| Author | Message | ||
     Buellifer |
The loan modification programs have been a joke. You have a house that has tanked in value and the best the banks can come up with is: a plan where they sort of delay what you owe long enough for you to get back on your financial feet -- if that -- based on the flawed logic that the housing market is certain to improve in just a matter of months. The real answer for what ails us is a Third Rail solution that banks don't want to touch: Erase some of the amount we borrowed, a process known as a principal reduction. To do so would share the burden of the housing crash with the lenders who helped create it. It would also allow us to get on with our lives, and, according to The New Bottom Line, save the economy in the process. Got your attention now, didn't we? Banks would rather poke out their proverbial eyes with sharp sticks than offer principal reductions. Only 2.8 percent of all loan modifications in the first quarter of 2011 involved any actual sort of principal reduction, according to the ratings agency DBRS. And that number is actually up a full percentage point from the same time last year. But some analysts believe that the industry-wide reluctance to perform principal reductions on a wide scale is actually what is holding back the housing recovery. Search Homes for Sale Browse through photos of millions of home listings or search for rentals If lenders would reduce all underwater mortgages to their current market value, the nation's banks could pump $71 billion per year into the economy, create more than 1 million jobs annually and save families up to $6,500 per year on mortgage payments, according to The New Bottom Line, a collaborative of 1,000 faith-based and community organizations who want Wall Street held accountable for the mess it created. Grassroots organizations associated with The New Bottom Line have called on state attorneys general to investigate banks for foreclosure fraud and to work for a settlement that includes large-scale principal reduction for borrowers. According to the report, "The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs," homeowners are struggling to pay their "boom-era mortgages with their recession-era salaries" and the economy is suffering for it. The report adds: "Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers." Amen to that part. The plan says that the money that homeowners would save on their mortgage payments each month would be spent instead on groceries, clothing, and household necessities. As consumer demand increased, businesses would start hiring again. The plan projects an annual stimulus of $20.5 billion in California alone, leading to 300,000 new jobs a year created there. A $12 billion stimulus to the economy of Florida would result in almost 180,000 new jobs. The report says that in 2010, the nation's top six banks paid out more than twice the cost of the plan ($71 billion per year) in bonuses and compensation alone ($146 billion in 2010). And that currently, the country's banks have cash reserves of $1.64 trillion -- a historic high. WELL... It looks like as the article state the banks would never want to do it... Most of the mortgages in America are held by the Big Banks... It's just corporate greed giving huge bonuses and not taking responsibility for their F up. It is so easy to blame America's problems on Presidents, Government leaders and Unions... When it is big business...Tell me do you think the senators and congressmen went to big businesses and said hey give me money and I will help you take American jobs away. Or was it the greedy business that bribed the government leaders? If big business was not so greedy they would never have let our leaders in their pockets and America wouldn't be as bad off as it is right now. | ||
| Sifo |
So who is supposed to eat the cost of the principal reduction? The bank? How about me. I paid my house off and the price fell. Who gets to bail me out? Not a can of worms, just at terrible idea. This is akin to those who think that you can stimulate the economy with huge government spending. They never stop to think about where the money has to come from. | ||
| Reepicheep |
Big business "greed" had *nothing* on many of the individuals buying at the time. For goodness sakes there was a "flip this house" TV series. The "banks" weren't buying houses, they were giving people loans. It was people buying houses. If you were a "victim" of these "greedy companies" then we should happily buy you out from your house... in return for a legal commitment that you will never again vote, have a line of credit of any kind, or have any kids... since obviously you aren't qualified to handle it. | ||
| Cowboy |
Sifo--good post My home is paid for where is my check? | ||
| Ft_bstrd |
