Talkback: “Why Sheila Bair wants to bail out consumers”

Why doesn’t the govrnment bail out the working family. Instead giving large sums of money to banks that will not loan or ceo’s to take lavish trips or large bonuses. Give every (working )american family a $25,000. bail-out. They will either spend it or pay off debts. Either way the money will be put into circulation. Help the average Joe for a change. No money to the lazy guy who will not work or to the top ceo’s who waste it on lavish trips to the spa. Wake up government and help the folks who pay the taxes.

I think it’s funny that when people were making out on their over inflated houses (equity loans/ new cars/ trips/ 500 inch TV’s, etc) there were no complaints even as people dug themselves deeper into debt (their own fault). Now, based on their own poor judgement, people are screaming bloody murder about it being someone elses fault. I didn’t go on a binge..same TV, same car, a lowly 1% savings acct..no stock market loss. Why should I pay for your poor judgement?

Sheila did ever so briefly address the topic of high redefault rates (note to author – this should be the focus of the article), but only provides a nebulous concept of “refinancing in such a way as to make the loan truly sustainable.”

Here’s a newsflash for some of the “modify the loans” crowd. Are you ready? Try this on for size:

The reason people redefault is the same reason they defaulted in the first place: They didn’t have strong financial sense.

As a result, they bought more house (and quite likely more car, etc, etc) than they could possibly pay for (also see: ARM). After loan modification, these same consumers STILL don’t have any financial sense. The end result: a redefault. Congratulations, doctor! You’ve just treated the symptom, and ignored the cause. Good show, mate!

Bottom line: Irresponsible consumers deserve what they get, and that is not a bailout. No less a man than Ben Franklin once said, “We must allow people to succeed, and we must also allow people to fail.”

In general, no, she should keep out of the housing market and concentrate on keeping the FDIC afloat. Bad things will happen when she takes her eyes off the ball.

There could be a place for fraud prosecutions, and there certainly were a lot of them. There could be a place for renegotiating terms on FHA, FNMA, and FRE loans, which are already government-guaranteed. Otherwise, these are just bad commercial transactions; the buyers used massive amounts of borrowed money to bid up prices and now want a way out of the deals. We can’t justify taxpayer money for this. I suggest some options:
– Renegotiate with the lenders;
– Do lots of short sales to get out from under the oversized mortgages;
– Give the properties back to the lenders prior to foreclosure.

These are ‘no recourse’ loans. Armed with the knowledge that they can give the properties back to the lenders prior to foreclosure, the borrowers should have a very good bargaining position to renegotiate the loans or do short sales, without waiting for foreclosure or resorting to bankruptcy. Be proactive; fix the real estate problem and preserve your other assets before you’re down to your last dollar.

Foreclosures are a normal part of the housing cycle meant to return prices to their historical statistical norms. For every person that “loses” their house another will gain a home when the price reaches a true market value.

There are historical statistical relationships such as income-to-price and rent-to-mortgage ratios that were horribly affected by the real estate run-up. These ratios will find their equilibrium and any bailout, including Sheila Bair’s schemes, will only muddy the process, wasting tax payer money and encouraging further moral hazard in the process.

The housing run-up of the past 7 years was ill-gotten and there’s no easy solution other than to allow the prices to fall in order to establish a true market value. In California, particularly Los Angeles and San Francisco, prices are still wildly overpriced and predicted continuing steep declines (according to Case-Shiller.) Foreclosures actually help the process occur quickly so housing can return to it’s normal 2-3% annual appreciation.

It’s commendable for Sheila Bair and the government to want to help the ailing housing problem, but the best they could do is to step out of the way and let the market restore itself.

Let every homeowner refinance to the current value of their home. I know ours has lost almost 200,000.

Have people pay interest only, like they do in Japan. For several years until the value of their homes come back somewhat. Win win situation.

I think, in all fairness, people’s homes should be reappraised at the fair market value of today…Not the overinflated numbers that were backed by toxic securities and credit default swaps. This should be made for investors as well as owner occupied, because if they aren’t, then you affect multiple properties and multiple families (if an owner can’t pay his primary mortgage, do you think he can cover his investments? DUH!!).

After these over-inflated houses are assessed their true value, the loan terms should be reworked, maybe in some instances to 40 or 50 years.

I think that if homeowners can see that they aren’t paying for something that has depreciated worse than a car (who would think a home would depreciate faster than a Cadillac off the lot!), it won’t be so ridiculous for them to pay for it.

