Mortgage Crisis

I had the opportunity to watch CSPAN and some government folks talking about the mortgage crisis.

I know folks who have lost their homes through forclosure and it is for a variety of reasons. Some lost jobs and/or marriages. Others took on more than they could handle, or got mortgages they did not understand. If these people did not lose the income, they may have been able to stay in their home. Even during the best of times, they may have lost their homes.

I also know people who bought the house of their dreams. Their house has lost value, and they bought more than they can afford by some measures. They stay in the house because it is a home. It is understood that the value of real estate, generally increases over time, and that no money is lost forever. Due to the devaluation of the house, one individual lost the money from the sale of a previous home that was used as a down payment on the new home. No plans to move in the future. They feel lucky to have the house of their dreams, even if it is a bit more than they can afford. They want to make this house payment work.

Why write down mortgages? What is to prevent these people looking for a write down to come back again and again every time they lose a little money?

I remember in the olden days, there were many "rule of thumb" observations. One was that one had to stay in a house for five years to pay off the fees related to buying the home - realtor fees, mortgage fees, transfer fees, etc. Another, was that one bought a starter home, maybe small, fixer upper, or condo. Then after some time and improvements, bought into a better, bigger, or for some reason, nicer home.

IIRC, the reason people put down 10 or 20 percent was to ensure that in the event of a housing market fluctuation, the bank would not lose money if the owner defaulted.

Why shouldn't people who took out those low or no money loans be expected to take on some risk? I did, and have been in my home for over ten years.

If you didn't plan to stay in the house and planned to make money through speculation (move from house to house and not really making a long term home) I'm thinking you added to the overall problem, and should accept some risk.

Why encourage people to become serial mortgage write down seekers? I can envision a future where people do this on a regular basis. Not all, but some. There will be those that seek out these opportunities, and others that help them. A scam for the next generation. imho

If government is going to write down mortgages for some, should they also bailout the rest of us who have lost money on our homes? Lost equity?

The lost dollars are the same for everyone.

If you want to help the person who claims they will walk away because of the lost value, help everyone who has lost value. Or, let everyone accept the risk that the housing market will at times go down. At some point, I have to believe the price of real estate will begin to rise again.

In my mind, lost real estate value is no reason to walk away from a home, if you are in about the same financial condition as when you bought the house. If the house wasn't a good deal when you bought it, why did you take out the loan?

A house is a home for many. For others, it was an investment based on speculation. Should taxpayers be bailing out every one who speculates? Another version of privatize profits, socialize losses?

Lost value is different from cases where people have been tricked by teaser rates, fraud, or mortgages they did not understand. How do you measure buyer understanding of mortgage terms? If someone wants to keep their home, but needs to refinance to reduce monthly payments (add a few years, adjust the interest), why not give them the opportunity to refinance for a fixed rate with the SAME principle. Wasn't the home a good value when you took out the original loan?

Some people buy cars $20,000, add on all kinds of insurance products $5,000, some other stuff $5,000, no down payment, and drive off with a car that depreciates to maybe $15,000 when the ink is dry. Somehow, they manage to pay it off in five years without looking for a handout, or help with the depreciation. The car, will probably not appreciate in value. It will at some point end up in the junk yard for recycling.

Real estate over time appreciates in value. If you've been tricked, that is one thing. If you're walking away because of a market adjustment, temporary loss of value, that is another.

just my humble opinions

What are other opinions?