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Just a day after signing the $787 billion stimulus package in Denver, President Obama traveled to Phoenix today to announce his plan to help struggling homeowners avoid foreclosure. The $75 billion plan has been called ambitious and it certainly has its critics. Millions of homeowners could be affected by the plan, which would create incentives for mortgage brokers to renegotiate home loans and put more funds towards government-owned Fannie Mae and Freddie Mac. Parts of the plan may change as lawmakers sink their teeth into it, but many changes can be made by the president himself.
How will this national plan affect you? Are you facing foreclosure, or struggling with monthly payments? How much lower would those payments have to be for you to stay in your home? Do you work at a bank or a housing counseling organization? What do you see in this plan for you and your clients?
GUESTS:
- Gabe: Logger who is facing foreclosure on his home in Douglas County (and prefers that we not use his last name)
- Tom Cusack: Author of the Oregon Housing Blog and former Field Office Director, U.S. Department of Housing and Urban Development
- John Charles: President and CEO of Cascade Policy Institute
Tagged as: foreclosure · mortgage · real estate
Photo credit: Respres / Flickr Creative Commons
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What about the 24 year old with a new family that has been completely priced out of his home town by retirees moving in and bidding up the price of real estate far beyond what the local economy could support?
Is he less worthy? Why should be have to spend 50% of his earnings on housing to bail you out of your predicament. A predicament largely of your own making. No one forced you to move to Redmond.
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None of these “bailouts” is going to work.
All of them are too little, too late.
There has to be a realization that the paradigm has shifted and trying to resurrect the consumer based economy is not going to happen; and there are going to be a lot of unavoidable casualties. Until that simple fact is recognized and tactics are changed all that is happening is we are prolonging and deepening this Depression!
The roots of this depression predate the last administration and the one before that. The roots of this Depression can not be blamed on something as laughable as liberal -vs- Conservative; the roots of this Depression can only be blamed on EVERY politician everywhere, and the consumer!That is all history, TODAY; Washington must stop this short term bailout foolishness and immediately start working on the survival and exit strategy.
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My dear Desolation
When you talk about "unavoidable casualties", you're actually saying that some people (millions) will just have to homeless, without medical care or food, living on charity for the foreseeable future. Somehow you think that this will ultimately 'solve' the problem. A bit cold-hearted, don't you think?
As for 'the politicians', let me remind you that some of our leaders were elected by the thinnest of popular vote margins, or with less than a majority. Some of them were elected by you: you can't blame them, when you allowed yourself to be fooled into voting for incompetent and corrupt individuals promoting a political philosophy that used to called Fascism, but that term is now un-PC. Look it up. Even Wikipedia has a decent article on the system.
Best of luck!
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rposner.
Millions of people ARE homeless. I have volunteered weeks working in homeless shelters in Oregon; so tell me of what I know.
Millions of people do not have medical insurance I have spent over a decade thus.
I have scraped for food, worried about providing for my family.
I have lived with a mortgage rate over 15% and watched the value of my home fall to 1/2 what I paid for it.
I got out of the inflated PDX housing market before it tanked because this depression has been visible to anyone paying attention for years!
Politicians... I absolutely can blame them and I can (& do) just as easily shoulder my portion of the blame IF I voted for them!
I have no need to look up fascism; I fully understand the definition of it. I also understand the definition of Socialism and I further understand the definition of capitalism and it is interesting that the latter has outlasted the former, in every iteration of these uniquely human experiments.
You have made no point because your projections of me are nearly 100% off the mark.
Better luck next time! -
This plan will keep housing prices artificially inflated. I went to graduate school 2003-2005, after which houses prices had gotten so high that I decided my generation would never be able to afford a home. I still have not bought a home because of the housing frenzy and then talk of the bubble. It was like sheep running over a cliff. Now, we are supposed to bail out people who made unwise decisions, so that people in there 20's and 30's will never be able to afford a home without two incomes. There is nothing in the constitution about the right on a return in your investments. Now I am supposed to bail out people who bought more than they could afford (if you have to get an ARM it is more than you can afford) or who owe more than their house is worth (even if they can pay the mortgage) so that I can still continue to never afford a home? Housing prices MUST continue to come down for things to return to sustainability, otherwise we are pushing off the inevitable. Having to pull in $100K (two incomes)to afford a home in Portland is not sustainable. It leaves home ownership to either only the rich or to people who want to leave their kids in daycare while both parents work full time their whole lives.
