense (think we know the answer to that one)? The lenders (and our pension/mutual/bond funds?) should be the main ones who get hosed. They **KNEW** better, whereas the FBs are often just completely ignorant and stupid. The lenders preyed on the FBs.”
“Speculators (and those who purchased more than one home in the past few years) should also not get a single cent in a bailout. AND HOW CAN WE PREVENT IT?”
A reply, “We can’t. The same well-heeled folks who brought you this bubble can buy the influence on Capitol Hill to steal the money from Joe Soccer Mom needed to keep it going.”
Another had this, “Here are my criteria and thoughts: 1. No bail out for anyone. Whether you are lender or a borrower, you made your choice to lend or borrow, now deal with it. 2. If a loan was made to a borrower with insufficient income to meet the payments for a 30 year fixed interest version in that amount at that time, then the lender should be fined the amount of the loan. All monies collected go into the Social Security general fund. The borrower still has to deal with honoring the agreement.”
“3. If a borrower is found to have misrepresented their income on a no doc loan, then they are guilty of fraud and should be prosecuted for fraud.”
“4. If an appraisal value exceeded the comps for that house and then there was a cash back situation, then all of the ‘professionals’ and the borrower should be investigated for fraud. Agents, Lenders, Brokers, Appraisers, everyone.”
“I realize that much of what I list here is simply not going to happen, but by putting it down it makes me think about it and maybe engage in some dialog with others on the pros and cons of it all.”
The Denver Post. “For retirees Patrick and Marilou Foley, a mortgage carrying a low 2 percent interest rate seemed an answer to their prayers. After failing to sell their home, the couple wanted to refinance into a smaller mortgage payment so they could rent the home out. They also needed cash to deal with mounting medical bills.”
“‘They told us we were sitting on a gold mine,’ Marilou said of the brokers at an Arapahoe County mortgage broker that provided the couple with an Option Adjustable Rate Mortgage.”
“Despite its name, the Foleys said their new mortgage left them with limited options and put them on a path to foreclosure. Two months into the new loan, the minimum payment that they thought would be around $1,000 is closer to $2,074 when property taxes and mortgage insurance are added in.”
“Taking that minimum option will add more than $1,100 a month in unpaid interest back into their loan’s principal. Once unpaid principal grows to 115 percent of the loan amount, their payments will rise sharply. ‘It is going from bad to worse,’ Marilou said. ‘I can’t eat and I can’t sleep. I am desperate.’”
“A prepayment penalty on the Foleys’ loan means the couple can’t refinance within three years absent a hefty fee. And the cash they expected to receive never materialized. But Marilou isn’t staying idle. She is talking to the Arapahoe County district attorney and trying to organize other borrowers into a class-action lawsuit.”
“Consumers bite on the low ‘teaser’ rates, only to find themselves in over their heads, said Patricia McCoy, a law professor at the University of Connecticut in Hartford and an expert on predatory lending. ‘We are in this no-man’s land of outmoded disclosure laws that are really confusing,’ she said.”
“‘Negative amortization was never explained to me,’ said Marilou Foley, who added that she would have ripped up the loan papers if she had understood that a prepayment penalty had been slipped in.”
“‘To me, it is per se unsafe to give a senior an option ARM,’ law professor McCoy said. ‘They do not have the financial ability to weather that.’”
“Ferren Rajput defended the loan his company provided the Foleys, saying it is saving the couple $800 a month from their previous mortgage arrangement. The lower monthly payments provided by option ARMs can give people on fixed incomes more flexibility, not less, he said. Washington Mutual, one of the largest mortgage lenders in the country, calls option ARMs ‘the right loan for retirement,’ he said.”
NO BAILOUTS! Let the people take out their anger and pain on the culture of greed and ignorance we live in. I advocate the tarring an feathering of any politicians who try and bail stupid people out at my expense.
- Agreed
- She is talking to the Arapahoe County district attorney and trying to organize other borrowers into a class-action lawsuit.”
WTF! No one MADE her take out the loan!!!
You are painting with a very broad brush.
Sure, FBs include flippers like Sean Casey who knew what they were doing.
But other FBs were defrauded by shifty lenders. There have been numerous reported accounts of closing paperwork that differed radically from the good faith estimate, of borrowers who got a 30-year fixed only to find out that the lender repeatedly pushed paperwork for a negative-am, and even paperwork that changed from the version the buyer’s attorney reviewed.
I have no desire to see anyone who committed outright fraud get away with it–whether they are borrowers or lenders.
I agree Sold at Peak ,no question, get all those bastards that pulled sh-t like that , Im sure it happened .
Absolutely. My brother-in-law had papers drawn up that did not include the contigencies they had specifically requested. Supposedly KW reprimanded their agent. But I doubt it.
“‘Negative amortization was never explained to me,’ said Marilou Foley, who added that she would have ripped up the loan papers if she had understood that a prepayment penalty had been slipped in.”
I sincerely doubt that the broker removed the page that Foley had signed and replaced it with one where the Prepayment Penalty clause was checkmarked. Rather, I’m sure that Foley just signed this page without having read it, along with the dozens of other pages of purchase forms.
The stack of documents you have to sign to buy a house with a mortgage is indeed quite large. IMHO, if you don’t have the intellectual wherewithal to either read every word yourself, or hire a lawyer to do it for you, then you have no business buying the house!
I have no pity whatsoever for this lady and I hope her lawsuit goes nowhere. What kind of idiot buys a house without reading the loan docs???
I thought these Red State voters hated lawyers. I’ll bet they would even hold their nose and call in the ACLU if they could get their money back. Boy, oh boy, how the world has turned upside down.. As Shakespeare said “Bring on the Lawyers”
I think we need a counter class action lawsuit against any FB class action lawsuit for driving up the price of housing with fake money and lies.
I would love it if a law firm would attempt to file a class action suit on behalf of people who had their property taxes raised as a result of “comps” based on fradulent mortgages. The problem is that “Mortgage Moms” are too valuable a contingency to anger.
Who, exactly, would the claim be against?
One said, “Absolutely agree this is THE main concern for most of us. Will the FBs or lenders get bailed out, how and at whose expense (think we know the answer to that one)?
Whose expense indeed. Who really pays if the gov’t “bails out” any of these players? Not the taxpayer because he/she doesn’t cover the current gov’t spending now. Not in the future either. Why you ask? Because we owe 9 trillion now and climbing. Just to get to a balanced budget we’d have to eliminate spending/raise taxes about 600 BILLION a year. What would that do to jobs/economy? These deficits are obligations incurred prior to any bailout money spent and this deficit has almost no chance of being paid off regardless of any tax increase. Add in the outyear entitlement obligations and that amount gets into the 40 - 70 TRILLION dollar range, depending on whose numbers you are using. The country is technically bankrupt so any additional “money” spent just goes on top of the pile that isn’t going to get paid off regardless. Any bailout that does or doesn’t happen won’t make a wit of difference in the country’s fiscal outlook, imo, because the dollar can not survive the recklessness of past congresses even if they were inclined to stop spending. Former treasure sec. O’neil put out a report (made MSM for one day as I recall) shortly before he was shit-canned that outlined the steps necessary for the U.S. to put it’s fiscal house in order. None of them were even remotely attainable from the aspect of political survival and ALL of them would have had to have been implemented in order for the plan to work. I’m not for a bailout by any means but all we are doing is jockeying over possession of the staterooms on the titanic at this point.
The last Dukes of Hazard movie, someone was going to strip-mine Hazard County to get its coal but thanks to the Dukes, the good people of Hazard County voted the project down. What if foreign investors force the US Government to sell them the coal, the rights to mine it and the security force to allow the strip mining?
This thread seeks to define and limit the personal affects of the housing panic. Bloggers assume that the high standards of the United States of America will be preserved and that their rights and freedoms will be protected - maybe they will and maybe they won’t.
Peak oil is here, the United States of Amercia has the largest coal reserves in the world, maybe the foreign investors start to think about what they would like for the US debt that they hold and maybe they think about coal!
It now time to reduce the housing panic, to minimize the loses, to comfort the families who are caught in a financial vice, to develop programs then can help. The task is too much for me ( a Canadian). The bloggers here are well positioned to effect change - they have a good understanding of the American real estate market and moreover they are Americans.
God bless America!
“Here’s to the crazy ones, the misfits, the rebels, the trouble makers. The round pegs in the square holes, the ones who see things differently. They’re not fond of rules, and they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them, because they change things, they push the human race forward, and while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world are the ones who do.”
– Apple Computers, Think Different
“God bless America!”
Thank you for that sentiment — it is nice to hear from a Canadian. I think that most of Ben’s regular posters will agree that we (blush) have no power to reduce the panic that is about to ensue in the housing market. What is going to take place is, to me, similar to all those cycle-of-life scenes you see in the nature movies, like the old lion who wanders off to starve and be eaten. It’s going to happen, people are going to wail and moan, politicians are going to be outraged, and at the end of the day, people will pick themselves up, dust themselves off and get on with life, however changed it might be.
posted “Bailing Out The American Dream”
What’s the problem? The FED just bailed everybody out, that wanted government help and direction. The will not let people get loans they cannot pay them back! Simple and to the point. I bet that will solve the entier mess. I know for sure it will help current sellers get a good buyer and not some flake.
Personal I am glad the FED had the foresight to plan ahead to deal with the problem. Atleast before it got out of hand. I think this will really help the Banks and other lenders like Countrywide so they don’t get stuck with any bad loans. I know the loan brokers and agents will be happy too so they don’t have any bad marks on thier records.
Yep! it a win, win deal!
