Bush's Bad Mortgage Medicine

Source: Forbes

The Bush Administration's plan to rescue the housing market and keep the economy from slipping into recession took flak yesterday for freezing interest rate hikes for a mere fraction of subprime, adjustable-rate borrowers. But there's a bigger risk: It could deepen and lengthen the credit crisis.

According to analysis by Barclays Capital, the "freezer-teaser" plan applies to just 240,000 subprime loans. The Mortgage Bankers Association reports the number of subprime adjustable rate mortgages at 2.9 million.

It also won't help the 16% of subprime borrowers who are already delinquent or in default, and it won't help millions of other homeowners who either will be deemed able to pay the higher rates when they adjust, starting in January, or who have the unhappy circumstance of having a house worth less than their mortgage or a loan that has already reset to the higher rates.

President Bush, along with Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson, outlined other proposals Thursday that are meant to help the 2 million borrowers facing sharply rising rates on their adjustable-rate mortgages beginning next month. The plan includes refinancing some of the borrowers into private, fixed-rate mortgages, or putting them into Federal Housing Administration loans.



Read more: http://www.forbes.com/home/wallstreet/2007/12/06/bush-mortgage-subprime-biz-wall-cx_lm_1207subprime.html

He's doing this to save the economy from going into further tailspin.

A MSMarticle I read last night on Yahoo.com had a while mess of idiots in the comments section blaming "liberals" for this and claiming we were becoming a "socialist state". I sh*t you not.

that these idiots write about.

My theory is that people like this at some point just give up and say "my life sucks, and it's someone's fault." Must be the liberals.

But my god, a socialist state? Really? These people need to travel more. They might have a clue what they're talking about and recognize that socialism ain't such a bad thing.

You know. The "I made it on my own and f*** everyone else" and "disregard the fact that someone else paid for college and I got my first job from Daddy's connections" kind of folks...Ron Paul libertarians or so it seemed.

Hell, if they had at least a little travel under their belts they would realize that we are so f***ing far from socialism that it's beyond frightening.

Someone tried to sell me an ARM and I told them then Id rather live in an appt that deal with an ARM. Its pretty clear what was going to happen when the phrases

"were currently at record low mortgage rates"

and

"this mortgage will go up if the standard rate goes up"

One sees it in my neighborhood of South Arlington, VA. THere is a strong contingent of Salvadoreans and Guatemalans. Some are legal and have been here a while. Many are "fresh off the boat" and do not know English let alone have any kind of formal education.

About a year ago today my quite-obviously-illegal-but-nice-folks neighbors (renting like us) moved out telling the landlord that they were getting a home. She (a bible beating Republican...but one making a buck off of them...and us) and I heard the news together. We both looked at each other and knew: someone was selling them one of those ARMs and they fell for it. She was worried

Now my wife and I are looking around for houses with the foreclosures going on. We see many of them. Immigrants (Illegal or not) or low income Citizens (white and black) who were completely hoodwinked and ignorant to what they were getting into. Although we are friendly of course, it is obvious that many of these ARMs were pushed on people without even a basic knowledge of book-keeping and were not explained exactly how this adjustable rate mortgage would work. Also the homes are not well maintained: no one explained to them just how to take care of a home. Some of them are in definite worse condition than they were sold at. Black mold, clogged air filters and vents as well as dirty boilers are a few of the things we've seen.

Even though we might be able to afford a house now, we are wary. It makes us feel horrible to know that this house was foreclosed on people who were taken advantage of.

Sadly, yes, they were "duped". Completely taken a ride for. There was no way they could keep up with the rates and it still was sold to them. I hope the jackasses who commissioned off of those sales (Realtors and mortgage salesmen) have consciences....but I doubt it.

I have experience with a great Realator. He explained everything to me. He wanted to get us moved somewhere but I lost my job before I could commit. I don't think all these folks had the same experience. It was just people "flipping" their houses and a STRONG push to sell as quick as possible. Although home ownership is something everyone deserves, it is obvious that it was not explained to these folks who got fooled or they were simply not ready (if they ever would be) to buy a house in the financial or responsibility sense.