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I disagree. I think the purpose is to help homeowners who's home prices are now lower than they owe on their mortgage to renegotiate their mortgage to that lower price. This will bring down home values across the board back to reasonable values. (I agree that the whole American system is broken that requires 2 parents working full time in order to have kids and a home. Americans are not raising their own kids because we are slaves to our debt!)
Also, I am in my 20's and I bought a home with my husband 2 years ago at the peak of home prices. We did not get an ARM but in the last 2 years our home value has dropped well below what we owe on our mortgage. We are doing fine paying our mortgage but have wanted to refinance into the low interest rates currently available. Because we owe more than our house is worth, we can't do this currently. Obama's plan would allow us to do this which would also help save us some $$$ each month. I worry that if one of us lost our job, we would quickly go into foreclosure without much in the way of savings.
~Lisa, Aloha
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FireIce-
Why should taxpayers pay for you to refinance a poor financial decision, especially if you can still afford your mortgage? What will keep prices artificially inflated is keeping people in homes they cannot afford. Foreclosures are necessary to bring prices down to sustainable levels. Your situation is exactly my point, housing prices need to come down to a level where you can maintain your mortgage payment without 2 full incomes.
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It has been said by political pundents from both political parties that current economic stimulus proposals by Congress would've paid-off over 90% of ALL American mortgages including those not facing default which would've done more to secure our economy than the Christmas tree of gifts that the current bill. Yet, members of Congress felt that this would be too "socialist" in nature to accept, however bailing-out large financial contributors to members of Congress was quite acceptable.
I think its time we had some good old fashion trials for treason including public hanging to eleminate the greed and corruption in Washington DC.
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I believe that in order to get through this housing debacle there needs to be not only incentives provided to loan givers but a change in the mind of home owners as well. Home owners need to sacrifice that for a while, most likely a long while, there isn't going to be the liquidity of housing (instant buying and selling) that there once was. You won't be able to find buyers for your home, and most likely won't be finding buyers that are willing to pay the prices that you value your home at.
This is why incentives to reorganize home mortgages is so important. Home owners need to stabilize themselves and reformat their loans in a way that is payable a sustaining. Doing this will open up and potentially help the credit freeze as creditors find themselves in situations where their lendees are at least paying something back to them, rather than having to default and foreclose their property. I view this to be a slow change, but as the lenders reorganize the loans they have given out so the lendees are able to pay, they will see their profits come in and be able to open themselves up to other potential lendees as well. Patience is the ultimate virtue right now.
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As a business owner in Bend I don't believe that any forclosure reduction plan will repair the local economy. We (Central Oregoneons) were foolish to get caught up in believing that we were building a strong economy during the building boom. Central Oregon's economy is one of consumption rather than one of investment, we must change our economy to one of investment.
There are very few living wage jobs and until there is something to provide real jobs then housing will continue to decline. Our local officials need to get into gear and begin selling the very talented workforce in Bend rather than looking for a federal bailout.
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I am being evicted in three weeks. My partial payments too were refused. My loss of job and assets came from expensive child custody trial (over 100,000.00 dollars) and being a single jobless 52 year old women of a 4 yr old are 3 strikes again me. Yet I pay my taxes and the banks were ready to get help from the American people, so you would think that the banks should be required to modify our loans and keep people from living in the streets. I have also looked into transition housing and low-income but long waiting lists will not work for me, and all of this could result in my son's father taking me to court again to try and get custody of my son.
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It was asked what does it hurt to keep a house out of foreclosure and a family in the home the love and want.
It hurts every family starting out that is currently renting and waiting and hoping to buy a house they can afford. It hurts every family that bought a smaller house than they would prefer because they did not want to be slaves to their mortgage and are waiting for prices to come down to before buying something bigger. These families are saving money for a down payment and acting responsibly. Why are they less worthy than those families that overbought and overpaid in the last couple years?
