I haven’t had time to post but the US government is no longer interested in purchasing toxic mortgages and taking them off the books from banks. Instead the Federal Government will provide capital to banks by purchasing stock in the companies. Honestly this sounds like a better plan, though I’m unsure if it’s the Government should keep on interfering with the free market economy.
Worse yet is the fact that Treasury Secretary Paulson is now suggesting that we need to spend more than $700B on the bailout. More likely $1 trillion.
And of course this weekend there was summit meeting regarding the global economy. The truth is that our economic pains is not just in the US. Nor do our pains affect only ourselves, nor do we only feel our own pains. Our economy, much like our jobs are global. We are working not only within the isolated regions of the US, but rather the world. Our economies are all interrelated, hence right now the economy and our choices regarding our economy is being scrutinized by the world. Everyone wants us to get our economy going because we affect everyone else. Japan is now in a recession.
So what should we do about the mortgage bailout? Should we do a moratorium on mortgage rates? Thus allowing people to stay in their homes? I think that might help. If you have an adjustable rate mortgage and can afford it if it doesn’t adjust, then perhaps that would be the first step to stabilizing the housing market. Second, should we allow people to renegotiate with banks to get a fixed rate mortgage even with bad credit? If their rates are 8-10% should they be fixed down to 6%? Would that keep them in their houses and foreclosures down? Should we try?
I think we need to. Right now where I am, there is little foreclosures. But the market has stalled. Not a big deal, but I know in CA it’s dying. And perhaps people wouldn’t walk away from foreclosures so easily if the laws were changed, i.e. you can’t walk away scott free. And if their rates were fixed or frozen to their current rates.
Would this solve the problem? No. But it might help. Would it piss people off? Yes. Everyone whose responsible and reading this is likely current on their mortgage. But the truth is, like the international economy. One man drowning can drown us all. Or we all have to swim harder and prevent the guy from drowning.
Tomorrow the automakers bailout and a book review.
11 responses so far ↓
1 Christina // Nov 19, 2008 at 1:47 pm
I definitely think it would be worthwhile to try those tactics – that way you avoid people being deliquent and avoid foreclosures.
2 fengshui // Nov 19, 2008 at 8:08 pm
” If you have an adjustable rate mortgage and can afford it if it doesn’t adjust, then perhaps that would be the first step to stabilizing the housing market. ”
This is quite irritating….. I closed when the rates were 6.5%, and I have to pay that. So, we should let Joe and Susie continue to pay 4% because that is what they can afford? But yet I continue to pay 6.5%????? Hardly seems right for those of us who bought a house that was affordable for our budget…..
3 Kristy // Nov 20, 2008 at 7:58 am
I don’t think we should help homeowners. They got themselves in this mess, they need to get themselves out. It is ridiculous to bail these people out. Housing prices have been over priced for a long time, its about time it stabilized.
4 LAL // Nov 20, 2008 at 9:07 am
But how to stabilize it? I am not happy but I think that rather than foreclosures, keeping interest rates at a level these people can afford will be better.
Realize Fengshui that if foreclosures occur your home price will be hurting. At least mine is the same as it was 3 years ago, so I’ve been told. I’m not really sure I’m having it CMA by 3 different realtors and they are all telling me an awful high price compared to what I feel our home is worth.
Granted MAJOR repairs have undergone while we owned.
5 Kristy // Nov 20, 2008 at 9:13 am
LAL – “But how to stabilize it? ”
You don’t. The market needs to correct itself. If/when the government interferes, it will just take longer to correct and stabilize.
