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Aaron747
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Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 1:59 am

From the same President who nudge-nudgingly advocated amnesty for illegals, now we have amnesty for people who haven't been able to take full responsibility for their financial situation. Is this any surprise from a leader who never kept a business solvent? I can't believe the more sensible heads in the Republican party are allowing this nonsense! It's an insult to people who 1) pay their bills on time 2) live within their means and 3) chose fixed-rate mortgages despite somewhat higher rates because they knew they could pay.

The homeowners' rescue plan proposes all kinds of market intervention, including the federal government's time-honored recession-avoidance favorite: rate-fixing. News for all in Washington who failed to either run businesses or sit through one macroeconomics course: recessions are natural corrections necessary for any healthy economy. Staving them off does far more damage than prolonging their onset. Please tell me I'm not the only one who has a huge problem with this precedent!

Among other things, the plan:

includes an agreement, brokered by Bush administration officials, between the loan servicers who would administer a rate freeze and the investors to whom the mortgage debt has been sold. The agreement sets conditions under which rates on certain loans could be temporarily frozen. It isn't binding, but because it has the support of major investors, it is expected to give loan servicers much more flexibility to quickly rework some loans and direct other borrowers toward refinancings.

The plan comes as anxiety grows about the economy generally and the troubled housing sector in particular, and becomes an issue in the 2008 presidential race. The stakes are particularly high for the White House, which could shoulder the blame if the mortgage turmoil is seen as tipping the economy into recession. Interest rates on 1.5 million mortgages are expected to reset higher next year, creating a drag on the economy. Already, foreclosure problems are contributing to waning consumer confidence and worries about falling real-estate values.


...

Mr. Bush is focused primarily on helping homeowners, not lenders or speculators. The plan would stave off foreclosures for people who are making mortgage payments on time, but who will be overwhelmed when the low, introductory interest rates on their mortgages go up, and who don't have the cash or home equity needed to refinance. To screen out speculators, owners would have to live in their homes.

The plan applies to loans originated between Jan. 1, 2005, and July 31, 2007, that reset between Jan. 1, 2008, and July 31, 2010. Office of Thrift Supervision Director John Reich said this week that the plan could help "tens of thousands" of homeowners.

For other borrowers who are in somewhat better shape, the White House also wants to speed up refinancings, through the Federal Housing Administration and other sources.


http://online.wsj.com/article/SB119688188491114732.html

Expanding government to no visible end, aiding and abetting irresponsible behavior on the part of both consumers and lenders...you just have to love the fiscal responsibility being exercised by this White House.

A few salient points for the PotUS and his team:

"You're just giving the junkie more dope," says Christopher Whalen, managing partner with Institutional Risk Analytics, a consulting firm.

Is this simply prolonging the pain? "Some people who would qualify for this supposed assistance are probably better off defaulting," Whalen says. "The redefault rate for mortgages that are changed or modified is 30 to 40 percent. These banks continue to extract as much cash out of the borrower as they can, then they do default."

If they paid an inflated price, can barely make the payments and now owe more than their house is worth, "Are we really helping them?" he asks.

Why help only one group of borrowers? Is it fair to freeze rates for borrowers who took out loans they could not afford if rates went higher, but not help borrowers who took out loans they could afford if rates went higher? Isn't that rewarding gamblers and penalizing the more prudent?

"This strikes me as not very equitable or sustainable," says John Shoven, a professor at the Stanford Institute for Economic Policy Research. "The boundary is going to keep moving. People just on the other side who can't get help will raise a stink. I don't know how you hold that line."

Will this make it harder to borrow in the future?

"The American way is, a deal is a deal. Not a deal is a deal until it hurts and then we'll change it. If the government forces one side to break a contract, it could easily have unintended consequences. Lenders might not be there the next time," Shoven says.

Are we emulating Japan? Starting around 1990, Japanese banks kept bad loans on their books, which prevented them from making new loans. This led to a decadelong economic malaise.

"The concept of forcing (U.S.) banks to keep bad loans on their books violates every precept of regulation in American banking. Bad loans must be taken off the books to allow good loans to be made. Forcing banks to keep bad, low-return loans on the books is something that the banking regulators have never done," writes Dick Bove, a bank analyst with Punk Ziegel. "Bad loans must go bad."

Let's be honest about ARMs. Adjustable-rate mortgages are tied to short-term rates and reset at various intervals. They start out at lower rates than fixed-rate mortgages. In exchange for the lower initial rate and payment, ARM borrowers take the risk that if rates go up, their payments will go up.

People choose ARMs because they are gambling that interest rates won't go up or because they can qualify for a bigger mortgage with an ARM than a fixed-rate mortgage. That lets them buy a larger house or take more cash out of their existing house.

Many people who are now facing painful payment increases had the misfortune of taking out ARMs when short-term interest rates were near all-time lows.

They should have known the odds of rates going up were high. Many were led to believe that if rates went up, they could refinance into a fixed-rate loan (assuming they qualified at that point) or sell the house and pay off the loan (assuming housing prices didn't collapse.)

Were some misled? Undoubtedly. Suing or prosecuting brokers or lenders who made false statements seems like a better remedy than a blanket rate freeze that treats all lenders and borrowers the same.


http://www.sfgate.com/cgi-bin/articl.../MN0RTONT8.DTL&type=business&tsp=1
 
halls120
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 2:16 am



Quoting Aaron747 (Thread starter):
I can't believe the more sensible heads in the Republican party are allowing this nonsense! It's an insult to people who 1) pay their bills on time 2) live within their means and 3) chose fixed-rate mortgages despite somewhat higher rates because they knew they could pay.

Yes, it is an insult. But given that we are in the midst of an election, and states like California, Florida and Michigan have the largest number of people affected by subprime loan defaults, are you surprised?

This is like the post-9/11 insanity, when the Bush Administration overreacted and created DHS, largely because of democratic pressure. Same thing is happening here.

Quoting Aaron747 (Thread starter):
Please tell me I'm not the only one who has a huge problem with this precedent!

You aren't the only one. This is not unlike the Chrysler bailout - not in scope or substance, but in appearance.
 
mt99
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 2:20 am

Well its not going to help a lot of people, since GWB gave out the wrong number

http://www.reuters.com/article/businessNews/idUSN0623644320071206

""I have a message for every homeowner worried about rising mortgage payments: The best you can do for your family is to call 1-800-995-HOPE," Bush said after a White House meeting with administration officials and lenders on a new plan to help.

