More Idiocy From the Government - "Lend to Minorities With Bad Credit"

• Con_Alma

  gut;828683 wrote:The real value in owning a home is it's the largest source of savings most people will have, that's why it has favored tax status....

  That's sad. Very sad. It's not a source of savings nor should it be. Although it may be an appreciating asset to think that your form of shelter is a savings vehicle is disaster in the making. It's an expense. If you want"savings" then open a passbook account at your bank because a house isn't a savings account.
• Con_Alma

  majorspark;828702 wrote:I understand this. Real estate is most times a wise investment. ...

  Real estate can be a good investment. One's home should not be thrown into the fray as an investment, however. Your home is a basic necessity in life and is an expense. People get into trouble when they mix investing and basic needs.
• believer

  

  majorspark;828702 wrote:You can't renege on your contributions to a savings account. The bank can seize your property and bring the individual to financial ruin if they default on the contract.

  All true but I will also say that I have yet to see anyone who has been through foreclosure and/or bankruptcy actually end up in total "financial ruin." Most were able to secure financing on car loans, obtain credit cards, or even secure a new mortgage (albeit at significantly higher interest rates) within short order.
  
  I'm not defending it at all. I'm simply pointing out that there is life after financial failure.
  

  majorspark;828702 wrote:Too bad the financially unstable drowned waiting for the waters to recede. The government may subsidize your stupidity but no government life raft for you. That is reserved for those deemed to big to fail.

  I lol'd. It is amazing that the Feds will eagerly use taxpayer dollars to bail out the UAW and Government Motors in a heartbeat, but the individual taxpayer is easily tossed to the sharks if their financial ship hits an iceberg.
  
  I'm not suggesting Biig Government should bailout the "little guy" but they shouldn't be so eager to "fix" the financial boondoggles of mismanaged corporations either.
• gut

  Con_Alma;828722 wrote:That's sad. Very sad. It's not a source of savings nor should it be. Although it may be an appreciating asset to think that your form of shelter is a savings vehicle is disaster in the making. It's an expense. If you want"savings" then open a passbook account at your bank because a house isn't a savings account.

  
  If you take the equivalent rent and put that toward a mortgage on a house, part of your money goes to equity (as opposed to flushed down the toilet on rent) which is indeed a savings. How does that not make good financial sense? People ignoring the equivalent rent theory and buying too much house is a different story.
  
  To the point majorspark made above, yeah people shouldn't be incentivized to commit to a 30-yr contract on something they can't afford. But that is, IMO, separate from the govt providing affordable loans - cheap interest rates doesn't mean you should take on more than you can afford or "expect to grow into". And that's where the buyer is to blame, sure there was some predatory lending out there but stupidity of the buyer is really no excuse. I've said it many times, no student should be given a college degree without having taken at least a few course teaching basic financial management skills such as investing, buying a house, and paying taxes, but apparently many liberal arts colleges think it's more important for students to study 15th century music or the geography of soils.
• gut

  believer;828728 wrote: I'm not suggesting Biig Government should bailout the "little guy" but they shouldn't be so eager to "fix" the financial boondoggles of mismanaged corporations either.

  
  Even when the govt played a large roll in that financial boondoogle and the risk of doing nothing threatens serious damage to the US economy? People have already forgotten how fragile the economy was and how things ground to an almost complete stop with liquidity/lending completely dried up. If you were a small/medium sized business needing a loan to fund growth (and hiring), you were SOL.
• believer

  

  gut;828777 wrote:Even when the govt played a large roll in that financial boondoogle and the risk of doing nothing threatens serious damage to the US economy? People have already forgotten how fragile the economy was and how things ground to an almost complete stop with liquidity/lending completely dried up. If you were a small/medium sized business needing a loan to fund growth (and hiring), you were SOL.

  Whenever government gets involved in anything there are bound to be some mismanagement, corruption, cost overruns, and political shenanigans. So its initial involvement may have contributed to creation of the boondoggle, but asking the government to step in to "fix" the boondoggle it helped to create is sort of like asking the inmates to run the asylum. Just sayin'.........
  
  I was also referring to the large multinational corporations that the Feds deem "too large to fail" as pointed out by majorspark. I said nothing of small to medium size companies.
  
  It just worries the hell out of me that people automatically assume gubmint is the answer to fixing all our ills.
  