The loan modification process is a complete joke. The banks don't want to modify ANY loan. Period. Out of the $119B of single family residential home loans held by Chase, between 300,000 and 400,000 have been offered any sort of modification. We tried for over a year with Chase (who is one of the worst along with B of A) to create some sort of loan arrangement to no avail. We sent in no less than 7 complete application packages with multiple updated supplements. Their systems are a joke. If you remember B of A actually attempted to foreclose on a house they weren't a lien holder: http://www.digtriad.com/news/watercooler/article/1 78031/176/Florida-Homeowner-Forecloses-On-Bank-Of- America These banks intentionally refuse to work with homeowners. The system that is designed to help homeowners actually helps banks foreclose upon them. Banks foreclose on houses, sell them on the open market for pennies on the dollar and then hit Fanny Mae and Freddie Mac for the shortage. Anything not covered by the Federal government they come after the homeowner for. It's ridiculous. Chase attempted to foreclose on our house while they still had our application in process. | ||
| Thumper74 |
Weird. I'm 27. I own my own home. I bought a reasonably priced place with reasonable property taxes, that I could afford (barely) if making minimum wage. Why the $%^& don't I get handouts for living within my means? I'm also looking at rental property, that I could afford by working part time... | ||
| Strokizator |
Never buy anything based upon the Greater Fool theory. If you buy something that is overpriced/overvalued but expect some guy who's a bigger idiot than you to come along a year from now and pay you even more for it, you're setting yourself up for a big disappointment. Recently it was houses, before that dot.com stocks. Gold is ready to go next (imo). | ||
| Oldog |
The only thing that burns my grits here is BoA got a bail out then more cash from, Buffett, I'm tired of class war fare, Tired of dishonest bankers, tired of O-bammer If any big bank starts to go under let them go, let the execs who made bad decisions with others money pay the price. the real interest you pay on a house note, take your down payment, add the sum total of installments ( not including escro ) subtract what you actually paid from that ... bet its more than 7~8 % of the total.... | ||
| Ft_bstrd |
There shouldn't have been a SINGLE dollar of bailout. Not TARP. Not GM. Not Chrysler. Nothing. The only way the free market works is if failure is allowed to happen and the consequences visited upon the investors. The result is that the next batch of investors will be more cautious. | ||
| Moxnix |
>>>There shouldn't have been a SINGLE dollar of bailout. Not TARP. Not GM. Not Chrysler. And our SEC has to constantly do its job of making sure investors, including the one-tooth shepherd out on a Wyoming slope doing trades from his android, is protected by a level playing field of available information. | ||
| Sifo |
Most of the mortgages in America are held by the Big Banks... That statement is simply false. Most mortgages in America are held by Freddie/Fannie. Regardless of that, I'd still like to hear where you think all of this cash is supposed to come from? Sounds to me like you just expect banks to give away hundreds of millions of dollars. Based on what? And that currently, the country's banks have cash reserves of $1.64 trillion -- a historic high. This might have something to do with new regulations passed as part of the bank bail out requiring them to hold more cash reserves. Make sense to me. Force a business into meeting certain requirements then demonize that business for meeting those requirements.  | ||
| Slaughter |
LENDERS created this? Are you saying the buyers are such greedy, ignorant dumbasses that they couldn't control their borrowing? The Lenders should have taken pity on them because they couldn't control themselves? We decided we could NOT afford to buy - since the LAST real estate downturn about 12 years ago. Saw the real estate prices escalating and just sat on the sidelines watching this whole thing... we'd go for walks watching new construction, KNOWING there were no buyers - there were still suckers who were investing in construction without a future. And we rented... and wondered at the whole "no visible means of support" that we could see - more than 5 years ago. Everybody told us "YOU HAVE TO BUY NOW or you'd NEVER get your foot in the door." We could NOT afford to buy so we didn't. We rented. There was no rule in our book that said that we needed to own a huge pile of debt... so we rented. Then the market tanked Got us a nice place with a detached 1000 square foot shop out back on a short sale for less than half of what he paid for it just 3 years before. Because we weren't paying more mortgage than we could afford over the past 5 years on some dumbassed non-fixed-rate mortgage, we actually had some savings. Can't fix stupid. More tax money doesn't fix stupid - it only excuses it all around on all sides. The bail outs of all folks - stupid lending institutions and stupid borrowers is like the daddy coming to bail out his kid again after getting busted for the tenth time. Neither the kid nor the Dad will learn. | ||
| Guell |
Im with slaughter on this, I have no pity on people who bought more than they could afford. I didnt buy 5 years ago for the same reason, i had people telling me i needed to etc etc. Im looking to close on a place by sept 9th with a detached shop also. This time around it was cheaper to buy than to rent. | ||
