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Thread: hopefully you were smart enough to buy a house that you couldn't afford ...

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    Banned Melonie's Avatar
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    Default hopefully you were smart enough to buy a house that you couldn't afford ...

    ... because it appears the US gov't is preparing to make the next 5 years worth of mortgage payments for you (at a cost to US taxpayers of $50,000 for EACH underwater homeowner)


    (snip)" FDIC Finalizing Direct Home Loan PlansFDIC Finalizing Direct Home Loan Plans: WSJ
    By Reuters
    Reuters
    | 30 Apr 2008 | 05:59 AM ET

    Federal Deposit Insurance Corp Chairman Sheila Bair is finalizing a legislative proposal that will let the Treasury Department issue direct loans for nearly 1 million homeowners, in a move to prop up the housing market, the Wall Street Journal said on Wednesday.

    The plan, which needs Congress approval, would permit new government loans so borrowers can repay up to 20 percent of the principal they owe on their mortgage, the report said, citing
    confidential draft of the proposal.

    Though borrowers would not have to make any payments on the Treasury loan for the first five years, they would still be required to pay off the mortgage and loan, the report said.

    The FDIC has calculated that it would require a $50 billion public debt offering to modify 1 million loans, the Journal reported.

    An FDIC official was not immediately available for comment."(snip)

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    Veteran Member TheLioness's Avatar
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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    Hmm...I have my doubts that even this plan would work. I personally know the clerk of court in my county, and he says that mortgage companies/banks try their best to work with homeowners who are facing forclosure and most of them would just rather forclose than have to actually work to keep their house. Still sucks that they're using our tax money for this. No offense to anyone going through forclosure.

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    God/dess Paris's Avatar
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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    I would argue that the vast majority of homeowners cannot afford to "own" their homes. If the median home price is in the $300K range, and family would have to earn over $75K a year to afford the payments of a 30 year fixed mortgage. That means that only 25% of the population can reasonably afford a median priced home.

    I see this as a propping up of the real estate market, not a "bail out" of homeowners that bought too much house. Unless the problem of an overpriced housing market is fixed we are going to be right back here in a short amount of time.


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    Banned Melonie's Avatar
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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    ^^^ all true about 75% of Americans living in houses that their current incomes cannot afford. However, the facts of this bailout plan remain ...

    No matter how X number of homeowners managed to obtain financing to purchase a home that they couldn't afford, the fact remains that they are living in those homes. Under the terms of this proposed bailout plan, the federal gov't via whatever GSE is made responsible for the bailout implementation, 50 billion dollars of (additional) tax money will be transferred from higher earning Americans and used to ...

    A - subsidize a refi loan for the underwater 'subprime' homeowners
    B - allow those homeowners to continue living in their unaffordable houses for the 5 year duration of the bailout plan anyhow
    C - stiff the (mostly foreign) investors who initially ponied up the money with which the banks made the 'subprime' loans
    D - postpones eventual foreclosure by the 5 year duration of the program

    in other words, if this bailout program flies, it will establish a de-facto 'right' of home ownership regardless of actual ability to pay.

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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    If it goes through, it will merely lighten the curve of descent.

    In the end, people have to be able to afford the house, no matter what you do for them.

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    Banned Melonie's Avatar
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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    ^^^ not if politicians establish new programs which de-facto require higher skill higher earning 'neighbors' to not only make their own mortgage payment but the mortgage payment for their 'troubled' neighbor as well !

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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    Quote Originally Posted by Melonie View Post
    ^^^ not if politicians establish new programs which de-facto require higher skill higher earning 'neighbors' to not only make their own mortgage payment but the mortgage payment for their 'troubled' neighbor as well !
    Those programs will have no endurance. Sooner or later they are going to run out of first time buyers who cannot afford to get into the game (which some state is a major problem with the housing market lock up we are in right now.)

    Plus what politicians talk about and what they do often is not congruent.

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    Banned Melonie's Avatar
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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    ^^^ agreed on the door being closed in regard to new first time buyers being able to afford getting into the game. Recent tightening of lending standards by regulators and financial institutions has now set a much higher hurdle for new mortgage approval. Besides a 600+ credit rating the would-be buyer also needs to be able to prove income, needs to cough up about 25% of the purchase price between down payment + closing costs + fees, needs to have a level of income that calculates out to mortgage payment + property taxes + insurance not exceeding 33% of gross income, etc.

    However, that does not alter the apparent fact that the US gov't is committed to a course of action that intends to subsidize already existing 'subprime' mortgage homeowners to the point where they can continue living in their house, they can continue making 'teaser' monthly payments versus payments that would actually amortize their mortgage debt etc.

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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    Not to mention, that in this market, or at least generation, there is more evidence that just because you make 75k today, doesn't mean you will or CAN make that much in 1 - 2 years.
    People are not ruled by their memories.

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    Default Re: hopefully you were smart enough to buy a house that you couldn't afford ...

    Quote Originally Posted by Mastridonicus View Post
    Not to mention, that in this market, or at least generation, there is more evidence that just because you make 75k today, doesn't mean you will or CAN make that much in 1 - 2 years.

    Isn't that the truth. It seems that jobs are getting ever more flaky and unreliable. People are required to move ever more often in their life times.

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