Unfortunately he was a couple digits off, it is actually 1-888-995-HOPE (4673). "

Who need writers for late night shows? You cant make up stuff like this!
 
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tb727
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 4:31 am



Quoting Mt99 (Reply 2):
Well its not going to help a lot of people, since GWB gave out the wrong number

I think he was hoping people wouldn't figure out the real number to call.

Another day, another sigh.  Sad What has happened to my country?


To borrow a quote from a favorite movie of mine, Tommy Boy, GWB, Let's say the average person uses ten percent of their brain...how much do you use? One and a half percent. The rest is clogged with malted hops and bong resin.
 
deltagator
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 5:00 am



Quoting Mt99 (Reply 2):
1-800-995-HOPE," Bush said......Unfortunately he was a couple digits off, it is actually 1-888-995-HOPE (4673). "

So it's come down to making fun of the guy because somebody loaded the wrong number in the teleprompter? That's the straw you are grasping at now?  sarcastic 

Quoting Mt99 (Reply 2):
Who need writers for late night shows? You cant make up stuff like this!

Please keep your day job. If you think that was funny you suck at life.

Quoting Aaron747 (Thread starter):
I can't believe the more sensible heads in the Republican party are allowing this nonsense!

You're making the assumption that there are sensible heads in the GOP, or any party for that matter. It's all about buying votes through the release of various welfare programs. We're bringing up a country of non-responsible "blame everyone else" pussies and it pisses me off.

Quoting Aaron747 (Thread starter):
It's an insult to people who 1) pay their bills on time 2) live within their means and 3) chose fixed-rate mortgages despite somewhat higher rates because they knew they could pay.

I would agree 100% with that statement.

Quoting Aaron747 (Thread starter):
Is this any surprise from a leader who never kept a business solvent?

No be fair...the Texas Rangers may have sucked major ass while he was the owner but they are still around today though probably only because he sold them.  Wink
 
Alias1024
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 5:41 am

This isn't meant to help the average citizen. It is meant to buy the votes of the foolish, and help the banks that made the bad loans and still have them on their books. The rate freeze helps those banks in a couple ways.

First is that they can keep extracting money from borrowers who are in over their heads for another five years before foreclosing. Right now, some of these banks may be pushed near insolvency if they have to eat billions in bad mortgages. This rate freeze allows them to collect money from these bad loans for another five years so they can get their financial house in order before taking the hit from all their loans defaulting.

Second, the rate freeze will help reduce inventory in the housing market, bolstering housing prices, which the banks are hoping will allow them to foreclose when the house is worth more than it is now. This might be the only way in which some average people will benefit. If you are looking to sell a home in the next couple of years this rate freeze should help you get more for your home than you otherwise would have, assuming the credit market hasn't locked up to the point where nobody can get a mortgage.

Everyone else gets screwed out of this. The people in these mortgages will more than likely still lose their homes, but not until they have paid another five years of money to the bank. Investors who bought these loans get hosed because they don't get the money they are contractually entitled to. Responsible individuals get punished because they don't get access to the same low rates as the deadbeats. Finally, anyone looking for a loan gets hurt as this will tie up a lot of capital in bad loans which aren't paying much, reducing the access to capital for everyone.

Quoting Aaron747 (Thread starter):
It's an insult to people who 1) pay their bills on time 2) live within their means and 3) chose fixed-rate mortgages despite somewhat higher rates because they knew they could pay.

Absolutely!!!
 
Flighty
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 6:03 am



Quoting Alias1024 (Reply 5):
It is meant to buy the votes of the foolish, and help the banks that made the bad loans and still have them on their books. T

Correct. It's not like Bush gives 2 s-hits about the poor. Instead, this is meant as welfare to the large bankers, who have seen their cocaine budgets plunge under $7 million annually to under $4 million. Something must be done. And, it's this.  Smile
 
wingnut767
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 1:44 pm



Quoting Aaron747 (Thread starter):
From the same President who nudge-nudgingly advocated amnesty for illegals, now we have amnesty for people who haven't been able to take full responsibility for their financial situation

I agree with you on this but your attacks on Bush and the Reps is missing something. The Dems. Last I saw they control the house and the passing of laws and budgets. This is an equal oppurtunity vote grab by both parties.

My new home was bought with a fixed rate and two years ago and I mkae my payments. What do I get. Nothing except more wasting of my tax dollars.
 
L-188
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 2:30 pm



Quoting Halls120 (Reply 1):
But given that we are in the midst of an election, and states like California, Florida and Michigan have the largest number of people affected by subprime loan defaults, are you surprised?

Nope, this is a election year proposal.

Quoting Halls120 (Reply 1):
when the Bush Administration overreacted and created DHS, largely because of democratic pressure.

I blame the democrats absolutely for that abomination.

Quoting Wingnut767 (Reply 7):
The Dems. Last I saw they control the house and the passing of laws and budgets.

Great job they aren't doing either........they should have had some budget bills and haven't gotten any acceptable versions to the WH yet.

Quoting Aaron747 (Thread starter):
now we have amnesty for people who haven't been able to take full responsibility for their financial situation.

Ok, folks take a note, here we have a proposal that Aaron747 and I actually agree on......what a way to start a Friday morning!
 
LHMark
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 2:44 pm

If only it were as simple as irresponsible people deciding not to send their mortgage check. I'll bet, when a lot of these people bought those homes, they did not expect to run into this.

Ameriquest, once the largest subprime lender, was investigated and finally had to pay a settlement for:

• Charging consumers thousands of dollars in discount points that resulted in higher commissions for sales personnel but failed to yield a lower interest rate for borrowers;
• Concealing the interest rate and loan costs during the application process;
• Sending inaccurate "good faith estimates";
• Making misleading comparisons between borrowers' existing loans and Ameriquest's loan proposals;
• Falsifying loan documents to push through loans, including inflating borrowers' incomes;
• Pressuring appraisers to inflate the values of borrowers' homes;
• Closing loans before they were approved by the corporate office; and
• Failing to fund loans in a timely fashion.

They lied to customers about their mortgage rates, included documents which stipulated that variable mortgages were actually fixed rate mortgages (then shredded those documents after signing), then lied about these mortgages' viability and sold the debt. Fucking scumbags.

