House rejects Bailout; DOW drops 650

[Elok]

Originally posted by BeBro
Is it just me or is there a weird wish to see the own economy or at least the financial system suffer from all this? Ya know, talking about the wealthy guys taking it is all great, but does US politics now just sit back and watch how things play out?

I'm not sure if I'm feeling exactly what you're talking about, but I am feeling a certain perverse pleasure at this. Partly it's just that I don't yet have a visceral understanding of how much this is going to suck. Partly it's that I don't understand economics, and therefore hate and fear it, so I can't help smiling when big-time investors go down any more than sixteenth-century villagers can help cheering when the heliocentrist heretic gets burned at the stake.

But mostly it's just the Hindenburg reflex. You know, when you watch the old footage of the Hindenburg crashing and burning, and you're dimly aware that a LOT of people just died, but all the same you catch yourself thinking, "HOLY FVCK that's a big fire! Wheeeee!"

[Kidlicious]

Originally posted by Patroklos


Not having people pouring out their lifes blood to pay for mortgages that are breaking them through their greed and/or pride maybe?

Rent something marginally smaller for half the cost and bank the remiander for a down payment/fixed interest rate homer purchase in ten years. Oh, and have a resevior of cash available until you buy in the meantime.



I am not against helping homeowners with 1.) a fixed rate 2.) a proper down payment and 3.) a respectable income/debt ratio at time of purchase. If you lack any of those three, **** you.

Forgive me, but don't they still owe the mortgage minus what the bank get's for the house, or is that wrong?

[Patroklos]

Forgive me, but don't they still owe the mortgage minus what the bank get's for the house, or is that wrong?

It depens on the terms of the loan.

The mortgagor may be required to pay for Private Mortgage Insurance, or PMI, for as long as the principal of his primary mortgage is above 80% of the value of his property. In most situations, insurance requirements are sufficient to guarantee that the lender will get some pre-defined percentage of the loan value back, either from foreclosure auction proceeds or from PMI or a combination thereof.

Nevertheless, in an illiquid real estate market or following a significant drop in real estate prices, it may happen that the property being foreclosed is sold for less than the remaining balance on the primary mortgage loan, and there may be no insurance to cover the loss. In this case, the court overseeing the foreclosure process may enter a deficiency judgment against the mortgagor. Deficiency judgments can be used to place a lien on the borrower's other property that obligates the mortgagor to repay the difference. It gives lender a legal right to collect the remainder of debt out of mortgagor's other assets (if any).

There are exceptions to this rule, however. If the mortgage is a non-recourse debt (which is often the case with residential mortgages), lender may not go after borrower's assets to recoup his losses. Lender's ability to pursue deficiency judgment may be restricted by state laws. In California and some other states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans, however, refinanced loans and home equity lines of credit aren't.

If the lender chooses not to pursue deficiency judgment—or can't because the mortgage is non-recourse—and writes off the loss, the borrower may have to pay income taxes on the unrepaid amount if it can be considered "forgiven debt." However, recent changes in tax laws may change the way these amounts are reported.

Any liens resulting from other loans taken out against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure, but the borrower is still obligated to pay those loans off if they are not paid out of foreclosure auction's proceeds.

http://en.wikipedia.org/wiki/Foreclosure#Further_borrower.27s_obligations

[Arrian]

I am not against helping homeowners with 1.) a fixed rate 2.) a proper down payment and 3.) a respectable income/debt ratio at time of purchase. If you lack any of those three, **** you

My gut instinct is to agree with you... but then I don't think the end result would be helping many people. The problem appears to be that staggering numbers of people do not meet your 3 criteria. I'd love to be wrong about that, btw.

I'm aware of the "moral hazard." The end result still has to hurt (much like the AIG bailout) so it's not a free ride for the irresponsible. The problem we are dealing with seems to me like systemic irresponsibility. What is needed, ultimately, is a cultural shift. That's all fine and dandy, but I'd rather not sit on a high horse watching as the economy collapses.

-Arrian

[Riesstiu IV]

Originally posted by Elok


I'm not sure if I'm feeling exactly what you're talking about, but I am feeling a certain perverse pleasure at this.

I do too.

