Do you agree with this. There is a dangerous housing problem in the U. S. Many people are going to lose?

Question

their homes if the government doesn't step in. It is my opinion that part of the problem is that people buy houses they should know that they can't afford. I can't believe all the very large homes being built. If your income is such that you can afford to make the payments that is one thing, but what if you lose your job? You could be fired, laid off, etc and it would be devastating. People need to think about these things and be sure that they have money put back just for this possible occurence.

Answer 1

The current situation is not a DANGEROUS problem, but it's going to force a substantial number of people to rid themselves of the house they bought which they could not afford, and move back into renting. These folks will have housing, but it won't be what they wanted.

Answer 2

unfortunately most people are not that smart. They go to their realtor and their bank and they are told, "Ok heres a 350,000 home and your payments are only going to be 895 dollars per month" So the people start signing away, without reading anything about how much they will pay in 2 or 3 years when the interest rate goes up.

Personally I dont think its the governments job to step in. Yes they are there to protect us, but this is not a communist society where if person A makes a big mistake and loses a ton of money, that person B, C, and D have to have thier economy go down the drain to mitigate the damage to person A. I mean really...whats the worst that is going to happen to person A? He has to go rent an apartment now...Oh no!!!! An apartment. Thats almost as bad a living on the streets of Bangalore!!! I mean come on. Our Dollar has lost 15% of its value in the last year because of the governments unwillingness to raise interest rates. That 15% is why you are seeing gas prices get higher. Anything you buy now thats from another country its like an invisible 15% tax on everything. Imagine if you went to walmart and all of a sudden they said...Oh we just added another 15 sales tax to our already existing 7.75% sales tax. So now you have to pay 22.75% sales tax. Well thats really whats happening, but its just invisible. I say let them lose their houses and let them rent. Its not like they were in the houses for 40 years and it was their family home. They were most likely in for just a few years.

Answer 3

I don't think government intervention is warranted. Frankly, the lending industry can deal with this on their own as they created the problem. Part of the issue has been the potential for these "creative" loans to skyrocket in required payments. The lenders most certainly can make the terms more favorable to the mortgage holder--

they can reduce the amount of the monthly payment by choice--superior to mass defaults,
extend the period for the lower interest rate (putting costs on the back end),
they can waive refinancing costs to get them into an affordable fixed rate mortgage (and that means the people can pull more funds out to help them make the mortgage payment until they can increase their income/decrease expenses).

There are undoubtedly other fixes available. For those of us who are responsible and took a 30-year fixed-rate mortgage we should not be penalized subsidizing people who either were greedy or too ignorant to sign for the "creative" mortgage. There is a reason those types of mortgages used to be the domain of the rich--they had the funds to deal with increased payments.

Anyway, it is true that people too often purchase a home they cannot afford. In fact, one Harvard law prof who specializes in bankruptcy includes the unusual idea that people should not have mortgages in her book: All Your Worth by Elizabeth Warren. Only other book I've seen advocate that is Michael J. Laurence's Your Money Rules for Financial Freedom.

Too many are out there screaming about taking on as large a mortgage as possible and taking advantage of "creative" mortgages. This is foolishness for the reasons you cited: "stuff" happens in life, then what do you do? If you want to do investment properties, sure, leverage to the hilt, but your own HOME? People do not understand how expensive owning a home is. It's not just the mortgage, taxes, and insurance, it's the maintenance, the repairs you can't do yourself, replacing appliances that die, etc. In Phoenix, AZ, for example, if you need to replace your water heater you must have a city permit to do so. Even if you go with a basic tank heater, say 40 gallons, you're going to look at $700 or so to buy a reputable new one, hire a qualified installer, get the old one hauled off, etc. That is NOT chump change. You also don't want to let yours burst because if you have a homeowner's insurance claim that can result in your policy being cancelled, premiums jacked up, and difficulties in selling your house (CLUE reports). Yes, for something as common and non-indicative of a true housing problem as a burst water heater can be a problem.

One thing people can do to reduce the likelihood of a tragedy is to get private disability insurance because if you start missing bills, you will be spiralled down into a huge mess. No one should ever assume he will be able to get Social Security disability, plus you have to be out of work for a year, then they don't pay for the next 5 months, and you probably needed an attorney to get your benefits and he will take 25% of whatever Social Security owes you at the time he wins your case. Normal people can't wait that long to make their mortgage payment.