  "Governments tend not to solve problems, only to rearrange them." - Ronald Reagan
• Devils Advocate

  

  believer;828805 wrote: "Governments tend not to solve problems, only to rearrange them." - Ronald Reagan

  
• believer

  

  Devils Advocate;828947 wrote:

  Clever. How long did it take to have someone help you run a search for "funny Reagan images"?
• Manhattan Buckeye

  Shiller is projecting a possible 20% drop in residential housing, if that happens God help us all, we are absolutely boned.
• believer

  

  Manhattan Buckeye;829571 wrote:Shiller is projecting a possible 20% drop in residential housing, if that happens God help us all, we are absolutely boned.

  Maybe the Feds will subsidize the purchase of large tubes of K-Y jelly to help ease the discomfort.
• Con_Alma

  gut;828755 wrote:If you take the equivalent rent and put that toward a mortgage on a house, part of your money goes to equity (as opposed to flushed down the toilet on rent) which is indeed a savings. How does that not make good financial sense? ...

  
  It makes sense for everyone if we lived in a sterile environment. It makes sense for some people if they're financially stable enough to not rely on equity value if they're are in need of moving.
  
  it doesn't make sense for those that will leave their house if the market puts them in a negative equity scenario with increasing loan payments due to fluctuating interest rates.
  
  There's real estate investing and then there's the expense of habitation. People get into trouble when they mix the two.
• gut

  Con_Alma;829818 wrote:
  There's real estate investing and then there's the expense of habitation. People get into trouble when they mix the two.

  
  When they over leverage, otherwise outside of the bubble your downside has historically been the equivalent cost of renting. If we are talking a $1000 mortgage vs. Equivalent rent, without doing the math after two years you should have enough equity of about $6000 to cover your selling costs assuming no price appreciation. Inside of 2-5 years agree it's more a speculativee investment, but over that horizon it's not mixing and matching it really is mitigation your living expenses, or more accurately hedgin your living expenses against inflation.
  
  I also wouldn't confuse over leveraging with a poor investment choice - that's really more a case of spending too much no different than renting an apartment you can't afford or buying/ leasing a car you can't afford.
  
  Obviously the equation changes when the equivalent mortgage doesn't buy as nice of a place, and the your are talking about trading habitation expenses for investment. But otherwise with the exception of the bubble - which by no means was hidden, after several years the buyer comes out ahead making it a prudent financial management decision akin to shopping for discounts. And not an investment decision. Homes have generally not been investments because the returns considerably underperform the markets, but they have been a savings vehicle because the favored tax status gives you some of your "rent" back even after maintenance expenses. Initially your upside to recover selling and other costs, but as time goes on the greater discount you realize vs. equivalent rent and this is so because of leverage and favored tax status.
  
  Another way to look at it is I can get a very affordable mortgage but i can't get a cheap loan to cover my rent the next 30 years. It's also a low hurdle to get better returns on my money in the market (the opportunity cost of a higher downpayment). Buying a home, again outside the bubble, has historically been a " free option" that takes 2-5 years to get into the money. Putting yourself at risk of financial ruin a home or any asset or purchase is nothing more than financial mismanagement.
• gut

  ccrunner609;829888 wrote:Obama has proven one thing.....he knows nothing of economics and plays politics when making these decisions that should be made politically free.

  
  It's really hard to believe anyone In his position can be that ignorant of economics. I think it's more of a case of him simply ignoring what he knows because of some ulterior motive - and I'm not suggesting it's anything more sinister than a genuine desire to help the little guy "get his" if even only for 4 years.
• Con_Alma

  gut;829881 wrote:When they over leverage, otherwise outside of the bubble your downside has historically been the equivalent cost of renting. If we are talking a $1000 mortgage vs. Equivalent rent, without doing the math after two years you should have enough equity of about $6000 to cover your selling costs assuming no price appreciation. Inside of 2-5 years agree it's more a speculativee investment, but over that horizon it's not mixing and matching it really is mitigation your living expenses, or more accurately hedgin your living expenses against inflation.
  
  I also wouldn't confuse over leveraging with a poor investment choice - that's really more a case of spending too much no different than renting an apartment you can't afford or buying/ leasing a car you can't afford.
  
  Obviously the equation changes when the equivalent mortgage doesn't buy as nice of a place, and the your are talking about trading habitation expenses for investment. But otherwise with the exception of the bubble - which by no means was hidden, after several years the buyer comes out ahead making it a prudent financial management decision akin to shopping for discounts. And not an investment decision. Homes have generally not been investments because the returns considerably underperform the markets, but they have been a savings vehicle because the favored tax status gives you some of your "rent" back even after maintenance expenses. Initially your upside to recover selling and other costs, but as time goes on the greater discount you realize vs. equivalent rent and this is so because of leverage and favored tax status.
  