“Personal I am glad the FED had the foresight to plan ahead to deal with the problem. Atleast before it got out of hand. I think this will really help the Banks and other lenders like Countrywide so they don’t get stuck with any bad loans. I know the loan brokers and agents will be happy too so they don’t have any bad marks on thier records.
Yep! it a win, win deal! ”
————————–
I’d agree with this statement if the year was 2002. Unfortunately, nobody acted with “foresight” but rather a reactionary CYA. If they cared about the financial system, this mess wouldn’t have existed in the first place.
While it seems easy to assume they didn’t know WTF they were doing, I can’t imagine the leaders of our economy were ignorant to this whole thing. It’s why I’m fearful of what they might have planned. Some kind of currency “correction” tops my list. The difficult part is finding out what else would be safe.
CA renter posts “I’d agree with this statement if the year was 2002. Unfortunately, nobody acted with “foresight” but rather a reactionary CYA. If they cared about the financial system, this mess wouldn’t have existed in the first place.”
My comments were in jest. People will get the usual Government bail-out……. in 3 years they will come out and shoot the wounded. Then call it a job well done!
“They told us we were sitting on a gold mine,” Marilou said of the brokers at Altus Home Loans..
“In the documents are all the disclosures, but who reads all the disclosures?” Klaess said. “This is a license to steal.”
“Negative amortization was never explained to me,” said Marilou Foley, who added that she would have ripped up the loan papers if she had understood that a prepayment penalty had been slipped in.”
Neg Am was explained in the documents you signed, documents you failed to read before signing. But why read when you’re “sitting on a gold mine?”
I think they misunderstood the defintion of “mine”, it’s “a type of self-contained explosive device which is placed onto or into the ground, exploding when triggered by a vehicle, a person, or an animal. ” (wiki.)
“They told us we were sitting on a gold mine, Marilou said of the brokers at Altus Home Loans..”
If that were really the case did Marilou ever consider why they were cutting her such a great deal? FB’er born every minute!
Sounds to me like the broker fully disclosed what was going on, but the homeowner failed to perceive the obvious - that it was a gold mine for the brokers, not the owners.
Kinda reminds me of that saying…In every deal to ggod to be true, there is a sucker. If you don’t know who the sucker is it’s proably you!
Hey, Mary Lou, this sounds like a “he said” - “she said”…what lawyer is going to take your word for anything, when you signed your name to the paperwork. Do you think the loan officer might defend himself by telling the judge, I explained every thing
in detail. Maybe it’s time to tape all loan signings.
maybe they were talking about her ass?is there a pic?
posted ““They told us we were sitting on a gold mine,” Marilou said of the brokers at Altus Home Loans..”
You were sitting on a tubesteak, that got angry!
I know this is preaching to the choir, but damn, HOW do these people sign up for these things?
I realize that the average American knows next to nothing about math and finance — hell, I didn’t know all that much about them either until I went back for the MBA — but how much smarts does it take to sit with a calculator and put in “30 * 12 * [amount of monthly payment]“, look at that number, and if it is lower than the amount of money they are borrowing, know that something is WRONG with the loan?
It takes a lot of smarts. You have an MBA - you understand the math and the legal implications.
Now try it from the point of view of a high-school diploma, can’t multiply 15*17 and get the right answer, have trouble understanding a train schedule, have never read a supreme court decision, typical person.
That person is seriously screwed. Short of 10 years more education, 30 more points of IQ, and/or the life experience of seeing other people in their community going to debtors’ prison, they will make bad choices.
i don’t have an MBA, but like most folks, I can read and as an American consumer, I understand that if it sounds too good to be true it is. They signed the paperwork–if they didn’t read it, is it everyone else’s fault? They choose to believe they owned a “gold mine”–how is this my problem? Sure, if the loan broker practices fraud, the state AG should be onto him/her–but, presumably financing their house is their largest financial dealing–doesn’t common sense, not an MBA, dictate that they read the paperwork, and if they find it confusing, hire a real estate lawyer to review it for them? They say they are only 2 months into the loan–the media has been jumping all over the ARM story for months now–do they not even watch television? Sorry, these are not innocent lambs–they saw a chance to make easy money and their greed got in the way of their common sense. Too bad, but their foolish greed is just that–their problem. These are not youngsters, they’ve been around the block a few times..if you act like a sheep, you’re gonna get shorn.
I mostly agree with you: these people’s bad choices shouldn’t affect the rest of us.
Trouble is, they don’t have much at the end of the day: let them keep one car, $1000 if they have it, and $5000 worth of clothes, etc. Everything else goes to the bank.
Then, we go after the people who actually can pay: the realtors, banks, appraisers, etc.
They don’t read the paper work, and if they do, they ask the “helpful” man in the snazzy suit what it means.
When they buy a used car they know that the shifty guy in the bad suit is trying to con them.
When a stock broker is pushing some microcap, they know full well that it could blow up.
But, in most of their experience with banks etc, the person on the other end of the desk was generally pretty honest, and they of course assumed that it was regulated such that they can’t completely screw you.
WRRRRONG!
Frankly, in few people’s personal history and most of the modern cultural history of the USA, has ever getting a mortgage or buying a house been laden with such a wretched hive of scum and villainy.
“Frankly, in few people’s personal history and most of the modern cultural history of the USA, has ever getting a mortgage or buying a house been laden with such a wretched hive of scum and villainy.”
I do believe that we’ve added a talented writer to our rolls. Nice piece.
Exactly, Dr. Chaos.
“We must be cautious.”
Yea but the mortgage broker said this “The lower monthly payments provided by option ARMs can give people on fixed incomes more flexibility, not less…” That’s more flexibility in the short term and less in the long term (way way more long term than short). It’s all how you word it (sales).
But on the other hand, you have to be pretty naive to trust these sales people, ie., not know they are looking after thier own best interests not yours!
Buyer Beware!!
Oh please. I really don’t have alot of sympathy for these “poor innocent, ignorant people who got swindled by sleazy lenders”. The “innocents” took advantage of a ridiculous situation - just like the sleazy lenders. Since when are homes being given to people who can’t afford it (yet)? Sorry, but if you buy something on credit that is way beyond your means, you lose it. Period.
Used to be a mortgage lender would march you right out of the office if he/she thought you couldn’t pay off a mortgage (it happened to me in the early 90s). Of course, the consumer is going to believe the lenders want their money back; therefore, they would not make loans which the buyers couldn’t qualify for. Most people didn’t think of mortgage lenders as “salespeople”.
The rules changed and nobody told them.
What made me read and ask questions until I understood everything about my 2 mortgages was a compelling need to understand and control what happened to me and a total and complete belief that most were out to screw me over. Sometimes paranoia is a GOOD thing.
My business background really didn’t add that much to the process except maybe that’s where I realized it’s eat or be eaten!
Actually I was a buyer so I was trained to be relentless in my search for the hidden costs. It was more about mistrust though.
BAILOUT! This is the name of the game, since 1913.
Of course, we will ALL pay for it through inflation. This
is a no brainer. Just look at the recent history, and
especially the S&L bailout.
-Maha
I don’t understand how a bailout of individuals or even banks is possible, except for cutting interest rates and there are severe limits to how low interest rates can go and still have the dollar worth something. During the S&L crisis during Reagan’s terms, bank share holders lost all of their holdings, depositers got their money back up to the FDIC limits and the bank’s bottom line was fixed up enough so that remaining assets could be taken over by another financial institution. There’s no way that people being foreclosed can be bailed out any more than people losing money in the stock market can ask for refunds. In depression conditions, there may be rules to let people stay in the bank’s home for a while, but there is no way that people do not lose their ownership of a home during foreclosure.
Simple, the FED prints money and gives it to the FDIC,
who then gives it to the depositors or share holders.
Additionally, they can print money to buy shares of the
insolvent banks. This is how the risk banks take on is
passed on to the smoe on the street, and its been going
on forever. Read “The Creature from Jekyl Ilsand” for
more…
-Maha
Don’t give me that we were senior citizens and we DIDN’T know or understand Crap ! Greed know no age limit and they sure as Hell understood this part, “‘They told us we were sitting on a gold mine,’ Marilou said
I don’t doubt that a number of the mortgage scum agents slipped in pre-payment penalty loans that they didn’t disclose to the people . No body in their right mind would agree to something with a stiff penalty like those .
I think the pre-pay penalty was designed for the flipper that the lender wanted to penalize for only using the loan for a short time .In fact , the pre-payment penalty was originally designed to discourage short term speculators from taking loans they were only going to use for a short time ,while they got the benefit of the teaser rate and lower yields in the beginning years of a loan .
As far as the older couple is concerned ,my question would be why didn’t they lower the price in order to sell the house since that was the original intent . This might be another case of a FB who can’t accept the fact that they need to sell at a lower price .
If the older couple has medical bills they just might not be able to afford a house anymore . But in general ,adjustable arent good for people on fixed incomes unless their current income could cover the highest adjusted rate .
I am guessing the prepayment penalty might make the paper sell for more on the secondary market. Does anyone know whether this is the case?
Of course they sell for more in the secondary market Getstucco . Just think of how much of a yield the investor/lender is going to get on a 10k pre-payment penalty loan that gets paid off within the first two years .
I remember about 10 years ago the government was backing a first time buyer loan program . They put a pre-pay penalty on the low rate loan if you rented the property in the first 7 years . They put a pre-pay on the loans if you sold it in the first 7 years or even refinanced it . They had to do this to keep investors from trying to get the loans that were intented for true owner occupied first time buyers .
( Investors will put their kids , anybody on loans sometimes to try to get the loans that are intended for low income first time buyers at a reduced rate .)
That is absolutely the reason. The secondary market is guaranteed a certain return on their money and if the loan is paid too soon then they may actually lose because the secondary investors pay some transaction fees, etc. that wouldn’t be covered if the loan is paid too soon. Akin to an upfront load on a mutual fund, etc.
