Mortgage Crisis

[Sonny]

Hopefully, those of you among us that own property are in a fixed rate mortgage. The financial picture of the overall U.S. mortgage industry is not very pretty at all. And it's going to get worse.

What role do you think the federal government should provide (if any) to bail out homeowner who bought too much home or mortgage companies that made thousands of bad loans?

[Beta]

Hopefully, those of you among us that own property are in a fixed rate mortgage. The financial picture of the overall U.S. mortgage industry is not very pretty at all. And it's going to get worse.

What role do you think the federal government should provide (if any) to bail out homeowner who bought too much home or mortgage companies that made thousands of bad loans?

The mortgage companies are totally at fault for just tossing out loans to people without taking the necessary precautions...now everyone is defaulting.

IMHO the gov't bailing people out that made god-awful financial mistakes isn't going to fix the problem...esp in the future.

Fixed rate and AFFORDABLE mortgage is the only way to go.

[primelax]

An ARM can be better for the consumer in certain situations. The real root of the problem is questionable lending practices by finance companies.

[Adam Gamradt]

Joe,

You're missing some of the subtleties of the debate. Many of the loans that are defaulting are guaranteed by the government.

Given that many mortgages are sold to another company immediately after they are taken out, this leaves the process open to abuse.

Less scrupulous lenders simply don't care if their clients default, since the government guarantees the loans.

So even though those companies may be, as you claim, at fault, they are not held accountable.

As for government intervention, I don't know enough about the problem to recommend a solution. I would like to see our federal fiscal policy geared to reward people who save, rather than geared toward people who spend.

[Beta]

Only some of the loans are insured by the govt, and for only about $100k.

[Adam Gamradt]

Perhaps I'm misinformed on the matter.

Do you have some sources? I'd like to brush up on the issue.

As bad as the problem is, it's pretty good for people who own rental property. Just read an article in the Strib that indicates rental vacancy rates are down to 3.9%.

[Beta]

Perhaps I'm misinformed on the matter.

Do you have some sources? I'd like to brush up on the issue.

As bad as the problem is, it's pretty good for people who own rental property. Just read an article in the Strib that indicates rental vacancy rates are down to 3.9%.

Yeah Ill def look for some online sources.

My gf works for a pretty prominent bank as a "Debt Capital Markets Analyst" so I have been educated through having to sit through her talking about stuff like that all the time and as a side-bonus...my investments are all in order.

Some mortgages are sort of guaranteed by the federal government, generally ones that have been given to people who need affordable housing. The crisis in the economy is not because of individual mortgage loans in the sub-prime defaulting. It is because the securities that have been structured based on the future cash flows of these mortgages are not delivering as expected, and the default rate has soared above any historical precedent. Therefore, securities that are rated at AAA (the first traunch of these securities anyways) and the like (which signifies that there is virtually no chance of default) are defaulting. So like what you're saying only applies to specific mortgage loans, and can sometimes apply to small business loans, not any other type. In addition what “insured” does and does not mean in this case can be sorta gray. In addition the crisis is from lack of liquidity….no one can buy or sell these securities….aka, they are being marked down because the market is at a standstill.

[laxfan25]

I'm glad to be locked in at 5 3/8%. The problem is about to get significantly worse this fall, as a large batch of ARM mortgages written two years ago (at the height of the easy money) come up for readjustment. There is plenty of blame to go around, consumers should know what they are geting into, but the sales tactics of some of the mortgage brokers are definitely shady, in particular those who used "self-reported income" in order to get their client's approved. I'm sure they were telling customers to be cautious ("Don't worry about it! Your house will be worth twice as much in a couple of years - sign here!) There was outright fraud in some cases, and they were just looking to pocket the easy commissions.

This will affect all of us in a number of ways. If you want to sell your house it'll be tougher to find approved buyers. If you want to buy, tougher to get credit (although the price drops help) and the overall drag on the economy and stock market will bring down 401K values.

It would be nice to think that the gov't could help out hard-working families that are about to lose their homes, but that's not likely. After all, the gov't is covering the rear-ends of companies that have walked away from their pension plans - where they spent all the money that should have been going into the employee's retirement accts and now have handed that bag over to all of the taxpayers.

I was listening to a story yesterday afternoon about the auto industry, and the head of a big supplier, Arvin Meritor, was saying that the Big 3 can't afford to continue to provide the level of benefits that the auto workers are used to. He said they (Arvin) have cut expenses by trimming back on the benefits of current workers and eliminating health benefits of their retirees. I can appreciate the cutbacks for workers, but how do you just drop the benefits entirely for your retired employees?? I guess we'll be picking up their Medicaid tab.

[shrekjr]

I'm locked at 5% with only 6 1/2 years to payoff, hoping to payoff in 5 1/2 years, then add to the nest egg. I worry about my kids and what they will be able to do with housing when they get out of college and their time comes in another 2-3 years.

[CyLaxKeeper00]

attorneys must be present to close all home loans. the way i see it, the lawyer is at fault for not advising their clients.

[TexOle]

You might need an attorney in Iowa for a home closing, but most states that is not the case. I worked for a Title company for 2 months, and it was the most miserable 2 months of my life. One of my main responsibilities was doing home closings, and I have never been to law school. Half the people (that were ahead of me) I worked with did not even have college educations. I seriously watched Office Space to get ideas for things to do at work.

Anyways, I am generally against Government bailouts. If you can't pay for something then that is your fault. I can tell you horrid stories about people getting ripped off by lenders. It was disgusting.

[laxfan25]

attorneys must be present to close all home loans. the way i see it, the lawyer is at fault for not advising their clients.

Not the case in MN and MI, the two that I am familiar with.

[TexOle]

I worked in MN.

From what I have seen the individuals who get their loans from a financial institution where they use variety of their services (banks and credit unions) tend to get better deals and find themselves in better situations.

[Sonny]

Anyways, I am generally against Government bailouts. If you can't pay for something then that is your fault. I can tell you horrid stories about people getting ripped off by lenders. It was disgusting.

Lenders might not be completely excused.... But at what point does personal responsibility play into the situation? It's safe to say if you are living in an apartment, you aren't going to be able to (financially) handle a new $250K condo or house in the burbs.

[TexOle]

I do live in an apartment. Many of these problems are on the homeowner. If you would not buy something else that you cannot afford then why do you make the purchase of a home that you cannot afford. I cannot afford a house, and I do not plan on buying until I can afford that purchase. My point was there are a lot of shady lenders that are out to make a quick buck by giving bad advice.

People need to know their limits financially.