BiggerPockets

Lets see how much thought is going to go into this housing / bank bailout . . . frankly, I'm starting to think that the move to make is to stop paying the mortgage so I can:

a) Get "bailed out"
b) Renegotiate my loan
c) get any or all of the other great perks that some people in politics will bestow on those people who walked from their home.

Why not, right?

What do you think? Isn't this bailout just rewarding bad behavior? Yes, some people got screwed by bad people, but lots of people made bad decisions. Why should they be rewarded and those of us who pay our bills not?

Attached is a link to a CNBC interview of Warren Buffett this morning. Click on the video in the link to get his thoughts.

http://www.cnbc.com/id/26867866

He talks about the dire situation effecting the credit markets last week and the consequences of doing nothing. I don't pay much attention when people on Wall Street start screaming the sky is falling, but Buffett is of a different sort and I believe him when he says this would effect everyone significantly. I was surprised by the gravity of some of his comments.

I agree with you whole-heartedly on the concept the executives that got rich making bad decisions should not get off easy.

I agree with you whole-heartedly on the concept the executives that got rich making bad decisions should not get off easy.

I don't think that Josh was specifically talking about executives. I sensed that he was speaking of setting a bad precedent for the good old regular American borrower.

Buffet is right about the credit market-as bad as the stock market seems right now, stocks are doing MUCH better than the credit market. Although, if the government doesn't do anything stupid and starts acting rationally (I know, I know) it could help the country out. There is so much fear in the credit market right now that the 3 mo Treasury Bill auction went for .05% this week! People are willing to lend the US government money for virtually no return as 0 return is better than a loss in investors eyes right now! Last week, T Bills were actually trading ABOVE par meaning that people were willing to take a guaranteed loss rather than risk a much bigger loss-or said another way-they were willing to pay to have the US Government take their money. Things are FUBAR right now.

Michael - This bill probably won't take into consideration the consumer in terms of bailouts, but Obama has proposed that something to that tune be done ASAP, and he's not alone. These guys need to think long and hard at the ramifications of such a bill.

let me insert my 2 cents into this discussion: on sep. 10th i quit my full time job ( paying $ 11.50/hr, no benefits - in fact they offered ' health insurance' with the premium that would exceed my monthly take home pay......funny, huh?) my lady keeps her p/t library job with take home of $ 900/ month exluding some o/t... as i said before we paid cash for our house so the house expenses ( utilities and taxes) are about $ 550 over the calendar year avg.; we drive toyota yaris sedan ( paid off , 45 mpg. avg.) with monthly fuel costs of ca. $ 50; our food bill is about $ 100 per month, monthly auto ins. = $ 18, trash p/u = $ 10( just switched supplier) , internet is $ 3.33/mth. ( just switched isp).... total monthly expenses are then ca. $750 plus we get eic every year due to low income and our two college aged daughters still living with us ( it will be ca. $ 4000 fed. and state tax returns included) which subtracts about $ 330 / mth. - so our avg. monthly expenditures ( for basics) after that correction come down to $ 420, which - with only my lady working ( without o/t) leaves us with $ 480 monthly surplus...... now, because i quit my job , in about 2 months i will be getting free er and hospital care ( zero income backrated 3 mths); our local supermarket dumpsters are overflowing with high quality throw away food ( hope to reduce my monthly food bill to $ 0.00 soon)....... so now we are prepared for a long and painful great depression #2, not sure how about you guys; for us $ 700 bln bailout does really mean crap because we will get our yearly eic anyways ( obviously we have and will have zero tax liability) so we will never be " on the hook" due to that bailout; moreover - if - despite , or maybe in absence of the bailout -us economy tanks we will still be well off ( dumpsters will be full regardless- actually they will be more abundant if folks skimp on food and - as a consequence- stores will throw away even more good stuff.....) anyways for me and my wife future looks rosy ; kids will go out of college in 2 years and good luck to them; we will concentrate on mushroom hunting ( stupid term as it is) and growing veggies in our garden........

right - and capitalism without risk associated rewards is like christianity without heaven.....now, lets take out word " risk" and replace it with " uncle sam bailout" and we have HEAVEN FOR EVERYBODY..... too good to be true ? yessssss!

Arrg! This just makes me want to scream! Someone buys a house they can't really afford. But, they can, based on some "teaser" rate, and, most likely, flat out lies about their income on their application. And you say you want to set their loan back to the teaser rate? B*llsh*t! They should have bought a house they could afford based on their actual income and the fixed rates THAT HAVE BEEN AVAILABLE EVERY MINUTE OF EVERY DAY FOR THE LAST 10 YEARS! People who bought a house they couldn't really afford, assuming that their income would rise and their house value would rise and they could refinance are gamblers. If prices really had continued to rise, they would have been screaming bloody murder about paying taxes on their gains.

(Deep breath)

Yes, I'm sure there are numerous cases where people were put into bad loans. That's fraud, and something should be done to help those people. Letting them stay in a house they cannot afford is not the answer, though. Let them off the hook for the deficiency judgment, and let them get on with the life they could afford.

I daresay most people in this position knew exactly what was happening when they took these loans. Anyone who owned their home for 30 or 50 years, and is getting foreclosed was either out and out conned or used their house like a piggy bank.

Sorry, Karen, I don't really mean to attack you on your first post in the forums. It just really, really galls me that people bought houses they can't afford, or took all their false bubble equity out, creating a house they couldn't afford, and now want to be bailed out. Meaning that I'll pay higher taxes and my grandma will see her income from her CD's reduced to pay for what, in many cases, was greed on the part of these borrowers. I bought a house I could and can afford. I refied in the midst of the boom but took the great fixed rate that was available then. Where's my handout?

I agree with both Karen & Jon...is that possible? I agree with Jon that people made some stupid choices but I side with Karen that it seems to me the smart thing for Countrywide and other banks would have been to simply reset the interest rates, especially enlight of the bailout talks. O.k. maybe not reset all the way back to the teaser rate but how about to something market rate like 6%. I know that some banks have a policy not reducing to less than 7.5%. If people can't afford it they will end up foreclosing anyway but at least they can try a few payments at the new rate and try to hang on. There are many ways the banks could improve their own situations but I guess it's easiest to create a horrible mess and then wait for Uncle Sam to clean it up.

I agree with both Karen & Jon...is that possible?

Shari,
I don't think so. It's a matter of math.

Karen,

I think the lenders should have to convert the variable interest rate loans to a fixed rate loan, at their expense, and the interest rate should be fixed at the original agreed upon rate on each mortgage.

It is my experience that an interest rate change will not make any difference. If you cannot afford a home at today's rates, then it was never meant to be. Our rates have been historically low for years (as Jon said).

The interest rate isn't the problem. The new loan balances are the problem. If you owned your home for 30-50 years, then you probably had some equity when you refinanced. So, for the person that was in their home for 30-50 years and refinanced, where did the money go? (obviously not to paying their mortgage).

Interest rate modifications are a phony product being pitched for politicians to be able to claim that they are "sticking up for the little guy".

In very few cases do they do any good. Anyone with a HP12-C can do the math.