These prepayment clauses are similar to “yield maintenance” on the commercial lending side of the business. This would also have to do with opportunity costs. A pool of loans without prepayments would obviously sell for less than a pool of loans with prepayment penalties (with similar rates), especially in a falling rate economy.
The problem that a subprime lender faces is the following. There will be a lot of defaults, mostly 1 to 5 years in the future. To pay for those defaults, he collects a spread. An informed borrower (and I’m not denying that there may be plenty of other kinds) is willing to pay the spread because he has some sort of impaired credit (low FICO score, no down pay, whatever). Without a prepay penalty, anyone who’s credit improves over the next year or so will refinance, even with unchanged or slightly increased interest rates, in order to get out from under the high spread. So for the first year or two the holder of the risk gets the high spread and some risk, and after that all the good borrowers would disappear and stop paying the spread, and only the borrowres that stayed bad would remain. With a prepay penalty, the borrowers with improved circumstances are induced to stick around for 3 or 5 years, and continue to pay the spread.
BTW - the prepay penalty usually goes to the servicer, not the investor (why I don’t know). But investors are still willing to pay more for loans with prepay penalties, because the penalties make them prepay more slowly.
I did a refi in the mid-1990s. The night before the closing, the broker called me up and told me that they couldn’t give me the rate that we agreed to. It was just too difficult to do.
I just told her that was fine. We had gone through the paperwork and it would have been a pain to do it again but between when we started and the closing, I had contacted my credit union and found that they had a really odd instrument that would be better than the refi we were doing. It was either a five or seven year fixed with a balloon at the end. We planned to pay off in that time period anyways.
Mortgage Broker told me that she’d call her manager to see if she could get me the original rate.
I felt like I was buying a used car.
She said that they really wanted my potential repeat business in the future and would honor the original rate.
I imagine that this sort of thing is done to those buying houses too. If you’re furniture is in a moving van or you’re on a tight timeline, you may just have to bite the bullet.
We didn’t lock the rate in as rates were relatively stable at the time and I’m not the kind that likes to spend money on vapor. Especially when there were many options back then. The banks weren’t competitive back then. But I should have looked at our credit union first. It didn’t occur to me to call them as they had had a fraud problem a decade ago.
I have heard more story’s out of Colorado about inserting items at the closing table and also have first hand knowledge of this with our son and his wife.
short story, they bought from KB homes, there leader approved for X percent on loan, when closing came it was increased and added stuff in agreement also.
They walked away from the deal,
Good Boy.
To add, from reading in here, advise them to not even look again till 2q 2007.
2q2010 Maybe
the prepayment penalty was put on their loan in order for the broker to make three and a half points “on the back” in yield spread premium. option arms without the yield spread paid do not have prepayment penalties. further, the yield spread paid (and hence the prepayment penalty) allowed the lender (wamu, countrywide, whoever) to increase the overall spread over the index to astronomical levels. that’s why these poor people have a rate around 9% instead of 7%. talk about collusion, lack of fiduciary duty, etc. i personally believe that the attorneys are gonna have a field day with this because of the incentives given the brokers to screw the borrowers on purpose for their own enrichment.
boulderbo,
The YSP isn’t stated anywhere on the loan documents, is it?
Yes it is. Should be on the HUD 1.
I am 100% against any bailout of lender or borrower. Many of these people are boomers. Therefore they lived during the last real estate bubble and saw how many people suffered. I agree that there will be massive political pressure to bailout one or the other or both, due to sheer numbers of people and size of corporations(mortgage bankers, and so on) involved. The real question is how one can protect himself from getting fleeced to bail out the lenders / borrowers? Move lots of your assets overseas - take $9,999 with you several times a year when you go to the Carribean for an extended weekend and open up a bank account. It’s legal. Other suggestions: Buy gold bullion with cash. Buy up municipal bonds. Never take a short term capital gain profit on stock. Use your municipal bond interest gains to finance your down payment and closing costs on a house (15 year loan) in 2012 - interest rates will most likely be higher, but then you will be buying a house at 50 cents on today’s dollar and you can take advantage of the tax credit. My final advice which gives me my biggest tax break: Do your homework and study up on tax shelters. I use one that is entirely legal. Read the IRS web site, not the sites of tax protestors. The best advice on tax shelters comes from the Federal government, itself. They have hundreds of forms in the tax credit subject. I don’t talk about it much except to the people I know who use it. If this tax break becomes too popular, Congress will kill it. Mum’s the word.
You post some good stuff, Bill.
Luv this blog.
Thanks. I can easily maximize my total state and federal income taxes to 15% of $200,000 income legally, but no one should waste their time asking me how.
Don’t you mean minimize?
uh uh. Maximize! In that I would pay no more than 15% - that would be my max. For me to do that now would be to add one additional tax break - the mortgage interest tax deduction, but I don’t own real estate, so can’t. My current combined federal and 2 states income taxes total 25% of my weekly gross. But if I had the 15 year mortgage (I intend to get it in 5 or 6 years) and adjusted my work location to give me the slightly larger tax break, I would bring it down to 15%. After getting the tax refund (in 2007) from Arizona for paying California taxes (currently Ca resident), I will probably lower this combined state / federal rate to 22%. Income? About $4600 per week.
great post as always! your blog is quite cool as well. good stuff!
Sorry, but where the heck can you buy gold bullion with cash? I.e. where you won’t get ripped off, etc.
What’s the best way to buy gold? Every time I’ve looked, I’ve run into scamsters who have a HUGE transaction cost. I want to pay current market price + as small a transaction fee as possible. It would be nice to fill my home safe with a little bit, for extreme emergencies…
Also, is is really easy to board a plane with $9,999 in cash? Wouldn’t they detain you if they find it?
I buy gold through a California company called California Numismatic Investments (CNI). Their spreads are pretty small on gold coins and they offer free shipping on orders over $1000.
You sign it, you own it.
Ever since the the thought of a bailout crossed my mind, I commited to the following approach. It may take some time, but any politicians who understand the impact should be scared out of their wits at the prospect. From lower middle class roots, I have become highly educated, have built a very successful business in the US, and pay a LOT of money in taxes. You want to bail out these idiot FBs and their predators? Fine, do it without my money. I will stop paying taxes as of right now, and will repatriate to another country at the first hint of a bailout. I will write letters to every one of my “representatives”, as well as newspapers, word of mouth, etc. Everyone will know why I am leaving, and I will pull no punches in explaining it to them. For those of you who will stay, I encourage you to hide your assets and get yourselves hooked up to a government teat, since a bailout will be a harbinger of that behavior. And you know what happens to the runt of the litter who cannot get in…
I do not mean to be pompous, but without people like me who are professionally and financially responsible, perform skilled labor, and raise responsible children, this country is F*CKED. And they know it. They just need to be reminded.
I would hate to work for another country, but I have roots in Europe, and will not hesitate to beat feet the hell out of the American Titanic. Let the bankers and their FB bitches bend over and take their medicine. Do not even think about bailing them out on my dollar.
I will stop paying taxes as of right now, and will repatriate to another country at the first hint of a bailout.
I’ll be right behind ya Geek…See lower post.
This sounds familiar…Atlas Shrugged?
Who is geekden?
LOL.
Well if I have my Fed or State taxes raised because of potential bailouts I won’t be happy about it ,that’s for sure ,but what choice will I have but to pay it . That’s what makes me so angry about this bogus housing boom.
Real estate should be cheap , like bread and milk should be cheap . Sorry ,rant over .
And how! The looters are gather on the village green right now. Time to head for Galt’s Gulch folks.
You would have to have to reonounce your citizenship in order to get out of paying taxes, an action which is very difficult to get the government to accept and approve. Also, it is against the law to renounce your citizenship in order to avoid taxes.
No you don’t have to renounce your citizenship to get out of paying a lot of the taxes. I don’t say “all”. There are a lot of ways to reduce your taxes, I would guess you are paying double taxes of what you could be paying. You should just research the IRS tax forms and let your imagination run. I found some good ones and am using them. A friend of mine paid 3% of his income in taxes in the 2002 tax year. Mine was 9%. This was combined state and federal. And these were on $120,000 income that year. He earned the same I did. Only that he had mortgage payments and I didn’t.
“I will write letters to every one of my “representatives”…”
I have done this already. Each of them have web forms to accept e-mail, and I was brief…any bailout will mean a vote for anyone else but them.
You’d better start packing!
Raise corporate taxes for causing wages to stay low, not income taxes. Corporate taxes before Regan were 32% of tax revenue collected, now it’s only 8%. No wonder their profits are at a record high.
-
Remember to vote Republican in November.
Note to Libertarians: The current Republican party is not your friend. They are socialists too; they are just corporate socialists.
Stop voting for parties. That makes the party machinary more powerful. Vote for candidates, candidates who have shown that they understand the issues at hand. That may be Republican, it may be Democrat. The only that we can do as pleeb voters (because we do not have the money or the power to do anything else) is to vote in such a way that issues, not parties, become the center of American politics.
Buckley understood this. That is why the initial conservative movement was so successful. It is also why he has disowned the lot of them now.
I’m a Libertarian. I think that most registered Libertarians already vote without respect to party, because we see them as just two versions of ever-bigger government. My own tactic is to vote against every incumbent (except the infrequent Libertarian candidate) and I tell the poll watchers that, and why. Only when enough politicians-in-place are unelected, will any of them truly pay attention to what voters want. The exceptions, like Ron Paul, are few and far between.
Just to make this a little clearer… I am far more willing to vote for someone whom I disagree with who is also rational and is capable of making coherent arguments. This type of candidate can at least be reasoned with and help shape sane policy.
