Currently 70% of America is making there Mortgage payments on time...  It is the other 30% that is screwing it up and going into foreclosure...  I was simply suggesting that the banks should be made to refinance for a smaller value that is most likely what the house is actually worth (i.e.-purchaser buys house at 150k couldn't make payment so I'm suggesting banks are made to go back and finance them at 120k/whatever home value is currently and/or at a different/lower interest rate)...

That way banks are taking a 20% loss instead of a 50% or more type loss, which is what they'd incur if they take on foreclosure proceedings...  

After all a great deal of people are facing foreclosure because the banks gave them ARMs, shitty loan options, etc...  That is there fault, but it seems there irresponsibilty is effecting the majority at this point

I've heard more criticism of others ideas, which is fine, but it sure would be nice if others came up with some resolutions on the premise that just allowing banks/businesses to fail isn't an option...

And should they refinance when the home rises in value?

No they shouldn't be allowed to refinance... They should be able to only sell...  I suppose the money lost buy banks should also be repaid when they are selling property...  That will mean home owner either takes a loss or that they don't get as much if any profit from the sale of there house...  Example- if house was bought at 150k refinanced at 120k and later sold at 200k they should only be able to keep 50k...

Does that sound reasonable?

The industry has policy in place to prevent bankruptcy, greed and lack of ethical supervision had screwed it up.

The industry is supposed to be run on this principle. AHI minus Income Tax, divided by 3 equals Mortgage + Taxes + Home Own Ins.

It looks like this.

100,000 - 28,000(income tax @ 28% bracket) = 72,000  divided by 3 = 24,000

24,000 divided by 12(mo/yr) = 2,000

2,000 = house payment including taxes and home owners insurance.

If that process is not held true, you have people in homes that they can NOT afford!  Now apply that to the AHI per family nation wide of 43,000.  The monthly house payment(including taxes and insurance) average should be approx. 830/mo.

Compare that to the average home cost nation wide of 169,000 with an average payment including taxes and insurance of 1,465 is it really that hard to see where the problem is?

Propertay taxes MUST come down, property values MUST be corected, interest rates MUST be stable AND people have to be sold houses that fall within thier income ranges and not pushed beyond for larger commisions by borkers and realitors and bigger profits by the banks.

People need to live within their means and take a step back and look at what is neccesary when it comes to the design and size of the home being purchased!

Apply that principle to everything in life.  Do you need to buy a car that you can NOT pay off before it is in the junk yard?  Roll a higher loan...

Does everyone in the family need their own TV, Ipod, Computer, CP.

Correction...average household income in the USA is 43,000.

-- Modified on 9/30/2008 1:37:01 PM

Your statement is ideal, but rarely found in todays world.  I place your scenario here "Example- if house was bought at 150k refinanced at 120k and later sold at 200k they should only be able to keep 50k..."

The reality using your numbers...house was bought at 150K refinanced at 170K and now worth 120K leaving the home owners or the bank sitting on a 50K loss.(this 50K correction will take 8-10 years to break even)

70% of americans are in this position.  30% have equity or are at even with the housing values dropping!

-- Modified on 9/30/2008 1:12:43 PM

Your logic is flawed only in that it assumes that people earning 33k should be able to afford homes.  Personally, I couldn't exist on that number, which I realize varies by location, but that's a low number.  Now, if they're looking to buy their very own shack, more power to them.

Lending definitely eased, and we're seeing the fallout now.  The trick is to re-assess whether we believe that home ownership is a god-given right.  If so, plan to pay more in taxes.

Not really.  For starters, who is going to keep track of all that?

It would seem to me that if someone was in a house that they couldn't afford, the bank would do well to restructure the deal to something that would keep the loan from going bad.  If that means that they take a little hit, rather than a big one, so be it.  In many instances, they could rewrite the paper, re-amortizing it over 30 yrs and the payments would drop and all would be well.  They may find themselves financing 130% of value, but the alternative isn't great either.

Banks don't seem to do well when they get creative.

43,000 is the national average household income!  You would be saying that the average person in america should not be allowed to own a home, only those above average should!

Correction..43,000 is the average household income

-- Modified on 9/30/2008 1:36:02 PM

a price has to be paid. A crime has been committed and the economy is the victim. Charges need to be filed. Suspects need to be arrested. Who will do this? Who will be the sheriff? High noon is now!

and stop merely reading it...  There are men/woman that use there thermometers to read the temperature of the environment, but do nothing about the temperature... Then there are men that try to change the temperature of the environment...

Which one are you?  I hear a lot of reading temperatures and not real tangible plans for change/economic rebound...

I got that comment about 70% homeowners making there payment and 30% not making there payment from CNBC...  Other potentially beneficial options are to remove Capital Gains taxes for 6-12months and FDIC increase up to 1million...

The house value might have gone down to 120k, but homeowners are still making payments on the 150 or 170k price, which they can't/never could sustain...

All I'm saying is make the banks take a hit by refinancing at the 120k at a better interest rate...

Not sure why this isn't being understood or what the problem is with that idea...

Not even deliquency rates are that high. Not nationaly nor even in Michgan, Sacramento, LV, etc.

I don't have current numbers but national annualized forclosure rates have to be in the very low single digits.

First thing that has to happen is to find WHERE all the money has gone. [I did tell you that in a post further down(INS Co, Finanace Co, Oil Co, Tech Co)]  That money has to be redistributed back to the American people.

The housing industry alone...
1) Re assess properties and lower property taxes accordingly(this does mean less money for government and will mean cuts at the government level)(pay for this change by eliminating past government employee benefits shorter than 25 years of service, including non war time military and all government employees and politicians)
2) Lower property values mean lower ins costs(less exclusions "such as flood, fire, mudslide tornado, earthquake" on policies with the same premiums, insurance companies have been gouging consumers for years thus the 5 Trillion in Cash assets) This lessens the need for government assistance and puts the burden on Ins companies to use their stock piles of cash assets instead of looking at big brother to do THIER job of insuring policy holders!
3) Encourage lower interest rates and shorter length of terms for home loans 10-15 years MAX, NOT longer terms!  Institue the need for 10% down on homes again and NEVER allow 100% loan to value mortgages! (people wanting homes should have to save 10% down it encourages them to save and they have a permanent invstment to be lost, accountability)

This will only help the housing issue, not entirely the banking issue.  that is entirely a different animal that is more like any other business structure.  

BAD management and busniess practice and stratgies.  Do you care if your bank has marble floors and million dollar glass entryways?  I just want my money to be safe, a glass house does not do that for me, but is incredibly expensive!  They do not need teakwood desks and 700 dollar chairs to sit in.  Board members need to control their spending and accountability needs to be handed down by the FDIC.  We bail out these banks, all the laps of luxury should be removed and conttracted to never be replaced!  Golfing memberships EVERYTHING goes!  The managers and board members are fired and no walking money is attached.

That better?

Guess I missed whatever the percentages were... Was kind of glancing back and forth, oops...

Banks here in 'small town midwest' aren't statues of glass marble and granite. Come to think of it, our foreclosure rate here is low and our real estate values aren't depressed (yet).

-- Modified on 9/30/2008 4:06:42 PM

I'm not saying that they shouldn't, but I don't think that we should give them ours because they don't make enough.  I seem to recall busting my ass to pay my way through college, and moving to where the good paying jobs were.

I don't see that "the American dream" means that we fork over the stuff we've worked hard for to somebody else, so that they can live well.  I owned a 2,000 sq ft home in SoCal, making $36k/yr.  I didn't have a pot to piss in after paying the mortgage, so it's possible to do.  You just can't have the house, a giant SUV, plasma screen and the rest.

In general, it's a good thing that those rules exist.  At times like this, it might be worth looking at alternatives to spending $700b on bailouts.

" I didn't have a pot to piss in after paying the mortgage, so it's possible to do.  You just can't have the house, a giant SUV, plasma screen and the rest"

That is precisely my point!  We have too high of expectations for ourselves and our kids.  Teaching them that we NEED to have all those things even if only on paper(credit) is WRONG!  That is the part that is society fault as a whole. (well not all of us, I have a two bedroom house and more than two kids to a room with me ond mom having slept in the living room for 15 years!)

Insurance gouging, banks greed, oil,greed, and tech toys have bankrupts this nation as a whole.  We have a ton of rethinking and reorganaising to do!  Top to bottom.

Okay heard it right this time on Lou Dobbs... 70-75% of subprime mortgages are performing 30-25% are not performing well... Thats what I heard the first time...

-- Modified on 9/30/2008 4:29:39 PM

One must also distinguish the difference between a foreclosure, or at risk foreclosure and not performing well.
The foreclosure percentage is much smaller, although I cannot give an accurate percentage off the top of my head.
A loan not "performing well" can be as little as 15 days past due, or even on again off again late.

"We have too high of expectations for ourselves and our kids.  Teaching them that we NEED to have all those things even if only on paper(credit) is WRONG! "

Yet our children, who are too unsophisticated to reject the messages, are subjected to a literal barrage of extremely sophisticated advertising which tells them over and over that they do need those things. Advertising tells them that they need those things to be happy, to have friends, to be attractive to the opposite (or same) sex, to have long lasting love, etc. etc.

It's crazy to allow our children to be subjected to this mythology and not expect them to swallow it.

I also want to address your insistence that people should only buy what they can pay cash for. The judicious use of credit can smooth our one's earning over their lifetime. It's vital that people understand that they are spending their future income when they use credit, though. They are also giving up control of their financial decisions. Use more credit, have less control. Those are lessons I tried very hard to get through to my students but I fear I was no match for the corporate juggernaut.

I remember a professor (think it was Finance) talking about using a credit card.  His advice was to never pay for a dinner date on the card.  The logic (and yes, he said it) was that if you didn't get laid, you'd be really mad when you got the bill and were reminded that you spent all that money and didn't get any.

It was actually a good lesson, in that, it's a reminder that credit used wisely is a good thing, but that it's easy to spend money that we don't have.