Housing Crash Solution

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Housing Crash Solution: Get Congress to pass a law establishing a rate ceiling on all primary residence home loans, existing and new, at 3.5% (including fees) for the next 6 years. This would encourage people to keep and remain in their homes, even if upside down value wise, as it could make it more affordable. It would also put more money into the hands of the middle class who would spend it and help stimulate the economy.

Proveloper's picture
Proveloper
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Jul. 31, 2007 3:01 pm

Comments

More than the rate, we need a program to force write off's of underwater mortgages, for primary homes. Just like we allow for investment properties.

That way the balance sheet of 13,500,000 American families would improve instantly. This would free many from fear of collapse, it would stabilize real estate markets, and get construction workers back to work.

Until balance sheets improve, people will save and pay down debts. More saving, means fewer jobs. Which means more people unable to pay mortgages...

Phaedrus76's picture
Phaedrus76
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Sep. 14, 2010 7:21 pm

Why only mortgages? Why not car loans and credit cards? These absurdly low RE rates are an aberration that the rest of us are paying for. I also believe they are limiting home loans. Why would a bank want to be stuck with a 3% loan for 25-30 years? When inflation returns-these loans will be unprofitable. Obama better hope there are enough rescued homeowners to win him the election since the rest of us who have not received anything from Obama don't have much reason to vote for him. These pretzel twisting antics to favor homeowners are wrong. How are you ever going to eliminate the mortgage deduction for tax reform?

DynoDon
Joined:
Jun. 29, 2012 9:24 am

You've got it all wrong. Housing prices (nationwide, our urban prairies are signs of social collapse, not economic) in America are not too low, housing costs are still too high.

This applies to every aspect of America life. We do not have an unemployment problem; America has too many people working too many hours. We do not need to stimulate the economy; we need to spend less, not waste more. We did not need to bail out the automobile companies; we needed to replace them. We did not need to "reform" health "insurance"; we needed to remove a terribly destructive parasite.

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doh1304
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Dec. 6, 2010 9:49 am

Let's forgive the college loans first then the graduates will have the money to purchase a home, never pay a dime toward their mortgage and get that loan forgiven just in time for free healthcare.

Think of all the secured votes .

Redwing's picture
Redwing
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Jun. 21, 2012 4:12 am

Finally someone with a plan!

I know this is crazy, but how about this for a plan...

Don't take on more debt (mortgage) than you can handle. Have we learned nothing from bailouts? Corporate or personal, they don't work and they don't solve the bigger issue. If you bail out a homeowner who made a bad choice, you are, in turn, hurting the contractor who buys foreclosed properties, rehabs them and then rents or sells them. Since he can't buy the foreclosed (cheap) house, he's not buying remodel products from Home Depot. So what you say, they are a big evil company! Fine, but they nuts and bolts and cabinets and ladders from the small mom and pop shops and small companies that employ Americans. So, now they guy at the ladder company is getting laid off and guess what, he's going to lose his house.

I guess those of you on left would suggest we now bail out the ladder company, right?

Conservative_Th...
Joined:
Jun. 15, 2012 11:01 am

Free healthcare-are they going to prison?

DynoDon
Joined:
Jun. 29, 2012 9:24 am

No. Just don't buy the forced Obamacare insurance plan. Just pay the fine if you get caught.

Redwing's picture
Redwing
Joined:
Jun. 21, 2012 4:12 am
Quote Redwing:

No. Just don't buy the forced Obamacare insurance plan. Just pay the fine if you get caught.

No. First make pharmaceutucal and hospital corporations be non-profit, and any other government or social service contract for the general welfare as well.

Then, at the much reduced rate, pay with a single payer system, every health care cost for everyone in the country.

Add money from a healthy estate tax.

Raise the rates on the rich until they squeal please and thank you, and the corporate rate.

Make sure all military contracts are non-profit.

Re-build America.

With a CannaButter Option.