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My husband and I tried to buy in 2006, like many of the people this bill offers to help, and we came away from the market with the abolute certaintly that a bust was coming. We made the decision to wait and rent, even when we were offered ARM loans and double mortgages and other "exotic" loans, because you can always refinance your interest rate, but you cannot refinance to a lower buying price (or so we thought. Most economists seem to agree that lowering the principle is the only next step available to us). This economic downturn is not going to be easy for any of us, but the idea that we should help all the people who saw the same facts we did and decided to just go for it, to take loans they knew were more than they could afford, is very frustrating. Our only chance to own a home is the resetting of this market to something close to affordability, and although I think that is inevitable eventually, it seems that all these economic packages try to delay that inevitable. It is very frustrating, because it seems to reward people who made decisions we were too responsible to make.
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You were smart. We're bailing out the stupid. There are millions of stupid people, from Main St. to Wall St. Greed and short-term thinking are rewarded by our current system.
Fact is, that's the way it works. The dumb have to saved in order to save us all.
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I'm no expert; just a low wage worker who still has a job. I've never owned a home (and glad of it) and I live paycheck to paycheck. I'm trying to pay down debt, while living concientiously and responsibly. The American Dream is such a big part of the reason we have arrived at this economic crisis. As a nation, we always manage to put a bandaid on the situation and continue to strive for what we are "entitled" to, ( spend, consume, waste etc.) and we sell our lifestyle to the rest of the world. And why would developing civilizations not want what we have? It all comes down to supply and demand and balance in the system. The global economy is unchartered territory. Everyhting is too big and too complicated, and we tend to expect too much, and who knows how it will all turn out? There are a lot of greedy people out there able and ready to take advantage of this situation, and they will. I'm sure that's not going to help. Things will get worse. So, hang on for the ride...
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very well said!
america needed a big dose of reality ... and we're
getting it.
i pray we are wise enough to learn a lesson and
share this lesson with our children.
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In the discussion about foreclosures, there is much use of the term "losing your house". Llet's be clear on something here: being a foreclosed on is not "losing" your house. Is foreclosure an emotional and financial loss? Absolutely. But for most people, you suck it up, put some things in the storage, move into an apartment, in which for the storm to pass. Your house is not lost, it's returning to his rightful owner, the bank.Save your tears for the people who are really losing their houses: victims of hurricanes, earthquakes, forest fires. Many these people had responsible homeowners insurance, but this insurance still did not cover a completely destroyed house.My family has a home in Southern California that was completely paid off. It was completely destroyed in an earthquake, with no insurance coverage. We rebuilt it at a cost of over $800,000. That, my friends, is losing yout home.
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No, that's living without earthquake insurance in a place that has lots of earthquakes.
That's called dumb.
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I have a conventional loan but am now unemployed. I'm wondering if Tom can give us any links for consumers on how to navigate the refinancing process so that we can take advantage of lower interests rates.
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There needs to be an immediate moratorium on negative amortization loans. Even as we are in the middle of the worst financial crisis since the Depression, banks are writing negative amortization loans like there is no tomorrow. There is going to be a massive spike of option loan resets in 2011 that dwarfs the subprime spike of 2007 that started this mess.
Say you got yourself into a Pick-A-Payment loan and borrowed $300,000, and have been making the minimum payment at 2.75 percent. Your monthly payment would be about $1225 a month. Since you picked the minimum payment, as 80 percent of all Pick-A-Payment customers do, you are in a negative amortization situation. Because of this, your principal is RISING by $556 a month!After three years, you now owe $320,016. More than what you started out owing. And now your house is worth less. You are so far underwater you are drowning.
When your loan resets after three years, you would now have to start paying the interest and principal payment. At an interest rate of 5 percent, this means your monthly payment now jumps from $1225 a month to $1718 a month. That is a $493 jump in your monthly payment.
That's a huge jump. How many people could manage an extra $493 bucks a month in payments? And they can't sell their house for what they paid for it.
This is EXACTLY what is happening to people and is going to be happening to many millions more over the next two years.Not only are the economy's problems not being addressed, they are being exacerbated and are going to get worse if negative amorization loans are not stopped NOW.