Incidentally, as a reward for his "contributions" the CEO was appointed Ambassador to the Netherlands instead of butt buddy of cell block #12.
 
cfalk
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 2:48 pm



Quoting Aaron747 (Thread starter):
From the same President who nudge-nudgingly advocated amnesty for illegals, now we have amnesty for people who haven't been able to take full responsibility for their financial situation. Is this any surprise from a leader who never kept a business solvent? I can't believe the more sensible heads in the Republican party are allowing this nonsense! It's an insult to people who 1) pay their bills on time 2) live within their means and 3) chose fixed-rate mortgages despite somewhat higher rates because they knew they could pay.

I agree 100%.

A friend of mine financed his home last summer, 100% debt. Nothing down, and mostly ARM (adjustable rate). He works in construction. I begged him not to do it, but his wife wanted that house. He'll be OK for now, but in a year or two when rates start going up again, he's going to be in the shitter. And it will be his fault.

My estimates are that interest rates will bottom out in 3-4 months, and I'll be refinancing my own mortgage at that time. Hopefully I can talk my friend into a fixed rate loan too.

But I also want to see some of these bankers put in jail. In fact, I want to see everyone who recommended, authorized, sold, or legalized ARMs, in banking and in government, pay a price in blood. ARMs should not exist, period.
 
mt99
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 2:57 pm



Quoting DeltaGator (Reply 4):
So it's come down to making fun of the guy because somebody loaded the wrong number in the teleprompter? That's the straw you are grasping at now?

I would think your comment would be valid if this was one of few "straws" GWB has to pull. But seriously, he has provided haystacks upon haystacks upon haystacks of "straws" to be pulled. This is just the latest.

I searched Google news and there is no mention of a "teleprompter malfunction." Can you please provide a link that mentions one?

Dont forget how e was unable to pronounce either "Olmert" or "Mahmoud" when making a statement from the MidEast Peace talks in Annapolis. (evil teleprompter again?). I know its silly - but - seriously makes him look "unprepared"

Quoting DeltaGator (Reply 4):
Please keep your day job. If you think that was funny you suck at life.

It provided a chuckle. Kinda like David Brent / Micheal Scott from "The Office"
 
MaverickM11
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 3:02 pm

This has to be one of the more immediate cause-effect relationships in the economy--a fix isn't needed; it was never a failure of the economy. People lent money they shouldn't have lent, they borrowed when they couldn't afford it, and they invested when they had no idea what they were investing in, and they all got screwed royally and quickly. It's not like the Venezuelan poor who will never make the connection between their vote for Chavez and their deteriorating standard of living ten years later after his policies inevitably implode; this was almost immediate, and to assuage the effects for irresponsible behavior will only increase the likelihood of it happening again.


But it is an election year so why am I not surprised.
 
deltagator
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 3:46 pm



Quoting Mt99 (Reply 11):
I would think your comment would be valid if this was one of few "straws" GWB has to pull. But seriously, he has provided haystacks upon haystacks upon haystacks of "straws" to be pulled. This is just the latest.

I'll grant you that between "strategery" and "won't get folled again" but this one isn't even remotely funny or even that stupid. He messed up a number that probably could have been screwed up by anyone. It just comes off as piling on for the sake of just piling on more and it doesn't do anyone any good.

Quoting Mt99 (Reply 11):
I searched Google news and there is no mention of a "teleprompter malfunction." Can you please provide a link that mentions one?

Lighten up Francis. I'm just thinking that might be the issue and offered it as a possible reason. Besides, the number was 800 versus 888. Be honest and tell me how many times you've messed up a number like that. I know I've done it more than once and it doesn't bother me that the President did it. Of course I don't do it when speaking to millions of people but it was an honest mistake. You're being foolish if you think it was an opportunity to mislead or Dubya being stupid. We get that you can't stand him. I just think there are many more valid reasons to go after him than this one.

Quoting Mt99 (Reply 11):
Dont forget how e was unable to pronounce either "Olmert" or "Mahmoud" when making a statement from the MidEast Peace talks in Annapolis. (evil teleprompter again?). I know its silly - but - seriously makes him look "unprepared

I hadn't heard that one but it doesn't surprise me. Dubya is a bad speaker and to make it worse he followed Bubba who was one of the best speakers. Dubya is damned if he does, damned if he doesn't.
 
mt99
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 3:51 pm



Quoting DeltaGator (Reply 13):
Francis

Francis?

Quoting DeltaGator (Reply 13):
I just think there are many more valid reasons to go after him than this one.

Ill give you that for sure!

Quoting DeltaGator (Reply 13):
Dubya is damned if he does, damned if he doesn't.

He is - after all - "The Decider"  Wink
 
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sebolino
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 4:00 pm

I though that all the republicans believed in the sentence "Government is not a solution to our problem, government is the problem".

After tariffs on steel, aids to airlines, hidden subsidies to Boeing and help to subprime victims, just to name a few, I think Bush is a real leftist !!! Or perhaps just an hypocrit ?  Smile
 
deltagator
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 4:02 pm



Quoting Mt99 (Reply 14):
Francis?

Go watch "Stripes" and then you'll understand.

Quoting Mt99 (Reply 14):
He is - after all - "The Decider"

Oooh...forgot that one!

Quoting Sebolino (Reply 15):
I though that all the republicans believed in the sentence "Government is not a solution to our problem, government is the problem".

A fair amount do. It just seems that the ones in charge right now don't. It's quite sad.
 
tootallsd
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 4:12 pm

This is all about bailing out the banks and keeping the average guy in his loan yoke. Like all Bush initiatives -- there is the false front and there is the reality.
 
Pope
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 4:38 pm

Let me echo the comments that I have absolute no sympathy for people to gambled and lost. I really don't care if you bought a house you couldn't afford using a financial instrument that was so risky.

That being said, what exactly is government's involvment in this "aid" package? Best I can tell the government's only role was to encourage groups representing two private parties to reach an agreement between themselves. It's a mediation.

The government couldn't force the change in terms even if it wanted to.

That being said, what's the objection between the government encouraging mediation of a problem between two sides? How does it differ from when the government encourages unions and managment to reach an agreement before a strike?
 
dl021
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 4:41 pm

I think that this rate freeze is probably a bad idea, and that it's politically motivated in an effort to make voters feel better until next year.

Quoting Alias1024 (Reply 5):
First is that they can keep extracting money from borrowers who are in over their heads for another five years before foreclosing.