6 fengshui // Nov 20, 2008 at 9:46 pm
“With this economy whose buying cars? But they are surviving because they don’t hire union workers. Besides the fact people are buying more imports than US made cars, the truth is unions and their demands are sinking the automakers. Union workers make an average of $73/hr. Honda and Toyota pay about half at $47/hr. That means union workers at the Big three make an average of $150k/year, while their competitors make $90k/year. I don’t think the affordability of these type of manufactoring jobs sustainable”
I disagree with you, not on the bailout, but the bit about the unions. My hometown is located where there is a GM plant, that is closing next month. My hometown thrived because of the jobs that plant provided. Now, I do diagree that a highschool drop out working on an assembly line makes as much as me with a masters degree in nursing, and has better health insurance than me, but they do deserve decent wages, but perhaps not as much as they were making. Does that make sense? A decent salary, and benefits, but not to the point where it bankrupts the company. AND I think that the auto makers saw this coming YEARS ago and did NOTHING about it. I drive a Hyundai because I like the style of the car. The 3 big auto makers have done nothing to meet the demands of the US people, especially the fuel economy and style categories. Ford, GM, and Chrystler kept making huge gas guzzlers or ugly 4 door sedans. And the 2 sports cars that Ford and GM made weren’t affordable for most. And, the warranties suck….. I have great warranty on my Hyundai and it is stylish and sporty, so that is why I bought it, much to the dismay of my father, who makes me park it in the street because it isn’t an “American” car…..
7 fengshui // Nov 20, 2008 at 9:47 pm
I posted my response under the wrong thread…. my bad
8 fengshui // Nov 20, 2008 at 9:52 pm
“Realize Fengshui that if foreclosures occur your home price will be hurting. At least mine is the same as it was 3 years ago, so I’ve been told. I’m not really sure I’m having it CMA by 3 different realtors and they are all telling me an awful high price compared to what I feel our home is worth.”
I’m sure that everyone will be hurt by foreclosures, but some areas more than others. I am fortunate to live in a popular area in a popular city, where home prices have been stable and we never saw steep increases here to begin with, and the foreclosure rates are low in my county. I am not saying that we are immune to being hurt by foreclosures, but we are better off than 75% of the country.
I still am bitter about people being bailed out when they made stuoid decisions and the rest of us have to pay for it. It just makes me wonder how people are going to learn from their mistakes if they don’t have to suffer any consequences, and are even rewarded by a super low interest rate????? There isn’t a simple solution, I understand….
9 LAL // Nov 30, 2008 at 12:39 pm
I understand. But I differ between the housing bailout and the Big three mostly because the home has happened in the last 5 years. But the automakers have been in trouble for how long?
And foreclosures are running certain areas of the US into the ground. I believe subprime is a small percentage of people, in limited areas of the countries.
10 Kristy // Nov 30, 2008 at 12:45 pm
LAL-
I don’t understand what you are saying about the bailout for homeowners and the one for the automakers? So what if the trouble with housing has only been the past 5 years and the automakers have been in trouble for the past 30?
How do you feel about the bailout of pensions?
11 LivingAlmostLarge // Nov 30, 2008 at 1:06 pm
I believe that it’s a compromise because they get 50% of the promised pensions. I think companies shouldn’t be making such promises because they can’t keep it.
Automakers have not done anything to stem the trouble from happening. If they only started 5 years ago I’d have more sympathy. But they had a ton of money invested in the 1990s to help them research fuel efficient cars, thus Toyota dumped money to create the Prius. What did the Big 3 do with the technology? Nothing. They made bigger SUVs?/Cars.
Second, in the 1980s there was a massive overhaul of many private companies doing away with pensions because of 401k creation. They did not discuss with the unions and explain why it was not a sustainable system. In the 1990s when the Big 3 got the bailout they still DID not reform the pensions and unions. They did not consider what would happen when oil became more expensive.
Homeowners and banks are not exactly the same. We all agree that the majority of people and areas are not in the position of foreclosures. It is more localized and narrow. I doubt places like missouri, wisconsin, Iowa, etc are seeing the rates of Las Vegas, Miami, CA, DC. Nor the precipitious drop.
It’s affecting them, but not to the same extent because they didn’t write the same mortgages in many areas. I have friends living in the midwest who don’t know one person who has a crazy loan. And yet everyone in CA and New England, I’d say many I know did USE a crazy mortgage. But they were young and stupid.
Very different scenarios. Unfortunately the bad decisions of a few very rapidly affected the many. In 2005 when I bought the realtor told me that already where I live people were not being allowed to buy without 20% DP.
In CA, my BIL was still being given a $300k mortgage on a $22k/year salary. How does that happen? Seriously, I doubt he might have qualified in Kansas.
Leave a Comment