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As a percentage - there are not that many foreclosures.
The media tries to paint a picture that all home loans are in default. Simply not true.
Somewhere around 95% of home loans are current -
Yeah.. and.. what is your point..
the 5% that aren't are causing all of this mess.. does it really matter then that most are current..
Come on GreatDay.. banks are folding left and right all tied into mortgage backed securities.. the point is thse mortgages 5% or not, are causing such a huge problem...
Again..I didn't spend more than I could afford (my mortage, btw was $3300/month for astarter home on LI NY in a modest neighborhood). The product I purchased with was a bad product. It became unaffordable when the interest on it spiked
How was it a bad product? Did you not get what you agreed to purchase? Did the bank violate its contractual agreement with you?
Or did you enter into the agreement willingly, and then bail when the interest rate spiked, as spelled out in the terms of your contract?
If the 30 year mortgage was at a lower interest rate and a lower monthly payment, why did you take an ARM? Probably because you thought the long-term outlook would make the ARM more affordable. That's taking a risk, and you were wrong.
Quote:
Originally Posted by TristansMommy
When the risk spreads beyond the individual homeowner and the lender they made the agreement with then you have a problem that needs to be fixed.
The risk spread because people bought securities backed by your mortgage. No one who who had an economic stake in your mortgage was forced into the deal. They all had a chance to perform due diligence and decide if they wanted to be tied to ARM mortgages. They took on the risk willingly.
Of course, if there was fraud, then you're in a different ballpark, and I'm sure that there will be plenty of these claims to go around. That's why we have a legal system.
the 5% that aren't are causing all of this mess.. does it really matter then that most are current..
Come on GreatDay.. banks are folding left and right all tied into mortgage backed securities.. the point is thse mortgages 5% or not, are causing such a huge problem...
WAMU did not "fold" because of "bad mortgages" necessarily - they "folded" because of a "run on the bank" - depositors removing money at a very high rate - when they did not have to -
95% of mortgages are PERFORMING - current. Why should taxpayers bailout those few who are not performing?
Why not just send 6k to every household earning under
250k and let the corporations fend for themselves?
Again, the issue is liquidity in the market. Businesses and stupid consumers require credit.
This explains it quite nicely:
Quote:
close to three quarters of U.S. ethanol plants, or 123 of the 160 operating ethnaol plants are at risk of being shuttered in the coming months, according to Citigroup analyst David Driscoll. Small and mid-sized ethanol plants are in trouble due to a record-setting spike in corn prices, bumped up by the Midwest floods and increasing demand. This news comes after CitiGroup downgraded all the major publicly traded ethanol players including Archer Daniels Midland, BioFuel Energy and VeraSun Energy.
Plans for new ethanol plants are being put on hold or canceled, too. Since May we’ve counted 11 planned plants suspended (check our map, embedded above). The credit crunch is making it increasingly difficult for proposed plants to get financed. Heartland Ethanol said last week that it has pulled the plug on seven planned ethanol plants. Walker R. Filbert, the president of developer Heartland Ethanol told the News-Gazette that the company was unable to get bank loans to finance the plants. Filbert said: “We’ve been digging out from [the credit crunch] for 10 months for all businesses, let alone ethanol plants.
That overwhelming vast majority of businesses purchase their inventories on credit.
This is true for ethanol plants, processing plants that convert corn to corn syrup, food processing plants like Coca-Cola, Pepsi and 10,000 others that buy corn syrup for their food products, or milled corn, it's true for Wal-Mart, Meijer's, Target, Kmart, Sears, Kohl's, Albertson's, Publix, ZF Lenksystems (manufactures steering columns and gears for cars) and thousands and thousands of other businesses and manufacturers.
Business and industry buys inventories on credit because it is a good use of their money and it helps them manage their cash flow better, right?
Not ever business or manufacturer has $100 Million in cash lying around to purchase inventories so that they can sell or manufacture into a finished good to sell.
Even if they had $100 Million cash lying around, why should they spend the cash?
Borrowing $100 Million to buy inventories then selling them for $200 Million retail then paying off the $100 Million debt with a 3% interest is better business.
If the banks don't have money to lend, then business and industry cannot purchase goods on credit.
If they spend $100 Million in cash to purchase inventories, then they cannot purchase any more inventories until the sell off their current inventory for profit.
That ultimately leads to production problems, which in plain English means lay-offs.
The problem is foreclosures. .. Stop the foreclosures, restructure loans that can be into fixed interest rates with longer terms and you stop the bleeding..
No, it doesn't work like that.
What are you going to restructure their mortgage to, a $125/month payment? Because that's what you'd have to do, and even then you'd still have failures.
