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Best thread ever............lol.......
Here's another plan:
1) Have a $1 trillion national lottery.
2) Since everyone who wins a big lottery jackpot is an idiot and blows it all within 2 years, it will stimulate the economy.
3) I need to get in that guy's entourage.
Craig,how many years would the mortage be for under your plan?
Toner Cowboy, 30-year mortgage. But 15-year would be fine as well if they can afford it. A 0% interest loan results in about $278 per $100K payment on a 30 year loan. If a homeowner can't afford that then they shouldn't be owning a home. FHA would enforce strict ratios to insure we don't end up in this mess again and the punishment for default on your loan is banishment to the secondary loan market.
The plan is very solid but I think a distinction needs to be made between those who pay their mortgage on time and those who got themselves into trouble. I do agree that regardless of the situation, rewarding stupidity and un-sound financial moves benefits no one but those to whom money is already no object.
If the plan is to help only those who are behind and "need help", I think we're going to see everybody that owns a home all of a sudden stop paying and join the bailout club. Terrible, terrible idea. I had a conversation with a friend last week about it. He can easily afford his house, but is considering stopping his monthly payments to get some sort of deal.
Craig, your idea has been tried in Japan. Take a look at the outcome.
3. Allow all state and municipal entities to refinance their bonds to 0% interest in a similar manner.
Wait a second, I hold a bunch of munis (OK, I do not, but let's pretend that I do.) I do not want them to refinance. Why should I let them?
Klarek. If you purposefully stop your payments you wont get a bailout. If your 'friend' is prepared to quit his job the government will tell him to get lost. If he gets fired or laid off , and proves he couldnt afford his payment due to job loss or something beyond his control, then he will qualify.
In other words, no, there is no situation where a guy is making his house payment and all is well and then 'decides' to tank the whole thing and stick his hand out. Nor do investment properties qualify.
Nor does anyone who got a 'stated' or no doc loan qualify unless they can now go back and prove thru tax returns that they could afford it when they got the loan.
The only thing your friend can do is quit his job and then wait 6months and qualify for chapter 7 bankruptcy and dump all his debt including his home. Its irrelivant what the government makes a bailout plan or not. He can still get 'bailed out' thru bankruptcy.
I know thats got to sting a bit, but its the reality. Obama and Mc Cains teams are not stupid. Why do you think they are both going to make these plans for mortgages?
They figured out its FAR worse if they dont.
One thing is for sure. When people dont want to accept a simple concept, they will find any far fetched exuse to explain the exception to the rule or use that as a reason why the reality wont work.
1) you have to prove you cant afford the mortgage anymore (must be less than 35% of gross wages)
2) you must prove you COULD afford it when you got it. Thus no doc and stated are going to be out of the question wont they? Unless you plan to show your back tax returns to prove your income was what you wrote it down or it was only 35% or less DTI in the case of no doc.
3) You cant quit your job or just stop making your payment. If you do you will not get the bailout. However, you can simply do that and go bankrupt, which ends up being an automatic bailout anyways and there is nothing the government can do about it.
4) Since going bankrupt causes other creditors to take further losses and jack up the prices for us who pay in the first place, stop people from diving into bankruptcy by keeping them in their home in the first place so they dont just run off.
5) People already buried and in bankruptcy can have their mortgage modified because the lender is already taking that loss and has no recourse because of the bankruptcy. The 'loophole' is for people self employed can simply work 10 hrs a week to downgrade their earnings to below the theshold . W2 employees are the ones who are going to get bitten by the changes in the bankruptcy laws.
i don't see how this would keep home prices from skyrocketing all over again
Craigs plan is a mockery and secretly a way to mock any bailout plan. He goes to the ridiculous extreme in hopes of discrediting any such bailout plan. I found it funny. I didnt take it seriously.
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Klarek. If you purposefully stop your payments you wont get a bailout. If your 'friend' is prepared to quit his job the government will tell him to get lost. If he gets fired or laid off , and proves he couldnt afford his payment due to job loss or something beyond his control, then he will qualify.