Nah...it'll give them time to get out of their houses, though. Home values may take a temporary dip, but over time they almost always go up. It'll give people time to get out, which isn't all bad.

Quoting LHMARK (Reply 9):
They lied to customers about their mortgage rates, included documents which stipulated that variable mortgages were actually fixed rate mortgages (then shredded those documents after signing), then lied about these mortgages' viability and sold the debt. Fucking scumbags.

OK...but I'll say that most of that crap came at the lower levels where brokers and branch managers were making deals happen in order to increase their commission levels, while violating company policy. I'll guarantee you that the president/CEP wasn't ordering it. I'll also guarantee you that he wasn't looking too hard for it either. It seem that many people on the higher levels stop thinking in any terms but macro and the smallest numbers for them are fractions of millions. It's very easy for the mid level guys to work the system in order to increase their numbers. Happened in the car business all the time, and it was definitely against corporate policies, but you don't see people looking for trouble in boom times.

Quoting Cfalk (Reply 10):
A friend of mine financed his home last summer, 100% debt. Nothing down, and mostly ARM (adjustable rate). He works in construction. I begged him not to do it, but his wife wanted that house. He'll be OK for now, but in a year or two when rates start going up again, he's going to be in the shitter. And it will be his fault.

And there is the long and short of the entire issue. People get greedy, and there's no way to buy a house without seeing all the numbers at closing, and knowing if a certain amount of bogueing up of credit numbers is happening. People who are blaming this whole thing on the credit companies are ignoring that this could not have happened if people weren't getting stupid on the buyer side.

Quoting Sebolino (Reply 15):
I though that all the republicans believed in the sentence "Government is not a solution to our problem, government is the problem".

You are correct.

Quoting Sebolino (Reply 15):
After tariffs on steel, aids to airlines, hidden subsidies to Boeing and help to subprime victims, just to name a few, I think Bush is a real leftist !!! Or perhaps just an hypocrit ?

Well, hj is a politician and is faced with the other side trying to do worse.
 
miamiair
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 4:44 pm



Quoting Mt99 (Reply 14):
Francis?

 
miamiair
Posts: 4249
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 5:01 pm



Quoting Mt99 (Reply 21):
Man, you must suck at life!

Now I see why. Lighten up.
 
andessmf
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 5:08 pm

First of all, this is the time when government intervention was the LEAST deserved. But calls for intervention and help are not coming from Bush alone.

Second, if the Democrats had called for help (which they have) and Bush had refused, the same people blaming him for doing something, would have found a reason to blame him for doing nothing.

Quoting DL021 (Reply 19):
Home values may take a temporary dip

Sorry, Ian, this is not a temporary dip. Home prices went up due to a presumed demand that was not really there. A lot of people found that purchasing homes with no money down, and waiting for appreciation to give them a nice profit was good living. BUT, this became the typical 'bubble', and history shows that bubbles will always return to the mean. In other words, this NASDAQ chart shows how once prices hit bottom, what will happen then.

http://en.wikipedia.org/wiki/Image:Nasdaq_Composite_dot-com_bubble.svg

Quoting DL021 (Reply 19):
People get greedy

They get greedy and economically stupid.
 
MaverickM11
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 6:01 pm



Quoting Sebolino (Reply 15):
After tariffs on steel, aids to airlines, hidden subsidies to Boeing and help to subprime victims, just to name a few, I think Bush is a real leftist !!! Or perhaps just an hypocrit ?

Yes, yes, and yes. But he is a politician, and he doesn't work in a vaccum but with a lot of other people, who are also politicians.
 
baroque
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 6:03 pm

Hmm, well an interesting but rather depressing thread.

Back some months ago in relation to the value of the US $ the sub prime problem was mentioned and it was proposed that the problem was so large that the US government would have no choice but to intervene - the old story about if you owe the bank a thousand dollars and cannot pay, you have a problem but if you owe 10 billion dollars the bank has a problem.

Apart from the strong likelihood that the measures announced so far will first not work and second to the extent they do work will make very little difference, what is to worry about?

Ah. a real estate price bubble. When the dot com bubble burst, the fallout was relatively limited.

It appears that bursting the real estate bubble could hurt a significant number of current house owners and in the aftermath of the forced sell off, a large number of mortgage holders not currently having a problem. The packaging and resale is going to make it near impossible for the measures proposed to work by consent. The extent to which the potential defaults affect the financial markets could mean something far worse than the dot com bubble.

And while you are wishing financial catastrophe on the US, quite a few of the rest of us would be quite happy if you were less enthusiastic as your catastrophe is being shared around the world - although I suspect the Chinese have probably been to canny to be caught except through their holdings of US Government bonds.
 
AirportSeven
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 10:08 pm

Let's not forget the Federal Reserve Bank's role in all of this. The Fed cut interest rates to the bone throughout this decade, and lenders had to put together all kinds of shady deals in order to make any kinds of profits off of mortgage interest. "Quantity" became the rallying cry over "quality" when it came to writing mortgage loans. Low rates and easy ARM offers created artificial demand in the real estate market by throwing open the door to anybody with a paycheck and a pulse. New homes starts blew up to meet the artificial demand and ran wild for years. Then, without anywhere else to go, interest rates starting creeping up again. As soon as that happened, the veil fell from the ARM scam.

This rate freeze has nothing to do with protecting innocent home buyers. This is the only way that mortgage lenders won't get stuck with overpriced and under capitalized foreclosures on their hands. Somebody that bought a new home two years ago with no down payment that defaults on their loan when the ARM kicks in has next to nothing in the way of equity in the property. They've been paying on interest only, and suddenly their lender has a repossessed home that they will have to divest themselves of in order to recoup to extract some capital from the deal. Plus, they'll be trying to sell a house in a market that is glutted right now. Multiply all of that by the number of ARM defaults looming on the horizon, and the future looks bleak for those companies that played fast and loose with ARM's and no down payment deals.

The rate freeze will keep the buyers in the homes, putting equity in the homes, but what will happen five years from now? Many of the buyers will be in the same situation of not being able to pay their mortgage notes, but selling the house after the foreclosure will be easier for the lender after the owner has put five years of equity in and the housing market has corrected from its current state.

In the same way that the government shouldn't have bailed out the airlines after 9/11, the government shouldn't be bailing out lenders or borrowers in this situation. The market knows best how to correct itself; corporate welfare only encourages the continuation of the sloppy practices that created this problem in the first place.
 
