Bailing Out The House Flippers

I will post more details as they become available. But the thrust of the plan is simple. Help homeowners who are underwater or can’t afford the monthly payment.

* Enable refinancing for 4 million to 5 million “responsible” homeowners who took out conforming 30-year fixed mortgages with an 80 percent or lower loan-to-value ratio and are current on payments.

* The decline in home values means many of these families cannot qualify for conventional refinancing because their loan-to-value ratio would exceed 80 percent.

* The program would allow mortgages owned or guaranteed by Fannie Mae and Freddie Mac to be refinanced, reducing monthly payments.

But how is this fair? And doesn’t this just disrupt the housing market. And for what, for whom?

Last night CNBC’s David Faber made an appearance on Hardball and discussed the current financial crisis. Chris Matthews, and he wasn’t wrong, lays much of the blame on Countrywide but believes homeowners are innocent because they were duped.

Not so says David Faber. To be sure there were some who were poor … but the majority knew exactly what they were doing.

Adding fuel to the fire … Jeremy Brandt of 1800 Homeowners says … homeowners in California who could pay their mortgages, but whose homes are currently underwater (owe more than they are worth)  are deciding to hold back to take advantage of the Obama plan.

Great … so we help the irresponsible become more irresponsible while we continue to toil for the irresponsible and us. Nice. Welcome to the new government controlled financial sector.

23 replies
  1. Dimsdale
    Dimsdale says:

    Even if everyone trying to get on the latest dole was not a “house flipper” per se, they were riding high on the expectation that the housing bubble would never burst, and that their house values would continue through the roof, and subsequently took out equity loans or simply counted on that equity to fund their retirements etc.?? Hence no saving, and lots of spending, usually on credit.? In the most egregious cases, they bought houses “high” and now have huge mortgages on modest houses.? Dumb, dumb, dumb.? Obama voter level dumb.

    And people wonder why this house of cards collapsed?? People need to learn a good hard lesson in the form of foreclosures as a reward for this level of stupidity/ignorance.

    You don’t need an economics doctorate to figure out that the housing boom would go bust: just a simple look at recent history would tell? you it would happen.

  2. Darlene
    Darlene says:

    The sad reality is that the bailout/stimulus/homeowner assistance plans all promote irresponsibility.  Whether it be housing, healthcare or welfare, continuing to fund the people who make bad choices is a bad path.  People, individuals choose to buy houses, buy cars and even have children.  No one forces them to make these choices.  I keep hearing "Personal Responsibility" but every new plan or person associated with this administration goes against everything I know about personal responsibility.  The double-speak is maddening!!!

  3. davis
    davis says:

    House flipper or not, if your neighbor forecloses the value of my house (never mind yours) will go down. The lesson to be learned by all of us: if this slide is not stopped minimizing the foreclosures we all be paying through the nose!!

    • Wayne SW
      Wayne SW says:

      The value of my house is determined by the market.  NOT, whether you or anyone else defaults on a mortgage.  Propping up the housing market will only delay and interfere with normal market pressures.  I only care about the value of my house when I decide to sell it.  Since I have owned a home, the market value fluctuates to market pressure.  Home values are not predictable like the reuturn on a bank CD. 

      Why should I practice fiscal discipline when the Govt will reward and bail out those who are fiscally irresponsible, by confiscating my assets?  Our current elected leaders nead to get out of the way, and not  interfere.  The market will correct itself.  Failure is the result of making poor decisions.  The less government inolvement in our lives the more freedom we have. 

  4. Dimsdale
    Dimsdale says:

    Personal responsibility?   Whazzat?  Every liberal program is designed to lift the burden of personal responsibility from potential liberal voters.   Can't afford your car, your house, your kids?  Cry "I'm a VICTIM!!"

    If you know the government will be there to catch you when you fall, you tend not to look where you are going.  Or don't care…

  5. Dimsdale
    Dimsdale says:

    One might argue that the value of the houses, yours included, dropped before the foreclosures occurred.? Propping up the housing bubble is not going to make your house keep its value forever: it will just delay the inevitable.? The people that stand to lose the most are the ones that bought high, and now have an upside down loan.? Even if they sell, they lose.? That is the price of believing that the bubble was going to last forever.? Perpetuating the bubble will, at best, only allow you to possibly (but not likely) sell your house to someone at an inflated rate, passing the inevitable price drop to them.??