In other words, no, there is no situation where a guy is making his house payment and all is well and then 'decides' to tank the whole thing and stick his hand out. Nor do investment properties qualify.
Nor does anyone who got a 'stated' or no doc loan qualify unless they can now go back and prove thru tax returns that they could afford it when they got the loan.
The only thing your friend can do is quit his job and then wait 6months and qualify for chapter 7 bankruptcy and dump all his debt including his home. Its irrelivant what the government makes a bailout plan or not. He can still get 'bailed out' thru bankruptcy.
I know thats got to sting a bit, but its the reality. Obama and Mc Cains teams are not stupid. Why do you think they are both going to make these plans for mortgages?"
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No, I dont think you get it. His mortgage is in his name. His salary isn't enough to afford the house, but it was bought with additional income from his spouse. All he has to do is show that his salary is insufficient. He'll qualify
That's my point: Everybody will scam the system. These politicians ARE idiots. Any homeowner bailout is stupid.
The mortgage CANNOT be in his name if his wifes salary was used to qualify. It will have to be in both their names.
You know nothing about mortgages. You couldnt if you honestly are putting forth this line of logic.
You cant have a mortgage in one persons name if there is a co borrower. Thats INSANE. What a joke. Where do you get this stuff? Do you make it up as you go along?
So if your 'friend' (that probably doesnt exist or you are lying about his situation) doesnt cough up his wifes income , then he will NOT qualify.
So now your play is to now make up the fact his wife no longer works or they are divorced to keep your losing argument going.
Keep making up the facts as you go along. But my advice is for you to at least reseach it before you post them.
Thanx for all the interesting comments! To carry this further let me see if I can address some of them in order:
1. We refinance ALL current primary home mortgages, but people still need to qualify under strict income ratio's (how about the more conservative 28% ratio). We also offer these new FHA loans to ALL new primary home buyers who qualify. Any home that still goes into foreclosure will now likely have a buyer who could afford to purchase it after foreclosure.
The plan helps everybody initially (cause we can't easily determine who was reckless), but it clamps down on the future hard. Everybody including the responsible get mortgage cost relief.
2. Japan (I lived there) did reduce central bank interest rates to 0% and even negative for a time, but that was for member banks only. This is a whole new way of putting money in the economy that does not rely on banks as middlemen and their willingness to loan. Their problems might well have been taken care of much quicker if they had done what I am advocating.
3. It is true that this will remove the primary home mortgage market as an investment vehicle, but there will still be opportunities in the seconday market and lot's of other places to invest your money.
4. State and local municipalities would only be able to refinance as their bond terms came due so all obligations would be fulfilled. However, as we move to the future, states, cities, and schools would all be able to invest in far more infrastructure that is despeately needed and will create much needed jobs, if they can do it for 0% interest.
5. Again, if you are not making payments now, and not able to afford to make them under the refinance - you don't qualify and we will find someone else more than willing to take your place as a home owner.
6. The skyrocketing price concern is very valid. In order to prevent this from happening the FHA would implement loan limits (which we are all used to) and additionally value limits that keep $/sq ft from rising and construction quality standards to prevent fraud. Home builders would build primarily to those standards knowing the market outside those standards is limited.
7. I'm quite serious. I think that changing the paradigm of how money gets into the economy from a top-down, to a bottom-up approach creats fare more fiscal stability and predictability. It is however a massive change in the way we think - which is just what Henry Paulson and the country needs. In any case, the discussion allows for interesting exploration of the subject :)
Craig
"The mortgage CANNOT be in his name if his wifes salary was used to qualify. It will have to be in both their names. You know nothing about mortgages. You couldnt if you honestly are putting forth this line of logic."
He didn't use his wife's salary to qualify. It happened during a time that people were taking out huge loans compared to their salary. They've been able to pay for them on two incomes, but could easily prove they can't shoulder the current mortgage with just their salary.
