What if the government extended (loans, credit, mortgages, buy)

[jimj]

home loans to 70-80 years for those who can't afford their house instead of the government lowering the price to it's current value and us taking a hosing.
I'm thinking that they could be kept at the original sales price, not reduced, start the people in them out fresh with a cheaper payment held by the government. If they fail to make ANY payments after that then out they go. If things got better they could refinance into a normal loan thereby repaying the full value.

[Barkingowl]

[jimj]

Let's see if I can explain it better, my son was rushing me last night when I wrote the prior post.
Ok, so the government plan is to buy up these non-performing mortgages,reduce the house to it's current value and issue a new payment plan based on that value eating the loss. Right so far?

How about instead of doing the above the government keeps the loan at the original amount but stretches the loan to 60-80 years at about 5 percent. If they sell the house or refinance the government gets paid back the full value of the original loan they took over and if the person misses anymore payments after the new loan goes into effect then out the door they go, PERIOD.
This could be a win/win with no one getting a free ride IMO.

[Nor'Eastah]

Originally Posted by jimj

How about instead of doing the above the government keeps the loan at the original amount...

Would you kindly explain how encouraging continued asset inflation, without allowing the market to correct for malinvestment, would help anyone/anything?

Sounds like you think your own property should retain its artificially inflated value, just because you've made the payments on time.

It doesn't work that way. This is a tide that will lower all boats.

[jimj]

Originally Posted by Nor'Eastah

Would you kindly explain how encouraging continued asset inflation, without allowing the market to correct for malinvestment, would help anyone/anything?

Sounds like you think your own property should retain its artificially inflated value, just because you've made the payments on time.

It doesn't work that way. This is a tide that will lower all boats.

Actually no that's not what I'm looking at. What I'm looking at is US as in you and I having to buy down mortgages for people who took on too much and can't pay the freight. No matter what your opinion of house prices they were worth what those people paid AT THE TIME they paid for it, that was the market then and that is what should be paid on.
I'm not worried about my house losing value since it only loses if I intend to sell right now which I don't.

[Nor'Eastah]

Originally Posted by jimj

I'm not worried about my house losing value since it only loses if I intend to sell right now which I don't.

If you don't intend to sell, you're right - it won't lose value as far as you can tell.

But housing is a very active market. People move for better jobs elsewhere, or to get more room for a growing family, or to downsize for an empty nest. The average homeowner moves every 5-7 years. When these homes change hands, the value fluctuates with the market. Right now homes are losing value (not yours, of course). The prices were run up too quickly, far beyond what the houses were worth, and you're trying to sustain this. I know your beef is with taxpayers having to come up with the difference. But we are incapable of footing the bill via taxes. There's no way to stop this current cascading loss of value. It's the trend, and the trend is your friend if you go with it.

If you fight it, you will be down for the count.

[bale002]

Originally Posted by Nor'Eastah

People move for better jobs ... When homes change hands, the value fluctuates with the market. Right now homes are losing value (not yours, of course). The prices were run up too quickly, far beyond what the houses were worth ... taxpayers having to come up with the difference. But we are incapable of footing the bill via taxes. There's no way to stop this current cascading loss of value.

The key variables here are consumption, jobs, and value.

The relatively productive, nowadays significantly in other countries through their credit balances, but also the productive taxpayers in the US, are subsidizing the consumption of the relatively unproductive in inefficient housing.

We are subsidizing deadbeats, bringing down everyone with it.

There is no leader is sight right now with the skills and the power to stop it.

Soon we will all be coolies.

[hank morgan]

Tell me this; why should the government bail out homeowners who purchased above their means to begin with? Those who bought what they couldn't afford from the get go. Now their mortgages have failed and they get help. There are a LOT of people in this country who could be living in nice houses who don't because they can't afford it, and now those who bought above are being helped out, rewarded for being stupid, is what I call it.

Go ahead and set yourself up in a 3/4+mil home because when you discover you can't pay for it, someone will come along and help you out with the payments.

Extending to 70-80 years would have only made sense 70-80 years ago when people stayed put. Nowadays you wouldn't have enough equity into the home, in fact almost none even if a family stayed 10 years. People seldom stay in a home long enough anymore for that to work.

[Nor'Eastah]

Originally Posted by bale002

The relatively productive, nowadays significantly in other countries through their credit balances, but also the productive taxpayers in the US, are subsidizing the consumption of the relatively unproductive in inefficient housing.

We are subsidizing deadbeats, bringing down everyone with it.

You are mixing the chocolate pudding with the vanilla here, and hoping to come up with butterscotch. It don't work that way!

If you are against socialism, count me as an ally. I don't like the bailouts any more than you do. And yes, there are 'deadbeats' but we have been paying their way for almost a century now. That's the way the pols get votes - by giving handouts. It takes away from the rest of us, who are productive workers.

But the issue here is not socialism. It is the declining value of assets. Not just homes, but stocks, bonds, whatever. Name an asset class, and it has taken a hit this past year. Assets were driven up in price by free-wheeling banks lending globs of low-interest money to anybody who could fog a mirror. It was just like blowing up a balloon; it was unsustainable. Now the markets want to correct for fair value. We need to let this happen, not just with housing, but all asset classes.

We have to let some of the air out of that balloon before it explodes. The gov't and Fed have been trying to deflate slowly, in a controlled fashion. I'm not saying that I agree or disagree with that; it isn't up to me. However, encouraging some people to pay the old, inflated prices just to keep them up there, is not the answer.

[jimmyP]

The easy credit caused the over-inflation of housing. By extending mortgages to 50 years + aren't you really just doing the same thing - easy credit. Selling someone something they can't really afford?