I think our nation could benefit from some economic hardship. Currently the average American is a pretty pathetic and uninteresting person: a fat, retarded, shallow consumer who lives beyond his means. This citizen bases his life around constant fleeting media, being willfully ignorant of the world, and corporate loyalty (see Asher).

We've ceased becoming competitive in manufacturing nation. In the name of free international markets we have only shot ourselves in the foot. Now, I'm not hoping Americans starve to death but we may just stop buying tons of useless plastic sh*t from China and stuffing our faces. We may even learn to be a more self sufficient nation again.

Forget the bailout, it's a band-aid for a broken system. The bailout is just going to be thrown onto our already massive pile of debt. Any future American has enough debt to contend with. What the government and we as enablers have done is shameful enough.

[chequita guevara]

Originally posted by Kidicious
Forgive me, but don't they still owe the mortgage minus what the bank get's for the house, or is that wrong?

Depends on the terms of the loan, but you can declare bankruptcy regardless. The problem isn't so much people who couldn't afford their homes. It's the people who could, who, because of their neighbors, now find themselves with a property worth half what the mortgage is. Any sensible person would walk away from that, send the keys to the bank, and start over.

[Patroklos]

It's the people who could, who, because of their neighbors, now find themselves with a property worth half what the mortgage is. Any sensible person would walk away from that, send the keys to the bank, and start over.

No, thats not sensible unless you lost your job or plan to move in the next decade, which isn't most people. Just wait it out, the market won't be down forever.

The reality is that peoples home values have increased so much on average in the last decade that it is doubtful there house is not still worth more than they bought it for in most places. Now, if they were taking out lines of credit on the equity they might be hurting, but then they were also dumbasses for doing so.

[Zkribbler]

Originally posted by Kidicious


Forgive me, but don't they still owe the mortgage minus what the bank get's for the house, or is that wrong?

If they've refinanced they do.

But if it's a purchase-money real-estate loan, then most (if not all) states have a "deficiency statute," which limits the creditor's remedy to repossessing the property.

[chequita guevara]

Originally posted by Patroklos
No, thats not sensible unless you lost your job or plan to move in the next decade, which isn't most people. Just wait it out, the market won't be down forever.

If the value was based on a bubble, it's unlikely they will ever recover their investment. On the other hand, a 50% return on your dollar is better than a 0% return you get on rent.

Also, you can by a house again with a bankruptcy on your credit report. You just have lousy rates, but in time you can refinance once that goes off the credit report.

[Victor Galis]

Originally posted by snoopy369
I think the problem is not that (some of these) people don't belong as homeowners, it's that they can't afford the cost of house they have. Personally I think it should be much easier to own a home than it is, but that's the little tiny socialist streak in my otherwise conservative/libertarian beliefs

I think suburban sprawl is one of the great evils afflicting this country, so maybe I'm a bit biased.

[Colonâ„¢]

Originally posted by Comrade Snuggles


If the value was based on a bubble, it's unlikely they will ever recover their investment. On the other hand, a 50% return on your dollar is better than a 0% return you get on rent.

Maybe you meant a 50% loss over a 100% loss?

[chequita guevara]

Uh, yeah.

[Aeson]

Originally posted by snoopy369
I think the problem is not that (some of these) people don't belong as homeowners, it's that they can't afford the cost of house they have. Personally I think it should be much easier to own a home than it is, but that's the little tiny socialist streak in my otherwise conservative/libertarian beliefs

It will be much easier to own a home in 2-3 years if we don't bail out homeowners... Start bailing out bad mortgages and you artificially prop up housing prices at unaffordable levels.

[chequita guevara]

yep

[Kidlicious]

Originally posted by Comrade Snuggles

Originally posted by Kidicious
Forgive me, but don't they still owe the mortgage minus what the bank get's for the house, or is that wrong?

Depends on the terms of the loan, but you can declare bankruptcy regardless.

With the new bankruptcy law, don't you have to pay it off anyway?

The problem isn't so much people who couldn't afford their homes. It's the people who could, who, because of their neighbors, now find themselves with a property worth half what the mortgage is. Any sensible person would walk away from that, send the keys to the bank, and start over.

The alternative is renting and that's going up. I think people are interested in keeping their houses even if they are losing money, their principle residence anyway.