Politicians who spout sound bites are entirely dependent on their respective party organization (Republic, Democrat, Whig, whatever). They are nothing more than puppets.
Considering how badly the Republicans have mismanaged everything they have touched over the last 6 years, why do you think that they will be able to handle this crisis well?
Vote for Foley? LOL
“Vote for Foley? LOL”
i think the “do i make you a little bit horny?” IM is just a little bit damning, eh???
and he’s on the ‘child protection’ committee! talk about the fox guarding the henhouse!
That’s just the beginning. Read the congressman’s IM messages…
READER DISCRETION STRONGLY ADVISED: Foley’s Exchange With Underage Page
http://abcnews.go.com/WNT/BrianRoss/story?id=2509586&page=1
That stuff is really just too gross to read. Foley’s IM messages make Clinton’s and Monica’s tryst seem like a walk in the park by comparison. I did not think Republicans were into this kind of stuff.
“i did not think Republicans were into this kind of stuff.”
unfortunately, just like greed, perversion is apparently a bipartisan kinda’ thing.
The Monica thing was at least legal. Not this.
i agree the foley thing is a lot creepier! not sure about them both being legal, as they both have issues of power (employers) abusing the relatively powerless (employees).
‘not sure about EITHER of them being legal.’
… although monica did admit to coming to washington ‘with her presidential kneepads on’…
i suspect the page was being jerked around by the congressman. pun intended.
Perhaps you’re a lawyer and know more. I’m not, but it seems the underage aspect is a huge problem for Foley in legal terms. As far as Clinton abusing someone relatively powerless, there was never any dispute about it being consensual. If there were any chance of nailing him legally on an issue of power, I suspect the House Managers (remember them?) would have tried.
Manhattanite — whether congressional/white house pages are employees in the same sense as f/t salaried employees is a good question, but I’m not qualified to answer it. IANAL.
The thing about Foley is that what he did is flat-out illegal under the very child predator act he sponsored: he solicited sex from a minor over the Internet.
What Clinton did with Monica was unethical, but broke no laws (until he lied about it).
“I did not think Republicans were into this kind of stuff.”
These are the “Contract with America” and “Family Values” folks!
“it seems the underage aspect is a huge problem for Foley in legal terms.”
you’re probably right. certainly triple trouble!
“I did not think Republicans were into this kind of stuff.”
You’ve got to be kidding.
“The thing about Foley is that what he did is flat-out illegal under the very child predator act he sponsored…”
The people always have some champion whom they set over them and nurse into greatness. This and no other is the root from which a tyrant springs; when he first appears he is a protector. –Plato
Gives new maning to ‘No child’s behind left behind?’
maning = meaning or Freudian Slip?
“i did not think Republicans were into this kind of stuff.”
That Jesus platform was just another way to herd for votes. (herding sheeple that is)
Doesn’t this qualify him for the “Sexual Predator” list? If yes, it will be really interesting to see where he is not allowed to live, in his future life. What goes around, comes around.
Both sides are bought and paid for by special interest; They don’t represent us.
I agree with Crispy and Walker. Until people realize that its every man for himself (the dfinition of Capitalism), then they wont understand that this applies to politicians as well. There is no difference between Clinton, Bush II, Gore, Clinton II (Hilary), etc. They are all bought and paid for and don’t do sh*t unless they put finger in the wind and determine that they may be voted out. I am in AZ and it is ridiculous watching these two idiots bash each other over the Senate seat. The Democrat says the Repub voted with Bush 95% of the time, but the Repub says the Dem wont protect the border. Now let me get this straight, did either one vote for kicking out illegals, I dont think so. But they both voted for corporations to continue to make money by hiring illegals - which hurts Americans already living here by lowering the standard of living and real wages. So dont look to the gov’ment to take care of working class people -its every man for himself…
But do look for the gov’ment to bail out the bank. It will always happen, banks donate to the political parties, you and I dont…
“Both sides are bought and paid for by special interest; They don’t represent us.”
Amen, amen, amen.
“Remember to vote Republican in November”
If you support incompetence (George W Bush), chickenhawks (Dick Cheney), and child molesters (Mark Foley), then yes, absolutely, vote Republican in November.
hehehe…
The frontrunner for the governorship here in Mazzholeland is Patrick Duval, former board director for Ameriquest Mortgage.
He leads the female Republican Lt. Gov. Kerry Healy by 25% in the lastest Globe poll.
MAZZ is indeed totally braindead.
Repeblican vs Democrat is a smoke screen. They are really the same! It’s an illusion, just like W is from Texas, to keep you working, paying taxes, and mass consuming.
It’s all about the wealthy class vs the working class. And the wealthy class has decided to change things (for whatever reason). Chances are the change coming, signaled by the housing crash (but not only housing), won’t be good for the working class.
Get a clue man. Time is running short.
There are more sex scandels with this Administration/Party than when Clinton was in. And they’re GAY sex scandels!!!! What a bunch of slime balls these main stream politians are!
And you expect these slime balls to bail out RE/the people who took out stupid loans??? Hahahahahahahaha!!!
The only thing they’re are going to bail out is the Big Banks!! You know the ones that reduced lending standards and made all the money off fees!!
Hahahahahaha!!!!!
You can only have your head stuck in the sand so long! Good Luck!!
So are you saying we should quicken our pace on this road to serfdom by voting Democrat? Democrat rhetoric has always been for higher taxes and more taxpayer spending on those who will not work. I suppose that’s better than voting for perverted Repubs who at least have free market rhetoric!
“Repeblican vs Democrat is a smoke screen. They are really the same! It’s an illusion,…”
They are the left and right side of a single hog. Reminds me of my youth, when cars had hubcaps. If you were a normal kid and lost a hubcap, it was bad news because replacements were expensive. But it occurred to me then that the best solution was to go to a junkyard and buy any two decent-looking hubcaps and put them on the side from which you lost one. Very few people — only your friends, really — would ever know that you didn’t have a full set of matching ones.
“Remember to vote Republican in November.”
Remember to pull your head out.
posted “Remember to vote Republican in November.”
That was the worst joke I have heard on this Blog.
A bailout seems highly likely due to political pressure stemming from the disproportionate (”unfair”) share of post-bubble misery borne by minority households.
From a post on another thread:
“Required Reading
Sobering commentary from Jim Willie
[url=http://www.financialsense.com/fsu/editorials/willie/2006/0929.html]JimWillie[/url]
“… The promotion went so far as to have Fanny Mae advertise on television for minority families of color to participate in the dream of homeownership. This unfortunate group will stand as the last buyers, the suckers.”
I agree with you Stucco, there may be a bailout of Blacks and Illegals, although more likely if a Dem gets elected. Its funny that the minorites (I am one) always want equality via set asides and preferred college admissions but yet they dont push for the NBA to have 70% white guys since that properly reflects the country’s makeup.
At least there appears to be some validity to the claim that minorities should be offered compensation, given that FNM (ironically headed by a minority CEO at the time) was heavily pushing the toxic loans their direction. But any such compensation should come from FNM shareholders, who reaped the ill-gotten gains, and not taxpayers.
The only “relief” I could live with, IF the government is going to interfere anyway, is for them to declare void any prepayment penalties that extend beyond the first 12 months. That would pit the unscrupulous lenders against the unscrupulous mortgage brokers and hold harmless the stupid borrowers but not give them any taxpayer subsidy.
Chip .I like how your saying beyond the first 12 months on the pre-pay it should be waved for true owner-occupy people. No reason why a flipper who did a quick flip shouldn’t pay the penalty because he got the teaser rate for a year and had no intentions of holding the loan .
Wiz — yes — I should have made the distinction regarding owner-occupied. I’m afraid though, the gummint would broad-brush it, to keep it simple.
“After failing to sell their home, the couple, in their 70s, wanted to refinance into a smaller mortgage payment so they could rent the home out.”
These folks didn’t understand the market.
They should have just cut and run.
My hubby and I chose NOT to buy into that insanity because we KNEW it was a no mans land, even though we make enough to qualify for 600k+ (with option arm/IO) but we refused to sell our souls to such a ruse. If I, a nurse, am smart enough to research what “option arm” and “IO” mean, then so is the rest of the college educated - keep up with the joneses bunch! I don’t understand people who sign on the dotted line to the tune of 500k+ (or less in many cases) and they can only think of the payment!!!!! I’m no genius - blonde and all - but by golly, if I am buying a house or a car and they give me the monthly payment, then I try to figure out what the real costs will be at the end. If I am signing on to purchase something over half-million for 30 years and they tell me that the payment will be $1500 a month, I am going to be suspicious and start crunching numbers. If they tell me the interest may rise at the end of the 1/3/5 year period then I am going to check out an interest table or ask somebody something about how much higher the monthly payment may go!!!!!! If I am smart, I do not count on “way higher” salaries at the end of that time because shtuff happens!!!! I will denounce my citizenship if they bail these retards out!!!!!!!!!!!!!!!!!!!!!!!!!!
You do not need a college education to figure this stuff out; all you need is common sense! My brother-in-law never went to college, but even he was smart enough to figure out that he needed to use a fixed-rate mortgage when he bought his home.
Nurseliz — I thought you were a lawyeror something else, not a nurse. No joke. Long ago in a post, I though you said your screen name didn’t reflect your current occupation. (For whatever little my recollection is worth)
Anyway, I think you’re wise not to count on salary increases as a rationale for a toxic loan. My health insurance and co-pays ate up just about every penny of my final five or so pay increases, leaving nothing wiith which to deal with higher prices for other things.
Nope, I’m now an ER nurse!!! So I can save your life but not your house!!!:)
Liz — that is a tough job — good for you. I have a friend who is an ER doc, married, and they have a terrible time putting together a social life.