Real Tea, Real Party

anonymous green
Joined:
Jan. 5, 2012 10:47 am
Quote Conservative_Thom_Fan:

Finally someone with a plan!

I know this is crazy, but how about this for a plan...

Don't take on more debt (mortgage) than you can handle. Have we learned nothing from bailouts? Corporate or personal, they don't work and they don't solve the bigger issue. If you bail out a homeowner who made a bad choice, you are, in turn, hurting the contractor who buys foreclosed properties, rehabs them and then rents or sells them. Since he can't buy the foreclosed (cheap) house, he's not buying remodel products from Home Depot. So what you say, they are a big evil company! Fine, but they nuts and bolts and cabinets and ladders from the small mom and pop shops and small companies that employ Americans. So, now they guy at the ladder company is getting laid off and guess what, he's going to lose his house.

I guess those of you on left would suggest we now bail out the ladder company, right?

Look into your crystal ball and tell me what the weather is going to be like on this day 3 years from now. When you can do that accurately then you can claim that all these people in trouble with their mortgages should have known better and made bad decisions. The home I bought 8 years ago was well within my and my wife's means. That doesn't automatically mean that I can afford the payments now. I can, but you know what I mean. Every person that I personally know, and that's about 6 of them, got into trouble with their mortgage when they lost their jobs. One of these guys had been there for 22 years and he lost his job to downsizing due to the economy. Anyway, they all got either rehired or new jobs eventually but in the mean time 4 of them are either kicked out of their home or still fighting the mortgage company they have because they got a couple of months behind. Some of these mortgage holders are sharks just waiting to feed. You drop the ball for a moment and they strike. You would rather blame the homeowners themselves for unforseen circumstances.

Bush_Wacker's picture
Bush_Wacker
Joined:
Jun. 25, 2011 6:53 am
Quote anonymous green:

Add money from a healthy estate tax.

Raise the rates on the rich until they squeal please and thank you, and the corporate rate.

I especially love the "healthy estate tax" That always comes from those that have never accumulated anything in their life. Let someone else work and you take the benefits, even though the taxes have already been paid on the inherited wealth. Even Obamas super pacs and hollywood buddys would nix that foolish plan.

As for the raise the corporate tax rate, you will never understand that corporations do not pay taxes. It is us idiots that buy the shovels and rakes to try and grow a meager crop of ditch weed, that pay the taxes in the form of higher prices on their products.

Cultivate at night and watch out for Obama's drones. Tie-dye tee shirts are easy to spot from the air.

A butter option

http://www.jillstein.org/

Redwing's picture
Redwing
Joined:
Jun. 21, 2012 4:12 am
Quote Bush_Wacker:
Quote Conservative_Thom_Fan:

Finally someone with a plan!

I know this is crazy, but how about this for a plan...

Don't take on more debt (mortgage) than you can handle. Have we learned nothing from bailouts? Corporate or personal, they don't work and they don't solve the bigger issue. If you bail out a homeowner who made a bad choice, you are, in turn, hurting the contractor who buys foreclosed properties, rehabs them and then rents or sells them. Since he can't buy the foreclosed (cheap) house, he's not buying remodel products from Home Depot. So what you say, they are a big evil company! Fine, but they nuts and bolts and cabinets and ladders from the small mom and pop shops and small companies that employ Americans. So, now they guy at the ladder company is getting laid off and guess what, he's going to lose his house.

I guess those of you on left would suggest we now bail out the ladder company, right?

Look into your crystal ball and tell me what the weather is going to be like on this day 3 years from now. When you can do that accurately then you can claim that all these people in trouble with their mortgages should have known better and made bad decisions. The home I bought 8 years ago was well within my and my wife's means. That doesn't automatically mean that I can afford the payments now. I can, but you know what I mean. Every person that I personally know, and that's about 6 of them, got into trouble with their mortgage when they lost their jobs. One of these guys had been there for 22 years and he lost his job to downsizing due to the economy. Anyway, they all got either rehired or new jobs eventually but in the mean time 4 of them are either kicked out of their home or still fighting the mortgage company they have because they got a couple of months behind. Some of these mortgage holders are sharks just waiting to feed. You drop the ball for a moment and they strike. You would rather blame the homeowners themselves for unforseen circumstances.