    Bottom line: your house is only worth what someone is willing to pay for it.? Not a penny more.? It might look good on paper, but that paper isn’t greenbacks.

  6. davis
    davis says:

    I just don't get it! THE HOUSING BUBBLE HAS BURST. It's not a matter of if/when/how. It has already happened and I am glad somebody is doing something about it. Would you simply want to watch the economy to collapse: then what? We give tax cuts to businesses that are bankrupt? We borrow from each other? We expand the economy with barter?

  7. Dimsdale
    Dimsdale says:

    Knowing who is responsible for the bubble will prevent another from occuring and/or the same people leading us into another bubble, be it private or public sector.  I recall the bubble bursting before and we survived.   What was it, the late eighties or early nineties?   Bubbles come and bubbles go.  Best plan: buy low, rent high.  Wait for the burst.  The problem here is that the government is trying to prop up house prices and bad loans.

    Consumer confidence is what needs to be restored, not reinflating (or trying to maintain the bubble in its inflated state.   That is what this so called stimulus package is trying to do: put patches on the bubble so people can continue to believe that their houses are worth the inflated prices of a year or so ago.  They are merely delaying the inevitable.  Housing prices, like the economy, cycles.  It is called a market correction, emphasis on the "correct" part of that.

    Tax cuts to businesses that are bankrupt?  What do you call giving, yes giving, wheelbarrowfulls of money to banks and businesses that should be bankrupt?  Borrow from each other?  Yes.  I am in a credit union and that is exactly what we are doing.  And my credit union is not in trouble, having exercized good judgment on loans, unlike the biggies.

  8. Dimsdale
    Dimsdale says:

    Proof that Republicans are not responsible: no hysterical yelling for investigation after investigation, hearing after hearing, media "enhanced" story after story.

  9. davis
    davis says:

    I really don't get it. Were you and your cohorts on another planet while the bubble was being blown up? Did you not "benefit" from it: higher house values, bigger 401k, higher employment etc.? Now that the bubble has burst do really want to keep looking at the value of your house go down, your investments tank? And selectively point the finger at anybody, but not at yourself too? Do you really think you are winning something in this debacle? And do you really think that you have an answer so that "it never happens again"? This is the second bubble in 10 years, no more after this one?

  10. Dimsdale
    Dimsdale says:

    You make my case for me: this bubble was predictable, and there will be others, as you state, on roughly 10 year cycle.  I could see it coming, couldn't you?  I remembered the last bubble.  Didn't you think for one minute that housing prices were ludicrous?  Were you happy that first home buyers were shut out of the market in the "my home as an investment tool" frenzy?  Are you one of those that thinks your house was actually worth some perversely inflated estimate?  It was only if you sold it.  But you didn't.  My house's value never changes.  It is exactly what I want, and it is worth exactly what I paid for it to em.   I am not going to borrow against it.   I am just going to pay off the mortgage.  Myself.  Probably ahead of time, because I put extra principal payments on each bill whenever I can.  I refinanced when it was smart to do so; I didn't take out an equity loan to buy toys.  Thus, I can point the finger.

    Nobody is "winning in this debacle" but some of us have minimized our losses.  Sure, I have lost plenty from my investments, Now we just have to minimize the losses from the half assed "fix" of the stimulus bill and whatever scheme Obama comes up with next.   That I cannot control for.

    I do have an answer to the problem.  Remember this bubble in 10 years.  Don't get sucked in to the next one.    Don't let politicians fool with tried and true banking policies, you know, ones like "if you can't afford a house, we aren't giving you a loan?"  Don't borrow against an inflated and temporary value in your house.  Remember that not everyone is a home buyer.    Stuff like that.

  11. davis
    davis says:

    You make my point too, so we are even: yours is a 20/20 hindsight view of the universe. If you had that great a crystal ball you could have made a ton of money: invest and get out before things crash. I thought that was the way things work under capitalism and the free market (but not for everybody, only for the insiders). I hope you tell all of us what the next bubble will be and when it will burst. I would also settle for numbers to pick for Powerball. And I did not invest in housing and still got hosed.

    • Steve McGough
      Steve McGough says:

      It's a known issue that we have a problem with the number and has been noted on the site before. It's being looked in to. The poll votes are accurate, but of course, they are not scientific polls.

  12. Dimsdale
    Dimsdale says:

    No, quite the contrary.  I use history as a means of predicting the future, as people keep making the same mistakes over and over again.  Remember George Santayana's quote "Those who cannot learn from history are doomed to repeat it?"