717-200
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 11:02 pm

As someone who voted for Bush both times in '00 and '04 I am beginning to wonder what he is thinking with the attempted amnesty for illegals and now this "aid" for subprime homeowners. Like what Halls120 said in his post about post 9/11 this is overreaction and essentially a band aid soultion to the problem. Let the free market sort this out and yes there will be pain but the alternative will make the pain much worse and make it even harder for people in the future to realize the dream of home ownership.
 
andessmf
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Fri Dec 07, 2007 11:48 pm



Quoting 717-200 (Reply 26):
Like what Halls120 said in his post about post 9/11 this is overreaction and essentially a band aid soultion to the problem.

Aren't you describing ANY government proposed solution? After all, politicians like to give the apparency that they 'care' by doing something, anything that will remove a reason for the opposite side to show that they 'don't care'.

Anyways, the way I have read about this in the blogosphere is that this basically does nothing, only provides cover for government officials to show that they are being useful.
 
halls120
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 12:13 am



Quoting AirportSeven (Reply 25):
The rate freeze will keep the buyers in the homes, putting equity in the homes, but what will happen five years from now? Many of the buyers will be in the same situation of not being able to pay their mortgage notes, but selling the house after the foreclosure will be easier for the lender after the owner has put five years of equity in and the housing market has corrected from its current state.

In the same way that the government shouldn't have bailed out the airlines after 9/11, the government shouldn't be bailing out lenders or borrowers in this situation. The market knows best how to correct itself; corporate welfare only encourages the continuation of the sloppy practices that created this problem in the first place.

Excellent analysis.

Seven years ago, when I was finalizing the sale of my current townhouse, the realtor laughed when I asked if I was close to the qualification limit. She said "we could put you in something twice the price." I politely said no, I'll stick with what I thought I could afford.

I suspect that many of the people now in extremis got caught up in that kind of "you can afford more" horsesh*t.
 
RJdxer
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 1:22 am



Quoting AndesSMF (Reply 22):
Second, if the Democrats had called for help (which they have) and Bush had refused, the same people blaming him for doing something, would have found a reason to blame him for doing nothing.

They are still unhappy with this announcement:

http://www.hispanicbusiness.com/news/newsbyid.asp?id=84589

http://news.yahoo.com/s/ft/20071206/bs_ft/fto120620071612437112

Of course they are saying it is too little too late and doesn't help all those who they think should be helped, namely even those with fixed rate mortgages. But with the revelation that the CIA has destroyed some tapes that may show terrorists getting a heavy dose of interrogation, their interest has quickly moved on. You can't impeach a President over people's stupidity in personal finance.
 
yfbflyer
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 1:28 am

I dont think the bail out is as much for the home owners as it is for the banking industry. It's time to shut up and take your medication. The entire thing is a mess and any bail out is just delaying the inevitable.

I think what is really needed is a cold dose of reality for everyone involved. Home owners that risked their homes should loose them. Bankers that offered these mortgages should deal with the consequences. Politicians that encouraged these practices should face the wrath of their homeless constituents.
 
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Aaron747
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 1:37 am



Quoting AndesSMF (Reply 22):
Second, if the Democrats had called for help (which they have) and Bush had refused, the same people blaming him for doing something, would have found a reason to blame him for doing nothing.

Very true - and that's generally why they all need to be thrown out of the same boat. That said, the White House took it upon themselves to broker and sponsor these agreements, and didn't have the balls to stand up for what's right on both an individual and economic level. Bush, his team, and the whole lot of the Democrats are providing a textbook case for future arguments that only people completely clueless about business and possessing little talent elsewhere become successful politicians.

Quoting AirportSeven (Reply 25):
Let's not forget the Federal Reserve Bank's role in all of this. The Fed cut interest rates to the bone throughout this decade, and lenders had to put together all kinds of shady deals in order to make any kinds of profits off of mortgage interest. "Quantity" became the rallying cry over "quality" when it came to writing mortgage loans. Low rates and easy ARM offers created artificial demand in the real estate market by throwing open the door to anybody with a paycheck and a pulse. New homes starts blew up to meet the artificial demand and ran wild for years. Then, without anywhere else to go, interest rates starting creeping up again. As soon as that happened, the veil fell from the ARM scam.

An excellent point that can't be underscored enough. As many economists have said, if the American public knew, much less understood, the true workings of the Fed, angry mobs would have set fire to all twelve banks long ago. Some kind of majority of Americans actually believe the Fed is a government institution. Says a lot about the quality of our education system.  crazy 

Quoting Pope (Reply 18):
what exactly is government's involvment in this "aid" package? Best I can tell the government's only role was to encourage groups representing two private parties to reach an agreement between themselves. It's a mediation.

Facilitation. Even going this far is market intervention as far as I'm concerned. Nobody is willing to let the market play itself out and that's why a whole lot more people are going to suffer in the long run than need be.
 
QANTAS077
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 1:39 am



Quoting Aaron747 (Thread starter):
From the same President who nudge-nudgingly advocated amnesty for illegals, now we have amnesty for people who haven't been able to take full responsibility for their financial situation.

well it seems like there is a pretty big amnesty for predatory lenders too...

Quoting Aaron747 (Thread starter):
Please tell me I'm not the only one who has a huge problem with this precedent!

I have a problem with lenders putting reset clauses into loans in order to pay for the cost of their cash...the borrower in some, if not most cases, is unaware or unable to do due diligence and usually find out about their clauses when its to late. I've got no sympathy for greedy lenders. I'm no fan of Bush but for a million people + looking at home foreclosures is ridiculous and government intervention is the only way of band-aiding the problem.
 
Alias1024
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 2:17 am



Quoting DL021 (Reply 19):
Nah...it'll give them time to get out of their houses, though. Home values may take a temporary dip, but over time they almost always go up. It'll give people time to get out, which isn't all bad.

I don't expect the people who irrationally took out these ARMs to suddenly decide to act rationally. They will simply hope that interest rates are lower in five years. Also, I don't think prices will have rebounded in many of the most overbuilt cities.

Quoting Cfalk (Reply 10):
ARMs should not exist, period.