The mortgages aren't actually held by the mortgage company in a lot of cases. Foreclosure companies buy the right to foreclose, and the banks that don't own the mortgage get a fee automatically from the fly by night foreclosure contractors. It's a contract hit in reverse, the contractor pays to kill the homeowner. The bank dumps the problem of trying to collect for a mortgage they no longer own, win win. The contracts are automated, so there is no negotiation. In DE, Bo Biden passed a law that forced the banks to have a meeting before any mortgage could go into a third party's hands. Foreclosures dropped by 85%. The meetings required the mortgage contracts be produced, and ughh...

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douglaslee
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Jul. 31, 2007 3:01 pm

The only solution to the housing crash is inflation. Massive inflation, as in cash transfers into the hands of consumers. Print enough money to put $100k into the hands of every person with a Social Security Number. The deadbeat borrower can pay down his mortgage. I'll put my 100k into the bank. I'll be able to pay for the $20 gallon of gas and the $10 loaf of bread for a couple of years. The deadbeat borrower will still be screwed. But he was screwed already.

Or we could sell all the land to foreigners.

chilidog
Joined:
Jul. 31, 2007 3:01 pm

Sorry for the delay in responding. You've basically answered your own question. I don't have a crystal ball and I can't predict the future. Therefore, I'm extremely cautious when making long term financial committments. A home purchase, for me anyway, is a calculated risk. I can't pay cash for a home, so I have to weigh all the factors, renting vs. buying, job situation, cash flow, potential pitfalls and so on. My first home, was very inexpensive and in need of major repair. I bought, repaired and remodeled it slowly as I could afford to do so and 10 years later, I sold it for a very nice profit. During that 10 year period, we lived with constant construction, dust and dirt. I did most of the work myself to cut custs. Unfortunately sometimes that meant that things didn't get completed as quickly as they would have if I had hired a contractor. That also meant, that we didn't buy flat screen TV's and new furniture or expensive vacations. If I had lost my job during the first 5 years of owning that place, I would have been screwed. Maybe I got lucky, maybe I weighed the risk.

You call mortgage holders sharks as if you are surprised by this. To use your analogy, if I'm going in to shark infested waters, I'm going in a dive cage and taking a speargun. No guarantee of survival, but I'll take every precaution to put the odds on my side.

Further, I'm not saying every single foreclosure was the fault of the person taking the morgage. People get sick, people die, tragedy strikes and every situation is different. However, there were a whole lot of people who mortgaged way more than they could afford because they wanted (not needed) a bigger, newer home. They wanted granite and hardwood, a fireplace and a three stall garage. If you can afford all of that, more power to you. If you can't, and you gambled and lost, I'm sorry but you lose. That's gambling.

Take a look around Florida, the Outer Banks, NC, Myrtle Beach, SC and Las Vegas. There are an awful lot of foreclosures. Many of these were second homes, vacation homes and investment homes. Should we bail these folks out too? If that's the case, why not bail everyone who ever took a risk and failed. We've already bailed out Wall Street, now we are bailing out homeowners. Let's just keep going, let's bail out everyone who ever started a small business and failed; and everyone who purchased a car they couldn't afford; and how about everyone who gets a bad haircut; and everyone who orders something from a late night infomercial that didn't quite live up to the hype. When do we stop? When are YOU accountable for YOUR actions?

