lol. 50 DVDs per month. How is that possible?

Anyways, I can't see how this plan is going to help that many troubled homeowners. Also, the other side of the sword is that to the degree it does help homeowners, it's going to hurt banks and investors.

So long as the taxpayer isn't involved, then I'm fine with it. What I suspect though is that there is a quid pro quo going on here between the lenders and the government. I'm guessing that Paulson and Bernanke quietly conditioned bailout funds from the TARP program on the lenders agreeing to make these concessions. If thats the case then its just another taxpayer funded bailout, just opaque and indirect. The fact that this is what immediately comes to mind demonstrates the lack of confidence in our government and its institutions.

Just to clarify my previous statement.. The taxpayer is definetly playing a part in this.. it's just not as bad as I thought it might be. The government giving folks (or whoever is doing it) lower rates costs money, which likely means selling more treasuries to cover the money. This is ultimately paid for by the taxpayer one way or another up front. The plan is however, that this money will be recouped in the long term, and the "hit" to taxpayers is minimal.. which is something I can live with. Outright principal forgiveness would've meant large, direct, and an immediate hit to taxpayers. I personally like this plan..

"Homeowners" get help now, but don't get to suckle much on the government teat.

Dealguy123 said:The government giving folks (or whoever is doing it) lower rates costs money, which likely means selling more treasuries to cover the money.From what I've heard, the government is simply allowing lenders to renegotiate loans, it is not providing them funds to subsidize the loss from renegotiated loans.

The only taxpayer impact would be the losses taken by FNM and FRE from renegotiated loans, which is probably less than the losses they would have taken had those loans ended up defaulting. Net gain for FNM/FRE and their owners (all of us).

jayK said:From what I've heard, the government is simply allowing lenders to renegotiate loans, it is not providing them funds to subsidize the loss from renegotiated loans.

Ah ok, that sounds even better! Thanks for correcting me.

The only taxpayer impact would be the losses taken by FNM and FRE from renegotiated loans, which is probably less than the losses they would have taken had those loans ended up defaulting. Net gain for FNM/FRE and their owners (all of us).

Agreed. Stringing people along for another 10+ yrs by refiing to a longer term/pushing principal off to a later date should ultimately result in less losses for FNM/FRE. I'm perfectly fine with that. "Homeowners" get to keep their homes, banks take less losses, everyone's happy!

JayK:

Right now we are a hybrid system, my post was simply stating thats NOT what we are supposed to be: Re-read: When times are good we are purely a country based on captilalism, when they are bad, we all of a sudden become a hybrid nation. Was this the intent of Adam Smith and his "invisible hand" theory?

Also, if banks used the same lending standards they've used for decades to give loans based on 28/36 or 3x yearly income we wouldn't be sitting here in the first place would we? Home prices would not have doubled/tripled/quadroupled in 5 years, in California, since no one would qualify for a loan.

Lets break it down this way-I'll make the math really simple so you can follow along: Average home price in California $600,000. 2% interest only yields a monthly payment of $1,000 plus property taxes at $500 a month (1% property tax rate on the FMV of the home divided by 12) plus homeowners insurance $100 (fire, flood, etc at $1,200/year) or $1,600/month. Now take the same scenario for a fixed jumbo loan over 30 years at 6.25% and you get a month payment of $3,694.30 plus $500 property taxes plus $100 insurance = $4,294.30. Scenario #1 homeowner pays $1,600 Scenario #2 homeowner pays $4,294.30.

Now come again with that fixed mortgage suggestion? Either the borrower is turned away 85% of the time since the bank knows the borrower wont be able to pay back the lona, the price of the home is reduced to something the borrower can afford, the borrower works in Los Angeles and commutes from Tinbucktu, or the borrower is given an exotic interest only loan? Care to gues what happens in the housing boom?

Dealguy:

Stings? No, it was a business decision when I bought and its a business decision when I walk away. Bank made a business decision back then to lend to me, if times were good, they would have thrown me and my family on the street and resold house - which would be another business decision. Times are not good and Im still willing to walk, my credit gets shredded but rentals are everywhere and cash is King - stinging has nothing to do with it-its simply a business decision.

Now, if I would have been like you and had crystal ball - I would have bought a home back when they were cheap.

Kashmoney said:Right now we are a hybrid system, my post was simply stating thats NOT what we are supposed to be: Re-read: When times are good we are purely a country based on captilalism, when they are bad, we all of a sudden become a hybrid nation.Not sure what country you're living in, but SS, welfare, national infrastructure, primary & secondary education, FDIC, and many other socialist programs are running during both good times and bad times.

Also, if banks used the same lending standards they've used for decades to give loans based on 28/36 or 3x yearly income we wouldn't be sitting here in the first place would we? Home prices would not have doubled/tripled/quadroupled in 5 years, in California, since no one would qualify for a loan.What do lax lending standards have to do with socialism?

Lets break it down this way-I'll make the math really simple so you can follow along: Average home price in California $600,000. 2% interest only yields a monthly payment of $1,000 plus property taxes at $500 a month (1% property tax rate on the FMV of the home divided by 12) plus homeowners insurance $100 (fire, flood, etc at $1,200/year) or $1,600/month. Now take the same scenario for a fixed jumbo loan over 30 years at 6.25% and you get a month payment of $3,694.30 plus $500 property taxes plus $100 insurance = $4,294.30. Scenario #1 homeowner pays $1,600 Scenario #2 homeowner pays $4,294.30.Congratulations, you've just shown that higher interest loans result in a higher monthly payment. Do you want a cookie?

Now come again with that fixed mortgage suggestion? Either the borrower is turned away 85% of the time since the bank knows the borrower wont be able to pay back the lonaIf the borrower can't afford the loan, they should be turned away. This is no longer an issue, since lending standards have returned to sanity and those who should be turned away are being turned away for the most part.

the price of the home is reduced to something the borrower can affordWelcome to the cyclical housing market.

the borrower works in Los Angeles and commutes from TinbucktuHomes that are far from job centers have seen a big decrease, at least in CA, likely due to higher gas prices and the fact that these "cheaper" homes attracted people who were not financially fit to be homeowners.

or the borrower is given an exotic interest only loan?Again, since the credit crunch these types of loans are much less common.

Care to gues what happens in the housing boom?I'll tell you what I did when I purchased at the height of the boom: I got a fixed-rate mortgage I could afford. I'm still doing just fine, thank you very much, and I have ~$2K/month left over after all my expenses, retirement contributions, and savings goals have been met.

Can someone explain why people think the housing market will "rebound"? What does that even mean?

We had excessive supply, and some overheated demand (i.e. speculators), with the perception that home prices should be very high. Now people have been stung and will remember that house prices can fall. The housing supply is still out there (unless people have been demolishing homes I'm not aware of).

If people are expecting the housing bubble to come back, you may be waiting quite a while. If government plans are based on the assumption it will come back, then they are flawed.

walletfart said:Can someone explain why people think the housing market will "rebound"? What does that even mean?
If by rebound you mean prices back to the peak bubble level, it will be a LOONG while before that happens. If by rebound you mean prices hit a bottom and start to go back up, that may happen (relatively speaking) sooner.