Home foreclosers?

[Tom Earp]

The FED is dropping interests and it is devaluing the dollar.

It helped in the bail our of Bear-Sterns at what cost to us the tax payers?

Now, the Congress wants to give out Billions of Dollars to help Main Street, us as citizens.

Wouldn't the smart thing for the lenders to do to drop the high ARMs to a reasonable interest rate, keep people in thier homes and getting payments made? Would they not make money?

I guess I am just to damn dumb to understand.

[SWTXBelle]

http://www.npr.org/templates/story/s...oryId=89344381
http://www.npr.org/templates/story/story.php?storyId=89338743

[DeltAlum]

A story on yesterday's local and national news reported 7,000 forclosures last year, and 11,000 to 12,000 expected this year here.

[UGAalum94]

Originally Posted by DeltAlum

A story on yesterday's local and national news reported 7,000 forclosures last year, and 11,000 to 12,000 expected this year here.

Out of how many homeowners?

[Thetagirl218]

Originally Posted by UGAalum94

Out of how many homeowners?

I am not sure where the poster got the stats from but I know in Florida the amount of foreclosure cases is reaching an all time high!

[UGAalum94]

Originally Posted by Thetagirl218

I am not sure where the poster got the stats from but I know in Florida the amount of foreclosure cases is reaching an all time high!

No doubt, and I think it is true all over. And the problem is certainly real and of a scale that we many never have confronted.

But, I think it's probably worth mentioning that it's still a pretty small percentage of homeowners overall and that homeownership (or whatever the appropriate term really is for a 100% financed house), I suspect but don't know for sure, it probably still at a pretty high level, maybe even historically high if we go back to immediately before the current "crisis."

I don't doubt that we're heading into a recession and it scares me, but the mortgage crisis, on some level, may reflect a somewhat natural economic correction to some bad business practices in the form of making it too easy for people to buy and walk away from houses they couldn't really afford. And that people signed extensive legal paperwork accepting the terms of their loans, so it's hard to see them as being victims of anything more than their own bad judgment. (Although I certainly make enough mistakes that I'm still sympathetic to that)

The instances of people claiming to have been mislead about the terms of the loan seem pretty rare in contrast with people who took a calculated risk about ARM who assumed that they'd be able to refinance or sell before the ARM went up or who continued to refinance as the house appreciated until they had payments bigger than what they could afford.

I'm sorry if this sounds really harsh and uncaring. I do feel bad about people losing their houses. And I'm certainly concerned about the number of houses that end up in foreclosure and unsold, thereby affecting the housing values and quality of life of all the neighbors. And I'm kind of mad at the banks/mortgage companies who had to see this coming and chose to make an easy buck instead of thinking of the effect on other people when the deal went bad, as they had to realize that it would.

But I don't really think that big government bailout is the way to go here, and I sort of think we're going to be sold one.

[UGAalum94]

Not that anyone really cares but here's some census data:

http://www.census.gov/hhes/www/housi...ric/owner.html

It only takes us through 2000, but I suspect that rates went up even more between 2000 and 2006.

[AGDee]

From this article on Reuters: http://www.reuters.com/article/hotSt...49823320080129

In 2007, there were more than 1% nationwide, a 75% increase over 2006.

Nevada's foreclosure rate led the nation, with 3.4 percent -- more than three times the national average -- of households entering the process, RealtyTrac said. It had the highest foreclosure rate during every month in 2007.

Florida and Michigan had the second- and third-highest foreclosure rates, at 2 percent and 1.9 percent, respectively

Those are just a few highlights, but it's a good overall article with a lot of statistics and it discusses many of the factors that have led to the crisis. Personally, I never knew anybody who foreclosed on their house until the past year. I can name 6 off the top of my head now... and those are all people I interact with on a regular basis. In Michigan, much of it is due to the high unemployment rate. People who used to make 6 figures are suddenly without income and they can't sell their houses because the housing market is so poor. Two people that I know had extenuating personal circumstances. One co-worker had breast cancer and was on medical leave for months at 60% of her pay. She couldn't pay the mortgage on that and had to walk away from her house.

Another also had breast cancer and had to go on a totally unpaid leave for 4 months. Since she was off for more than the 12 weeks allowed by FMLA, when she went back to work, they made her part time and have given her no more than 28 hours of work a week. This was after 29 years of employment with her employer. To try to keep up with the bills they accumulated while she was on medical leave, they refinanced their house. The house was appraised at $185K, which was WAY higher than they could have sold it for. The refi was for $180K. Her husband was disabled and passed away this past November. She's getting nothing from his pensions or social security until the year that he would have received retirement benefits (he was 57 when he died). She can't afford the mortgage payment on her current pay/hours and the job market is truly awful. She's going to lose the house, but is hanging on there as long as she can. She has one kid in college and is raising her two grandkids. It's a really sad situation and a strong testimony as to why you should have life insurance outside of your employer. Her husband had been insured under his employer until he went on disability. Then, he couldn't qualify for life insurance because he was disabled. I desperately wish I could help her somehow... I just have to keep trying to win that lotto I guess!

While I agree that people should be very careful about paying attention to their loan terms, the mortgage companies did make it too easy to borrow too much. If someone appraises your house at $185K, you believe it's really worth that. It never was worth that much and they never should have loaned them that much money.

Another big problem that I see all over is that people took out home equity loans to pay off higher interest credit cards and so they have no equity in their homes. This was attractive because mortgage rates were low and credit card interest is no longer tax deductible. It was a huge financial advantage to go that route at the time but given the decreasing property values, it puts people further in the hole than they were.

