Bush unveils sub-prime assistance

[Siege]

President George W Bush has outlined a plan to freeze mortgage rates for five years to help homeowners hit by the crisis in the US housing market.

The move is aimed at shielding homeowners from the impact of rising mortgage payments which it is feared could lead to a fresh wave of defaults. Mr Bush said the measures could help more than a million individuals.

He described the housing downturn as a "serious challenge" but insisted that the economy remained "resilient".

Hundreds of thousands of sub-prime mortgage holders could default and lose homes as credit tightens in the US.

An estimated 1.8 million US homeowners who took out loans with discount "teaser" rates face pricey loan resets next year alone, the Federal Reserve has said.

Bail out?

Officials fear half a million borrowers risk losing their homes.

Many homeowners that signed up to cheap deals are now seeing rates rise.

Many believe these mortgage rates should be temporarily frozen, to make it easier for those caught out by the credit crunch to meet their mortgage payments and keep their homes.

But others say such measures would bail out homeowners who made imprudent decisions and delay the necessary correction that home prices must undergo in order to resolve the fundamental problem.

I heard the term "credit crunched Christmas" being thrown around. Seems aptly fitting... In a related article, Goldman-Sachs estimates that "financial companies' losses due to the US sub-prime crisis could be as much as $400bn".

It never fails to amaze me how so much money can just... evaporate.

[aerius]

It never fails to amaze me how so much money can just... evaporate.

Most of that money was pulled out of thin air in the first place, so it's not surprising at all that it should vanish into thin air when the crunch comes.

[Stravo]

You know this may sound rather Republican of me and believe me in no way shape or form am I letting the banks and lending institutions off the hook for this mess because they should have fucking known better than lend to these people but at what point do you look at the homeowner and say YOU should have known better? For example I know I can't afford these multi million dollar condos in Manhattan so I don't even try to get them and its not like these "teaser" rates are completely hidden. I'm sure if you read the paper work and the fine print it all comes out. So if you know damn well you can't afford these McMansions why should I feel that sorry for you when you go tits up?

I understand these banks and credit people actively recruit people but at what point do you stop and think to yourself, there's no way I can do this financially? When do we just say enough with bailouts and assistance for a crisis that could not exist if not for people willing to be irresponsible with their money and their families' futures?

Should there be some assistance? Sure. But this is not a story or crisis about banks and creditors being evil this is a conspiracy between lenders and homeowners both being irresponsible.

[Xisiqomelir]

Glad to be bailing out stupid home buyers now. Anyone else need some help? Maybe people who paid down payments on luxury cars using credit card introductory rates? I'll just leave the moneyhats out front. Maybe they can start just directly sending me the bills for others' HDTV financing plans?

I can't be too cynical though; even with all the problems people in this country are facing, the homeowners that agreed to terms they couldn't possibly meet just to hop into an inflated real estate market headfirst are the most deserving of sympathy. Can't wait to see them protest property tax hikes intended to fund education and social services.

[Adrian Laguna]

Here's an idea, how about we just forbid variable interest rates? People are obviously too dammed stupid to handle them.

[Alferd Packer]

Gee, if I would've known that was going to happen, I would've moved into a house on a subprime mortgage, saved my money and payed a good chunk of it down while the rate was frozen, then refinanced at the end of the five years and gotten a traditional mortgage. As it is, my wife and I might have enough scratch to put a down payment on a house in five years. Meanwhile, fiscally irresponsible douchenozzles get all the benefits of homeownership and don't have to pay the piper. Awesome.

[Gustav32Vasa]

Will not this only make it worse for the future?

[aerius]

Will not this only make it worse for the future?

Of course, but in 5 years it's likely going to be the Democrat's problem, the crashing economy and so forth was all the fault of the Democrats and the Republicans score another election.

[The Grim Squeaker]

Will not this only make it worse for the future?

Of course, but in 5 years it's likely going to be the Democrat's problem, the crashing economy and so forth was all the fault of the Democrats and the Republicans score another election.

Who was it a while ago that said something about not being able to roll this crash/bubble into the next one? . (No, I don't think it was you A)

[aerius]

Who was it a while ago that said something about not being able to roll this crash/bubble into the next one?

That was either Snuggles or Valdy.

[His Divine Shadow]

I want a home and car too. Can Bush give me a handout? It's the new republican way after all.

[Darth Wong]

You know this may sound rather Republican of me and believe me in no way shape or form am I letting the banks and lending institutions off the hook for this mess because they should have fucking known better than lend to these people but at what point do you look at the homeowner and say YOU should have known better?

It's not "Republican" of you to say that: it's logic. The Republicans are not doing this to help the poor. They're doing this to help the investors and Wall Street.

[DarkSilver]

You know the sad thing....

I know in five years, the bubble is not pop
it'll explode and ALOT of people will fall through.....

But seeing as I already own my home, and I won't be excessively affected (I haven't thrown myself into debt so glaring I have to rob Peter to pay Paul, as the saying goes) - I'm thinking of setting off money to the side..and in five years, seeing what I can get with off the (even more) massive foreclosure market I'm expecting to see out of this in my area.

