save the financially irresponsible (lawyer, solution, cost, education)

[baystater]

Are you willing to pay to save the financially irresponsible?

Bloomberg.com: Worldwide

[Rita Mordio]

It's not just saving the financially irresponsible. Adjustable rate mortgages, sub-prime mortgages, and especially the interest-only (for like the first 3 years) are some of the only mortgages that people can actually get into. A traditional mortgage requires so much upfront money and excellent credit to get into.

Earlier this year, I was going to try and get a home for myself (yes, I'm young, but ambitious) and I was rejected for the flat-rate mortgages because my credit wasn't mature enough (only about a year of credit with the only big thing on was a car loan) so I was offered these sub-prime mortgages that are getting people into trouble.

So, in a choice between a sub-prime mortgage and an apartment, most people took the mortgage because it got them into a house. Something they could be proud of. However, when it came time to make REAL payments, they'd gotten so used to the small payment that now they're in trouble.

Foreclosures are through the roof (literally, haha) and this ruins people's lives. It's very hard to get into a good apartment after a foreclosure... in fact, it takes a LOT to get out from under that.

So yes, I would rather pay a little more to help people out.. They're not financially irresponsible. But rather have less upfront funds and less of a credit score than somebody else.

[RedNC]

According to the OP it assumes that there is some kind of choice involved. When it comes to bailouts there has never been a “choice”. The savings and loan problems a while back were a prime example.
Am I “willing”? No. Am I going to put up a fight? No. Will I vote for a tax increase? Assuming there is and option on the ballot, he11 no.

Do I have a solution everyone could agree on? Probably not everyone, but here it is.

Take a look at all these loans looking for the following.
Anyone that is in trouble on their primary home would be eligible for assistance, as long as that is the only home they own. If they own other property they are not eligible for any assistance.
Anyone that is in trouble on any home that is not their primary home can suck eggs.

[Elmonellie]

Originally Posted by Kuharai

It's not just saving the financially irresponsible. Adjustable rate mortgages, sub-prime mortgages, and especially the interest-only (for like the first 3 years) are some of the only mortgages that people can actually get into. A traditional mortgage requires so much upfront money and excellent credit to get into.

Earlier this year, I was going to try and get a home for myself (yes, I'm young, but ambitious) and I was rejected for the flat-rate mortgages because my credit wasn't mature enough (only about a year of credit with the only big thing on was a car loan) so I was offered these sub-prime mortgages that are getting people into trouble.

So, in a choice between a sub-prime mortgage and an apartment, most people took the mortgage because it got them into a house. Something they could be proud of. However, when it came time to make REAL payments, they'd gotten so used to the small payment that now they're in trouble.

Foreclosures are through the roof (literally, haha) and this ruins people's lives. It's very hard to get into a good apartment after a foreclosure... in fact, it takes a LOT to get out from under that.

So yes, I would rather pay a little more to help people out.. They're not financially irresponsible. But rather have less upfront funds and less of a credit score than somebody else.

I don't want to bail out the idiot lenders or the idiot buyers. Because "they could be proud of" being in a house makes it okay to take a loan they can't afford? Wow. Now I've heard everything.

These jerks are totally financially irresponsible if they "have less upfront funds and less of a credit score than somebody else" and sign on to a loan they can't afford! What do you think irresponsible means?

[NewToCA]

My guess is that individual referenced in that article, running the subject PIMCO fund, has risk if these mortgages go bad. So in effect, he is trying to find an outsider to assume cost to protect his assets. This seems inappropriate to me, and unfair to those who did not benefit from taking on these low initial payment mortgages. Fairness to those who didn't take the risk is a consideration too.

As mentioned by another poster, I would initially break the universe of defaulting mortgages into those who used them to buy prime residences and others. Those who used these mortgages for purposes other than purchase of their prime residence I would toss aside, and let the banks negotiate their fate.

For those who used them for prime residences I would try to see if we could negotiate a process retaining their obligations, but allowing them to buy time to work out the financial problem gradually. Those looking for long term subsidy, I would be inclined to toss out with the investors.