| Sifo |
Q: What do you call a lender that tells people they can't have a loan that they qualify for under Freddie/Fannie guidelines? A: An inmate! | ||
| Oldog |
cant speak for any one else picked up my place which was in the hands of "fanny" OP paid about 40K more than I did Interestingly, my former rent for living, and work spaces ( with insurance on contents ) are within a few dollars per month of my mortgage and escrow payment perhaps building some equity may be worth some thing that and I got tired listening to the kids upstairs fight I knew it going in that Mr. Banker would loan me X$$ and I would pay back about 68% on top of X Why are banks entitled to bailout, to big to fail, hey uncle sam dissected ma-bell perhaps BoA and City may need to be broken up, } One question that has not been asked, the Doe family buys a house they are well qualified, and live with in their means, they save, and work hard, Now John and Jane get layed off or their business fails or illness exhausts the insurance, they don't want a hand out just help while they re-group, their savings are gone and they are looking or trying to re-locate, The are being totally responcible Hey they paid into the tax pool that was drawn from for TARp whats wrong with them getting some form of assistance and If not them Why the banks? (Message edited by oldog on August 29, 2011) | ||
| Strokizator |
Sorry Oldog but there's too many contradictions in that hypothetical case. Sounds to me like they bought too much house (who cares how much you qualify for?). If both spouses must be working in order to pay the mortgage then it's too much house. Oh, and there is no "tax pool". That lake's been dry for some time now. Tarp was all paid with borrowed money. A lot has been repaid with interest so it may turn out to be not the worst thing the gov't has done. | ||
| Cityxslicker |
just wait for the next round of 'hope and change' to dole out the seized and foreclosed houses as Section 8 subsidy housing, perpetuating the cycle. Any time there is something for nothing - watch your corn hole. | ||
| 2008xb12scg |
I am working on a loan mod now. I borrowed what I thought I coud afford, barely. Lost the second income and took a big pay cut myself (20% or so) It was my bad decision, and I don't blame anybody. It's simple either the bank wants to work with me to help me afford it or they don't and I let the house go. Either way somebody has to pay for my mistakes and I don't feel very good about that. I don't blame the banks, I don't feel like a victim either. But I simply can no longer afford it. What I don't get is I've been paying on time, or close to on time, for 6 years or so. So they know I have a good track record and steady job, though not as much $ at the job. If they refinance me (reducing payment not principal) they get me to give them 400,000 for a 175,000 house. If they foreclose they sell the house for 175 at best plus all the expenses. Why don't they want to work with me? Do they wright it off as a loss and make money? | ||
| Ft_bstrd |
Some people bought more than they could afford. Others bought far less than they could afford and then had their income cut by 65%. It doesn't matter what the house payment is when your income takes a hit. NINJA loans, I can see plenty of blame. Many good people got caught up in the tidal wave of foolish buyers. Even after the real estate crash, I still have positive equity. | ||
| Buellitup |
There is a lot of blame to go around, but the banks are number 1. Before deregulation, banks couldn't be leveraged more than about 10:1 or 15:1. Credit Unions and mom/pop banks would be lower because of the risk. Reagan, Clinton, and Bush removed that regulation over several years. The banks wanted the deregulation because of how loans were being traded -- instead of the lender paying back the bank, they grouped up the loans into bundles, slapped the AAA+ rating on them, and sold them no the open market (investment banks, not CUs). The bank is no longer at risk, but still pulls in money from the closing. That let the toxic funds get out there, mislabeled as good ones (I won't go into details, you probably know the gist of it). Then the banks took out insurance against those crap bundles because they knew they would go under....all while making more of them. The side effect to all of this was that the banks injected large amounts of fake capital into housing, and then it all started to correct itself, causing a land slide. From us not buying imported goods to people not keeping their homes. It caused not just our economy to collapse, it caused everyone we were connected to to collapse....which was everyone. Further, people's 401k's and business investments used those AAA+ loans for safe investments; they were on par with buying a US Bond. It was a safe bet. That's why whole states are suing the banks for this, because the retirements are gone. The S&P (raters of these toxic assets), AIG (the insurers), BoA for making the loans, the SEC for not keeping an eye on it....none of them stood to lose anything over this garbage. It was white collar crime and it was complicated and no one group is to blame for all of it. But the banks are the main culprits, and our government allowed it. I could go on and on about this. It was the banks. | ||