One or two rather nice houses obtained at their lowest values, then set out for rental should be good in the short-mid term as long as I keep the places up.

[Darth Wong]

My son could really use a super-powered top of the line computer for Christmas. The problem is that he can't afford it. But I have a great idea: I can loan him the money to buy that computer.

Of course, he has no credit rating and no job. But that's OK, because it's a "sub-prime" loan. In order to reduce my risk due to this bad-credit loan, I will package the debt as an "investment vehicle" and sell it to my wife Rebecca.

Of course, it will eventually go to hell when it turns out that Matthew can't make payments on his loan. But I don't want to take his new computer away from him, because that would be cruel. And I don't want to see Rebecca lose all her money, because she's an investor now, and it's important to protect investors. So I'll bail them both out.

And how will I bail them both out? No problem, I'll find someone who was responsible and saved his money. And then I'll rob him.

[Flagg]

The sad part is that it's not just effecting irresponsible homeowners and idiot investors. Alot of rentors are getting their rent jacked up because their landlords mortgage rates went through the roof.

[Defiant]

My son could really use a super-powered top of the line computer for Christmas. The problem is that he can't afford it. But I have a great idea: I can loan him the money to buy that computer.

Of course, he has no credit rating and no job. But that's OK, because it's a "sub-prime" loan. In order to reduce my risk due to this bad-credit loan, I will package the debt as an "investment vehicle" and sell it to my wife Rebecca.

Of course, it will eventually go to hell when it turns out that Matthew can't make payments on his loan. But I don't want to take his new computer away from him, because that would be cruel. And I don't want to see Rebecca lose all her money, because she's an investor now, and it's important to protect investors. So I'll bail them both out.

And how will I bail them both out? No problem, I'll find someone who was responsible and saved his money. And then I'll rob him.

Not to seem like an ass-kisser, but this could be the single best thing that I have ever read on the Internet. Ever.

Anyway, I'm curious as to who is more to blame. Is it irresponsible homeowners who got themselves in way over their heads? Or is it more attributed to the lending practices of some of these mortgage companies? Personally it seems like everyone got on the Stupid Train, and now no one wants to pay.

[SirNitram]

And the worst part? The most ridiculous, stupid, offensive part of the entire thing?

It doesn't work.

Why the hell should it? This Administration seems bound and determined to fail at every single task. This one is no different.

It's full of legal-speak, but I think I've diffused it into English:

You can be helped if you:
* have an income and live in their homes
* are currently making their payments on time
* would default if their interest went up

And, the loan:
# ARM mortgage has to have been taken between 1/05 and 7/7
# Has a rate reset between 1/8-1/10

You get bounced if you:

* have missed payment
* can afford mortgage rate increase
* don't have an income
* own homes which are worth less than their mortgage

I'm having trouble working out if this actually helps anyone in the entire collapsing Big Shitpile(To quote a blogger who I find amusing). Maybe the financial companies who'd like to salvage what they can out of their adjustables.

[SirNitram]

Anyway, I'm curious as to who is more to blame. Is it irresponsible homeowners who got themselves in way over their heads? Or is it more attributed to the lending practices of some of these mortgage companies? Personally it seems like everyone got on the Stupid Train, and now no one wants to pay.

It's the fault of people who don't read their goddamn contracts. It's the fault of people who believed that the price of Real Estate could only go up, and therefore they could bail with a profit. It's the fault of lenders who thought this was the coolest thing ever and they'd make money. It's the fault of the lenders who figured they could give out these loans, bundle them with real, useful loans, and then sell them and make a profit while someone else holds the bill. It's the fault of the government for not having some basic fucking regulation. It's the fault of the Fed for keeping the interest rate depressed so long this looked smart.

Having trouble finding a layer of this whose not at fault, actually.

[Phantasee]

I feel a little dirty right now.

I bought a couple recently converted condos over the summer, flipped them to people and made off like a pirate. The people I flipped them to? Well, the market was going down a little, and they were advised to hold on to them until April-ish, since they could afford the payments.

Now, the local market is likely to bounce back up in Spring, once a lot of the shit on the market gets pulled (speculators mostly). BUT! The one investor with a variable rate mortgage? Fucked, because the banks are starting to jack up rates on some of their loans now in Canada (or they will be soon enough). Other guy did alright, fixed rate mortgage.

So I profited (hugely) off a stupid person who now has a good chance of having his investment property foreclosed on his ass.

[Alan Bolte]

My son could really use a super-powered top of the line computer for Christmas. The problem is that he can't afford it. But I have a great idea: I can loan him the money to buy that computer.

Of course, he has no credit rating and no job. But that's OK, because it's a "sub-prime" loan. In order to reduce my risk due to this bad-credit loan, I will package the debt as an "investment vehicle" and sell it to my wife Rebecca.

Of course, it will eventually go to hell when it turns out that Matthew can't make payments on his loan. But I don't want to take his new computer away from him, because that would be cruel. And I don't want to see Rebecca lose all her money, because she's an investor now, and it's important to protect investors. So I'll bail them both out.