There are all sorts of contracts out there that people should not sign after they read and understand them. That's why PEOPLE SHOULD FUCKING WELL READ AND UNDERSTAND LEGAL CONTRACTS BEFORE THEY SIGN THEM. Fresh off the boat or 12th generation and greedy for their slice, people must understand contracts BEFORE signing them. I hate that this society has gone so far into the "everyone wins the soccer game" mentality that fucking LEGAL CONTRACTS can't be binding on the damned adults who signed them. Fuck this bailout, and fuck anyone who supports it. Nobody goes into a closing without understanding its importance. Know what you are signing. There is no more basic premise. Fuck bailing out those who signed bad deals in the face of that. I hope they enjoy their free 5 years of illegitimate occupancy in homes they should be kicked out of NOW.

They should have, but they didn't. I feel sorry for them, but the gist of it is that there was some serious predetory loaning going on and they preyed on the ignorant. What about that is crap?

Everybody wins soccer game? No, that's not what I implied.

The long and short of this sorry affair is that the prices won't go back down to sanity as quickly or to the level they need to. The shitty investors who plied this type of morgage deserves to have this blow up in their faces but won't. The people who are going to be "bailed out" will be paying through their noses to escape forclosure and trying to sell to a market that won't comply as the real FR mortgages are audacious. They'll be in the same boat once the rate freeze wears off. So will the idiots who financed this stupid affair. Frankly, I think this is once case in which those who bought into it need to learn the lesson the hard way. It's the only way the market price will come down.

One needs to have a low six figure income to get something semidecent in my neighborhood and childcare for a dual income takes a huge slice out of that if you've got a family.

We hardly have an "everybody win's soccer game" society being promoted here with the rate freeze. If you think that you need to go to FReeperland. This move is purely economic and not really making anybody a "winner".

OK, so we agree. Go into traffic court sometime. "Oh, your honor, I SHOULD HAVE stopped for that red light, but I didn't. Please don't fine me." How is that one gonna work? Or maybe "I SHOULD HAVE paid my income taxes, but I wanted to buy a pony instead." How's that for responsible? Nobody's bailing out the red-light runner. Nobody's bailing out the tax-delinquent equine enthusiast.

I don't feel sorry for them. That does not make me illiberal. That makes me someone who agrees with people who attempt to game the system going down when they get caught. Investors did not ply these mortgages. They BOUGHT THEM from those who plied them, with certain returns PROMISED by contract (sound similar? Like maybe those borrowers who promised to pay certain amounts by contract?).

People in your neighborhood who borrowed beyond their means to obtain a house they couldn't afford belong out of those ill-gotten houses.

This move is giving people a chance to continue residence in homes they couldn't afford 3 years ago, can't afford now, and won't be able to afford in 5 years. It rubs raw the people who wisely chose fixed rate mortgages 3 years ago. Where is the 5-year-fixed teaser rate for those people? Signed the fixed at 7%? Good on you. Keep paying that rate. Signed the variable at a 3% teaser rate, and now can't afford the payments when that teaser is set to increase to 8%? No matter - keep paying that teaser for the next 5 years. Nevermind that it doesn't even cover the fucking interest on the loan. Contracts don't matter when people don't have to be responsible for signing them.

It just makes me sick. Honest borrowers who wisely chose to live within their means are now going to be paying higher rates than the greedy suckers who bought gimmick ARMs for the next 5 years. I think we're totally justified in feeling wronged. After all, if we had just been greedier, we'd be riding the gravy train for the next 5 years, too!

Feeling sorry for the shmoes who got taken isn't wrong, but paying a 400$ traffic ticket and loosing your house are two quite different things scalewise. What am I going to do about it? Not much...

I just hope they land on their feet. More homeless in this country isn't going to help anyone. If they go back to renting than all the better but some are going to get screwed again.

We've been priced out of this artificially inflated market since 2003. Only now can I afford to buy, but the chunk of change of my paycheck is painful. Even now in my neighborhood we get looked down on as renters who bought 7 years ago and have mortgage payments+insurance+tax payments similar to our rent payments.

What was $180,000 in Arlington, VA in 2000 is now $355,000 (2 bedroom one bath duplex house)...it was $395,000 pre foreclosures. Of course when the foreclosures started happening we saw prices sink, one to as low as $320,000 for a house with black mold and severely damaging "improvements" to the house by people who did not know what the f*** they were doing.