Mark my words. -
am a broker and assistant to Brenda Hereth of Coldwell Banker, BSSP, one of the top foreclosure realtors in all of the NW and the #2 agent of Coldwell Banker on the west coast. We have about 55-60 bank owned properties listed right now. Brenda is actually my fiance's mother, my fiance is also a realtor, we work with his aunt and father also, so it is basically a family business of selling bank owned homes.
In this business we have seen and done it all. When we are assigned a property to list, often it is still occupied with the former owners, and it is on us to "facilitate their removal." These are families, elderly, the infirmed, spanish speaking young moms, tenants of all walks of life. We are authorized to offer them around $500 to $2500 to move, usually within 3 weeks. This is very traumatic for the occupants, and we try to make it as painless as possible, though we can not know what they are really going through. Then, when the property is vacant, is is our task to have the properties "trashed out," or have all of the previous items in the house removed, and the home given a full cleaning. Sometimes my fiance and I have to do the "trashing out" ourselves, and we have found some really heartbreaking things in the process. At one very nice home on Bull Mountain, we found a sweet little photo album of their second child's birth, along with receipts for large expensive items, and the phone number of Countrywide, their mortgage company, scrawled along the top of the receipt. We see mail piled to the very top of the mail slot, from just disappearing from the home and not leaving a forwarding address. At one home when we arrived it looked like the former occupant went out for coffee and never came back, he left every-every-everything, from beds to clothes to wall hangings to the coffee maker to his toiletries and cleaning supplies to his suitcases and cherished items. It seemed that he just gave up and left. We were assigned another home that someone had just committed suicide in, supposedly because of the debt he was facing. He was in the middle of remodeling his home, and half of the home was left completely unfinished, very eerie. -
your stories reminded me of a news story i saw last year regarding "foreclosure alley" in california.
a TV news station did a video showing the process you describe.
tragic.
for anyone interested ... it's a bit long - but worth it ... here's the link
http://kcet.org/socal/2008/09/foreclosure-alley.html
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your stories reminded me of a news story i saw last year regarding "foreclosure alley" in california.
a TV news station did a video showing the process you describe.
tragic.
for anyone interested ... it's a bit long - but worth it ... here's the link
http://kcet.org/socal/2008/09/foreclosure-alley.html
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The “it’s not my problem” attitude is close minded. It is not my problem that people need Social Security or Medicare. I’m young and won’t need any of those services for many years if these programs are even still around. So do I get to choose not to pay taxes on those services? It is everybody’s problem when our family, friends, and neighbors are in trouble.
Also I'm only 25 and have owned my house for five years now and like the caller I too have never missed a payment on my house. That doesn't mean I'm better than those people who are struggling.
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For those of you who have found your self in a jam the USDA is now offering loan programs to help.
They used to only help farms but now they are offering assistance to Rural_development.
Here is the information on the program for Oregon
http://www.rurdev.usda.gov/or/
-Alex
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Time is of the essence... There are millions of mortgage modifications that need to be managed. Computer Sciences Corporation has an applicaiton called Early Resolution that takes a 90 to 120 day process and brings it down to less than a week.
Early Resoltuion can be employed by banks and mortgage service providers. It is apparent that an application such as this would grease the skids to get this done ASAP. See more at:
http://www.csc.com/banking/ds/11315-earlyresolution?ref=ls
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I have a question for Tom Cusack: I bought a very modest condo in 2005, and am currently in an interest-only, sub-prime loan with an adjustable rate mortgage that's due to adjust in June 2010. I'm able to make my payments at the current rate, but how do I find out what the new rate will be, so I can know if I'm headed for disaster?
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Hi Janie. If you are in an interest only loan, then your principal, the amount you originally borrowed, has not gone down one cent.
Your best bet is to not wait until it resets in 2010. Interest rates are at the lowest in history right now. You should refinance now.
With all the money the government has been spending and printing, inflation is inevitable, which means interest rates are going to have to go up.
Get yourself into a fixed rate loan as soon as you can. You don't have to wait for your ARM to reset. I refinanced an ARM several years ago a year early.
