With all these people who are defaulting on mortgages, why should they be let off the hook for taking on?

Question

a mortgage they cannot afford?

They signed the contract.
They had a chance to read the terms.
They had an obligation to know that they could not afford the home when the payment ballooned.

What about all the people who made good decisions? Why should the ones get rewarded for making a bad decision?

I see the government getting its nose in this financial problem.

It is really clear that most of you have no idea what happened with this mortgage situation. I doubt many people here even own property.

Here is what happened.

About 6 years ago, mortgage companies started to offer no money down and teaser rate mortgages. These rates were well below prime and only were to last for a few years. These were offered to people who could not afford the traditional payment program. It was solely designed to get people into more home for their monthly dollar. It was offered to those who would not qualify otherwise (either lack of income, too much debt, or poor credit).

Answer 1

Another important fact about these mortgages, is they are based on a house appreciating over time. For instance, you get one of these so-called "sub-prime" mortgages, and make the low payments for 5 years, then you refinance into a conventional mortgage because your house has appreciated enough for you to qualify for one. Unfortunately, we are seeing houses DEPRECIATE. There are just too many people losing their jobs, and this causes them to be unable to refinance. Alot of people go into these loans knowing EXACTLY what they were getting into....I did. Unfortunately, when my rate adjusted, my house was worth 5000 dollars less than it was 5 years ago, so I actually had to put cash down to refinance my own house into a conventional mortgage. It was a gamble and I lost. Fortunately, I had the money to buy myself out, but alot of people don't.

People who lose their houses are hardley getting let off the hook. When you allow your house to be forclosed, you still owe the difference between what is owed on the house and what the bank sells it for...with the market the way it is, as I mentioned, houses in alot of markets are depreciating, so you could forclose and be on the hook for thousands of dollars. So now you file bankruptcy, and you have a foreclosure and a bankruptcy on your credit report. Without alot of cash it will be YEARS before you can even hope to buy a new house, wich means you have to rent. Renting, you loose tax deductions, and often you live in a crappier neighborhood.

Most banks are making out on this deal because of PMI and they were smart enough to hedge high risk loans with low risk loans. The banks that didn't do that are going under...a well they should. The market is leveling itself out, and I don't see our government getting too involved in what is going on. The economy is still growing...

Answer 2

Some people claim the problem is with the bankers.... This is not a local bank issue, these are National mortgage companies that work over the phone. I work at a bank in my town..... we have NEVER forced anyone to sign a loan paper, in fact we often decline loans when we feel the borrower cannot afford the payments. I have worked at my bank for 20 years and we have NEVER had to forclose on a any property.
Now, about these sub-prime loans. Most of these people had no downpayment and their monthly payment barely covered the interest. Now when the interest rate raise, and the property values drop, they cannot afford the payments, and yes the Mortgage companies will lose money, because the loans are higher than the property values.

Bottom line: I feel every person is responsible to learn everything they need to know about the papers they are signing. ( I have a push lawn mower, and if the salesman wanted to sell me a big riding mower, do I go along with it?? No!, Because I know what I need and can afford)

Answer 3

Technically you are right, and the results should be allowing the over-inflated economy to take a fall.
But with so many people heavily in debt, a tumbling economy could devastate the entire nation, to the point that we experience a depression much like the one back in the 30's, and the people in the government fear that such a dpression could make us very vulnerable to the attack of foreign enemies. The current government needs the taxes it is receiving to pay for the military as well as social services, if everyone lost all their money and couldn't pay any of their debts the economy and the money for social services would disappear and more people than just those defaulting on their loans would suffer.
It's like this - by not bailing out some of the mortgage holders, it would add to the numbers of people requiring government money to stay alive. If a large number of people were added to the welfare rolls at once it would cripple the current government, the system, and drain the tax dollars.
By bailing out some of the debt-holders, the debts get paid and the money is used to loan to other consumers, and it keeps people off welfare and government assistance.
What you need to do is focus on clearing your own debt and building up a savings account and insurance that could help you bail yourself out so you don't need to depend on the government to save you in times of crisis.

Answer 4

Most people go along with the lender. If they get approved for the loan, they assume the lender knows his business and they can afford the payment. Banks don't really lose anything when the borrower defaults since most of the time, the property is worth more than the remaining loan amount. I just cleaned and did some minor repairs on a house that was abandoned. Bank paid me, paid electrician to do some outside work and still sold the house for several thousand over what was owed.

Answer 5

There are a lot of things you don't know about this situation.
I'll see if I can condense this down.
The mortgage companies made it to easy to get a loan. no money down and easy financing. no verification of the information.

I have worked in construction all my life and the last 12 in management and in the last 53 years of life I ain't seen nothing like this.

Yes the offers were to good to be true.
you take your average apartment dweller and give them a shot at owning their own home and they will jump on it every time.
So would you.

They make it sound like at the end of 3 years when the ARM went up the re financing would be just as simple the second time. WRONG
3 years in and the people that talked them into swimming out here in the deep water don't even know their names.

I walked through a sales office one Saturday and the people the company had working that place almost sold me a house.

Yeah they are grown ups but you offer someone that thought owning a home was just a dream and all of a sudden its offered to them on a silver platter of course they grab for it with both hands,
SO WOULD YOU.

Answer 6

I agree with you. If people used their heads and actually read the contracts, then they should have known all the possibilities that laid ahead. However, I do wonder if those people would just talk to the banks where they have the loans- I would think the banks would benefit from working with the homeowner to find an interest rate the homeowner could afford rather than defaulting on the loan entirely.

Answer 7

Let them all go under . The banks and loan companies ,the people who signed up for the loans .
Why should my tax dollars go to bail out yet another scandal of some idiots playing fast and lose to make quick profits that any reasonable person would have said no way this will work .

Answer 8

*sigh* Not all of the people signed on to mortgages they couldn't afford. The people that are really getting slammed are the ones that got a mortgage they could just afford, but with a variable interest rate. When the housing market started to slump, the lenders jumped the rates which doubled and tripled people's mortgage rates, which pushed them into foreclosure. I don't blame the people, a lot of them were told the market was good and they could refinance for a fixed rate in a couple of years. How would you feel if you could just afford $1000/month mortgage and after a year of good payments all of a sudden you get a bill for $3000?

Answer 9

No to all the above. You took out a settlement. They gave you something, you should do your facet of the settlement. as a result they gave you the money for the living house, you in return ought to pay decrease back the money they assist you to borrow, plus interest. so a techniques because it being ethical criminal duty, i don't think of so. i think of if maximum human beings might desire to pay their very own loan they could, so morally they're attempting. actual now could be basically a real tense time for human beings.

Answer 10

The fact that such an inordinate amount of people are losing their homes due to defaulting on the mortgages is a statement of the current economic status created by the government and today's job market. That's why something needs to be done on behalf of those people by the government. It's not so much bad decision making as it is a tragic statement of the U.S. financial straits and the lack of economic gain available to the citizens of this country today.