This is a serious problem, but if people don't look to the government to bail them out, the problem can be resolved. Some people are going to lose their homes, but also some people signed on for a house that was twice as much as they could afford. A slight miscalculation is one thing, but going for mansion prices is just foolishness and the sensible working people shouldn't be expected to bail out those folks at all.

Answer 4

Sure, it's going to be a problem, even more-so than it is now.
The issue was that we had mortgage companies making loans to people who could not afford it, and those loans were purchased by investors who simply made bad investments by buying loans that were sub-prime. That's just plain stupid, and I don't feel sorry for the investor or the mortgage company one bit.
I do, however, feel like something should ultimately be done for the homeowners in the equation. To start with, I think the mortgage holder should be forced to carry the loans for another 5 or so years at the lower, teaser, interest rate. If it costs them money to do it, so be it. They had no business making those loans in the first place, and the investors should not get a free ride here either. If they wanted to invest in that sub-prime crap then I have no sympathy.
Any government intervention should be limited to that, but they should not pay money to anyone, homeowner, investor or mortgage holder. They're all big boys and should have to take their lumps as they deserve.

Answer 5

Another problem that I see is the fraud involved with the mortgage industry. I recently had quite an experience several months ago when I tried to refinance my own home.

I had been seeing these ads on the internet for these unbelievably low rates, so I thought that I would try one.

This internet broker prromised me a 4.75% fixed mortgage.

At the sign off the title officer expected me to just sign the papers without reading them because my mortgage broker supposedly had already showed me all of the papers.

It is true that my mortgage broker had showed me a lot of papers that looked like the papers that the title oficer was having me sign.

The papers that my mortgage broker had showed me had a fixed rate of 4.75%

Howeve the papers that the title company had were for an adjustable rate mortgage at 9.75%.

If I had not resisted the pressure of the title officer and had been more agreeable I could have wound up with a ridiculous 9.75 % adjustable rate mmortgage.

Fortunately for me I have been doing this for 40 years and I am not as agreeable as many people are.

The title officer had other people waiting to do their sign offs and made me feel very uncomfortable reading every page in a mountain of papers, most of which had rather meaningless boilerplate.

Some of the type was so small that I had to ask the title officer for a magnifying glass to read it. This was much to the distress of a very impatient title officer.

When I came to the page that said they were tryiing to give me a 9.75% adjustable rate loan instead of the 4.75% loan the mortgage broker had prommised me, I grabbed all of the documents from the title officer and walked. out.

The title officer was furious and said that I was stealing property that belonged to the title company. I told her she could sue me if she wanted to and walked out with the documents.

Unfortunately in dealing with these people that is what you must be prepared to do.

Most people are trained that they must be agreeable. These mortgage brokers and title companies involved with this take advantage of that.

I did not want any documets lying around that title company that they might use against me later.


I went back to the bank where I have my checking and savings accounts.

My bank offered me a 30 year fixed rate loan at 5.75% or a 15 year fixed rate loan at 5.25%.

I took the 5.25% 15 year fixed rate loan because I can afford the higher payments, the rate is lower and it will be paid off sooner.

If these mortgage brokers could attempt a fraud on me like they did to me several months ago, it makes me wonder what are they doing to people who are less sophisticated and more agreeable than I am.

Answer 6

In my area the problem started with speculators. They bought houses, rented them out and waited until the prices rose enough to sell. That's sn investment gamble. The problem was that couples looking for new homes had to compete with the speculators. Of course the boom burst. Speculators just wrote it off as a loss. For the young couple forced to buy a home they couldn't afford the effects are disasterous. Should the government step in? I don't think so, the speculators would get as much money as the homeowners. I don't think that's fair. Unfortunately for the (now homeless) homeowner it will take longer to build their finances up just to get back on their feet.

Answer 7

You are absolutely right. As a matter of fact, i was talking to one of my collegues 2 days ago who once worked for a broker and his job was simply to approve families and individuals with all sorts of credits - good, bad and ones with no credit at all. He knew that many of them could not even afford to make the very first mortgage payment. Yet they came arround it and got families approved just to make their 2% commision. He agrees that he's guilty of this but was doing what he was told to do - his job!