And how will I bail them both out? No problem, I'll find someone who was responsible and saved his money. And then I'll rob him.

This is an interesting way of putting it, because it's much like how libertarians see all tax-paid social programs. In fact, I'm not sure I see the difference. However, the point of social programs is to build a better society, and (to those who care) to alleviate human suffering: the question is, what programs are worth the money? A hardcore libertarian might argue that trying to improve society is folly and so no program is worth robbing a man of his hard-earned money, but I'm sure most of us here disagree. Thus, the real issue here is not that anyone was "robbed," but that the money is being used to bail out businesses that should have known better and give property to the irresponsible. The latter isn't so different from government-provided disaster insurance. The former would be acceptable if I thought it would be good for the economy as a whole. I don't much like either, though.

[J]

And the worst part? The most ridiculous, stupid, offensive part of the entire thing?

It doesn't work.

Think of it as one of those White House press conferences they have every so often where they state they've "turned a corner" in the War on Terror. It's a pretty little speech to distract everyone from the fact that the whole thing is a hopeless debacle. It's an empty reassurance to try and keep the financial markets from panicking and erasing trillions of dollars of capital overnight.

[Gerald Tarrant]

And the worst part? The most ridiculous, stupid, offensive part of the entire thing?


You can be helped if you:
* have an income and live in their homes
* are currently making their payments on time
* would default if their interest went up

And, the loan:
# ARM mortgage has to have been taken between 1/05 and 7/7
# Has a rate reset between 1/8-1/10

You get bounced if you:

* have missed payment
* can afford mortgage rate increase
* don't have an income
* own homes which are worth less than their mortgage

I'm having trouble working out if this actually helps anyone in the entire collapsing Big Shitpile(To quote a blogger who I find amusing). Maybe the financial companies who'd like to salvage what they can out of their adjustables.

I think the target of this loan is the kind of people that would be fine if it weren't for the credit crunch. In a normal environment those eligible people would probably be able to refinance. The current tighter credit means that banks limit their loans to "safe" investments. So people that are on the margins of their definition of "safe investment" don't get loans. I think this plan is trying to limit the damage to those sub-prime or ARM debtors who are fulfilling their obligations, and would have kept their obligations if not for the credit contraction. I think they don't plan on extending bail-outs too far, because some Sub-Prime borrowers have un-salvageable financial issues, and the bailout won't save their mortgages.

[Darth Wong]

My son could really use a super-powered top of the line computer for Christmas. The problem is that he can't afford it. But I have a great idea: I can loan him the money to buy that computer.

Of course, he has no credit rating and no job. But that's OK, because it's a "sub-prime" loan. In order to reduce my risk due to this bad-credit loan, I will package the debt as an "investment vehicle" and sell it to my wife Rebecca.

Of course, it will eventually go to hell when it turns out that Matthew can't make payments on his loan. But I don't want to take his new computer away from him, because that would be cruel. And I don't want to see Rebecca lose all her money, because she's an investor now, and it's important to protect investors. So I'll bail them both out.

And how will I bail them both out? No problem, I'll find someone who was responsible and saved his money. And then I'll rob him.

This is an interesting way of putting it, because it's much like how libertarians see all tax-paid social programs. In fact, I'm not sure I see the difference.

The difference is that tax-paid social programs help the needy. These bailouts help people keep stuff that they bought while living beyond their means, such as buying a house when they could only realistically afford to rent an apartment. You honestly can't see the difference here?

However, the point of social programs is to build a better society, and (to those who care) to alleviate human suffering: the question is, what programs are worth the money? A hardcore libertarian might argue that trying to improve society is folly and so no program is worth robbing a man of his hard-earned money, but I'm sure most of us here disagree. Thus, the real issue here is not that anyone was "robbed," but that the money is being used to bail out businesses that should have known better and give property to the irresponsible. The latter isn't so different from government-provided disaster insurance. The former would be acceptable if I thought it would be good for the economy as a whole. I don't much like either, though.

Social programs reduce suffering among the needy. Bailouts like this reward greed. In my family analogy, social programs are analogous to the food and shelter, not the top-of-the-line computer.

[brianeyci]

I wonder why George the Dumber doesn't use his same logic of "welfare state" on this.

Healthcare for children makes a "welfare state" including "children" 25 years old, so of course bailing out home buyers makes a "welfare state."

But apparently catch phrases are only to be used when convenient.

After reading Mike's explanation, I have to retract my earlier comments in the forum (if anybody fucking cares) about it being "cruel" or "suffering" to lose a home. Hell, I am a pro-apartment guy.

[SirNitram]

Easy, Brian. This is about helping the companies.

A foreclosure is alot less juicy than a loan that keeps going. The 'freeze' this creates means that the present interest rate on qualifying loans levels out. This means that those people who could possibly keep paying interest still will, resulting in money to the banks. And the investors who bought the bundles those loans are in.

Of course, there's no reason for these bodies to care about the rest; no profit to be made extending their presense when they'll wind up foreclosing anyway.