| Buellitup |
Just to be clear, sure people shouldn't have over extended themselves. But if it hadn't been for the deregulation and the merge of banks with investment banks, the loans would never have been made in the first place. | ||
| Ft_bstrd |
Are we going to place any of the blame on CRA? | ||
| Buellifer |
At reepicheep Before you post shit like this... Quote..."If you were a "victim" of these "greedy companies" then we should happily buy you out from your house... in return for a legal commitment that you will never again vote, have a line of credit of any kind, or have any kids... since obviously you aren't qualified to handle it." How about sending me a personal message and ask if I am have those issues, instead of assuming. I have a job I pay all my bills and make enough money my wife stays at home and takes care of the kids. I do not appreciate the attack. You saying, you guys buy out my loan and I should not vote, have credit or kids... I have three kids so your were saying I am an unfit father and a terrible U.S. citizen. That's what I got out of it. It just sickens me a lot of these banks took advantage of people by offering these $hitty loans in bad faith. Yes it is up to the people to read the fine print but most people are just excited and stressed out when getting a house and want the papers sign so they can get moved in. It is also the the lenders job to explain the loan while signing. I had a lender give me the short story on a page I was about to sign, I asked him to read it to me so I can understand it better he agreed to without hesitation. Many banks and mortgage companies have sent their appraisers to homes and said they are worth more than they really were so they could lend more and make more money. The housing market was booming and the Greedy banks and mortgage companies saw an opportunity to flees America. Do you believe the country would be as bad if the housing market never crashed? People over extended themselves, but the banks let them. The banks knew they could not afford by their income to debt ratio. And if the borrowers lied about their income then again it is the banks fault for not calling the employers to verify. The greedy banks are the biggest reason the economy crashed and it has gotten worse. The banks got bailed out by us tax payers. Now that they are making huge profits again. They should return the favor and do what this article say should be done. from Sifo Quote..."Most of the mortgages in America are held by the Big Banks... That statement is simply false. Most mortgages in America are held by Freddie/Fannie." Any company buying and giving out loans is a bank in my book. (Message edited by buellifer on August 30, 2011) | ||
| Buellifer |
Buellitup Thanks for explaining it much better than myself. Mine is like jiberish. I'm just a blue collar worker with a high school and trade school diploma.  (Message edited by buellifer on August 30, 2011) | ||
| Ducxl |
Hey,where's MY frikken bailout!!!! I'm no different! I invested in a 401k and trusted the market NOT to tank.It did! And i lost a ton on those greedy Wall st. execs preying upon ME!!<<<<< I didn't mean that seriously.Just trying to point out the folly in expecting to be compensated after a poor investment.Do Casinos' offer refunds when you bet the farm?We too,decided we couldn't yet afford a Mortgage and haven't bought yet.Maybe we should be bailed out for being fiscally responsibly? WHAT A CROCK Fatty said it best:
As far as my rant above it was meant in jest.Extreme sarcasm.I've learned we make choices in life we have to live with.My Grandfather was a very successful Dentist and lost EVERYTHING in 1929.He pulled himself up by the bootstraps and EARNED it ALL back. | ||
| Ft_bstrd |
Ever notice how against debt our grandparents were? Why is that? They had their perceptions altered by the events of the Depression. They saw their leveraged neighbors lose their homes. They saw banks force immediate repayment of loans causing businesses to fail. I believe that we shall see a similar result in the current Gen-X and Gen-Y population. That's a good thing. Savings rates were horribly low. Most people spent more than they earned. This "recession" will force changes in behavior IF the market is allowed to do what it was designed to do. The faster we can get to the bottom of the housing crash and stop propping up bad loans, the sooner the housing market can recover. | ||
| Oldog |