[UGAalum94]

AGDee, the people that you describe that you know are absolutely the most sympathetic to me, but they also seem to be people who would have been at risk of foreclosure no matter what the terms of the loan were.

It's a tragedy, but I'm not sure there's much the mortgage industry or anyone else can do to keep people in the homes that they've lost the ability to pay for.

Maybe an expansion of Private Mortgage Insurance to protect the buyer too would help, but I don't know how it would work and stay solvent.

If, in some cases, the lose of the job was linked to choice or behavior by the buyer, (of course, I don't mean your friends here, AGDee, but I've known/been related to a lot of people who have made interesting employment decisions that lead to dire financial situations for their families which were not in any way driven by external forces), how are you essentially going to let people choose to turn the cost of their homes over to the insurer and still think that the insurer will stay in the black? I honestly don't know how you'd do it.

I think the mortgage companies that overvalued houses will pay for it if we avoid a big bailout; having the ownership of a bunch of properties that they can't sell will drive companies who did this out of business.

Unfortunately, it might ruin some neighborhoods in the process. But if we do bail them out and put in protective legislation to prevent them from doing it instead, we're almost going to have to put homeownership out of the reach of a lot of risky borrowers. Maybe that's the way it ought to be, but I suspect it's going to trouble many, particularly housing advocates.

[DeltAlum]

Originally Posted by UGAalum94

Out of how many homeowners?

Beats me -- just passing on the number given by both national and local TV.

No matter what the percentage is, though, it's pretty tough on those thousands of people/families.

[Tom Earp]

The foreclousers not only seem to be affecting signle family homes but apartment complexes and duplexes too. So where do these homeless people go?

[DeltAlum]

One good thing is that daughter number one and husband were able to take advantage of interest rates and refinance their condo from a variable rate to a thirty year fixed and save some bucks.

[UGAalum94]

Originally Posted by DeltAlum

Beats me -- just passing on the number given by both national and local TV.

No matter what the percentage is, though, it's pretty tough on those thousands of people/families.

No doubt, but I think the coverage on this issue may be A) escalating problems with consumer confidence beyond what actually might be merited and further weakening the housing market and B) making people think we need large scale taxpayer supported responses that I'm reluctant to think we need.

[AGDee]

Most of the unemployment in Michigan is auto workers whose factories have closed. My ex has a friend who has had to let his house go to foreclosure too because Ford moved him to Kansas City when his plant closed. Since the housing market is so bad, he can't sell his house here but had to buy a new house in KC for his wife and 4 kids. So yeah, he's got a foreclosure on his record, but he couldn't afford to pay two mortgages at once either.

Michigan has been in it's recession for a while now so some of the things that I'm seeing are different than what others see. There are people who just bought more house than they could afford on an interest only type loan deal and now that they have to pay interest too, they can't afford it. That is poor financial planning and lack of foresight. But then, there were some very persuasive mortgage brokers selling them these deals, assuaging their fears/anxieties. I have an ARM but it's a reasonable one. I had a 4% interest rate at the start, it can't go up more than 2% a year, has a max limit of 12% interest (which is high, but I would be able to still pay it if it happened) and it has actually gone down two of the five years. I expect it will go down again this year, but I am hoping to refinance for a 15 year fixed and, with making an extra payment each year, plan to pay it off by the time I'm 55, in preparation for my own retirement or in case of disability. Some of them are not reasonable.

The fallout will affect more than just the mortgage companies that gave them these loans though. The dust will settle eventually though and hopefully people have learned valuable lessons.
1) Don't finance the full cost of your home, if you can't put at least 10% down, don't buy it yet. Put 20% down ideally. If you can't afford to save up that much, you probably can't afford to buy a home yet.
2) If you get an adjustable rate mortgage, be aware of it's terms and make sure you can afford the "worst case scenario"
3) Save! Everybody should have an emergency fund
4) Avoid debt
5) NEVER finance for more than the cost of your home.

Home values were going up so fast that people began to assume that trend would continue and that was a dangerous assumption. People have to start learning to plan for the worst case scenario instead of the best. We, as a country, got lax with our financial situations and we're going to pay for it now. I do know that when I bought my house, the mortgage agent prequalified me for $185K. I would not have been able to EAT if I had mortgaged that much and I realized it so I only mortgaged $129K.

[UGAalum94]

Originally Posted by AGDee

The fallout will affect more than just the mortgage companies that gave them these loans though. The dust will settle eventually though and hopefully people have learned valuable lessons.

1) Don't finance the full cost of your home, if you can't put at least 10% down, don't buy it yet. Put 20% down ideally. If you can't afford to save up that much, you probably can't afford to buy a home yet.
2) If you get an adjustable rate mortgage, be aware of it's terms and make sure you can afford the "worst case scenario"
3) Save! Everybody should have an emergency fund
4) Avoid debt
5) NEVER finance for more than the cost of your home.

Home values were going up so fast that people began to assume that trend would continue and that was a dangerous assumption. People have to start learning to plan for the worst case scenario instead of the best. We, as a country, got lax with our financial situations and we're going to pay for it now. I do know that when I bought my house, the mortgage agent prequalified me for $185K. I would not have been able to EAT if I had mortgaged that much and I realized it so I only mortgaged $129K.

I agree. But part of what I fear is that if we respond politically at too great a level, the lesson other people learn instead is that the government will always help and bail you out when you screw up or that government regulations are what we need to protect us from ourselves.

I'd get over it if I were just worried about the lesson learned, even if I thought it was the wrong one; the problem is that reality won't be able to deliver on what people will come to expect.