My home has lost half its value…HALF! I am angry…I can’t see paying for it. Even though I have improved the property considerably, it is still only worth half of what I paid for it. How long will it take for me to just break even? I would probably be dead before I see it, and still owe…What is the point of owning a home, if you can’t use it to help you when you retire? I feel so stupid that I bought into this ridiculous lie of an American dream, it is a nightmare!

No. First of all it is a punishment to those who remained sensible and stayed within their budget. People who bought over priced homes also caused the price inflation and kept reasonable people out of better homes. Now we will reward these at the expense of the ones who stayed within their budgets and means, and are still making payments and have been making payments.

Two, in the markets where the foreclosures are the highest, the jobs are also disappearing fast, there is no guarantee that the people who are refinanced will be able to keep up the new payments.

Three, if and when the prices may go up, these people will be rewarded with price appreciation, while the tax payers are shouldering the burden of bailing them out, they should not be allowed to gain ANY benefits from price appreciation, it should all be payed to the treasury.

It will be best to bring the jobs back permanently, that is in manufacturing, free trade and globalization have failed, and damage the country immensely, The foolishness must be stopped.

The banks should adjust the deliquient mortgagors payments to the current market rent. The rents should then be adjusted every couple years to the greater of the cuurent or new market rent. All increases in rent(mortgage payments) would be applied to mortgage principal. The end result would be less abandon houses for the bank, some incometo the bank less costs to dispose of the homes and an overall better balance sheet.

The foreclosures crisis absolutley needs to be addressed, but those who over bought need to be weeded out. In order to receive the help you should have to complete a mandatory Household Budget 101 Course (also make this course mandatory for all high school students). The data from the subprime loans should be compiled and those who are responsible should have their assets frozen and then seized on their way to the slammer. If the money is in a Swiss Bank Account put their pampered butts in a chain gang until they remember where it is and return it. Apply this money to the deficit and/or use is to create real productive jobs that pay a decent wage. Repair our infrastructure, reward new energy efficient technologies. Resend unfair trade practices and the tax breaks offered to companies that outsource our jobs.

There also need to be rules and regulations implemented immediately to the Credit Card Industry. Many people have sold their souls and as long as they continue to raise rates/lower limits/charge outlandish fees we will continue to be a debtors nation. When they came before Congress they were given 4 minutes to tell who they were and then there was no time for questions – Give us a break, there wasn’t another time available?

Outlaw lobbyists. Cut out all pork. Set a reasonable amount for the Election Coffers and do not allow any other contributions or gifts.

When the bank bailout was up for grabs, people wrote their representatives in record numbers. For the first time our government officials were fearful for their jobs. I thought finally they get to see what we have been going through for the last 40 years. Instead they ignore us and go on with business as usual. Wake up this is how we got where we are. Trying the same thing and expecting a different result is insane. As it stands the only way out for many is death. You made tidy profits for years off of interest/fees and people foolishly borrowed and borrowed. They assumed if you would loan it to them then they must be able to repay it. They could barely make the payments and now you think that raising the rates to 30% will help you keep the same profit margin? Those who didn’t buy in to your schemes are holding their funds even tighter than before. Many have stopped buying and started paying down their debts (this brings joy to my heart). Many are crying bail me out too and I will spend, spend, spend. These people apparently haven’t learned a thing and are willing to make the same mistakes again as long as they don’t have to give up the me, me, me attitude.

This will be a long, painful journey. Living within your means sometimes stings your pride, but the peace of mind that comes with an emergency fund and the knowledge that you can still pay the mortgage (fixed at 4.5%) if one income is lost is becoming more and more priceless.

Good Luck My Fellow Americans and God Bless Us All!!

Sheila is on track. First and foremost the government needs to adjust prices. Hugh profits were and are made in the housing industry. Homes built for $75000 are sold for $300,000 and more. Add in a 30 year mortgage and interest and we close in on $700.000. The nation is better off collecting a partial of owed income with homes DRASTICALLY reduced than footing the bill at 100% while having the home sit and deteriorate. Also bungled bundled mortgages should be assigned with chosen location and actual seen and touch coop ownership that investors are paid by the month a service of electronic pay would be set up by banks as bailout payback. Free. Last a force of unemployed construction workers need to design and change the existing 3 and 4 thousand foot dwelling into two and three family living spaces with in reason. These dwellings will replace HUD and public housing. Budgets will be out of public housing. European type dwellings. Work can be done by live ins or not. Finally, and above all, We the People need to see the actual cost. $100,000 space tool bags bought at Sears for $35.99 is unacceptable. As gas adjust and cities go broke the bottom line is how much was really spent. Court orders may be necessary but the ludicrous profits in the housing market of the last 16 years needs to be witnessed to encourage investors to invest and that even at drastically reduced prices their investment will pay dividends.