<p><a href=“Subprime bailouts would get costly - Apr. 13, 2007”>Subprime bailouts would get costly - Apr. 13, 2007;
<p>This report makes me thinking, if I stop paying my mortgage, may be I could qualify for some of the $120B assistance money?</p>
<p>Why should we who save our …off pay for those who buy house bigger than they could afford?</p>
<p>I’d go for that! lol</p>
<p>I wouldn’t want any of my tax dollars going to this. Way too many people have over-extended themselves in this country and leveraged to the max so they can have their ‘things’. Others are more fiscally responsible even if it means not having so many ‘things’ and toys. I don’t see any reason why the latter should bail out the former.</p>
<p>This proposal is a slap in the face to everyone who has struggled to make their mortgage payments in full and on time, even when it meant going without furniture, new cars, and in some very lean months owing to unexpected events such as illness etc. even going without enough groceries…</p>
<p>You guys are rough – I think the proposal targets people who were duped into misleading loans by unscrupulous sub-prime lenders. </p>
<p>(citing from the article) Many of those borrowers were put into loans with low teaser rates that are now adjusting upward, sometimes doubling their monthly mortgage payment. Consumer advocate groups say those loans, with steeply rising payments, were pushed on borrowers who didn’t understand the terms. Advocates say a government bailout, even a large one, is appropriate because regulators didn’t do enough to stop predatory lending, and because of the high cost of foreclosures. "</p>
<p>From the cited article:
There appears to be evidence that many of those who have sub-prime mortgages are not those who were “over-extended… and leveraged to the max so they can have their ‘things’.” Instead, as noted in this NPR (link to written piece, not audio clip) [background</a> piece](<a href=“http://www.npr.org/templates/story/story.php?storyId=9085408]background”>www.npr.org/templates/story/story.php?storyId=9085408) on the sub-prime lending crisis:
A chart in this article notes that sub-prime loan refinancing accounted for 49.3% of refinancing loans made to blacks in 2005, 33.8% of those made to Hispanics, and 21.0% made to non-Hispanic whites. </p>
<p>Another NPR story (link to page offering audio link) talks about a [possible</a> upside](<a href=“http://www.npr.org/templates/story/story.php?storyId=9469959]possible”>www.npr.org/templates/story/story.php?storyId=9469959) to some of these lending practices in the recent past:
</p>
<p>I don’t claim to know yet what I think the best response to this crisis is, and am not a supporter of bailouts, but I think it’s important to note that it’s not just high-spending big-rollers with lots of toys who have fallen under this dark cloud.</p>
<p>(Edit: katliamom, I see we cross-posted)</p>
<p>That does make a difference, but still, what about the very, very basic and universally understood concept that adults should not sign contracts that they do not fully understand? </p>
<p>Who here rushes through signing legal documents for something as critical as a house if you don’t understand what you’re doing? And if you have questions, don’t you consult a trusted friend, or a spouse, or some other adult if you cannot afford a professional such as a lawyer or an accountant?</p>
<p>Interesting that the default rate is HIGHER in the suburbs around Baltimore than within city limits according to the past weekend’s Baltimore Sun…</p>
<p>“Many of those borrowers were put into loans with low teaser rates that are now adjusting upward, sometimes doubling their monthly mortgage payment. Consumer advocate groups say those loans, with steeply rising payments, were pushed on borrowers who didn’t understand the terms.”</p>
<p>Then why not make the lenders pay? They’re the ones who profited from any wrongdoing. The government has the power to cap the adjustable rates on a class of existing mortgages if it finds the rates unconscionable. Presto, the payments stay low and the bailout money comes out of the lenders’ pockets. Why isn’t that a better solution than redistributing taxpayer money to the predatory lenders who (according to the theory) caused the problem in the first place?</p>
<p>^^ The lenders do end up paying if the loan defaults. Some of these lenders are already in trouble and I imagine more of them will end up reconsidering the qualifications of the borrowers when approving loans.</p>
<p>I’m with latetoschool - anyone entering a contractual agreement as significant as a home loan should either understand the basics of the loan agreement (and it’s really not that complex) or seek help before they sign.</p>
<p>I agree with the OP and most of you. I’m tired of bailing out those who think they deserve to live above their means. Sure, some may have been swindled. Most, I’d bet, are the same folks who are over their heads in credit card debt and who have entertained (if not acted on) filing for bankruptcy while enjoying new clothing, furniture, etc. For those of us who do pay our bills, live within our means, etc…it gets old.</p>
<p>And the real estate attorneys who handled our closing wondered why DH insisted on reading the loan docs, etc. IN ADVANCE of settlement!!!</p>
<p>This whole sad saga illustrates how the deck of life is stacked against the dull and the ignorant.</p>
<p>Talk of a government rescue is just talk; I’ll be shocked if anything beyond legislative window dressing gets passed. There’s already a “truth in lending” that tries to explain loan terms language the unsophisticated can understand; I really don’t know what more you can do.</p>
<p>The conventional wisdom was that banks lose a lot of money when they have to foreclose. In recent years, though, many banks were essentially processing loans, and them packaging them for resale in the financial markets.</p>
<p>Not only ‘ignorant’ but also greedy. I don’t believe that all of the borrowers currently in trouble are in their situation due to being taken advantage of by the lenders because they’re unable to comprehend the rates and terms. Many of them wanted a bigger house, wanted to by a couple of Lexuses, wanted the RV, wanted the expensive lifestyle, and therefore leveraged themselves beyond their means and are now going to have to live with the results.</p>
<p>The ‘victim’ mentality doesn’t fly with me on this one.</p>
<p>I think that we can take the empathy for low-income buyers a bit too far. I disdaiin the predatory lenders as much as the next guy. I know that they can “gloss over” the fine print. Despicable.</p>
<p>However, I don’t think we need to tar all low-income folks with the “stupid” brush. Not reading the fine print on loan documents is rampant. But it takes only basic common sense to ask a few simple questions: how high can this interest rate go? What is the highest my payment can go? There are simple answers to these and a few other simple questions. If a person just doesn’t ask these questions, unless they are actually mentally-challenged in some way, I’m not sure that they are totally victims in the process.</p>
<p>Sometimes people just don’t want to ask. They like that they can suddenly qualify for more home than they thought. They avert their eyes and figure that “somehow it will all work out.” </p>
<p>Full disclosure: the significant other of one of my close relatives is one of these types who has come “this close” to foreclosure a number of times. She is neither a low-income person, nor a rich spoiled kid (adult) who has the Lexus and all the toys. What she is is someone who chronically overspends her means, and is focused on “wants” way more than needs. I don’t want to bail her out.</p>
<p>On principal, I agree that people should not be rewarded for their stupidity or short-sightedness.</p>
<p>On the other hand, I wonder if there is enough of a potential problem with foreclosures that would result in a significant price drag without some sort of intervention.</p>
<p>According to the article more than 1 in 75 homeowners will be affected over six years. (There are about 73 million homeowners in the US by other sources). I’d like to see some costs-benefits analysis around this too. We’re not in a position right now to afford to err on either side.</p>