She’s really a real estate agent. She didn’t want to admit that. It came down to saying she’s a nurse or a hooker. Either one is better than admitting to be “an agent”.
The poor FBs!!! Waaa!!! I dudn’t know whut I wuz sihnin’, them leanders took advantage of me. They were all flippin’ geniuses last year. I hope the whole system breaks down, I hope they all rot. Eat mah shorts flippers, you make me sick. Arrogant when they make a profit, retarded innocent little schmucks when they lose. The dollar is going down, and all those stupidos deserve the country they inherit, because they are all worthless.
“Arrogant when they make a profit, retarded innocent little schmucks when they lose.”
I’ve seen plenty of that.
Screw all the FB’er’s.
These azzholes had all the opportunity in the world to avail themselves of legit, honest appraiser’s and they listened to their sleazebag and lender to get the rubber stamper.
Remember the ‘90/’91 bailout ran $500 billion.
However, The average American, 65% of whom haven’t read a complete book since graduating from HS, didn’t have a clue about the bond float which transpired.
I remember workin’ with a college degreed real estate agent who didn’t understand that a bond was an IOU.
If a gov bail-out does go down, one had better be checkin’ the immgration laws of the country’s rated above the US’s 16th place.
65% have not read a book, you have got to be kidding.
Granted there are many idiots buying homes that have no business buying homes, and most will feel entitled to the government bailing them out.
Yeah-I was in Barnes and Noble one rainy afternoon and just picked up the stat from a book I pick up on a whim to peruse.
I berate myself for not remembering the source-but like you I was pretty astounded.
I could give you a few more useless stats, if you’d like.
I could give you a few more useless stats, if you’d like.
If you can’t read a simple book, you’re certainly not goin’ to read the mind numbing fine print on your loan documents.
Dumb and dumber.
I could give you a few more useless stats, if you’d like.
If you can’t read a simple book, you’re certainly not goin’ to read the mind numbing fine print on your loan documents.
Dumb and dumber.
I’ve also heard that only 10% of books sold get read beyond the first chapter. Incredible when I think of it, but then I need but look at my own bookshelves for all the books awaiting that ‘rainy day’ - and now that it is raining, I’m at my computer… darn internet…
“I’ve also heard that only 10% of books sold get read beyond the first chapter.”
That is truly discouraging, in one sense or another.
I knew I bought and read a lot of books, but I didn’t know it was 10%.
Some statistics are available from Reading At Risk, a report commissioned by the National Endowment for the Arts based on survey data from a sample of 17,000 adults. The survey was conducted by the Census Bureau. Factoid 1: 43.4% of Americans did not read a book of any kind in 2002. Factoid 2: 52.3% of young adults (25 - 34) did not read a literary work in 2002. In 1982 only 37.9% adults in the same age group had not read a literary work. I would guess that more people in this age group have been buying houses lately than in the early 1980’s, which makes me wonder about how carefully the mortgage documentation was read.
i wasn’t able to turn the pages of a book without tearing them until i was 12,due to encephlitis,and have probably averaged 3 books or a bit more a week for the last 41 years.lots of history..and recently a good deal of economics,comparing the two i fail to see why thet call economics “the dismal science”.
That number shocks me. I thought it would be higher.
A bailout is a pretty silly idea from just about any angle.
Keep in mind, what we call the S&L bailout really was to bail out depositors with those S&Ls, not the owners. If things get really ugly, you can be sure the Federal government will have to spend some real $$. But the poor bastard getting foreclosed on, or the shareholder in the subprime lender that goes under, isn’t going to get any relief.
Depositors get pennies on the dollar. The owners (except a rare few) got to steeal the money and not go to jail. Can anyone say Neil Bush (although he wasn’t the only one)!!!
I know someone who was a honcho in one of those S&Ls and was able to walk away with a very handsome pension, while the customers were left to hang out and dry. Fortunately, I am now old enough to accept that often there is no real justice and not get heatburn, thanks to Prevacid.
“I know someone who was a honcho in one of those S&Ls and was able to walk away with a very handsome pension, while the customers were left to hang out and dry.”
Does anyone remember this photo from a few years ago?
I’ve been on a mission as of late to spread the gospel of the bubble. I post on the local craigslist, and get flagged off very quickly by realtors. It’s fun, but I wish my message could hang around longer. So I got the idea to call into one of the few local real estate radio talk shows. It just so happened that my idea to do this came 2 minutes before one started. So I typed out my points and found a radio to tune in. The show is a paid block of time from local businesses, guided by someone from the radio station. What I heard had my jaw on the floor. They were pushing for people to buy condos near schools where the parents thought their kids would go in 5 years. People were calling in with ideas of having spouse that doesn’t work buy house and write off all payments as losses and all sorts of other write it all off tax ideas, which the mortgage brokers on the show laughingly responded that nothing is illegal in the US anymore. They were suggesting that anyone smart was buying at least 2 houses a year to turn into rental properties. They had a stump the hosts game. I called in and asked for percentages of risky loans in the local market. When they asked types I said “Negative amortizing, Liar loans, fixed rate.. you know.” They said the statistic would be impossible to generate because there are too many different situations. I slid in some other comments that I’m sure hit home to listeners, “Since the prices of housing in the Hampton Roads market are totally out of line with the salaries of the jobs…” They finalized with “the market will reach an equalibrium” … I didn’t get a chance to say the equalibrium is 40% decrease in current prices. I’m thinking about hounding all of the shows. The advice given on that show was absolutely wreckless and scary. The main host (real estate guy) just kept going back to the fact that he owned 20+ properties, and other standard lines. I think I will record Thursday’s show and post the mp3 or AAC+. I should be able to dump it from their internet stream. After hearing the show, it came to me that it hasn’t died yet, and just how bad it really is in the local market (Southeastern Virginia).
LOL. Some things never end. Most of these guys are late to the gravy train so they are trying to milk every last drop.
Milking every last drop from a gravy train - talk about mixed metaphors! I understand what you’re trying to say, but… =)
The brokers may be laughing that nothing is illegal in the US anymore, but they’ve clearly got a big audience for this happy fraud. Count me as another one ready to take my assets and my business and emigrate elsewhere if the bailout happens..let the FBs and the illegals try to keep the party going.
good for you VaBeyatch! Virginia Beach yatch what’s that?
I hereby award you American Patriot of the Month This award is given to the American who makes the most effective effort in the month to defend the United States of America from enemies foreign and domestic.
God bless America!
posted “I’ve been on a mission as of late to spread the gospel of the bubble.”
Praise be, Brother!
An American Nightmare
Last week my brother’s best friend calls me for a little free legal advice. He tells me that his wife of 18 years has just left him, emptied out their checking account and filed a restraining order to keep him out of their $750,000 home. He has been unemployed for the last two months and this has put some pressure on the relationship.
I tell him not to worry since he has that beautiful home with nice equity that will be split between them. He tells me that it’s not what it appears to be. Apparently they bought the house with some money down but couldn’t resist the “wealth effect” and took two HELOCS for two new cars, four wheelers, 42″ Plasma TV and various vacation trips. Bottom line neg equity. If they sell this place they will have to bring 100K to the table. This guy is 53 years old and use to work for a bank, WTF. He’s a nice guy so I stayed away from telling him about the financial hell he is about to face, short sale, BK, 1099’s. Amazingly, wife thinks she will be able to keep the house on her 70K a year income, she will be needing a serious “come to Jesus” from her lawyer.
I like this guy but any bail-out for he and his wife would be total bulls&*t. While he was sipping wine in the Napa Valley I was working and saving money. His and all FB’s bail out is BK. The BK laws are there for this purpose, no need for futher government intervention. He signed it, he owns it.
Tell him to quit claim the house, w/ ALL the equity to her in exchange for her assumng the mortgage. She’ll think he’s a pushover, but his revenge will be a certainty.
Paul
Even a quit claim will not get his name off his mortgage and two helocs. If he quit claims then he’ll have no control over the property and still be responsible for the debt. Ah, Divorce and the bubble. Divorce is bad enough without having to deal with the bubble on top of it.
That is right. The only way to get his name off the mortgage is for her to refinance it in her name. A. She won’t qualify on her income. B. She has no incentive to take him off the hook.
I agree, that is why he needs to have her assume the mortgage, if possible, using the “equity ” as bait. “Honey, I’m sorry things didn’t work out. Since I’m such a jackass, You keep the 1.2 mil house, w/ 500k equity, and youjust be responsible for the 700k mortgage.”
Heh, heh, heh.
“Tell him to quit claim the house, w/ ALL the equity to her in exchange for her assumng the mortgage. She’ll think he’s a pushover, but his revenge will be a certainty.”
I love it.
The bankruptcy reform passed last year, reportedly at the behest of the credit cards companies, might prove to have been passed in a timely manner for all the FB’s out there.
If I recall the details, people with income will be put into a repayment plan and not get the “get out of jail free” card that was available under the old law.
Talk about a debt-hangover–making payments (if only partial ones) on a house that the bank kicked you out of 5 years ago.
It sounds like he would be better off trying to get a job as soon as possible and then work something out to avoid divorce. And sell as
many assets as he can. The combo of divorce
and out-of-control debt can be a double
financial killer.
Michael,
A good, common-sense post. This guy needs to get a job, get a life, sell the house (and anything else not attached to it), rent a nice, little apartment in the midwest and find a regular old J-O-B to pay the rent and, hopefully, put aside a little for savings.
posted “An American Nightmare”
Divorce is the same as a BK. Dividing assets, paying off bills etc. Silly, silly woman. When all is said and done she will be dust just like him.