There is no one on Earth who can tell what your interest rate will be in 2010. But chances are good it will be higher than if you refinance right now.
There will be refinance charges added to your principal when you refinance, so keep that in mind. You will be refinancing for your original amount plus about six to eight thousand dollars.
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the person who is saying that this crisis is not his problem is incorrect. we are all citizans of this country and have an obligation to take care of each other. if my neighbors go down eventually it will decrease the quality of life for everyone. it is only money and the best way to use it, in my opinion, is to help my neighbors and fellow citizans.
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I don't feel sorry for anyone involved. In fact I feel angry that my tax dollars are going to help bail out these people, I'm paying for thier foolishness and greed. It's like I'm are being punished for being responsible. If you make a risky investment and it goes south that's your problem not mine.
When My wife and I moved here 4 years ago everyone (especially our bank who is in bailout trouble now) was pushing us to buy buy buy. We knew people who bought houses they couldn't really afford with loans that were intereast only. They thought they were going to get rich as the real estate rocketed up and resell it. They all thought it was a gold rush we were missing out on. We thought they were crazy, as much as we wanted a house, we knew we couldn't responsibly afford a house at the point we were. We thought the houseing market was overinflated and it was unwise to take on that type of liability.
So now I have to pay my rent and help pay these peoples mortgage so they can stay in a home they never should have bought in the first place? How is that fair?
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Not every one is losing their home because of variable balloon rates or investments. Some lose homes because of medical expenses and/or attorney fees. My only crime was to fight for my son and the only winner was the court and the attorney. I got joint custody of my child but I lost my job, my retirement and my home, and in am constant threat that his father will again take me back to court After losing everything my attorney dropped me cause I can no longer pay them. I am more angry that the banks can take our tax dollars, pay their stock holders but refuse to work with the taxpayers that bailed them out.
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"John Charles: President and CEO of Cascade Policy Institute"
The CPI is an extreme right wing Conservative Republican propaganda group, they have even stated that President lincoln was a Communist!
Now. Lets remind ourselves that Conservative Republicans caused the current world Re-Depression by pushing through the 1999 law to prevent any regulation and/or oversight of the new derivative financial scams and schemes. They have no credibility in talking about economics and even Alan Greenspan has admitted that Free-Markets do not work and are at the root of our current sub-prime crisis.
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I hate to be in agreement with someone who sounds so heartless, but I do agree that we should not become silent shareholders. It is unfair to those of us who looked at the same facts and came to the conclusion that buying a house 2 or 3 years ago was a bad bet. These people made decisions based on information available to all of us, and signed contracts saying they would pay back if those decisions proved wrong. It is unfortunate that they are taking us all down with them, but the example of the business owner borrowing against their house and then losing it is infuriating. That was a big risk, one I would not take, and they lost. Now, they are changing the rules right when we reach the endgame we have played for, AND I am going to be the one to pay for it.
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It is important that it was not that long ago people bought houses... but they bought them with cash. When people put money in the bank and save to buy a house for cash... the money is accumulated and lent out to the community... while the savings grow. Housing prices would be in line with income if people saved to pay with cash. I own real estate... and I paid cash. It makes life simpler. This fact contributes to the benefit of the community at large.... and my pocketbook.
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John Charles is right. You haven't brought a single homeowner on the show who isn't at fault for their own situation.
The solution to get prices in line with incomes is for banks to actually require 20% down, and require people to be able to prove that their income is in line with their mortgage payment. It's simply good business on both sides of the contract. Both the homeowner and the bank should want to be sure that the payments are sustainable.
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Some offhand remarks shouldn't go unchallenged. John Charles' remark about the inviolability of contracts is simply incorrect. Contracts are renegotiated and revised all the time. One of the purposes of government is to referee such renegotiations when face-to-face private negotiations don't work. Such renegotiations don't have to involve courts or mediators, of course, and it is preferrable when they don't.
If the current market included banks that felt like lending or negotiating previously written contracts, then we wouldn't need the government to step in and encourage or mandate such actions. Market forces, like monetary policy, are currently slowed to a crawl or frozen in the mortgage sector, in part because mortgages were mostly monopolized by large corporations - a wrinkle in the "market forces" that the libertarian views did not condemn.