I would disagree with this. ARMs might be a very sensible and lucrative option during a period of high interest rates, as long as you know the risks and can afford to see rates go up a few points.
 
huskyaviation
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 2:51 am



Quoting Halls120 (Reply 1):
You aren't the only one. This is not unlike the Chrysler bailout - not in scope or substance, but in appearance

It is much larger in scope than the Chrysler bailout, first of all...second of all, was the Chrysler bailout a terrible thing? The Fed. Govt merely guaranteed the loans made by the banks (hence, not even really a bailout)...the drawdowns came in 1980 and 1981, and Chrysler paid the loans back in full plus interest in 1983. The government actually made money off the whole deal because they took stock warrants as collateral and sold them on the open market.

Quoting Alias1024 (Reply 5):
Everyone else gets screwed out of this. The people in these mortgages will more than likely still lose their homes, but not until they have paid another five years of money to the bank.

Not true. Don't forget that if these people are able to hang on, they may be able to (1) sell the home if the market recovers and pay off the bank, or (2) if the bank does end up foreclosing on them, the bank may be able to get higher prices at the auction for the property. This may prevent the individual from being personally liable for the shortfall if that occurs. Right now the banks can't recover the principal they have invested in these loans, so everybody loses.

Quoting Pope (Reply 18):
That being said, what exactly is government's involvment in this "aid" package? Best I can tell the government's only role was to encourage groups representing two private parties to reach an agreement between themselves. It's a mediation.

Exactly--the federal government is not intervening in the markets, so you can put down your arms or ARMs (pun intended) for now. Getting the banks to agree to a voluntary freeze stabilizes the markets and helps not only individuals but also the banks.

Quoting Baroque (Reply 24):
The packaging and resale is going to make it near impossible for the measures proposed to work by consent. The extent to which the potential defaults affect the financial markets could mean something far worse than the dot com bubble.

It likely would not be difficult to get securityholders (in almost all cases, institutional investors) to consent to amending the securitization agreements to stave off default on those securities (such as agreeing not to force acceleration on the payment of principal if the securities lose minimum ratings requirements by the rating agencies, or if pool loan default amounts hit particular thresholds). Most security-holders have no say, and therefore consent is not required, for the bank to alter the original loan terms with the debtor as they by agreement are the ongoing servicer of the loans. Securityholders buy the receivables, but they do not buy the accounts.

Quoting Yfbflyer (Reply 30):
I think what is really needed is a cold dose of reality for everyone involved. Home owners that risked their homes should loose them. Bankers that offered these mortgages should deal with the consequences. Politicians that encouraged these practices should face the wrath of their homeless constituents.

I love these types of posts. It's so easy to just say, screw the stupid homeowners, let 'em suffer, let the predatory lenders go under, punish the politicians, and let the market swallow the loss. Do any of you realize where a lot of the mortgage-backed securities are held? Pension plans--government pensions and private pensions. If that market completely crashes, and it likely will if something isn't done to cushion the blow of massive foreclosures, it will be your money getting flushed. The ripple effect doesn't stop with the homeowners, banks, and politicians.
 
halls120
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 3:56 am



Quoting HuskyAviation (Reply 34):
second of all, was the Chrysler bailout a terrible thing?

It wasn't a good thing. That is, if you believe in free enterprise.

Quoting HuskyAviation (Reply 34):
Not true. Don't forget that if these people are able to hang on, they may be able to (1) sell the home if the market recovers and pay off the bank, or (2) if the bank does end up foreclosing on them, the bank may be able to get higher prices at the auction for the property. This may prevent the individual from being personally liable for the shortfall if that occurs. Right now the banks can't recover the principal they have invested in these loans, so everybody loses.

And what lesson did we learn? Banks can continue making dubious loans and individuals can keep taking on debt they can't handle, knowing that the government will step in and save both groups from having to face their self-inflicted mistakes.

Quoting HuskyAviation (Reply 34):
I love these types of posts. It's so easy to just say, screw the stupid homeowners, let 'em suffer, let the predatory lenders go under, punish the politicians, and let the market swallow the loss.

why should stupidity be rewarded? What's so bad about letting predatory lenders go out of business, punishing inept politicians, and letting greedy investors pay for their folly?

I'm not saying that the government should do nothing. We clearly don't need a repeat of 1929, with government fiddling while Wall Street burned. However, in many respects, our elected leaders in the White House and Congress made similar mistakes over the past decade. What government should have done a long time ago is write regulations that could have prevented the subprime fiasco -- regs that would ban prepayment penalties, a requirement that income be properly documented and that a potential borrower had sufficient income to handle payments after the ARM rates go up.
 
AirCop
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 4:25 am



Quoting Halls120 (Reply 35):
why should stupidity be rewarded? What's so bad about letting predatory lenders go out of business, punishing inept politicians, and letting greedy investors pay for their folly?

And why did the financial institutions get into the sub-prime business, one word: Greed. Perhaps we should go after the CEO's of these institutions like the government finally did with Enron, but then again this real estate financing kept the economy going for the past several years.
 
LHMark
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 4:54 am



Quoting Halls120 (Reply 35):
And what lesson did we learn? Banks can continue making dubious loans and individuals can keep taking on debt they can't handle, knowing that the government will step in and save both groups from having to face their self-inflicted mistakes.

No, we learn that banks are given a free pass to offer loans to unqualified people, despite the fact that, in a true free market, such imprudence on the part of the lender would devastate their business. Now whose interest is the govenrment working for? That of the free market, or that of the institutions that donate millions in campaign contributions?
 
yfbflyer
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 5:26 am



Quoting HuskyAviation (Reply 34):
Do any of you realize where a lot of the mortgage-backed securities are held? Pension plans--government pensions and private pensions. If that market completely crashes

The market is certainly more resilient than that. The entire financial market is hyper-inflated and there needs to be a serious correction. I can't help but see parallels between the housing markets and internet bubble. There was no common sense then just like now. Hell there are even TV shows about people flipping houses. They took risky investments without thinking of the negatives. If the market doesn't correct properly any recovery will be that much longer.
 
melpax
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 6:20 am



Quoting QANTAS077 (Reply 32):

The same thing is starting to happen here. Sub-prime loans here are more commonly known as low-doc loans, due to the reduced requirement for financial information from borrowers. Look at the Western suburbs of Sydney in particular.
 
huskyaviation
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 2:07 pm



Quoting Halls120 (Reply 35):
I'm not saying that the government should do nothing. We clearly don't need a repeat of 1929, with government fiddling while Wall Street burned. However, in many respects, our elected leaders in the White House and Congress made similar mistakes over the past decade. What government should have done a long time ago is write regulations that could have prevented the subprime fiasco -- regs that would ban prepayment penalties, a requirement that income be properly documented and that a potential borrower had sufficient income to handle payments after the ARM rates go up.