The issue is Cost Inflation. You're paying higher prices and having your disposable income eroded. You think business and industry are impervious to Cost Inflation? No, you're paying higher prices because they are paying higher prices, and when consumers cut back spending because their disposable income is eroded, business and industry takes a 2nd hit.
Fixing the mortgage problem will only delay a recession, not stop it. That's why smart consumers are stopping credit spending, paying off debts and stocking-piling things like flour and canned goods when they're on sale so they can afford to pay $7.99/pound for chicken.
Sending people checks is a bad ideas, because many won't use it to pay down debt, but buy things instead.
I would propose a LOAN to these companies at 2% over the T-Bill rate. This was proposed by Newt Gingrich and I like a loan program more than a gift program.
I was wondering if any one else out there had looked into this idea. If we middle folks had access to 700 billion... hmm. It would seem that the money would end up back up top at the end of the day sooo..kill two birds with one stone. We get caught up and so do the big corps we are in debt to. Looks good on paper and after all the money came from us to begin with. At least a fair portion of it. There could be stipulations placed on how we use the money ( it needs to go to debt relief seems fair) to keep some from squandering it at the car dealership for a Hummer or something. As a SMALL business guy I know I would have no problem kicking back up if I was given a relief check with such conditions. If you think about it 700 billion is enough to make the majority of Americans millionaires. That would not really be a good thing but I could get caught up and moving forward handily on 25,000 easy. On the surface this seems a good plan but I'm no Wall St. Wizard.
How was it a bad product? Did you not get what you agreed to purchase? Did the bank violate its contractual agreement with you?
Or did you enter into the agreement willingly, and then bail when the interest rate spiked, as spelled out in the terms of your contract?
If the 30 year mortgage was at a lower interest rate and a lower monthly payment, why did you take an ARM? Probably because you thought the long-term outlook would make the ARM more affordable. That's taking a risk, and you were wrong.
The risk spread because people bought securities backed by your mortgage. No one who who had an economic stake in your mortgage was forced into the deal. They all had a chance to perform due diligence and decide if they wanted to be tied to ARM mortgages. They took on the risk willingly.
Of course, if there was fraud, then you're in a different ballpark, and I'm sure that there will be plenty of these claims to go around. That's why we have a legal system.
It was a bad product in the sense that it was an ARM I purchased with an NOT a fixed rate. If I had been in a fixed rate I would be fine.
NOw.. why did I purchase with an ARM.. basically I wasn't offered a fixed rate. The mortgage broker told me that I only qualified for a ARM because of the situation (I am stated income self employed and my credit score). Now..my score wasn't horrible, but it wasn't good. It wasn't good not because I am irresponsible, but because I had no recent open lines of credit (I was 31 at the time we bought the house.. I paid off all my credit debt from my late teens to early 20's in my mid twenties and swore off credit cards!). Ironically swearing off credit cards is a BAD thing. I was also advised since I was putting down money on the house and if I paid my mortage on time, I could improve my score and be offered a fixed interest rate at refinance. I figured that all those thing combined with improvements to the fixer upper (new kitchen/bath) that is supposed to add value, I would be a safe bet for a refi . So.. I did all those things.. my score shot up to a decent number etc. All my ducks were in a row.. However, the market started tanking and ate up any equity I had putting me at a high LTV..and as a stated individual self employed the LTV became too high for them to give me refi .
I was told by another broker on this board that I should have been offered a fixed interest rate at a rate that was above the one that I recieved at the inial 6.95% (which was above the best rates that were being offered to those with the best credit scores,btw. What I didn't know was that brokers recieve more money for pushing ARMS on the public. So.. as a first time homebuyer, while I thought I did the best thing I could do, turns out that I didn't.
When I discovered that I wouls be trapped I immediately tried to negotiate with my mortgage lender even BEFORE the reset and before I would default. I got nowhere for 6 monts.. then the adjustment hit and it was just impossilbe to meet. So , I stopped paying and started looking at other options that didn't include me getting to keep my house.
As of today, I have sold my house rather quicky with 3 offers on the table, all at full appraised value (I guess having renovated DID help for something, although not monetarily for me.). They have their commitment and i have a rental I'll be moving into.
I took a bad situation and attempted to get out of it as responsibly as I could possibly get out with the least amount of damage inflicted on all parties involved.
Hindsight is 20/20. I'm not a bad person, I'm not an irresponsible person. I'm not an investor that made a lot of money.. nor was I looking to. I was simply a young person ready to start afamily and ready to own a home. Had this been a different market at a different time, I would be here in the house I put so much into without any problems.
Stop demonizing the homeowners. Wall Street gambled with YOUR 401K's and with the financial economy. THEY are supposed to know what they are doing. Little Joe Homeowner doesn't.. not really. They couldn't figure that if things went south for them personally that the entire economy would tank.. but Wall Street could and just ignored it because they were making the big bucks.
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