Also - one small point - "moral hazard" is another way of saying "just desserts." Maybe people who use the fancy term should just say what they mean.
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Sir, you speak of goverment mandates for the marketplace as if you think market forces are either good or bad. Market forces aren't currently "slowed/bad," market forces are simply market forces. The "all-powerful" corporations of which you speak have monopolized a pile of worthless paper. These entities will negotiatie any contract into which they have entered if it is in their best interests (per Jon Charles' claim of invoilabilty). But, on the other hand, if the government wants to take over these entities because they are insolvent, then we-the-people can rewrite any of these entities' contracts as we please. But, to demand it across the market, including of solvent institutions (notwishstanding their survived, communist monopoly), is to invite the law of unintended consequences into marketplace, one that John Charles and I agree would be an endangerment to contractual law across all lands and seas (to say nothing of what it woud do to the marketplace).
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The government bailout does nothing for me either... except keep the economy that I rely on functioning.
How can you sit in a boat that is sinking and scream "It's not my responsibility to bail water" or "it's not my fault there's a hole so I don't think I should help fix it."
It doesn't matter how we got here, we are all in this together.
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I am not surprised that the wealthy Conservative Republican bragged that he is buying up houses now, as that is what they do with their Bush Tax Cuts for the wealthy. They caused the crisis and now they are profiting from it. That is what they have done historically, de-regulate or prevent regulation in the first place, causing crises, and then taking their profits from the misery and poverty they have brought on the people.
Conservative Free-Market economics caused these problems and we need to go back to Regulated Markets to cure them.
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I'm offering this quote from FDR for all of us to contemplate. It applies both to how we got into this situation, and how we can get out of it.
The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in essence, is fascism - ownership of government by an individual, by a group, or by any other controlling power.
"Among us today a concentration of private power without equal in history is growing."
-- President Franklin Delano Roosevelt
For those 'free market' types, I notice you all weren't griping about the government when things were going your way. Most of these posts are about whose ox is being gored, when in fact, the danger is to the Republic itself, by megacorporations and those folks who are deluded into embracing those values.
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Good FDR quote and good post.
And I'd point out that American Conservatives supported and financed Adolph Hitler in the 1930s, people like Charles Lindbergh, Henry Ford, and the Bush Family.
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The situation is too little too late as is being seen.
I deeply sympathized with Gabe’s story. Try to imagine an elderly person now retired who as an artist designed and built his own home and maintained it for twenty years for his family with thousands of dollars of landscaping self-installed. They evicted you and you are now homeless. Twenty years of your life and invested home is gone for nothing.
Recently Washington Mutual Bank as an advisor, converted my conventional home mortgage loan to the worst adjustable rate; interest only equity line of credit predatory loan as the bank conveyed that they will save you money while unemployed. When job loss occurred warning letters then start foreclosure. Worse, my then current wife was deported as an illegal alien just about the time the bad loan was made. There was no source of the luxury of a two-income household as many have today. Bankruptcy court laughed me out of the courtroom. False hope is conveyed that there is help from the government such as HUD that refused to talk to me over the phone as their secretary said that the problem is not bad enough in Oregon yet. I was left as forgotten. Associations like HUD were supposed to help. No attorney will talk to you unless you show a retainer fee. This was only a little over a year ago. NPR ran a story not a year ago that this is driving some people to become sick [read suicidal].
I was eventually foreclosed and evicted and now they say the government will help? Where were they a year ago? Where will I find the comparable land to rebuild now at my age?
Able to contract an attorney after the loss because WAMU held a $145,000 surplus fund after the foreclosure and resale that they refused to return to me as my true equity had I sold the home. I paid an attorney $20,000 to recover only $95,000. I want to offer a down payment to rebuild my home, but will the bank take my money even if I offer that I start receiving early retirement income in September 2009? There should be first a bailout to those who wrongfully lost their homes after 20 years and at retirement age. Some offer of a new loan first to those who were wrongfully made homeless by criminal banks.
Mark Seibold
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Sorry to say, this bailout is not gonna work either.