No bailout for speculators of any kind including specuvestors and speculords (speculator turned landlord).
No bailout for flip floppers.
No bailout for Home Builders large and small.
No bailout for Bankers and MBS holders.
Some bailout for recent purchasers just enough to keep them motivated to dig themselves out of their own troubles; after all, they are paying higher taxes and insurance and overpaid for their homes; being under for the next 10 yrs will be punishing enough; moreover, if they are not motivated they won’t contribute to the broader economy and the tax roll.
If there is any ambiguity by what I mean by recent purchasers = presently residing in the home = primary residence = not second or third home. Must live in home to qualify.
Maven — on this one, we agree.
The GAO is weighing in on the risky loans:
‘GAO wants danger of risky loans spelled out
By Jeannine Aversa
ASSOCIATED PRESS
October 1, 2006
WASHINGTON – Federal regulators need to do a better job of explaining to people the workings and potential risks of interest-only and other nontraditional mortgages, investigators have reported to Congress.
Nontraditional home loans that once were mostly the domain of the wealthy, especially interest-only mortgages and option adjustable-rate mortgages, have exploded in popularity in recent years as people stretched to buy high-priced homes during the housing boom.
…
Because borrowers with certain nontraditional mortgages “can defer repayment of principal and sometimes part of the interest for several years, they may eventually face payment increases large enough to be described as “payment shock,’” the GAO said.
However, it is too soon to tell to what extent payment shocks might spur an increase in late payments on home mortgages or an increase in foreclosures, the GAO said.’
I think I can make out the handwriting on the wall; it says, “A hard landing will be needed to restore affordability in the wake of the Wild Wild West episode which played out in the lending industry for the past couple of years.”
http://www.signonsandiego.com/uniontrib/20061001/news_1h01risk.html
Bailout by the US government? You have to be kidding. The US government is bankrupt. We (the US government) have to borrow almost $2 billion a day just to keep ourselves spending. Talk about FB’s.
The good thing about bailouts is that most Americans don’t get the inflation concept. As long as the govt has a giant printing press, bailouts will remain a viable option.
I know everyone hates the “inflation” option, but it seems to me FED policies over the past 25 years designed to suppress inflation have acted like a giant pressure cooker, and the economy is bursting at the seams.
“supress inflation..”" WTF
You’re not paying attention.
The dollar is only worth 20% of what is was in 1972!!!
Hey, I’m talking about 20% inflation, as though you can really tell me it is not there already, save some cheap Chinese imports.
They’ll get it when Corn Flakes go from $4 to $15 and gas goes from $2-3 to $10, both due to dollar devalue after bailout…
Good point. If it is as bad as you guys predict it will be, there is not enough money in the world to clean this mess up.
So far I have only heard stories about how bad things are going to be getting in the future. When do we see the blood in the street?
Take a look at the article in the Florida thread; people are bleeding from the ear with higher taxes and insurance and can’t sell their homes to leave the state.
“Take a look at the article in the Florida thread; people are bleeding from the ear with higher taxes and insurance and can’t sell their homes to leave the state.”
Ahhh… I disagree with the “can’t” part except for those who very recently bought and have no way to bring cash to closing. Most of the folks who want to leave just don’t want to accept the price necessary to move the property.
> there is not enough money in the world to clean this mess up.
There is more than enough money. The question is priorities. My SWAG is that the government chooses the inflation solution - i.e. make _more_ money.
If it is as bad as you guys predict it will be, there is not enough money in the world to clean this mess up.
You missed the thread on the guy from craigs’list tryin’ to peddle a pair of desert lots on a golf course in AZ for a $mil
because he was headed for foreclosure.
SOMEBODY LENT THE MORON A MILLION BUCKS FOR A COUPLE OF ACRES OF RAW SCRUB LAND!!!!!!!!!!!!!!!!
And you’re questioning if it’s gonna be BAD?????????
LMFAO!!!!!!!!
You got it, crash1.
It’s not just the Feds, too. The cities, counties & states all have huge underfunded pension obligations, not to mention growing problems with their own welfare programs.
All levels of government have greatly benefitted from the credit/housing boom. The bust will devastate revenues across the board — corporate & income taxes, property taxes, retail sales taxes, permits & fees will all decline dramatically.
The real question will be this: How do you raise taxes in a depression?
No a bailout is a really bad idea and will not fix the underlying problem. The industry must be placed under tight regulation designed to prevent fraud on both sides of the deal.
Exactly.
NO FREAKIN’ BAILOUT!
Many probably knew pretty much exactly what they were getting into with these loans, but figured they’d sell in a New York minute when things started to look dicey. I had one total nitwit tell me (after I warned her that she had no business or money to buy a house) that she’ll do it until she can’t. It’s just more of the same behavior that prompts people to do HELOC’s, get botox, max out credit cards, take their kid’s college money to Vegas, etc. Only to eventually look in the mirror and see they have no money and they’re still getting older.
Some people have no concept of time, integrity, or self-esteem.
BUT NO FREAKIN’ BAILOUT!
I so agree with everyone here….I can’t imagine leaving this country, but if it comes to that….I love Vancouver Island.
Doug Casey is recommending ranchland in Argentina.
It’s starting to sound like some of the folks on this blog should consider pooling resources to buy a few thousand acres of ranchland and start a new town. I wonder how difficult it is to get connectivity in Argentina.
It would be sort of like the German towns in Mexico. Maybe all those people who have been buying up land in Costa Rica and Panama are on to something - housing for U.S. tax refugees.
I think Jonestown is still for sale.
“I wonder how difficult it is to get connectivity in Argentina.”
Argentina has connectivity, though broadband is expensive and of limited bandwidth. There were 10M Internet users in Argentina (26.4% of the population) as of December 2005, up from 7.5M at the end of 2004 and 2.5M at the end of 2003.
The incumbent carriers are Telecom Argentina and Telefonica de Argentina, which have been fighting competition from Carlos Slim’s Telmex Argentina, which bought Argentinian ISP Ertach. Ertach is rolling out WiMax, which allows them to reach end users without using Telecom Argentina or Telefonica de Argentina local loops.
I studied in Argentina in ‘98. Traveled quite a bit. Much of it is desert. Desert does make good ag land if you can get water to it. The pampas is good as well. I would not be too trusting of the gov’t however.
Paul
They have two things that I think Melody and I treasure — excellent wine, cheap, prime beef, cheap and good cultural opportunities in BA, including excellent symphony and opera. I’m sure there is more to life, but that’ll do, for me.
Try Belieze. They speak english.
sm landlord,
Funny, but I’ve been thinking the same thing. Get a group of bloggers and buy a nice big piece of farmland to live off.
We also would leave the country if it came down to a bailout/currency devaluation/hyperinflation. Very little is left of what made American great, IMHO. There’s no more “American culture” as we are all supposed to be more of what we came from than what we came to.
Used to be a respect for honesty and integriry. No more.
Used to believe private property rights were vital to our country and individualism. Now, the govt can take private property and give it to a for-profit entity. Not to mention HOAs, special taxes, freakishly high prop taxes, etc.
No national language, no respect for the “working man”, elimination of the middle class so the corporatists can live high on the hog.
Not much reason to stay. Wouldn’t it be funny if the whole “illegal immigration” debate were to reverse as Americans flock to Latin American countries to escape the repressive US govt?
I have news for you, most of Vancouver is already owned by the Chinese, and last time I check, they were just over the other side of the North Pole. Not a good place to hideout from the New World Order.
I dont think we can leave, I think its going to come down to another Boston Tea Party, plain and simple…
Either that or Soylent Green.:)
But enough negativity, I’m off to get some free food from the Scottsdale open houses. Take care everyone.
The city of Vancouver, yes, but not Vancouver Island. They haven’t
fked that place up - yet. Cold but the summer there is awesome.
Not sure if that is why, but I have it on excellent authority that Vancouver has outstanding food/restaurants.
Catherine …..Your right that the bulk of the FB’s are the type you
talked about . Alot of them already got their money and spent it on adult toys and crap .
You are very welcome, but Canada is in the same s**t. Our government will be bailing out Canadian idiots too. Make sure your cash is stashed in a Swiss account.
This is actually not bad advice.
I will never willingly leave my country no matter how bleak things get. I will fight for it to the last drop. It is my birthright and my children’s and their children’s children. I will never ever pussy-out on America. They can print all the dollars they want. Not for some stinking bubble nor for the shills nor the fodder that inflated it. We will get through this folks; some stronger than others but in the end we will all move forward.
Amen to that. These bastards can leave but I’m staying.
Of course I mean the real estate bastards, not the people on this board. I love this board. It’s an oasis of common sense in a burning desert of stupidity.
Doug Casey is recommending ranchland in Argentina.
Geez, now there’s a blast from the past.
When DC and the “Crisis Investing” guy (gettin’ senile can’t remember the name) raises his head you know things are in deep do-do.
I must come clean, I was thinking of leaving and retireing to Belieze.
But your’re right. Although it may get difficult, but there’s no guarantees anywhere. If you stay and your not scared it will be a fight!
Good Luck to All!
I think some of you are being a bit harsh. I work for the City of Austin in a position that helps promote affordable housing. A lot of naive people are suckered into the worst situations by these very sophisticated mortgage brokers. They are told no money down - no money to get into the house. No need for a real estate agent – the developer has you covered. It’s very rare that these people are told about the adjusting interest rates, prepayment fees, etc upfront. At closing, sure, there is a quick “oh, by the way” statement but at the same time, you’ve got the developer’s agent dangling keys to their new house. In fact, what’s really sad is that, in Texas, a lot of these lower income people are primarily Spanish speakers whom are functionally literate in English. They probably can’t understand the loan docs if they tried. How do you explain amortization to someone with a 8th grade education from Mexico? Just my 2 cents.
