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Homeowner bailout is a lousy idea


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#31 SemiBizz

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Posted 06 December 2007 - 10:54 PM

Only way to have one of those loans is if you can write a check to them for the balance... just like a credit card incentive.
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#32 *JB*

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Posted 07 December 2007 - 01:49 AM

Wow! fixed? I, of course assumed they were adjustable. And these people were not told of the jack up in rates after a year when they signed? Incredible. This is a different bird altogether. This is, of course, fraud and will end up probably as class action suits in court.

Then the question arises, who services the mortgage? (I assume the 3-card monte lenders are already out of business). Freddie? Like they aren't already in deep doo doo.


Yeah --

Most of what I'm talking about is fixed interest rate schedules. 1st year X%, 2nd year X%, 3-30 Z%...or many other variations.

For MANY, they were told -- repeatedly -- that the value of the RE would jump so high, they could refinance to a "regular" fixed rate mortgage based on equity gained in a year or so...like letting the house make the down payment.

In Florida, the flippers assumed a 6 month turn around. The "buyers" the same as above.
The phrase I heard in most of the Florida ads and "real estate shows" (1/2 hour radio time bought, like Wade Cook did) was "Control $200,000 in real estate for only $500 a month" -- or some other figure).

Greed -- and "20-30% jumps in value will keep going forever" -- was the thing that blinded them to realities and the risk. (Risk, what risk??)

The real issue is what went on to get them qualified. I think that is where the fraud/colusion/payoffs/corruption took place. I do know a lot of these brokers took in a lot of money, bleed it off somewhere else, and then just went out of business...no assets left, no one to sue.
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#33 OEXCHAOS

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Posted 07 December 2007 - 07:46 AM

NAV, a couple of things. A ) crazy real estate markets, like CA are a different story no matter how you slice it. There's a culture of real estate speculation, if you ask me. B ) I still don't think most of those folk on the cocktail circuit REALLY understood how those rates were going to go up on those ARMS. C ) you are significantly more intelligent and resourceful than the average ARM borrower. By significantly, I mean more so than 99.5% of them. Mortgages are supposed to be simple for simple people. They always have been. They aren't any more. But folks still have a presumption of safety when talking to a bank or a bank like lender. I think that there's an obligation to treat them no worse than a stock broker would, and HE's liable to fully indemnify their account if he suggests something wholly inappropriate for the customer's sophistication level. And, having been in that business, I can tell you, IT'S A GOOD THING. I can't see how debt should be treated any differently. Mark

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#34 mike123

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Posted 07 December 2007 - 08:09 AM

Paulson is not bailing out the home owners!!! It is the mortgage bankers and wallstreet firms they are bailing out. If you owe 30% more than the house is worth now. You should get out.

#35 OEXCHAOS

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Posted 07 December 2007 - 09:40 AM

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.


Millbank, it's not the ADJUSTABLE part that's the big problem *(though it's bothersome to me). It's the hidden teaser rate. Folks have no idea that the reset rate is not at all related to the changes in the rates they are watching. They think that they can watch rates and if they start going up they'll refi. They don't realize that if rates fall, they almost assuredly STILL have to pay more in a couple years.

Believe me, this is not being fully disclosed if my experience is any guide.

These products are more like complex investment vehicles for the consumer than straight forward home loans. They should be treated as such.

Mark

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#36 NAV

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Posted 07 December 2007 - 10:17 AM

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.


Millbank, it's not the ADJUSTABLE part that's the big problem *(though it's bothersome to me). It's the hidden teaser rate. Folks have no idea that the reset rate is not at all related to the changes in the rates they are watching. They think that they can watch rates and if they start going up they'll refi. They don't realize that if rates fall, they almost assuredly STILL have to pay more in a couple years.

Believe me, this is not being fully disclosed if my experience is any guide.

These products are more like complex investment vehicles for the consumer than straight forward home loans. They should be treated as such.

Mark


Mark,

I agree there were many folks who did not understand these exotic loans very well. But i personally know a whole lot of folks who knowingly abused it and it only brings outrage in me, when i see them getting bailed out for anywhere ranging from financial imprudence to outright abuse/fraud.

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#37 milbank

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Posted 07 December 2007 - 10:45 AM

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.


Millbank, it's not the ADJUSTABLE part that's the big problem *(though it's bothersome to me). It's the hidden teaser rate. Folks have no idea that the reset rate is not at all related to the changes in the rates they are watching. They think that they can watch rates and if they start going up they'll refi. They don't realize that if rates fall, they almost assuredly STILL have to pay more in a couple years.

Believe me, this is not being fully disclosed if my experience is any guide.

These products are more like complex investment vehicles for the consumer than straight forward home loans. They should be treated as such.

Mark


Mark,

I agree there were many folks who did not understand these exotic loans very well. But i personally know a whole lot of folks who knowingly abused it and it only brings outrage in me, when i see them getting bailed out for anywhere ranging from financial imprudence to outright abuse/fraud.


I'm not a real estate pro Mark so my specific terminology might be off but, adjustable rates are adjustable and fixed are fixed from the beginning of the loan to the day it is paid off in my book.

Like you said, "These products are more like complex investment vehicles for the consumer than straight forward home loans." I feel this way about any and all adjustable rate loans and further feel they should not be made available for home mortgages.

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