Conservative_Th...
Joined:
Jun. 15, 2012 11:01 am

Wouldn't it make sense to have house payments automatically drop when interest rates drop? Interest rates have dropped over 2 points since I bought my house 7 years ago. For me to take advantage of that drop in interest I have to refinance. Why don't they marry interest rates with mortgage payments? Because of the economy and corresponding drop in interest rates then everybody's mortgage payments would drop and be much more affordable. If the economy improves and interest rates rise then you should be able to afford the original payment. Just make the original interest rate a ceiling that interest can't raise above. I find it crazy that my escrow part of my mortage raises with interest rates but nothing drops with the lowering of interest rates.

Bush_Wacker's picture
Bush_Wacker
Joined:
Jun. 25, 2011 6:53 am

No, that does not make any sense from a business perspective. However, if you want to offer me that deal, I'll take it. Let's say you give me $1000 at 3% interest for 5 years. If the interest goes down, I pay you less. If it goes up, I pay you the same. If the rates go up and you could be lending that same $1000 at say 6%, too bad. So, basically, you take all the risk. The risk of lending the lending the money and the risk that the money will be less valuable in 5 years. In return, I remove your ability to make a profit on the lending.

By the way, they do offer adjustable rate mortgages. Your payments ride along with the fluctuation in interest rates. Obviously, your risk increases. So, take a look in your crystal ball and decide what interest will be over the next 30 years and get yourself an adjustable. But please, don't come crying back if by chance we see 14% interest rates again.

Why is your escrow tied to the interest rate? Every escrow I've ever had was based upon insurance and taxes. It increased as my estimated taxes increased but no my interest rate.

Conservative_Th...
Joined:
Jun. 15, 2012 11:01 am

If you want to elminate housing bubbles make it illegal to buy a home unless you are actually going to use it. A lot of the bubble comes from realestate speculators in large markets trying to flip homes. Make people prove intended use before they can buy. Done.

ah2
Joined:
Dec. 13, 2010 9:00 pm
Quote Conservative_Thom_Fan:

No, that does not make any sense from a business perspective. However, if you want to offer me that deal, I'll take it. Let's say you give me $1000 at 3% interest for 5 years. If the interest goes down, I pay you less. If it goes up, I pay you the same. If the rates go up and you could be lending that same $1000 at say 6%, too bad. So, basically, you take all the risk. The risk of lending the lending the money and the risk that the money will be less valuable in 5 years. In return, I remove your ability to make a profit on the lending.

By the way, they do offer adjustable rate mortgages. Your payments ride along with the fluctuation in interest rates. Obviously, your risk increases. So, take a look in your crystal ball and decide what interest will be over the next 30 years and get yourself an adjustable. But please, don't come crying back if by chance we see 14% interest rates again.

Why is your escrow tied to the interest rate? Every escrow I've ever had was based upon insurance and taxes. It increased as my estimated taxes increased but no my interest rate.

It would be viable from a business point of view. If I refinance tomorrow at 2.75% and my current interest rate is 5.25%, I will be locked into that 2.75% forever or until I choose to refinance at an even lower rate. That isn't doing my mortgage holder any favors where as if my interest rate were to raise back up to 5.25% in the next ten years or so it would be a much better deal for my mortage holder. For this ability to take advantage of lower interest rates as they occur I would also be willing to pay a yearly fee that would be added to the payment. This would also be another revenue builder for the lender. My whole point to tying it to the interest rates is an attempt to mirror the fluctuating economy so that when things are good I have a better chance to make my payments and when things were bad I would have a better chance to make my payments and with that lower the odds of anyone ever needing a bailout.

Bush_Wacker's picture
Bush_Wacker
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Jun. 25, 2011 6:53 am

What you are describing is an adjustable rate mortgage. Not only do the exist, they are plentiful. They are also riskier than a fixed rate since the payments (rates) can and do, sometimes, increase. Most do not require a yearly fee.

Are you seriously not aware of these?

Conservative_Th...
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Jun. 15, 2012 11:01 am

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The other way we're subsidizing Walmart...

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