[Rita Mordio]

Originally Posted by Elmonellie

I don't want to bail out the idiot lenders or the idiot buyers. Because "they could be proud of" being in a house makes it okay to take a loan they can't afford? Wow. Now I've heard everything.

These jerks are totally financially irresponsible if they "have less upfront funds and less of a credit score than somebody else" and sign on to a loan they can't afford! What do you think irresponsible means?

Well, let's see, I have the terms of the I/O loan that was offered to me. Basically, I would get a $200K mortgage for a starting interest rate of 5% for the first 4 years (which is 830/month). After that, the company would refinance the loan. However, the extremely small print states that the interest rate of the new loan would be at their disgression.

Somebody I used to work with got into the loan a few years back.. but when she had to refinance, the new interest rate was actually DOUBLE the prior. Making her monthly mortgage payment go from around 800 to about 1700 which she was not prepared for it to jump THAT much in 30 days. She had to sell the house before the first payment was due or else she would have to foreclose. She got lucky in that one of her good friends was about to end her lease... so now both families live together in the house.

That wasn't irresponsible on her part. It was irresponsible and GREEDY of the mortgage company to raise the interest rate to the point where the house CAN'T be afforded.

Take a look at all these loans looking for the following.
Anyone that is in trouble on their primary home would be eligible for assistance, as long as that is the only home they own. If they own other property they are not eligible for any assistance.
Anyone that is in trouble on any home that is not their primary home can suck eggs.

Perfectly stated. Those who are in trouble with their one and only home should be assisted so they won't have the huge cloud over them. If they are in trouble because they bought more than one house and can't afford it, oh well.

[Rggr]

Just as with any "investment" it is up to the person getting in to know what they are investing in. To jump in because it feels good or because you just don't want to wait until you can afford it is the decision-making process of an irresponsible person.

[katzenfreund]

No - I would not be willing.... people are living WAY above their means. They need to start saving more and leading a lifestyle compatible with their income. Something less and less people are doing. Why should I foot the bill for their stupidity? We don't have a mortgage on our house and we paid it off by saving a lot and working hard to pay off the mortgage. Had it paid off when we were in our 30's. So it can be done. It's a small house, but good enough for me and it's all ours, not the bank's.

[baystater]

Originally Posted by Kuharai

Well, let's see, I have the terms of the I/O loan that was offered to me. Basically, I would get a $200K mortgage for a starting interest rate of 5% for the first 4 years (which is 830/month). After that, the company would refinance the loan. However, the extremely small print states that the interest rate of the new loan would be at their disgression.

Somebody I used to work with got into the loan a few years back.. but when she had to refinance, the new interest rate was actually DOUBLE the prior. Making her monthly mortgage payment go from around 800 to about 1700 which she was not prepared for it to jump THAT much in 30 days. She had to sell the house before the first payment was due or else she would have to foreclose. She got lucky in that one of her good friends was about to end her lease... so now both families live together in the house.

That wasn't irresponsible on her part. It was irresponsible and GREEDY of the mortgage company to raise the interest rate to the point where the house CAN'T be afforded.



Perfectly stated. Those who are in trouble with their one and only home should be assisted so they won't have the huge cloud over them. If they are in trouble because they bought more than one house and can't afford it, oh well.

Didn't your friend have a lawyer read over the contract first and explain to her what the conditions of the contract were? I heard that there are some in government that say they would like to see more financial education in the country. Well here's our chance to get a real good financial lesson, the hard way.

To steal a quote from Rome: "The ram must touch the wall." "No mercy."

[NewToCA]

Originally Posted by katzenfreund

No - I would not be willing.... people are living WAY above their means. They need to start saving more and leading a lifestyle compatible with their income. Something less and less people are doing. Why should I foot the bill for their stupidity? We don't have a mortgage on our house and we paid it off by saving a lot and working hard to pay off the mortgage. Had it paid off when we were in our 30's. So it can be done. It's a small house, but good enough for me and it's all ours, not the bank's.

I think this precisely explains the resentment many would have, appropriately in my view, towards a bail out. It is not much different than the welfare discussions, it has to do with diligence and appropriate reward. When you see someone living in a home they shouldn't have been able to afford in the first place, responsible folks resent being asked to subsidize this foolishness.