Re-negotiating ARMs would not be "Bailing Out" Homeowners

[shugah]

I've been reading the threads about so-called 'bailing out' people who are facing dire circumstances because of predatory lending practices. I'll go ahead and do my best to keep a lid on my horror regarding some of the posts I've read that suggest "just desserts" and only suggest that a helping hand to those who purchased homes - responsibly or irresponsibly or whatever you think regarding those facing foreclosure now - will help everyone. Even the @#$%^&*^ financial organizations that now hold the debts.

1.8 million (estimated) foreclosed homes does not benefit anyone. (If you disagree with that basic sentiment, please do not bother reading further.) It causes inestimable damage to the people who are foreclosed upon, it doesn't replenish the coffers of the financial industry - in fact, it causes them huge, possibly insurmountable, losses - it doesn't help homeowners who are not personally invested in this bursting of this "housing bubble" as it drives the value of their homes down.

Use of the term "bail out" for the homeowners currently facing foreclosure because of the predatory lending practices of ARMS and interest only mortgage loans is not an accurate way to portray a helping hand to the average American who is in this situation. No one is suggesting that these people should now get their homes for free.

How about the lenders that were so happy to provide unrealistic mortgage loans to these people now provide fixed rate loans at the same rate the homeowners have been paying for the initial "tease" period of their loans - even if it means extending the loan from 30 years to 40? If the buyers have managed to pay $1500 per month for the 2 or 3 or 5 year period of the unadjusted interest rate, it's very likely that they can continue to make that same payment.

Does anyone doubt that the lenders will be "bailed out" in the truest sense of the phrase? The fed has already done, and continues to do all it can to keep the market from crashing - Countrywide is gone, but Bank of America isn't going anywhere. In fact, it's appalling how well the financials are doing while your neighbors get put out of their homes.

Re-negotiating the ARMS is the best possible solution for everyone. The people who really wanted to buy a home will be able to stay put - go ahead and picture those happy and relieved families all 'round the xmas tree celebrating that they get to keep their home, and own it eventually too!- the lenders, or the institutions that now own the debt will be assured of continuous income - even if it is not at the high levels necessary to truly satisfy their need for money money money - and will not be holding 1.8 million empty homes. and the "sensible" "responsible" home buyers/owners will not watch their property value plummet.

So, I know that the gov't will bail out the banks/lender/financials that have knowingly, and with malice aforethought, caused the current real estate crisis. I know that the gov't has no interest in bailing out the actual people suffering because of the current real estate crisis. But, I maintain that a helping hand to those facing foreclosure will help everyone.

[Adsos Letter]

1. while a plea for "compassion" may fall upon deaf ears...

...an appeal to the self-interest of the "responsible" homeowners, as you suggest, may be the most effective.

[shugah]

3. my appeal is to the greater good of everyone

my compassion is to everyone who was hopeful/optimistic about the "american dream."

[HughMoran]

2. Stop making sense

Don't you know this site is for those that use the phrase "pick yourself up by your bootstraps, you lazy poor person"

:eyes:

[shugah]

7. i know, i know

we're in the "bootstrap mortgage" phase of our economy!

[JuniperLea]

4. I don't think you get it...

The sub-prime loans were sold to investment companies with the promise that the earned income would grow exponentially once the adjustments kicked in. There are right now people who are fighting, and winning, in their foreclosures because the banks cannot prove they own the properties. They don't own the properties because the loans were sold.

The banks will fight renegotiations because they 1) don't own the loans, and 2) they have made promises to others that hinge on actually raking in the higher interest payments.

It's stupid all around. If something looks too good to be true, it probably is too good to be true.

So, I tell a bank that I make $100k a year, when in reality, I make $50k. Don't you think the bank is going to get the money you promised to pay them anyway? And don't you think the investment companies will have the banks over the barrel too because the banks can't come up with the money they promised?

This isn't about picking on poor people. This is about being fiscally responsible.

[Adsos Letter]

5. It's true...

...which is why I think the OP's appeal to the self-interest of the fiscally responsible homeowner is likely to bring the greatest result.

[shugah]

6. yes, i do get it

the investment companies that bought the loans with the "promise" etc. etc. were certainly more stupid than the saps that took out the loan in the first place, right?

either the loans are good for those that bought them, or not. if the individual home buyer is so totally responsible, then what about your investment company that bought the debt? huh?

[JuniperLea]

9. It's just plain stupid to buy more house, car, or anything else

Than you can afford.

So far, the investment companies are coming out on top. And they aren't "MY" investment companies. I didn't make the decision to create such a stupid investment vehicle!

Everyone is stupid in this. Everyone. What I'm saying is that there isn't a chance in hell that it's fair to bail people out of home loans for houses they should have never bought. Why should they be rewarded with this uber cool home at discount prices? Why shouldn't they be forced to sell and allowed to buy something that actually fits their financial situation? What is so wrong with that? It's the fair thing to do. It's the right thing to do.

[shugah]

8. i don't think you get it

none of your financial institutions will fare any better than the "poor people" you think are being picked on.

the best case scenario - re-negotiate the sub-prime loans to fixed rate mortgages (even for 40 years instead of the traditional 30 year) - home buyers win, lenders win, home owners win!

i dunno - are you one of those "just desserts" folk? :shrug:

[JuniperLea]

10. Why should fiscal irresponsibility be rewarded?

Why should those of us who were smart in our home investments have to settle for what we can afford instead of what we could afford based on lies about our income? What is so wrong with someone living within their means and being fiscally responsible? Why is it fair to the rest of us that stupidity be rewarded with awesome homes out of our league?

[Lance_Boyle]

11. Do contracts mean NOTHING anymore?

When a person signs a contract they are legally obligated to uphold it. In the case of a mortgage, if the purchaser is unable to uphold his/her end of the contract, the appropriate remedy is foreclosure, not rate "re-negotiation."

[DadOf2LittleAngels]

12. ARMS are not hard to understand

They tell you this is the rate, this is how much it can go up a year, and this is the highest it can go. I took a higher fixed than an ARM because I read up on it.

That being said: There have been whispers the 'bailout' will take the form of a rate hike freeze on some home owners, this IMHO would be a good way to do it. But kids usually learn the concept of hot when the stick food in their mouth before it cools (almost always after being warned) people learn from consequences.

Right now I'm in a bit of financial trouble and *boy* have I learned allot, lord willing Ill survive it. But if two months ago the bail out fairy gave me a pass on my debt I would have learned little.

Freeze rates for a set time (12-18 months) but we cant just let stupid borrowing (and stupid lending) fly..