I know enough about mortgages to know that under most of the homeowner bailout plans I've heard, he'd qualify. I know a lot of people that would qualify. All they need to do is prove that they are distressed. Since the spouse's income wasn't used to draft the loan, they will prove the loan amount too much to continue being able to pay. I know these people, they make a lot of money, they bought more than one income could support and are getting by from roommates/spouses/etc, and dumbasses such as yourself think they won't be able to scam it. They will.
Klarek, I apologise. I quite like your posts and I really slapped you around on my last one. I strongly disagree with you on this one.
However, you lose this agrument hands down. And you keep making up new facts to try to support it. If he took out a HUGE LOAN compared to his salary, he WONT qualify now. Its plain and simple.
Your previous post says he bought the house with his wifes income, now says he didnt. You honestly think the government is NOT going to ask for BOTH your income tax returns to qualify for the bailout?
No?
Go look at the Mc Cain plan and it calls for credit worthyness at the time of the loan. If he took out a 55% DTI loan at the time, they wont bail him out. Its simple.
You have now stated all the bailout plans you have looked at. Please show us the SOURCE instead of vague claims taken as truth.
Show us the SOURCE where your buddy 'qualifies' for a bailout plan even though his income hasnt changed in the slightest. There is no such plan.
If your buddy took out a loan with his income and now cries the blues because his DTI is above the 35% , they will not reduce his mortgage . His lender may very well modify his interest rate to cut the guy a break but thats it.
So in the end, you are saying this
-The guy bought a house with his income alone under expanded guidelines because his wife was chipping in. He looked to her to pitch in but he got the loan himself.
- Nothing has changed except he technically doesnt qualify anymore and his income alone is above the 35% and he can cry 'distress' .
- It will never dawn on the government to ask him for ALL household income which will now include his wifes income as they are legally married . If they include her income now they can easily make their payment.
Thats it ? Thats your theory?
In order for this to work no questions could be asked about income.
''''If your buddy took out a loan with his income and now cries the blues because his DTI is above the 35% , they will not reduce his mortgage . His lender may very well modify his interest rate to cut the guy a break but thats it.''
Please understand that the servicer (e.g. GMAC, WAMU,etc) is no the actual investor. The options for 'bailout' are up to the actual investor. So if your investor is Fannie Mae for example, yes, they will not offer loan balance reductions but will work with gettign you a rate mods Other investors are actually reducing the balances to the current values or 90% of. Very rare, but it's starting to happen. AS long as you can provide a 'hard ship'. Now if Klareks friend's wife lost her job, they qualify. If he is simply holding back the fact of his wife's income when applying for a loan mod, the bank prob will eventually uncover the truth later and he will not qualify.
"And you keep making up new facts to try to support it. Your previous post says he bought the house with his wifes income, now says he didnt."
I'm not making up anything. What's with the constant assertion that I'm not telling the truth? I never said that he bought it with her income, but what I meant was that when he bought it, he and his wife's income could cover the monthly payment, which they assumed was painful but acceptable for a few years, then they'd sell it, profit, and buy something nicer.
Fast forward. People are coming up with "solutions" to help "distressed homeowners". Well he isn't distressed, but it would be easy to show he is. Since his salary is enough that he technically could afford the salary if he ate Ramen Noodles, never drove, and didn't contribute to his 401k, he'd easily qualify as distressed. He was given a loan that far exceeded 4x his annual salary. In reality, the extra income allowed him to afford it, and he could continue paying that amount. On paper, he is a distressed homeowner who will be bailed out.
"- It will never dawn on the government to ask him for ALL household income which will now include his wifes income as they are legally married . If they include her income now they can easily make their payment.
Thats it ? Thats your theory?"
That's exactly it. You think they are going over people's W2 forms? What if they don't file jointly? What if it was his girlfriend, not his wife when they bought (that is actually exactly the case)?
You're assuming the govt is smart enough to figure this out, but you yourself are naive enough to not see the obvious flaws and how easy it will be for people to take advantage of this.
I seem to have missed something? Why would the government borrow at 5% interest by selling T-bills to Chinese, then loan the money out at 0% interest? And then the people that get these loans will lend out the money on a riskier investment (such as credit cards) at 10% interest?