There is no doubt the industry requires regulation and there is enough fraud to choke a horse, but while many naive people have lost, others have gains in the hundreds of thousands of dollars and I see few complaining about their lot. This was all a massive crap shoot and some lost and some gained. My question is how does someone with an 8th grade education from Mexico qualafy to begin with? If fraud can be established on the part of the lender then certainly there should be liability, but the liability should be shared and if we forgave every debt based on IQ and education, I’d forget how to solve a rubics cube fast.
How do you explain amortization to someone with a 8th grade education from Mexico?
Ans: You can’t, at least not at closing time. So what can you do?
1. You could require a license to buy a house, certifying that the buyer had completed a course of study adequate to explain the transaction and it consequences. (Unlikely)
2. You could change the system so that any seller would have to carry a portion of the loan themselves, so that they have skin in the game on a default. (Unlikely)
3. You could let the market teach the lesson to the buyer. (Likely)
4. You could bail out the buyer and teach them nothing. (Possible, but counter-productive in many ways)
I can’t think of any other solution that even rises to the level of Unlikely. Maybe I’m just suffering from a failure of imagination.
Somehow the regulations work sufficiently well in the securities industry, that you didn’t have many brokers successfully hawking dot coms to Mexicans with an 8th grade education.
Since housing is so much more important for the economy, and susceptible to tricky and emotional manipulation—shouldn’t the requirements be much STRICTER on mortgage loans?
I’d prefer an official test: administered externally and impartially, before anybody is allowed to buy a house or refinance with anything other than an X-year fully fixed vanilla mortgage with NO tricks.
Yeah, you should need a license to borrow $500,000, especially if it puts the national financial system at risk.
absolutely right DrChaos!
I like that one, Dr. Chaos. Perhaps it’s a new business idea. Start a company that underwrites loans (I think an up and coming industry) and puts prospective borrowers through a standardized course on loans and borrowing.
Roger, I think you make a good point. A lot of people don’t recognize the amount of environmental and internal stimulus driving the lemmings to jump off the cliff with these sultry suicide loans.
When you step back and take a panoramic view of the entire spectrum of home buying stimulus, it is awesomely breathtaking. Heck, the gov’t has been stimulating housing demand since the 30’s. This bubble’s creation was years in the making and it took a perfect confluence of home buying stimuli coupled with buyer ignorance to fully inflate it.
Ok, maybe if the person can’t speak english ,make a requirement that the loan doc signing has to be taped and all terms of the loans must be explained in their language in front of the camera . Maybe all loan interviews with the mortgage broker scum should have a requirement that it be put on tape to insure that the mortgage agent scum disclosed everthing .
If you don’t watch them ,alot of them will do anything to make money on a deal . We saw a example of that the other day with that article from Ben on the Social worker .
Maybe we should question why mortgage broker agents are making these absurb amounts of money on these crap loans .
When I was in that business ,(dont laugh),I saw agents made 100 to 300 bucks per loan ,(and they had to do all the work of a full doc. loan package .)
But , I can’t help but think that most of the borrowers were victims of the real estate mania and they either wanted to get in before priced out forever ,or they wanted to make a quick buck in the real estate investment game and had no intentions of being a long term homeowner .
“When I was in that business ,(dont laugh),I saw agents made 100 to 300 bucks per loan ,(and they had to do all the work of a full doc. loan package .)”
Wiz — that is why I wish financial death on the mortgage brokers who slimed the big prepayment penalties into the I/Os in order to pump their commission. Very few of those borrowers knew they could have avoided it by balking.
That’s right. here is a lot of rescources spent to get the lemmings to jump (mass consume). Don’t forget the low people in high places that set the lending standards! And regulate the types of mortgages to release to the consumers (lemmings). There is a reason why they don’t teach consumer math (compound interest, etc.) and other useful consumer skills in high school.
The average Joe/Jane doesn’t stand a chance against the army of proffessionals waiting to take thier money!! At least at first, until they realize they must do thier homework or continually be fleeced!
This blog has enlightened many.
lower income people are primarily Spanish speakers whom are functionally literate in English.
And once they find out how the gringo’s f*cked them, they’ll be coming, machete in hand, to mMFl’s digs to kill his dog and burn down his house.
Meanwhile I’ll be hiding out with Adolph.
“Meanwhile I’ll be hiding out with Adolph.”
LOL. The doberman or pit bull, right?
Roger said, in part: “How do you explain amortization to someone with a 8th grade education from Mexico? Just my 2 cents.”
Forget what country they came from for a second. If someone doesn’t understand the conditions of the business arrangement (mortgage), they have no business entering into the agreement. Buying a house is NOT a right guaranteed by the Constitution, although, there are a number of folks on the Left who would argue the point.
How do you explain amortization to someone with a 8th grade education from Mexico? Just my 2 cents
You may or may not be able to explain all the details, but the general concepts are teachable - you just have to do it in small steps and use examples that relate to their life experiences. For example, everyone understands that a loan has to be paid back. Everyone understands that interest is added to a loan becasue nobody outside your family lends money for free. And so on. The only tricky part is explaining that paying less now means paying more later, but even that’s doable if you’ve set the previous steps up correctly.
I agree that closing day is not the day to do the teaching, though.
How do you explain it to someone with an 8th grade education from Mexico? You kick him out of a house he had no business owning in the first place. I am a college educated taxpaying
American who rents a bug infested apt at 1230/mo. I would love to own, BUT I CAN’T AFFORD IT. Neither could he. Duh.
“I am a college educated taxpaying
American who rents a bug infested apt at 1230/mo.”
Dude I’m sorry for you. Do you live in DC?
No Arlington - Courthouse
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There will be no bailout of FBs or FLs (F-ed Lenders). Even the pols understand that the correction underway is not only necessary, but good for the long-term health of our economy.
There will be little bail out. The government will have to decide if it wants to protect its debt (treasuries back the privately held FED) or do a bail out of speculators. It can not do both. If they try it is likely the dollar will get pounded and this will force higher interest rates on the US economy.
The FED does not print money. It makes credit easier for “qualified borrowers”. With the definition of “qualified borrowers” so extreme today, who can the FED loan funds too as collateral drops in value? In fact a drop in values or prices will remove many “qualified borrowers” for their collateral has turned to S..T.
From November 1929 to 1932 the FED lowered interest rates from 6 1/2 to 1 1/2 percent. Most people buy into the argument that the FED made some kind of mistake regarding liquidity and this made the depression worse. Most people think the FED raised rates. They only did this in the first 9 months of 1929.
The problem for the FED is that in a situation in which real estate, commodities, and stocks are falling (with borrowers tapped out in overpriced assets) few can qualify for a loan. During the first few years of the depression the secretary of treasury (Morgentheau?) was quoted as hopping the forclosures and general defaults would increase and wash themselves out so that a recovery could begin.
We are probably looking at a situation with massive debt default and deflation. Once it runs its course the FED and government will be able to begin a reinflation but it will be slow and not hyper. Note how even spending on WW2 and the New Deal did not cause hyper inflation. Remember the best person or company to loan money to is someone that has an income and has just gone BK. They have income and no debt. Wait for the mass of BK’s then look into buying.
>From November 1929 to 1932 the FED lowered interest rates from 6 1/2 to 1 1/2 percent. Most people buy into the argument that the FED made some kind of mistake regarding liquidity and this made the depression worse. Most people think the FED raised rates. They only did this in the first 9 months of 1929.
I thought that in 1932, after the British had left the gold standard, the speculators turned onto the dollar and exchanged their dollars for gold. In defense of the dollar, the FED increased interest rates, which fought off the speculators but strangled the struggling economy.
Before 1929, the FEd wanted to support the British pound and kept rates lower than they should have done, leading to massive liquidity - that was a mistake of the FED that made the depression after 1929 worse.
> During the first few years of the depression the secretary of treasury (Morgentheau?) was quoted as hopping the forclosures and general defaults would increase and wash themselves out so that a recovery could begin.
The then secretary of treasury Andrew W. Mellon is often quoted:
>Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.
This concept turned out to be not very attractive to the voters who wanted change NOW (in 1932).
Over the last 4 years, I have told countless people that they did not qualify for the loan they wanted using my banks guidelines. As far as I know, all of them got loans from other lenders to buy or cash-out refinance. To do this they used a Stated-Income loan or an Option ARM, or 100% financing, or some combination of these. Almost everyone knew what they were doing, often driven by greed. The other lenders knew the were giving loans to people who would not qualify using historically normal guidelines and loan types. So you know who I think should take the blame and losses.
Agree with everyone who believes the American Taxpayer should not have to pay for this mess; but does anyone really believe our Government will start holding anyone accountable when votes, cash, and power at stake?
Here’s my two cents worth…..and that’s about what my opinion is worth….LOL
http://www.runutz.net/index.php/?p=41
Dan — thanks for linking your blog site. If you’re looking for feedback in general, I find the font difficult to read — too thin. I use Firefox, though I’d think that is not the issue.
Thanks….and I ditched the template….it SUCKED!
The “bailout” will come free of charge. The government will simply issue more money. What’s an extra 2 trillion to the already insane federal debt?
Congress has discovered that the path to least resistance in finance is to simply print more money. No use upsetting the population by cutting programs or raising taxes when you can just create money out of thin air.
We’ve been supporting the world since WW2. It’s about time the world paid us back by supporting our out-of-control consumption by taking our rapidly inflating pieces of paper.
When more money is printed, there is inflation, which acts as a tax on everyone who holds cash balances. Borrowing money and monetizing the debt are two different things.