STROK You may interpret it that way I actually did not mean it that way, I indicated that BOTH had lost their jobs, and that the SAVINGS were gone, I assumed that they were honest and hard working and were looking for work "living with in their means" Hey I used the general rule that My parents used that my housing should not consume more that about 25% ~ 30% of my net income I do not advocate free housing, I question bailouts of the big banks when they get 70% on top of the borrowed amount, yet they will not work with a borrower who is dealing with a true problem, and being responsible about it. don't think its right, that BoA gets Tax payer bailout, but YOU or I cant get a loan modification or grace ( with an understood pay back ) to get on our feet, there is some thing wrong with it... other wise the 401 / market / casino comments I get them and in spirit agree, I took my retirement remnant from the bright sparks on wall street several years ago, paid the taxes and bought a house, even with the down turn I have a little equity, If I can stay employed through this mess it will get better. the sooner the market bottoms and stabilizes, and we get a change in washington // state houses the better.. | ||
| Xl1200r |
If both spouses must be working in order to pay the mortgage then it's too much house. In theory this is a good plan... but... Not everyone is married, or living with someone else. I'm single, in my late 20's and living on my own in my own house. It's been a bit tighter than I planned on, but not unmanageable. My bank approved me for a solid $30,000 more than I knew I could spend. I have a functioning brain and a calculator, it wasn't hard to figure out. If I had blindly bought something for the max the bank would allow me, no one is responsible but me. BTW, I could have easily afforded the max they'd lend me, but I'd have to give up some hobbies and things that most other people don't have/do - music, motorcycles, travel, etc. I'm curious how many of these families are having a hard time affording their McMansions, but don't do things like turn the AC off or set the heat lower. I don't have central air and the window units have been used only a few days this year. In the winter, i set my heat at 62 degrees 24 hours a day, 7 days a week because I'm willing to weat a sweater to save $50/mo or whatever it is. I've made sacrifices, sold things inlcluding a drumset and 2 motorcycles (soon to be three) to make ends meet comfortably. I don't think others should be rewarded for borrowing foolishly. People got hosed on these mortgages, no doubt, but nobody twisted their arm to borrow. They made bad decisions that they should have taken more cautiously and ended up with the short stick. Take the foreclosure, get an apartment (my awesome luxury apartment cost far less to live in than my small, modest house), and start over. These are the cards you've been dealt. | ||
| Sifo |
It just sickens me a lot of these banks took advantage of people by offering these $hitty loans in bad faith. Yes it is up to the people to read the fine print but most people are just excited and stressed out when getting a house and want the papers sign so they can get moved in. These "$hitty" loans are a direct result of Congress setting the rules, not the banks. I'll get back to that a bit later. The bad part of most loans isn't contained in the fine print. About the only thing in the fine print that I really worry about is any penalty for early payoff. Most loans that have that clause are actually government backed loans (Surprise!). Many banks and mortgage companies have sent their appraisers to homes and said they are worth more than they really were so they could lend more and make more money. The housing market was booming and the Greedy banks and mortgage companies saw an opportunity to flees America. The appraisal process was a small part of the problem. A part, but a small part. BTW, the appraisers are separate from the lender, but there was certainly an expectation that an appraisal meet the asking price of the home. It doesn't always happen though. The real problem comes into play when "drive by" appraisals are allowed. No I didn't make that up, that is what they are called. They literally drive by the house and make sure that it exists and appears to be in habitable condition from the street. Want to take a guess who sets the rules for this type of appraisal? A: Freddie/Fannie. People over extended themselves, but the banks let them. The banks knew they could not afford by their income to debt ratio. And if the borrowers lied about their income then again it is the banks fault for not calling the employers to verify. The greedy banks are the biggest reason the economy crashed and it has gotten worse. Yes the banks did let people overextend themselves. It's not up to the bank to tell you that you are overextending yourself. In fact you can go to federal pound me in the ass prison for doing that. If you qualify for the loan, they MUST grant you the loan, and even suggesting that you may be getting in over your head can land you in court. These are the laws that a lender has to operate under. Blame Congress for the laws. Blame Freddie/Fannie for the rules on income/debt ratios. The greedy banks are the biggest reason the economy crashed and it has gotten worse. The banks got bailed out by us tax payers. Now that they are making huge profits again. They should return the favor and do what this article say should be done. Most of the banks that got the bailout didn't even want it. Most paid it back with interest just as soon as they were allowed. (Imagine having an interest bearing loan