Do you believe homeowners going into foreclosure deserve a bailout? Whose fault is it?

Question

9/11 President Bush has a new FHA alternative to foreclosure announced today.

Answer 1

Any bailout will involve the homeowners refinancing or repaying the debt. There are several options that will be presented to most homeowners that include forbearance (a temporary halt to payments with interest still accruing), loan modification (rewriting the terms of the loan) and refinance. The bailout is more for the corporations than for individuals. This isn't some government welfare program that will pay off people's mortgages.

The bailout is intended to provide stability in the financial markets. Whether that is a legitimate government function is debatable.

Answer 2

May be not a bailout. More like an intervention. The government should be concerned that once foreclosures begin the property values will avalanche downward to the point that their tax assessments will have to be adjusted downward. They should prohibit foreclosures until the market recovers. Houses need to be moved they deteriorate while setting. So bankers themselves will not make as much by foreclosing and waiting until the market returns. If anything this will trash the market worse than it already is. Any positive indication on the part of the government could breath some life into the houuseing market.

Answer 3

The fault for this situation can be spear among several people.
1. The real estate professional who encourages a potential home buyer to look at and attempt to purchase a home this is way over the buyer's ability to pay. Their motive, to get the highest fees from the sale.
2. The lender who offers legal "creative financing" deals that are just too good to be true and does not fully disclose in normal language what will happen to the buyers. Things like adjustable rate mortgages with balloon payment, zero down mortgages are not understandable to the average home buyer. The lenders created these shakey loan arrangements by betting that home prices and the economy would continue to rise. Shame on them for gambling with people's lives. Motive high loan fees, more foreclosures that could be re-sold for a higher amount.
3. The home buyer for not educating themselves as to what they actually could afford and the bs that they would receive from real estate professionals and the lenders. There are tons of financial calculators on the Internet to help everyone figure out what they can afford. Shame on the homeowners for not wanting to live within their means.

The entire real estate economy was based on greed that finally collapsed. I would give those going into foreclosure a bailout where they get off without paying for their mistakes. BUT I would allow them to obtain governement backed conventional mortgages. -- Not as a reward for getting into the mess but as a learning tool and as a way to bail out our economy before we hit another major depression.

Answer 4

Some probably did not understand the actual terms of the loans, and those should be helped. Some were convinced by the mortgage brokers that th real estate boom was going to last forever. If they were not very experienced, they should be helped. The others were just greedy and expected to make a killing in the "market" and should be left to help themselves.

The real question is, who should be doing the helping? The taxpayer? The mortgage industry? The individual brokers? The investment-rating companies?

Obviously, it will be the taxpayers.This administration isn't about to really enforce free-market mechanisms that adversely affect the rich. They will say they are, but watch what they do.

Answer 5

No I have always believed that you should be responsible for your own finances. If you can not budget and afford a home, dont buy one. If the people would have done there homework as it were they would know that the rates change. If the government bails them out the rest of us that planned will suffer. It is strickly the home owners fault. This does not include people that are in trouble because of loss of job or lively hood. Just those that should have known that they can not afford a house.

Answer 6

More often than not, people are NOT apprised by lenders of all the costs and interest accruing on their loans and mortgages. I know I've gone in for loans and they have pretty much tried to get me to sign papers without even telling me so much as an interest rate.

A smart borrower will find out these facts for themselves prior to obliging themselves, but I think there should be some responsibility of the lender to explain.

There is a reason why, up until a few years ago you rarely ever heard of a 40 year amortization..thats crazy. That basically like paying rent to banks instead of landlords. Up until a few years ago it was unheard of to by a house with 0 down. Or to re-finance your home just based on your stated value of the house as opposed to the professional opinion of an appraiser...trust me, there ARE reasons these were not the norm until recently.

Personally, when market values skyrocketed, I was tempted to refinance on a higher amount but chose not to. I, unlike many others thought "geez..when the market takes a dive and my house is only worth 100,000.00 instead of 150,000.00 how am I gonna payoff that 150,000.00 mtg. Also then when the term is up and interest rates went from 5 to 12 % would I even be able to afford to make the payments on the increased mortgage amount.

A bail out is necessary as with out same there would be signifiant market down turns resulting in losses of capital and losses of jobs and would create a vaccum that would be difficult for the individual and the market to climb out of with out some assistance.

Answer 7

A lot of the people who are defaulting on their mortgage could afford the initial payments but they got one of the sliding mortgages where the payments increase as time goes on or are able to pay the actual cost of the mortgage but are sinking under the weight of the interest. Yes, they should have known that they would not be able to keep up with the increase in the payments and they shouldn't have jumped on that particular bandwagon but a lot of these people were trying to build a better life for their children and aren't just a bunch of ne'er-do-wells taking advantage. The mortgage industry has some culpability in all of this as well because, shockingly, they didn't care about doing the ethical thing, they cared about doing what was going to put the most money in their pockets. That being said, it's not about "who's to blame." It's about doing what's best for the economy because if we just leave people to flounder, it's going to affect all of us. If that means that they need a period of forbearance or they need to refinance their home loans, I don't see the problem. They're calling it a "bail-out" but that's misleading. The home owners are still going to be responsible for their own mortgage payments.

Corporations pulling in millions of dollars are "bailed-out" everyday and no one complains. Why are you up in arms because an average citizen who was trying to grab their piece of the American dream needs a decrease in their interest rate or a little time to get their ducks in a row?

Answer 8

It is primarily the fault of the homeowners. They should not have taken on debt they could not afford.

It is also the fault of the lenders, for allowing people to borrow money they could not afford to pay back.

Overall, there should not be a bailout for purchasers or lenders. They made the mistake, they need to live with the consequences.

Answer 9

While I agree there are such creatures as the predatory lender - I think that people need to be held accountable for their own actions. No one held a gun to their head and said "sign this mortgage for an amount you can't reasonably ever repay".

So - I guess I'm a "no" there should not be a bail out. It's time for people to stop playing victim and getting themselves into situations that they cannot get out of.

Answer 10

i've got have been given had 2 pals going into foreclosure and can say that genuinely, the banks are in charge. in the past each thing, if a private very own loan holder gets on the returned of the banks refuse to enable him/her to snatch up without huge outcomes. Secondly, optimal banks have refused to enable sources owners to do a house replace---proceeding to refinance their residences for a much better useful activity fee and cut back mortgages. i propose, if I lend you funds and you abruptly won't have the potential to pay the agreed upon quantity, do now no longer you think of of it makes extra advantageous journey to renegotiate a cut back reimbursement quantity than to insist which you pay what you abruptly won't have the potential to pay? in case you owe 4 hundred income accordance to month and abruptly won't have the potential to have the money for it using actuality of ailment or lost activity, and that i insist on it which you pay up contained in numerous case....what are you going to do? probably declare financial disaster. on the comparable token could desire to I say that the grasping banks gave human beings a private very own loan they actually might prefer to now no longer have the money for(they authorized them to boot)and then mutually as each element collapsed they did now no longer enable those human beings to pay much less...that easy this is.