But what you're saying is that from this point forward, we should more strictly regulate the process in which loans are made to prevent a future credit crunch. That's fine--I totally agree with that. But it makes no sense to just write off what has been happening in the last decade and let the chips fall where they may. The impact of such a collapse is more far reaching than you're making it out to be. If the banks, borrowers, and government can reach a solution to soften the blow not only to the direct players, you give the market time to transform itself without sucking every ounce of liquidity out of the market. This is far more than a political issue.

Quoting Yfbflyer (Reply 38):
The market is certainly more resilient than that. The entire financial market is hyper-inflated and there needs to be a serious correction.

There already has been a serious correction. What's next is a complete crash.

Quoting Yfbflyer (Reply 38):
If the market doesn't correct properly any recovery will be that much longer.

Please elaborate. It's easy to make this claim, but in practice is very shortsighted. Banks, subprime lenders or not, need liquidity in order to continue making loans. If they can't securitize the loans already on their books (which is their primary source of liquidity), good luck getting credit in the future.

I would much rather the government and the market have to swallow $50 billion now, and have the market land fairly softly, than have to swallow $500 billion when/if the bottom falls out from the securities markets.

Quoting Halls120 (Reply 35):
letting greedy investors pay for their folly?

A lot of your so-called "greedy investors" aren't investors per se; they are average Joes with families that bought more house than they could afford but weren't educated or given the whole truth about what they were doing. When they saw an opportunity to put their families into better homes, they did it. I for one don't see the need to just sit back and watch them drown.
 
baroque
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Sat Dec 08, 2007 2:12 pm



Quoting HuskyAviation (Reply 34):
I love these types of posts. It's so easy to just say, screw the stupid homeowners, let 'em suffer, let the predatory lenders go under, punish the politicians, and let the market swallow the loss. Do any of you realize where a lot of the mortgage-backed securities are held? Pension plans--government pensions and private pensions. If that market completely crashes, and it likely will if something isn't done to cushion the blow of massive foreclosures, it will be your money getting flushed. The ripple effect doesn't stop with the homeowners, banks, and politicians.

It was tempting earlier just to post "Yippee let's just have another 1930s". There is a touching faith that the free market will cope with any sort of corruption, when clearly it has failed many times before. Just stamping your foot and saying the free market works does not make it so. The last system failure took the New Deal and THEN a major war to get the US into recovery.

If you Google "Failures in the free market" you get 2.36 million hits - there must be something out there!!

Quoting AirCop (Reply 36):
Perhaps we should go after the CEO's of these institutions like the government finally did with Enron, but then again this real estate financing kept the economy going for the past several years.



Quoting QANTAS077 (Reply 32):
Quoting Aaron747 (Thread starter):
From the same President who nudge-nudgingly advocated amnesty for illegals, now we have amnesty for people who haven't been able to take full responsibility for their financial situation.

well it seems like there is a pretty big amnesty for predatory lenders too...

A bit like the Mikado, it would be good to construct a list of those who "never would be missed" in the fallout.

Whatever system comes in, it should be designed to prevent all those who have made indecent amounts of money out of shonkey loans from benefiting. As Aircop suggests the CEOs who will have had their pay inflated by bonuses should not benefit and should bear some of the pain. The same goes for the salesmen on commission who have also benefited at the future pain for mortgage holders and then all those involved in the financial system if it collapses. And if it does collapse, about the only ones not in the firing line will be hermits growing their own food.

As has been pointed out the pension funds will be major sufferers. If they collapse if will affect a couple of generations and mean much greater government payments towards social security than the value of these badly conceived loans.

Could it just be that the old regimes of financial regulation did have a point and did serve a useful purpose? OK, they probably slowed some from becoming insanely rich, but they also tended to prevent outright scams. All too frequently outright scams prosper under the current deregulated environment for long enough to cause considerable damage.

There also seems to be quite a spate of anti-trust cases at present. No doubt the tip of an iceberg.
 
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Aaron747
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 2:17 am



Quoting HuskyAviation (Reply 40):
A lot of your so-called "greedy investors" aren't investors per se; they are average Joes with families that bought more house than they could afford but weren't educated or given the whole truth about what they were doing. When they saw an opportunity to put their families into better homes, they did it.

That's a somewhat generous characterization.

Quoting HuskyAviation (Reply 40):
Please elaborate. It's easy to make this claim, but in practice is very shortsighted. Banks, subprime lenders or not, need liquidity in order to continue making loans. If they can't securitize the loans already on their books (which is their primary source of liquidity), good luck getting credit in the future.

All the more reason the plethora of bad loans currently out there (and as yet not known in total) should run their most natural course as soon as possible.
 
andessmf
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 2:37 am



Quoting HuskyAviation (Reply 40):
A lot of your so-called "greedy investors" aren't investors per se

No, they were speculators, biting off a lot more than they could chew on the expectation that 'real estate always goes up.'

The conservative estimate for the number of speculator purchased homes in the US during the boom was 30%. The real bubbly areas had anywhere from 40-50%. And condos did far worse at up to 70%.

Remember, the 'investors' bought homes not on the expectation that they would become landlords, but that the price would rise fast enough to allow them to quickly sell at a profit. Classic definition of speculation.

Now, since the speculator demand was far, far more than actual real demand, the prices started to rise very quickly. But in did not rise because more people wanted to purchase a home to live in. It rose because 'investors' wanted to purchase a home to profit from.

And most of these investors had NO need to place any of their money into these purchases, since everybody was more than willing to give you a 100% loan. So if purchasing one home could give you nice profits, why not purchase two or MORE to get you even MORE profit?

But since this was no more than a pyramid scheme, eventually the game ends and the last people get stuck with the hot potato.

The government has NEVER and should NEVER bail out people who play the 'I show you how you can make a lot of money game'. I see no reason for them to start now, creating a future expectation that the government will always bail you out if you gamble and LOSE.
 
huskyaviation
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 2:58 am



Quoting Aaron747 (Reply 42):
All the more reason the plethora of bad loans currently out there (and as yet not known in total) should run their most natural course as soon as possible.

Again, absolutely no information as to WHY that would be a better course of action, just an enormous assumption underscored by what appears to be ideology.

