The impending Seattle housing market collapse. (credit, homebuyer, school)

[Heiwos]

Originally Posted by texastrigirl

Unless they have a sub-prime loan, their ARM probably won't be getting jacked up anytime soon since interest rates are so low.

The reset rate is a fixed number of points above some rate index, so it doesn't matter that rates are low. 5 points above 3% is still 8% or $hundreds more per month than they were paying before. The whole point of the ARM is so that banks can gouge customers if they get caught holding it too long. Just like credit card teaser rates that jack up to 30%.

[Heiwos]

Originally Posted by MissingAll4Seasons

Also try to remember that just because someone got an ARM doesn't mean that they were fiscally irresponsible or grubbing for a house that was beyond their means, many of them had very viable reasons for getting them and had planned for the eventuality of a rate increase and were still well within reasonable value:loan margins... now they've lost their jobs or taken a cut in pay or hours due to the economic crisis in the country, their property values have plummeted (not just failed to increase), and they can barely make the current payment much less a higher one.

You mean something happened to them that was always a distinct possibility? Why should I feel bad enough to want to spend my tax dollars helping someone who didn't take reasonable measures to protect themselves in a downturn, which happens regularly?

A friend of mine has an ARM. I gently warned him many times over many years to get to a fixed rate before it's too late. He simply gambled, and lost. Gambling is fine, people just shouldn't expect a bailout when they lose.

[MissingAll4Seasons]

Well, there are a lot of people with fixed-rates in the same situation... house well below loan value and they can't afford the mortgage due to economic hardship. Most banks aren't even attempting to rework the loans anymore regardless of hardship... that's why there's so much jingle-mail (giving the bank the deed in lieu of foreclosure). Now, if the gov't steps in and tells the banks that they have to rework an ARM or a mortgage, so people can keep their homes, I don't see any real problem with that.

I think it's interesting that people complain about their tax dollars being misspent when a program doesn't benefit them, but laud tax expenditures when they're on the receiving end. That's like me getting ticked off that 50% of my property taxes goes to fund the public school (even though I don't have any children) and saying that other people are being irresponsible for having children!!

[Jennibc]

Originally Posted by MissingAll4Seasons

I think it's interesting that people complain about their tax dollars being misspent when a program doesn't benefit them, but laud tax expenditures when they're on the receiving end. That's like me getting ticked off that 50% of my property taxes goes to fund the public school (even though I don't have any children) and saying that other people are being irresponsible for having children!!

Not necessarily, everyone benefits from an educated population in a democracy (theoretically) - and YOU did go to school once (at least you had the option to attend public schools) and you were not likely paying taxes at the time.

[Heiwos]

Originally Posted by MissingAll4Seasons

Now, if the gov't steps in and tells the banks that they have to rework an ARM or a mortgage, so people can keep their homes, I don't see any real problem with that.

Neither do I, although I'd rather the banks be allowed to fail, or at least feel some serious pain (like pay high interest on gov't loans to survive), so they can figure out for themselves that not gouging customers to the point of them defaulting is in their (the banks') own best interests.

That's like me getting ticked off that 50% of my property taxes goes to fund the public school (even though I don't have any children) and saying that other people are being irresponsible for having children!!

Jennibc's right, you'd be in a world of hurt in a world without children, eventually. So all taxpayers have to contribute to kids. But in general, I agree.

[MissingAll4Seasons]

I agree that education is important and I did go to school once, too... so I don't complain about paying taxes to support the school system even though I don't directly benefit from it anymore. But a little bit of tax money to help keep people in their homes, off the streets, and still paying property taxes is exactly the same situation in abstract.

[jenlion]

But it does seem that if you play by the rules and are "responsible" -- and lucky -- most of the special programs DON'T directly benefit you. I highly doubt anybody is going to modify our mortgage so that we only have to pay something like 90% of what the house is currently worth -- we are likely to have to pay back everything we agreed to pay, because we CAN. And that's how it should be. I'm not going to complain that I have to pay back a loan I agreed to pay back -- just that I have to pay back my loan, when SO many people who can't will not, or will get things changed. If they get better terms, I want them too. I want a more-level playing field. Else why else work hard and try to take care of your own stuff? Isn't that.... capitalism?

But then there's the little problem of ... this is so BIG. SO many people are in trouble that it drags down everyone else with them. So, we have to prop people up, because if we don't then we all fall even further. So, as much as it sucks that I get to subsidize other people's mistakes and misfortunes, it would be cutting off my nose to spite my face if I didn't.

You know, I was thinking that I don't get to benefit from many tax programs, but I suppose I do. I may not be on welface, but I get to deduct mortgage interest -- nobody renting can do that. I get to drive on paved roads -- people without cars don't. I get to enjoy public parks -- people with no leisure time can't do that. I doubt the burden is equal, but I'd still take my end of the deal than that of a very-low-income person getting, say, WIC, or section 8, but doesn't own a home, a car, or have time or money to get to Yellowstone. I hadn't really thought about it much that way before.

And ditto on educating other people's kids. In TX I heard a lot about people being mad we were educating "illegal" kids. Um... many of them were born here... they are citizens... they're staying. You WANT them educated. You want educated people running your communities when they are adults!!! You want people who have options other than "poverty" or "crime"!

[Heiwos]

Originally Posted by jenlion

SO many people are in trouble that it drags down everyone else with them. So, we have to prop people up, because if we don't then we all fall even further. So, as much as it sucks that I get to subsidize other people's mistakes and misfortunes, it would be cutting off my nose to spite my face if I didn't.

Good post. I doubt homeowners will be significantly helped by gov't anyway. But if so, I say seriously consider doing what it takes to not be among the few paying everyone else's bills. If 50% of people foreclose, for an extreme example, seriously consider walking away yourself. Everyone does this to some extent. For example, when we come back from Oregon do we immediately fill out that WA state use tax form, to pay WA sales tax on every meal we ate in OR? We don't, because no one else does either.

[Ira500]

Else why else work hard and try to take care of your own stuff? Isn't that.... capitalism?

Nowadays, it's more like corporate socialism. A couple of years ago the banks were giving mortgages to anybody who had a pulse so they could charge a higher interest rate, and when so many of the borrowers couldn't make their payments, the government has to come in and rescue these banks, who are not using that money to loan out but to give bonuses to their executives or to buy other banks.

[MissingAll4Seasons]

Good point Ira500 -- if there are any bailouts, it's not actually the individual mortgagees that get the benefit... it's the banks which gave out so many risky mortgages that get the bailout. Any benefit to the homeowner is incidental.