forced upon your business against your will!) Almost all have paid the full amount back with interest at this point. Of the few that haven't, almost all of those have repaid the majority of the loan. The only one that still has the bulk of the bailout loan outstanding happens to be GM. Who grabbed GM again? Oh, yeah, that was the federal government! The banks have fulfilled their end of the bargain already, even if it was forced upon them against their wills. They have no obligation to do anything the article says. from Sifo Quote..."Most of the mortgages in America are held by the Big Banks... That statement is simply false. Most mortgages in America are held by Freddie/Fannie." Any company buying and giving out loans is a bank in my book. And if frogs had wings they wouldn't hit their ass when they jump. Any amount of my claiming that frogs have wings will not keep them from hitting their asses. Freddie and Fannie are not banks. They are federally funded and federally controlled. They set the rules for the vast majority of home loans that are originated. They also set the standard for virtually every loan program that I've ever seen. BTW, I've literally looked at hundreds of loan programs from dozens of lenders. I've sat in meetings with the people who work with the Wall Street investors putting together loan programs discussing what was being done with new loan programs that don't qualify under Freddie/Fannie guidelines. Often these loan programs were more strict than the Freddie/Fannie guidelines. What ever the deviations, they were always defined by exactly where and how they deviated from Freddie/Fannie qualification rules. Almost all of these programs had very minor deviations, trying to target a very specific market segment that Freddie/Fannie loans didn't handle as well. What I'm getting at here is that while private banks are free to do as they wish with their lending practices, the reality is that they are very tightly bound to the Freddie/Fannie qualification rules. The reason for this is simple. Few banks can afford to keep writing loans that they can't package and sell on Wall Street. The Wall Street guys won't buy packaged loans that aren't written according to known guidelines. So unless the bank in question has extremely deep pockets that can be magically refilled on demand, they have to follow Freddie/Fannie guidelines very closely. There is a lot of blame to go around, but the banks are number 1. Before deregulation, banks couldn't be leveraged more than about 10:1 or 15:1. Credit Unions and mom/pop banks would be lower because of the risk. Reagan, Clinton, and Bush removed that regulation over several years. The banks wanted the deregulation because of how loans were being traded -- instead of the lender paying back the bank, they grouped up the loans into bundles, slapped the AAA+ rating on them, and sold them no the open market (investment banks, not CUs). The bank is no longer at risk, but still pulls in money from the closing. That let the toxic funds get out there, mislabeled as good ones (I won't go into details, you probably know the gist of it). What you say is for the most part accurate. When you make the claim that they just labeled bad loans as AAA+ because they could, that just isn't the case. See what I've said about how designer loans are developed from Freddie/Fannie rules above. The most creative bank doing this by far was Countrywide. Even looking at some of the most creative loans offered by Countrywide, it was easy to see that 95% or more was EXACTLY according to Freddie\Fannie guidelines. Most loan programs that deviated from Freddie/Fannie guidelines did so for very specific things, and usually for only a small deviation, often with some other deviation that helped balance the risk by thinks like tightening the rules elsewhere such as minimum credit scores, etc. The point here is that blaming the way loans were bundled and traded for this crisis is like closing the barn door after the horse has gotten out. The real problem is that these loans were originated in the first place. Any thing after that simply shifts who's holding the hot potato when things go bust. X billion in bad loans is still X billion in bad loans regardless of who's holding the paper. The effect on the economy would have been devastating to the economy regardless of the rules of how these toxic assets were traded. The real question is how were these toxic loans allowed to be originated in the first place. The answer to that is the rules put in place by Freddie/Fannie. They are the ones who shape the home mortgage business. What do I know though? I was just a Loan Officer working for American Home Mortgage when all of this was taking place. You're kidding yourself if you think there weren't many discussions about how certain people were in no position to handle loans they could qualify for. The thing is that none of us were willing to go to jail to keep John and Jane Doe from not knowing that they don't have enough income to make a monthly payment if they also want to eat food and wear clothes. | ||
| Hootowl |
Tom, How dare you bring facts to this discussion. Jeff |