Sounds like a free handout for absolutely no reason at all. If you are going to do that, why don't you just have the government issue checks in the amount of $100k to everyone living in the United States every year for the next 30 years? I'm sure the Government can sell sufficient T-bills to finance that. Let's see, that would be $3 Mil per person for 300 million people; that is only 900 trillion dollars. The government is good for it, and the U.S. citizens will just spend it on buying more chinese products, so not only the chinese get their interest, they also get additional sales.
One important question that does not seem to be addressed:
Authorize the Treasury to issue home loans direct from the Treasury, bypassing the banks, at 0% interest through the FHA.
Where is the treasury going to get the money to make these loans?
Last I heard we're $11 Trillion in debt, with about $70 Trillion in unfunded liabilities. But, hey, if we'd like to squander even more wealth on nationalized housing, why not eh?
Forget about maintaining bridges or other infastructure... who needs those when we can trade houses with each other?
Pasadenan, no government borrowing. We are not using the Federal Reserve system at all. We will go direct from the Treasury printing presses to the consumer. The old paradigm involves government borrowing that saddles the taxpayer with interest in order to use their own printed money. This program does away with that problem.
The whole point is we don't need middlemen between the Treasury printing presses and the consumer. Our nation long ago accepted that we print money without any assets backing it. "Monetary Policy" is simply an acronym for how we manipulate this paper currency to inspire confidence that it is worth something. At least this system has something backing issued dollars.
As these new loans come into the economy, we simultaneously raise the banking systems reserve ratio to remove equal amounts of money from the economy to prevent inflation and America is stronger than ever before, from the bottom-up.
Every part of the plan is flawed. The fact is that there is no way to make the plan so it helps "those that need it" without introducing an asphyxiatingly high amount of hardcore scamming that will go on. It would outweigh whatever positive intentional help the plan offers.
Here is my idea of the perfect bailout: those that cannot afford their houses get to walk away from the debt. For non-recourse loans, they don't have to file for bankruptcy. In many cases, they don't want to continue paying for a depreciating liability anyway, so it's a sweet deal and the house will be sold affordably to somebody that can afford it. It will allow prices to fall to fundamentally supported levels and everybody ends up happy. Okay?
Klarek,
Sounds like a good plan to me... Let's call it the 'free market plan', where the market gives the rewards and losses to those who have earned them. Of course, we can't have that... as it's also a 'do nothing' plan, and sadly there is no such thing as a 'do nothing' beurocrat, especially in an election year.
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A Real & Workable Bailout Plan
Craig & Ann Williams, "CLW"
Vancouver, WA
Real Estate Agent
View my 1 listings
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Here is what I believe is a real and workable bailout plan, I call it the Williams Plan since I've advocated it for years:
1. Authorize the Treasury to issue home loans direct from the Treasury, bypassing the banks, at 0% interest through the FHA.
2. Refinance all primary home mortgages in the USA to 0% interest and charge a modest 2-3% loan fee to pay for the program.
3. Allow all state and municipal entities to refinance their bonds to 0% interest in a similar manner.
4. Put loan and value limits on these new Treasury loans to keep prices from rising artificially.
5. Raise the banking systems reserve ratio to remove an equal amount of money (~ $10 Trillion) from the books to prevent inflation.
The banks get bailed out as every mortgage is refinanced. The glut of homes is sucked up quickly by new primary home buyers. Americans get financial relief as the cost of a mortgage drops dramatically. And the federal government gets increased tax revenue as interest write-offs disappear. The money lent is backed by a real asset, albeit not gold, and the only losers are the banking middlemen who in the future have to make an honest dollar in some other way other than unnecessarily standing between the Treasury and the consumer.
Why do we not see such "bold" suggestions by our leaders? My years of energy trading, real estate, and an MBA in Securities Finance have taught me that solutions that help the people are resisted by those who stand to lose their power. Empower the people by changing the way money comes into the economy and quite a number of rich and powerful people stand to lose their current standing.
Now if I could only get my congressmen to listen!
Craig :)
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