Solution to homeowner foreclosure "crisis" (loans, debt, mortgage)

[killer2021]

Here is a better solution instead of thinking up all kinds of ways to prevent people from foreclosure. Instead of giving them money and helping them out here is what we do.

LET THEM FORECLOSE!!!!!!!!

Thats the solution to their problem for heavens sake! Yes, I'd love to go out and buy a lambo but I don't because I can't afford it. Its the same thing with people buying a home. You don't have to be a homeowner to put a roof over your head. Most of these people who are in foreclosure are in that situation because they can't afford the home, otherwise they wouldn't be in foreclosure. The solution is to let these people foreclose so they can get rid of that unaffordable asset and rent instead until they can afford to buy, like the rest of us.

Had we done this in the first place the market would be in a heck of alot better shape than it is.

Stimulus only delays the market's normal cycle of clearing all bad market decisions and ultimately, makes things even worse.

[maf763]

I'm not necessarily disagreeing with you, but would point out that a glut of foreclosures in an area has a ripple effect, dragging down values for people who are keeping up. I think this is as much a part of foreclosure assistance plans as aid to those directly affected.

[sean98125]

It is unfortunate that a lot of the "bad market decisions" were made by the companies that received the bulk of the funds. The government should take over the mortgages for primary family residences that are about to go into default and become the mortgage holder, relieving the banks of their bad debt. The loans can then be modified to a longer period or lower interest rate so that families can stay in the houses and to help stabilize the communities. The interest that the homeowners pay then goes to pay back the government expenditure. Once the economy stabilizes the homeowners can refinance with private lenders. I wouldn't offer any foreclosure relief for rental properties, vacation homes or second homes, though - just the primary family residence.

Instead of bailing out the banks we should have bailed out the taxpayers and let the banks go under.

[le roi]

Originally Posted by maf763

I'm not necessarily disagreeing with you, but would point out that a glut of foreclosures in an area has a ripple effect, dragging down values for people who are keeping up.

prices would fall, homes would be more affordable, and new people would buy them.

the way we're doing it, we're screwing all those people who would be buying cheap homes.

[texdav]

The loans on the loan that are good need to be separted on the bokks and those that were bad loan let fall into foreclosure. That is what fannie has discovered when they refi ;that 59% within a few months went back into foreclosure.But bu the time they get the unbundling done.Bascailly it will proably only invest with cash that can afford to buy the packaging really.

[maf763]

Originally Posted by le roi

prices would fall, homes would be more affordable, and new people would buy them.

the way we're doing it, we're screwing all those people who would be buying cheap homes.

True, but you'll also wind up with a lot of people underwater because of the drop which might lead to more people walking away from mortgages.

[wheelsup]

A lot of people are foreclosing because they lack a job, not because their mortgage went up $200/month

[hindsight2020]

Originally Posted by maf763

True, but you'll also wind up with a lot of people underwater because of the drop which might lead to more people walking away from mortgages.

You keep on harping on the rent-seeking argument. It's actually quite a pervasive attitude in this country when it comes to value-setting. Here's the bottom line on the "we gotta preserve property values" angle. People who worry about price preservation are people who are using the utility of a primary residence as an investment vehicle. That gig is up. The market does not OWE the home owner any kind of equity promise. That attitude is simply rent-seeking.

Incomes are not in line with median home prices, and the adjustment needs to happen. Homes were, up until recently, a mere utility. The whole "ride your house to the bank" is a recent phenom. People need to accept we're shifting into a Brazil-like distribution of wealth and realize the McMansion standard is a dead proposition for the majority, i.e. the voting majority, the prole. Keeping the prices artificially inflated while the government waits for the next "up cycle" to pick it up and carry it to the next century is not going to accomplish anything. And that very view of our economic construct is bullchit in the first place (boom bust inflation driven façade). Let it reset. People will still find a place to shelter from the rain. With the glut of housing everybody in this country can find a hole to hide from the rain... Will you no longer be able to refinance your way into your toys and the desirable cul-de-sacs you feel entitled to as a function of being born "American" and getting a college degree? Most likely. Tough c$it. Welcome to Brazil. Let it reset. Let it reset so hard it cracks the foundation.

[GregW]

I am fortunate in that I bought my property 26 years ago before the speculation started. It is still worth what I paid for it with only two years to go on the mortgage. I guess I missed the boom but I did not go broke.

Eventually houses will drop to the 2.5 median salary level much to the great disappointment of the speculators. Too bad if they are “underwater" they still owe the bank the money. Just because the home will not currently sell for what they paid is irrelevant. If they have the means to make the payments agreed to they should not be allowed to walk away without facing criminal charges of theft.

[Robineli]

It's unfortunate that this happens:

Special report: Flipping, flopping and booming mortgage fraud - Yahoo! News (http://news.yahoo.com/s/nm/20100817/us_nm/us_housing_usa_fraud_2 - broken link)