Quoting AndesSMF (Reply 43):
And most of these investors had NO need to place any of their money into these purchases, since everybody was more than willing to give you a 100% loan. So if purchasing one home could give you nice profits, why not purchase two or MORE to get you even MORE profit?

And again, you are wrongly focusing on the microeconomic bank to debtor relationship, without any mention whatsoever of the broader economic implications of how this will affect the secondary credit markets, and what, in turn, that will do the economy as a whole--it will affect the global economy and has indeed already started doing so. Maybe not you personally, but I guarantee just about everyone on here will have friends, family, co-workers, etc. who will be quite unhappy with how the "take your medicine" approach affects their interests, even if they had nothing whatsoever to do with subprime mortgage loans.

Quoting AndesSMF (Reply 43):
But since this was no more than a pyramid scheme

Show me a credit regime that isn't.

Quoting AndesSMF (Reply 43):
The government has NEVER and should NEVER bail out people who play the 'I show you how you can make a lot of money game'. I see no reason for them to start now, creating a future expectation that the government will always bail you out if you gamble and LOSE.

Federal loan guarantees? The S&L bailout? The Fed pumping enormous amounts of liquidity into the markets after 9/11? Check your history and facts and try again.
 
Flighty
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 3:03 am



Quoting AirportSeven (Reply 25):
Let's not forget the Federal Reserve Bank's role in all of this. The Fed cut interest rates to the bone throughout this decade,



Quoting AirportSeven (Reply 25):
In the same way that the government shouldn't have bailed out the airlines after 9/11, the government shouldn't be bailing out lenders or borrowers in this situation. The market knows best how to correct itself; corporate welfare only encourages the continuation of the sloppy practices that created this problem in the first place.

Absolutely right. Nothing more needs to be said.

There is _no_ benefit to this bail-out. Not for anybody except some fools who bet wrong. Amazing how fast the Republicans renounce Capitalism. Suddenly, it's Communist price controls that tickle Republican bankers' fancy. Almost funny.
 
huskyaviation
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 3:18 am



Quoting Flighty (Reply 45):
There is _no_ benefit to this bail-out. Not for anybody except some fools who bet wrong.

LOL I'm glad you're not the one making government decisions. It's such a simple-minded, shortsighted view of how the markets actually work that there is really no good way to respond to assertions like these, except to refer you to my posts above and to actually make an effort to educate yourself.

Please describe how this qualifies as a "bailout". Getting the lenders to voluntarily agree to pulling in the reins of ARMs prevents a much larger economic disaster in the future, which isn't far off unless changes are made now.



Quoting Aaron747 (Thread starter):
It isn't binding



Quoting Aaron747 (Thread starter):
it is expected to give loan servicers much more flexibility to quickly rework some loans and direct other borrowers toward refinancings.

Hmmmmm, not seeing massive federal funds being invested to "bailout" these borrowers.
 
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Aaron747
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 3:23 am



Quoting HuskyAviation (Reply 44):
Federal loan guarantees? The S&L bailout? The Fed pumping enormous amounts of liquidity into the markets after 9/11? Check your history and facts and try again.

The first two were inappropriate responses to extraordinary circumstances. It's no excuse for what happened nor the precendents set. The Fed's actions after 9/11 were modern proof positive that they exist mostly to keep certain institutions solvent and their majority investors perpetually wealthy.

Quoting HuskyAviation (Reply 44):
Again, absolutely no information as to WHY that would be a better course of action, just an enormous assumption underscored by what appears to be ideology.

Oh please. Basic principle of good faith banking, for starters. As one of the initially quoted articles already stated, there is ample evidence from the past experience of other developed and mature economies that encouraging the maintenance of bad loans is cancerous and foolhardy. A flood of consumer class-action lawsuits against the institutions most responsible for ARM deceptions would be a good start. The faster the market puts those institutions out of business, the better. The market will respond to lenders that have acted in good faith and keep a majority of well-performing loans on their books. Send the business their way and the far-reaching impacts of which you speak will be corrected in due time.
 
halls120
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RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 3:54 am



Quoting HuskyAviation (Reply 46):
Please describe how this qualifies as a "bailout". Getting the lenders to voluntarily agree to pulling in the reins of ARMs prevents a much larger economic disaster in the future, which isn't far off unless changes are made now.

You are correct - technically, it isn't a government-funded bailout because Bush persuaded the lenders to take the action you describe.

But as the OP noted in post #1,

Quote:
Are we emulating Japan? Starting around 1990, Japanese banks kept bad loans on their books, which prevented them from making new loans. This led to a decadelong economic malaise.

"The concept of forcing (U.S.) banks to keep bad loans on their books violates every precept of regulation in American banking. Bad loans must be taken off the books to allow good loans to be made. Forcing banks to keep bad, low-return loans on the books is something that the banking regulators have never done," writes Dick Bove, a bank analyst with Punk Ziegel. "Bad loans must go bad."

and without the stringent regulation I mentioned earlier, there is no guarantee that the banks won't be stupid once more.

Just how are we going to escape the same fate as Japan, when they allowed banks to keep bad loans on the books?
 
andessmf
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Joined: Wed Jan 25, 2006 8:53 am

RE: Bush Unveils Plan To "Aid" Subprime Homeowners

Mon Dec 10, 2007 4:33 am



Quoting HuskyAviation (Reply 44):
And again, you are wrongly focusing on the microeconomic bank to debtor relationship, without any mention whatsoever of the broader economic implications of how this will affect the secondary credit markets, and what, in turn, that will do the economy as a whole--it will affect the global economy and has indeed already started doing so. Maybe not you personally, but I guarantee just about everyone on here will have friends, family, co-workers, etc. who will be quite unhappy with how the "take your medicine" approach affects their interests, even if they had nothing whatsoever to do with subprime mortgage loans.

First of all, I am more involved in this market than most. Most of my family now has been already affected by what has gone on, to the tune of hundreds of thousands of dollars so far.

We DO NOT want to repeat the mistakes that the Japanese made, and the cures suggested are much worse than the disease. Trying to keep the credit market from crashing would mean that housing would remain unaffordable for most, and for those who can afford it, that it would take a disproportionate amount of their take home income.

Just because housing got to be so expensive does it mean that it should stay there. And that is the crux of the problem, isn't it? NO ONE could really afford housing till the exotic loans came that allow someone to temporarily live there.

And yes, this will completely affect the global economy, and should help to clean up the equity excess that have caused a lot more pain that some people could have ever imagined.

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