These politicians are not at all interested in helping homeowners. They have a lot of egg on their face around the world, and they need to restore confidence of foreign investors (sorry, too late)
The USA has burned retirement and portfolios 'held in trust' from around the world. This problem is much bigger than a 'bail-out'.
The rich will prevail. The peasants will return to the less 'consumer' lifestyle. Retirees are destitute, and need to be taken in by others.
The previous (2) $780B bailouts were misdirected, and this will be too. Band-Aids can't suffice when you need a tourniquet. (amputation). Which will include many of us, finances, homes, families, jobs... (I've lost 2 out of three so far, all because of the greed of some manipulative lenders) No time to recover. Laid off after 32 yrs, but 6 weeks shy of retirement.
Move on...
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This is a case of social policy being mixed with economic policy. Let's give everyone who "loses" their home to foreclosure this year and next year $1000 for moving expenses and $3000 for deposit and first month's rent for an apartment rental. ...Let the housing market take care of itself. We citizen consumers understand that our homes are sometimes more illiquid than others. That's why, for those of us who haven't lost our jobs, we didn't speculate in the housing market by leveraging ourselves into further illiquidity. But, this is why we have personal, economic bankruptcy and social safety nets. Let's not screw up the entire backbone of our economy (no matter the current pain) by mixing social policy with economic policy. ...Let's save the poor buggers who have been caught economically by getting them into an apartment, and let's put the safety net out for those that have lost their jobs. This is the way to go. This is how to spend money wisely. This will allow the housing market to clear itself and to find that rational equilibrium that the unobstructed pricing mechanism brings and which is naturally followed by job growth as only the productivity-seeking, free enterprise system can produce quickly and in vast numbers. While, at the same time, we can spend money where where it is most needed, first in the hands of the unemployed, and then in the hands of the poor, real estate speculators with not enough money to get an apartment. It will cost us all a lot less to do it this way and we can all feel alot better about it than if we were to say that we are doing something to help "homeowners" and the economy.
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The disaster came from lending policies not based on a down payment and an ability to pay. I would add those who purchased a home without 20% down and at least one year of living expenses secured in case of job loss, illness, divorce or I saw in an earlier comment deportation of an illegal spouse, were living in a tulip bubble expecting home prices to go up endlessly. Every mortgage broker, realtor, and banker knew that regular increases in home values cannot be sustained.
I believe our country put too much money into personal residences instead of making productive, long term job producing and educational investments. The jobs building a house end when the job is finished. The investment building a factory or improving the job skills of workers may continue and provide for our country's future.
A bailout that does not refocus home mortgages on smaller homes with larger down payments and smaller amounts of guaranteed loans would have prevented the current collapse. However politics offers a brass ring. We will bail out homes that should not have been mortgaged for people who should not have been given a loan. The prices of homes will go up. The economy of our country will go down.
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This bail out does nothing for me. I put 56 K dollars down on my house in Redmond in June 2006, and upgraded the house with hardwood floors, lighting fixtures and a garage door opener. I bought it at 20K under appraised value of 280K.
Having determined that I was not happy in the desert, I put the house on the market in 2007, with no takers, no visits.
I then found a "lease to purchase " agent, who took over the house, and contracted to buy the house at 289,900 in November 2008. I moved to Eugene in September 2007. and because the house was taken care of, bought another house in Eugene.
For various reasons including the agent disappearing with the funds, the house is no longer under contract, nor was it even rented past September 2008. It was not rented by an agent, and so far, I got one offer for 130K. That is half of what I paid for the house less than two years ago, and 40K lower than the recently appraised value. There are too many vacant houses there.
The bailout does not cover a house if it is not your principal home.
I didn't intend for this to be an investment, I could not sell it. I supported it for several months, until I lost my job. I now make about 1/3 what I made last year, in construction recruiting, so I cannot pay two mortgages, health insurance to OMIP and pay for my medicines, car payment and groceries.
I did everything right, but I face financial ruin over the decision to buy a house in Redmond Oregon at the end of the 20 year boom.
Even if the first mortgage holder accepts the ridiculously short sale, the second says they will sue me for the 17K I owe them.
At 64 years old, I won't live long enough to pay that off at the rate I am earning money. In this economy I do not see any way out.