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Homeowner bailout is a lousy idea


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#11 mike123

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Posted 06 December 2007 - 07:29 PM

You got it right! Most people don't realize what they are getting into. It was a scam. CFC CEO should be sent to jail. Don't know who is going to pay for the rate freeze. Don't think Paulson is going to ask CFC or GS to pay for it. Most likely investors or tax payers. Just did some reading. Looks like they want investors to take all the hit. Mortgage companies and wallstreet got off free. They also want congress to pass law so that local government can issue bonds to refinance these mortages. How nice Paulson! Investors and tax payers takes the hit and mortgages bankers took all the profits.

#12 Sentient Being

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Posted 06 December 2007 - 07:31 PM

When you are at historically LOW rates, and you are taking out a loan that can go up in a few years if rates go up......how can someone NOT expect their mortgage to go up? It was very clear all along that these teaser rates would most likely give way to much higher rates. Which is why (when My wife and I refinanced), we took the historically low FIXED rate and stayed far away from ARM's.
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#13 SemiBizz

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Posted 06 December 2007 - 07:32 PM

What if mortgage rates just started dropping now and went to the 4's ??? That's what I think can happen.
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#14 ed rader

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Posted 06 December 2007 - 07:35 PM

What if mortgage rates just started dropping now and went to the 4's ??? That's what I think can happen.



then i'll re-fi, pay off half my loan, and take a 15-year fixed on the balance :D .

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#15 mike123

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Posted 06 December 2007 - 07:35 PM

I think most people don't get the point of the bailout. It is not designed for these subprime home owners. It is designed to save the mortgage bankers and wallstreet firms. Paulson or BUSH couldn't care less about these poor people. We now have a happy ending and all the scam artists get off free. No fines, no jail time, not even CFC CEO.

#16 OEXCHAOS

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Posted 06 December 2007 - 07:37 PM

What if mortgage rates just started dropping now and went to the 4's ??? That's what I think can happen.


If an ARM's holder is lucky, he might pay about the same in 4 years...maybe.

As I said, nobody ever mouthed the word teaser rate. I'm sure a ton of folks were sitting there with loans figuring that if rates went up much, they get a fixed rate, or deal with the modest increase when it showed up. They in no way expected a 2-3% point jump. I'm sure of it.

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#17 SemiBizz

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Posted 06 December 2007 - 07:44 PM

The Feds can cap rates if they really want to. I don't see any way to stop them from doing it, especially considering what is at stake... like our country.
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#18 ed rader

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Posted 06 December 2007 - 07:49 PM



What if mortgage rates just started dropping now and went to the 4's ??? That's what I think can happen.


If an ARM's holder is lucky, he might pay about the same in 4 years...maybe.

As I said, nobody ever mouthed the word teaser rate. I'm sure a ton of folks were sitting there with loans figuring that if rates went up much, they get a fixed rate, or deal with the modest increase when it showed up. They in no way expected a 2-3% point jump. I'm sure of it.

Mark


Mark -- these people expected their homes to double in price in 2-3 years and to either sell or re-fi at a lower rate. they were panic buying in this area.

the same folks couldn't afford the same home when it cost half as much so you can't tell me that they were suckered.

they knew they couldn't afford the home....especially after the price had doubled.

i'm really surprised at what you are saying.

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Edited by ed rader, 06 December 2007 - 07:50 PM.


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#19 paulstan

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Posted 06 December 2007 - 08:08 PM

Something I don't see in most discussions on this: The "rate freeze" assumes that the home owner wants to stay in the place -- will that be the case when the home owners realize that they're effective debt slaves to a house with upside down value? I suspect many will choose to walk away rather than service the debt. After all, many have little or no real investment at risk.

#20 milbank

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Posted 06 December 2007 - 08:20 PM

A lot of good stuff here.
I will just add what I said on NAV's thread last weekend, I think Adjustable Rate mortgages should be banned. While there are some good uses for them, and if rates are dropping, it could be a boon to the mortgagee, overall, I don't think the average investor understands the gamble he's taking. Everyone who takes out a mortgage on a fixed rate takes the gamble that their ability to pay it will stay the same as it was at the time they took it. To add the added layer of chance with ARMs is, in my opinion, to much. ESPECIALLY with a sub-prime borrower.

The bottom line is, as far as the domestic mortgage crisis goes, all we are going to get are Hobbesian choices.
While the politicians say they won't and may not directly raise taxes to pay for this, to think that tax payers won't be paying for this is naive.

The main show, the one that hasn't really showed up on Main St. yet but, is slipping into town, any town on the planet as we speak, is on the other end of the crisis's spectrum. The ABP plague, CDO's etc. and the havoc on a much larger scale of money and damage that will produce.

Edited by milbank, 06 December 2007 - 08:24 PM.

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