    That is not the "crystal ball" that you insinuate I have, and nothing I wrote should have given you that impression.  It is commonsense and a recognition of economic trends.  I had no idea when this bubble would burst, but I could see the bubble and recognize it for what it was.  Couldn't you?  A big run up in prices is a sign of an inpending crash.  And I wasn't even paying that much attention, being busy with other matters unimportant to this discussion.  The tech bubble of the late nineties should have been even more obvious, given the junk bonds etc. permeating that situation.

    You really need to reexamine your definition of capitalism.  It is the liberals screwing with the system in the name of political correctness that truly threw the monkey wrench (can I say that anymore?) into the works.  I refer you to Thomas Sowell's article "Upside Down Economics" http://www.jewishworldreview.com/cols/sowell02180… You may not agree, but it may open your eyes.  Maybe not.

  13. Dimsdale
    Dimsdale says:

    People that are able to pay their mortgages, but choose to stop to get a refinance on an upsidedown situation are, in fact, flipping the houses to themselves.  Of course, it dumps their debt on the rest of us who choose not to follow that deceptive path.

    I wonder if this is the worst kind of entrapment by the government: sucking yourself into economic thrall to the gov't through one's own base greed?  Short term smart, long term stupid?

  14. davis
    davis says:

    WOW, you are trying to confuse me. I always thought the mantra was that if one can find a better way to take care of oneself, one should. You mean to tell me that if I refinanced my mortgage at a lower rate I was stupid and I deceived myself? I am I worse off if I have  a lower monthly mortgage payment? How would  the debt be dumped on the rest of you? Is the bank stupid/deceitful too?

  15. lauraB
    lauraB says:

    I am being punished for where I live.

    I live in super-expensive Fairfield County, CT and am very frustrated by the whole thing.  Only conforming (non-jumbo) loans qualify for these programs.  Conforming loan limits are generally set to $419,000, in some ares somewhat higher.  Around here that won't get you into anything but a shack in weak school district.    Our 5/1 Jumbo ARM will reset next year to likely an unaffordable amount.  We have been trying to re-fi, but right now rates on Jumbo loans, even ARMs, are higher than what we currently pay.    We'd love to sell and downsize, but with two other homes on our street already at rock bottom prices and NO offers, selling would take ages.  Plus by the time you take out broker fees  we would be left with virtually nothing to put towards a new home.  Don't tell me to FSBO – in this market you need a good agent hustling your home.

    We don't live lavishly.  We pay our bills on time.  We live in fear of what our reset will be.  I worry what impact these limits will have on home prices since so many others also have Jumbo loans.  If only our entire family and jobs were in Kentucky then maybe we'd get some assistance.  Those of us living in the Northeast or CA are SOL. 

  16. Dimsdale
    Dimsdale says:

    Sorry if I confused you.  I meant to say that people that stop payment on their mortgages even when they can easily afford them, in order to get a freebie (read that: you and me paying for it) recalculation of their mortgages per the Obama "stimulus" plan, they are essentially flipping the houses to themselves, in a manner of speaking.

    Refinancing is perfectly legitimate, because the mortgagee is paying for the service, and the bank gives it due to competition with other banks (something else that will be lost if the banks are nationalized.  If you refinance, YOU pay for it.  If you scam the system as described above and in the second vid segment (which I thought you might have viewed), WE pay for it.  Watch it again.

    If you think that it is a "mantra" to find a better way to take care of oneself, then why did you refinance?  I refinanced for excellent terms, better than anything now, paid the endless fees, and now have a 15 year mortgage at rates that would make most people cry.  I found a better way to take care of myself without the government.  

    I don't know how, after reviewing what I wrote, you came to the conclusions you did, but I will accept blame for writing too quickly this morning on my way out.  If you are still confused, feel free to ask for help.

    LauraB: you have my sincerest condolences.  My parents are in the same boat.  A good agent is a thing of joy (they are finally earning those exorbitant fees!).  Wouldn't it be nice to just give homeowners a year long Geithner tax and mortgage holiday so we can ride this out, instead of more nightmarish bureaucracy? 

    Isn't it odd how all of the really expensive housing always seems to be in the bluest states?

  17. davis
    davis says:

    Dimsdale, thanks for your offer of help, but it's not needed. I took care of myself. I have no mortgage payments, my house is all paid up.

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