We had some hopes that this would go back down by the 1/3 that they claimed it might before. Probably not now.

someone else who is paying their fine. Not only the ex-homeowners, but the suckers who bought the securities built on those mortgages are paying for it. Mortgage brokers and agencies were cashing in.

Those people in "ill-gotten houses" can probably afford to pay mortgages at fair and market interest rates. When shyster mortgage agencies try to bilk customers by jacking up the rates, I consider that a much bigger wrong than wanting to live in and own a house. It is simply legal extortion.

Honest homeowners are going to be paying for the thieving greed of these mortgage brokers and agencies for many years to come.

It is pointless to blame the victims of crime for being victims. It is the criminals who DID KNOW what they were selling and who they were selling it to that are to blame. THAT is who benefits from this. Not the ex-homeowner whose life is now in a shambles.

The subprime rates were going to jump in March of 2008. The subrpime rates were supposed to jump to 11 percent, foreclosures would have went through the roof, imaging the stock market's loss. This was done only to help the wealthy.

Don't the Muslims outlaw interest on loans? That sounds good right now.

It shows the education level of the people suckered into signing these no money down rip off loans.

its about greed and short sightedness...

All one had to do was ask their lender if this goes up 1% a year for the next five years (like most arms could) what will I be at...

The answer I got was 10 percent and far more than I could afford..

So rather than a 5% teaser I took a 5.75 fixed..

This is most evident in, inner city Detroit, going after someone's lack of knowledge and getting them to refi at a higher rate is also about lack of education. I am not talking about the house flipper's I have no sympathy for them.

I've read some comments that we should let those people lose their homes because because the commentator didn't get any help with his/her problems.

because they can't afford those homes. Period.

Why has DU suddenly decided that every greedy bastard who signed an ARM in 2004 deserves to be given their ill-gotten home at the teaser rate, legally-binding contracts be damned?

A good many of these people should not have taken out these loans. They should not be bailed out by the federal government, as that sets a bad precedent and will lead to more reckless lending and borrowing.

What I do favor is a law that mandates greater transparency about loans by lenders.

why should this be any different

According to a law expert on NPR this morning, the freezing of interest rates constitutes an illegal taking by the government.

The investors in the mortgages were promised the rate increase and freezing the rates without compensation is illegal.

He said the plan would be tied up in the courts for years.

I understand the constitutional principle, but I can't the banks are fighting so hard to charge additional interest that will ultimately force them to take additional losses from foreclosures and might actually tip the economy into recession.

The investors are mutual funds, foreigners and others.

The banks are the ones who bundled the mortgages and sold them to the investors.

although a lot of the high-profile holders of debt are banks and mortgage companies.

I still think freezing ARMs is a win-win situation for everyone except real estate speculators. Holders of the debt will make less interest income but suffer fewer forecloses. That is a plus. Fewer homeowners will get foreclosed on. The markets and the economy could dodge the most serious effects of a complete meltdown. The FDIC will have a lower risk of bailing out depositors for institutions that fail.

Fighting against the freeze just seems like short-term greed to me. Plus it's endangering all sectors of the economy. I hope Paulsen has been twisting some arms to get agreement.

That was not illegal.

The investors were promised a certain level of return from the increase in the interest rates. The promise is part of the contract they signed when they purchased the mortgages.

It's elementary.

"Elementary," hah!

The investors of the mortgages have done neither.

As it turned out, the wage freeze turned the country against Nixon and union membership grew.

The courts can overturn any contract or agreement on grounds of compelling state interest.

Regardless, by the time the courts decided the interest rate increases would have taken affect since the court would have to come up with a compelling reason to prevent them.

I just don't see that happening.

And I'll take the words of a law expert over someone with only 40 posts and no history to fall back on.

"I'll take the words of a law expert over someone with only 40 posts and no history to fall back on" is just an appeal to authority, not a proof.

those anticipated rates, either. Still....they will sue, yes they will!

and this plan is breaking those contracts.

They were put on hold.

The union agreed to it.

Have the investors?

"Politicians want to look like they are doing something while not doing something," says Joseph Mason, a professor at Drexel University...

Especially this administration.

'til a Dem takes office, I'll bet.
Chimpolini cares for NO ONE.....

Can one party unilaterally change the terms of a contract? I'm thinking this will be challenged.

See post # 9.

We'll see.

:shrug: