The New Bailout

[TheMercenary]

Originally Posted by classicman

Aside/ How exactly is it that our elected representatives signed this bailout without even reading it? They are still now finding things that they had no idea were there. Gotta be done before Nancy goes on her trip...

What the fuck did they do? Oh thats right THEY DON'T KNOW EITHER Grrrrr /As you were.

Looks like that is going to be the modus operandi of the democratic congress.

[TGRR]

Originally Posted by TheMercenary

Looks like that is going to be the modus operandi of the democratic congress.

But it was okay for the republican congress to vote for the PATRIOT Act without reading it...because, apparently, the dems were mind controlling them.

[TheMercenary]

Originally Posted by classicman

What the fuck did they do? Oh thats right THEY DON'T KNOW EITHER Grrrrr /As you were.

Maybe that will be Dodd's newest excuse. :p

[sugarpop]

So what about the new housing proposal? Wall Street apparently approved, but damn, why does it seem like all the money is going to the people who need it the least?

And people keep calling these mortgages "toxic assets," and while the mortgages might be toxic, the actually properties aren't. The properties are worth something. So I really don't get it.

I think the government should have just divided the money up and given it in equal portions to every adult citizen who makes less than a million dollars a year. It might have been cheaper in the long run, and better for the economy.

[classicman]

Originally Posted by sugarpop

And people keep calling these mortgages "toxic assets," and while the mortgages might be toxic, the actually properties aren't. The properties are worth something. So I really don't get it.

Do the math - If the mortgage amount is more than the current home value, thats is a "toxic mortgage." To compound the problem there were ARM (Adjustable Rate Mortgages) bought by people to get into homes that, IMO, they couldn't really afford. Lets leave the "greedy lenders" out of this for a moment.
The homeowners took a gamble that they would be making more or they could refinance later or or or... before the rate on their ARM increased. Many knowingly did this. It has been done for many years, this is not something new. What changed is the home values.

To further compound the problem many homes did not increase in value, in fact, they decreased and on or around the same time the mortgage payment increased. Now you have a devalued home and an increased monthly payment.

An example of the impact:

A toxic mortgage is when there is a loan for $500,000 on a house that is currently worth only $250,000. This is generally held by an owner whose FICO score is poor (say 600 and below). Under the bailout, the government would negotiate with the current mortgage holder (BANK) and let's say buy this loan for $400,000. The bank is out $100,000 on paper but they now have $400,000 to play with.
The government then holds a $400,000 mortgage on a house worth $250,000 being paid for by an owner who still has a marginal ability to pay even the re-negotiated loan amount.

Assuming he can not or will not pay any more money, the government will either have to reduce the loan down to an amount the owner can pay or else foreclose on the house. If the government re-negotiates down to $250,000, they are (or more appropriately, WE are) out $150,000. If the government forecloses, they now own a house worth $250,000 with no one making monthly payments, plus they're out $150,000 from the initial $400,000 purchase. They must then find a buyer or else leave the home vacant until the property value increases enough for them to break even or make a profit.

Going back to the start, if the house were to increase in value to $1 million, the government would only be able to collect the loan amount of $400,000. They are not entitled to equity gains in the property (unless they owned and held it through foreclosure).

[sugarpop]

Originally Posted by classicman

Do the math - If the mortgage amount is more than the current home value, thats is a "toxic mortgage." To compound the problem there were ARM (Adjustable Rate Mortgages) bought by people to get into homes that, IMO, they couldn't really afford. Lets leave the "greedy lenders" out of this for a moment.
The homeowners took a gamble that they would be making more or they could refinance later or or or... before the rate on their ARM increased. Many knowingly did this. It has been done for many years, this is not something new. What changed is the home values.

To further compound the problem many homes did not increase in value, in fact, they decreased and on or around the same time the mortgage payment increased. Now you have a devalued home and an increased monthly payment.

An example of the impact:

I understand all of that. But really, shouldn't they have to eat that? After all, they all went along with the ride. They made the loans to those people. They knew (or should have known) what they were doing. When you take risks, the upside is profit, the downside is the opposite. Still, the houses are worth something, even if the mortgage was a bad one. They are probably worth now what they should've been worth to begin with.

[TheMercenary]

A good discussion of some projected problems which lay ahead.

http://www.taxpolicycenter.org/Uploa...mic_crisis.pdf

[classicman]

Do the math again.

[sugarpop]

Originally Posted by classicman

Do the math again.

You didn't read the rest of my reply, obviously.

[classicman]

Originally Posted by classicman

Do the math again.

Originally Posted by sugarpop

I don't want to do the math.

Originally Posted by classicman

Therein lies the problem.

Originally Posted by sugarpop

You didn't read the rest of my reply, obviously.

There was no reason to read anymore, even though I did. If you understand what the issue is then there is no issue. :shrug:

[sugarpop]

Originally Posted by classicman

There was no reason to read anymore, even though I did. If you understand what the issue is then there is no issue. :shrug:

Originally Posted by sugarpop

I understand all of that. But really, shouldn't they have to eat that? After all, they all went along with the ride. They made the loans to those people. They knew (or should have known) what they were doing. When you take risks, the upside is profit, the downside is the opposite. Still, the houses are worth something, even if the mortgage was a bad one. They are probably worth now what they should've been worth to begin with.

Originally Posted by sugarpop

I don't want to do the math. I understand the math. Do you understand my argument, or question rather?

Honestly, if banks had just renegotiated those mortgages to begin with, this may not have happened. Really.

And... whoever heard of an appraisal person asking the seller what price they would like their house appraised at? There was all kinds of trickses going on.

[sugarpop]

I don't want to do the math. I understand the math. Do you understand my argument, or question rather?

Honestly, if banks had just renegotiated those mortgages to begin with, this may not have happened. Really.

And... whoever heard of an appraisal person asking the seller what price they would like their house appraised at? There was all kinds of trickses going on.

[xoxoxoBruce]

Yeah, there was some (a lot of) underhanded shenanigans going on, especially in the subprime market.

But more than that, even intelligent people were making some poor choices when overwhelmed with all the legalese and "expert" opinions. Here's an article in NewScientist about how people tend to accept what "experts" say, even when it goes against their common sense.

[classicman]

Originally Posted by sugarpop

I don't want to do the math.

Therein lies the problem with your argument.

[classicman]

CURL: Stimulus oversight left up to taxpayers

So just who's tracking that $787 billion in taxpayer money that President Obama and the Democrat-led Congress are doling out? You are. Or you're supposed to be, anyway.

"We are, in essence, deputizing the entire American citizenry to help with the oversight of this program," said Rep. Brad Miller, chairman of the House Committee on Science and Technology's subcommittee on investigations and oversight.

So, too, said Earl Devaney, the ex-cop who's now chairman of the Recovery Act Accountability and Transparency Board, charged with tracking the torrent of cash now pouring out of federal coffers.
"I'm going to have millions of citizens to help me," he said, comparing run-of-the-mill Americans to inspectors general, the high-ranking officials charged with ferreting out waste and abuse in federal agencies.

And perhaps that's just as well, given the turnout of the panel tasked with keeping track of thousands of millions of dollars. Just three of the 10 members bothered to show up for the subcommittee's second meeting, dramatically titled "Follow the Money Part II."

Mr. Devaney, though, said his board - made up of 10 IGs - has a dual mission:
"First, the board is responsible for establishing and maintaining a Web site." Oh, and second, it's supposed to "help minimize fraud, waste or mismanagement."

Oh? Oh???? and second....

"President Obama promised a level of transparency, through the Internet, Recovery.gov. ... How do you intend to provide that level of transparency, to see how - who actually got the contract to pour asphalt?"

"As I mentioned in my testimony," Mr. Devaney said, "that Web site is evolving. ... I would probably be the first to admit today the Web site doesn't give you that kind of information."

"How do you plan to verify the actual number of jobs created?"

"Sir, we haven't really received any information about that on the Web site," Mr. Devaney said.