For those of you thinking of cutting and running when the FB bailouts begin, I got news for you, “they” are ready. There is a reason you must have a passport to leave from the USA to Mexico and some other countries begining in 2007. The Wall in Germany was built to keep people IN, if you think they are rebuilding The Wall on the Mexican border to keep people out of the USA, I have got some Florida swampland to sell you. Time to get out has all but passed.
“No way out”
Shiver…
Clark — I have wondered about that. There is a time-honored phrase about there rarely being any real coincidences, but I can’t remember it.
Be careful not to get lost in conspiracy theories.
So you need a passport for international travel, so what? Last time, I looked, American citizens could visit most countries for three month without applying for a visa first.
Look again Peter, there are new rules taking effect, rules that are easy to adjust to create a more narrow band of eligible travelers. The trend is what to look at. As far as conspiracy theories go, read KIAs post below, looks like a whole buncha conspirators signed into law their dastardly deeds once before and mighty quick. Where have we seen that before recently?
Until Lerah is skwaking like chicken little there will be no bailout discussion in Washington. A pork orgy can not have credibility as long as a major players like the Realtors publicly claim that all is well.
“A pork orgy…”
There ya go — a new opera: “Porkgy and Bess.”
1) There WILL be an attempt at a bailout. In the 1929 crash and ensuing disasters, the federal government declared “bank holidays” in an attempt to keep financial institutions solvent. They also continuously tinkered with the economy and caused massive disruptions and cascading failures. If you want a very thorough explanation, check here http://www.fff.org/freedom/1197b.asp One excerpt is particularly significant:
“Instead of ending the “disastrous action which made the government a speculator of farm products and the unsound policy of restricting agricultural products to the demands of domestic markets,” the federal government intervened in the affairs of the farming sector to a greater extent than ever before. On May 12, 1933, the Congress passed the Agricultural Adjustment Act (AAA), giving the government wide powers to fix the prices of farm products, purchase agricultural surpluses over an increasing number of crops, and pay farmers to reduce acreage in various lines of production.
On May 18, 1933, the Congress passed the Tennessee Valley Act, giving the federal government authorization for the undertaking of a massive public works project for the construction of dams and electrification in the southern states. It was nothing less than socialist planning for land use, conservation, and supplying of energy for a vast subsection of the country.
The AAA also gave the Roosevelt administration the authority to reduce the gold content and value of the dollar by up to 50%. Then, in contradiction to the promise that “a sound currency [would be] preserved at all hazards,” on June 5, 1933, Congress passed a resolution voiding the gold clause in all government and private contractual obligations, as well as requiring all Americans to turn in their privately held gold for Federal Reserve Notes, under penalty of confiscation and imprisonment.
Instead of a “removal of government from all fields of private enterprise,” on June 16, 1933, the Congress passed the National Recovery Act (NRA) providing for total federal government control of the industrial sectors of the U.S. economy. Mandatory “codes of fair competition” were established for each sector of the economy, establishing pricing and production regulations for almost every manufactured good in the country. Every retail store in America was encouraged to display the NRA “Blue Eagle” emblem in its store windows to assure people that the stores were “doing their part.”
On March 29, 1933, the Civilian Conservation Corps was established, putting government in the business of creating work for America’s youth. On May 12, 1933, the Unemployment Relief Act was passed, which later became the Works Progress Administration, which provided direct employment of millions on federal “public works” projects.
On July 5, 1935, the National Labor Relations Act was passed, making the federal government arbiter over the private workplace. The Minimum Wage Act was passed on June 25, 1938. The Social Security Act was passed on August 14, 1935, making government responsible for the retirement planning of the American people.
And rather than renounce “the prohibitive [tariff] rates” which had “resulted in retaliatory action by more than forty countries, created international economic hostility, [and] destroyed international trade,” the Roosevelt administration scuttled the London Economic Conference of June 1933 that could have reestablished stable foreign exchange rates on a gold basis and helped to end the tariff wars between nations. Instead, FDR sent a message to the London conference that the goal of his administration was to manipulate the U.S. dollar’s value for purposes of internal national planning.”
The foregoing draconian and all-encompassing measures also utterly omit the Bankruptcy Act of 1933 which attempted to suspend all foreclosures for five years, and the resulting litigation which the lenders took all the way to the Supreme Court of the United States. SCOTUS invalidated the Act, whereupon Congress promptly passed the Bankruptcty Act of 1934.
In short, there was no aspect of economic life which the government did not attempt to control and “improve” during that crucial period. The net effect was to extend what could have been a severe, but brief crash, into the Great Depression.
There is NO WAY the government will let a crash like this go without intervention. The pressure upon them to “DO SOMETHING!” will be too great. They will indeed do something, but from a historical perspective, it is far more likely to hurt the patient than to help the patient. Just as they have passed lender restrictions and regulations long after the damage has been done, thereby amplifying the negative (crash) forces, so, too, will they continue to act a day late and a few billion dollars short of a good solution.
2) The most likely type of intervention seems to me to be as follows: Fact - Helicopter Ben is at the controls. Fact - there will be a liquidity crisis as properties pile up in REO, massive builder and private sector inventory accumulates, and there are no buyers. Fact - somebody must DO SOMETHING. Conclusion: Helicopter Ben will dump money on the situation using any means at his disposal. Nobody will bite any more for low overnight rates, so an alternative must be developed. Most likely venue: Freddie and Fannie guarantees and FDIC insured loans at banks. These can shovel out huge amounts of money quickly to beleagured financial institutions. Actually, I don’t see any other way to get the requisite volume of cash out. As banks go under or lock up in bankruptcy (hoist by their own petards mind you), the public will experience acute short-term crises - they can’t get any cash from their accounts. The Feds can print as much as they want, and will dump this on the screaming masses through the FDIC. What this will do the the shattered remains of the foreign trade balances and world economy is unknown, but probably very, very bad.
The effects on the macro economy will nevertheless be ignored because US politicians must answer to US voters. The suppsoed “cures” will lead, over time, to inflation and perhaps hyper inflation because of the printed money being dumped onto the economy. Simultaneously, however, a huge portion of the populace will actually be experiencing deflation because of massive unemployment and contraction of most industries. Some will have worthless money while others will have worthless skills. Just as a new term had to be coined in the 1970’s (stagflation) for an occurrence which modern economic theory said could not happen, so too will a new term be coined for this phenomenon. I suggest “Clusterfark” but perhaps “implosion” or even “nova” might be more descriptive. Realistically, it will probably be deemed a “readjustment” or a “time of transition” by the powers that be, so my choices are irrelevant.
Apologies for the length of the post, but I’ve been worrying at this issue for a while like a terrier with a new toy. Comments and contrary viewpoints welcome.
It is not clear to me how exactly the taxpayers could bail-out overextended borrowrs, banks and others. Any ideas? Any bail-out by inflation seems only to mask the real price decline by nominal stability.
Cheap fixed rate loans financed by the taxpayer.
Cheap fixed rate loans financed by the taxpayer.
—————————
With an I/O payment that lasts as long as the FB lives in the house (infinity mortgage). The principal is due upon sale.
Sometimes, I worry about posting these things here as many of our thoughts and ideas seem to end up in the media and marketplace.
> Cheap fixed rate loans financed by the taxpayer.
With inflation rising, treasury rates should go up. Every rate close to or below treasuries is obviously a bribe from Uncle Sam not to sell cheap and should be attacked as a bribe.
The problem with the infinity mortgage is it wouldn’t address the issue of affordability. Under the best-case scenario home prices would plateau at a certain, high level. But a plateau means there would be no reason to “invest” in homes and investors made up 40% of home sales. You can’t fix prices on anything without there being serious ramifications and homes are no exception. The only way I can see a succesful bailout is if the Feds can convince the Chinese, Japanese, Russians, etc. to use their enormous dollar reserves to buy up the excess housing stock. We could rent our homes from the Chinese…
test
“American Dream Relief Act”
Makes me soooo happy that my family and I have been living *below* our means for all of these years. There’s nothing like seeing a neighbor who ran up massive HELOC debt to buy vacations, expensive cars, personal watercraft, and fancy dinner dates get bailed out using my money while my family and I are living below our means to make me feel all warm and fuzzy inside.
It’s even better if my other neighbor buys more house than he/she can afford using a stated income ARM, and fills it with new furniture with money from the “cash back” closing, and later gets bailed out with my tax dollars, while I slowly try to furnish my house with furnishings I could actually *afford*. It’s all part of the “American Dream”; for me to finance my neighbor’s risky behavior with my tax dollars. Remember the saying, “A fool and my money are soon partners”.
Kind of makes you think that living within your means makes you a chump.
And maybe it does.
Let me get this straight. First, Marilou Foley says that she knew nothing about a scam unfolding:
“‘Negative amortization was never explained to me,’ said Marilou Foley, who added that she would have ripped up the loan papers if she had understood that a prepayment penalty had been slipped in.”
Second, the lender says that this loan was not a scam but in fact a very smart mortgage for Marilou Foley to get:
“Ferren Rajput defended the loan his company provided the Foleys.”
“The lower monthly payments provided by option ARMs can give people on fixed incomes more flexibility, not less, he said.
And then, the lender quotes a higher authority to augment his argument:
“Washington Mutual, one of the largest mortgage lenders in the country, calls option ARMs ‘the right loan for retirement,’ he said.”
It seems to me there is a trickle down effect, starting with Washington Mutual.
If the US real estate market does not go down, then you will be seeing 50 year mortgages. 100 year mortgages may not be out of the question either to buy a 1-million dollar 1 bedroom condo in LA or Orange County take you choice. This should happen in say 5-10 years…..This ponzi scam will either cause a collapse and lenders will find another way to keep the hot potatoe moving to the next sucker buying at these currentl home prices…..