  Another way to look at it is I can get a very affordable mortgage but i can't get a cheap loan to cover my rent the next 30 years. It's also a low hurdle to get better returns on my money in the market (the opportunity cost of a higher downpayment). Buying a home, again outside the bubble, has historically been a " free option" that takes 2-5 years to get into the money. Putting yourself at risk of financial ruin a home or any asset or purchase is nothing more than financial mismanagement.

  There are variables and risks evident here. It's my position that I obtain the fundamental needs of life for my family and make them certain, without risk. After those are secured I am willing to risk my assets for gain. This is my point.
• believer

  

  gut;829894 wrote:It's really hard to believe anyone In his position can be that ignorant of economics. I think it's more of a case of him simply ignoring what he knows because of some ulterior motive - and I'm not suggesting it's anything more sinister than a genuine desire to help the little guy "get his" if even only for 4 years.

  Obama is attempting to help the little guy "get his" for the re-election votes at the micro-economic level.
  
  But I'm of the opinion that BHO's main objective is to see to it that the United States moves towards a European-style socialist economy. At the very least he is certainly anti-business or anti-free market and sees government participation in, if not control of, the macro-economy as being paramount to "prosperity."
  
  By "prosperity" I think Barry sees profits as necessarily evil and the companies that earn those profits as being instrumental in polluting Mother Earth. In order to make amends to nature and bring about social justice, those profits need to be confiscated and redistributed to the masses to level the playing field and give as many people as possible a comfortable yet modest standard of living thus insuring dependence upon Big Government entitlements and securing a dependable voting bloc for the Democratic Party for decades to come.
  
  It's either that or the Bammer and his staff are truly economic idiots.
• BGFalcons82

  

  believer;829914 wrote:But I'm of the opinion that BHO's main objective is to see to it that the United States moves towards a European-style socialist economy. At the very least he is certainly anti-business or anti-free market and sees government participation in, if not control of, the macro-economy as being paramount to "prosperity."
  
  By "prosperity" I think Barry sees profits as necessarily evil and the companies that earn those profits as being instrumental in polluting Mother Earth. In order to make amends to nature and bring about social justice, those profits need to be confiscated and redistributed to the masses to level the playing field and give as many people as possible a comfortable yet modest standard of living thus insuring dependence upon Big Government entitlements and securing a dependable voting bloc for the Democratic Party for decades to come.

  
  Hmmm....Sounds like you have joined me in the tin foil club....destroy capitalism as we know it, create European socialism, and put government in charge of making all things, "fair".
  
  I agree with you that he and his administration are either the stupidest economic fools ever to step into the White House, or they are quite clever in pulling off what you've written above. Those are the only 2 choices to me.
• gut

  Con_Alma;829899 wrote:There are variables and risks evident here. It's my position that I obtain the fundamental needs of life for my family and make them certain, without risk. After those are secured I am willing to risk my assets for gain. This is my point.

  
  No such thing as no risk. Many mortgages were non- recourse loans, which is why people who can afford the payments have simply walked away. But a 12 month rental contract carries risk, too. And all your bills are ultimately at risk due to your job. A lot of risks, especially with regard to a home purchase, can be very mitigated by a little business sense and sound financial planning. Even a 20% downpayment, at least half of which should be recovered if you were forced to sell tomorrow ( providing you didn't foolishly overpay), shouldn't cause financial ruin unless you overextended. Most of the risk you are talking here stems from reckless stupidity.
• Con_Alma

  gut;829922 wrote:No such thing as no risk. ... Most of the risk you are talking here stems from reckless stupidity.

  
  I have no risk regarding my home.
  
  I agree with your second statement completely.
• believer

  

  gut;829922 wrote:No such thing as no risk.

  True. Every economic decision we enter into bears some risk.
  
  It's my opinion that when people enter into mortgage contracts it is basically no different than a business risk. When an entrepreneur seeks venture capital through borrowing or other financial means, that business stands a very good chance of failing based on many variables...some the fault of the entrepreneur (poor decisions/management, etc.) and some a simple matter of uncontrollable macro-economic reality (disaster, slumping economy, etc.).
  
  When a home owner signs the mortgage contract they assume that their economic situation will remain relatively stable for 30 years and that their home's value will appreciate over the course of the loan.
  
  That worked nicely for several decades after WWII. But with the radical shifting of our economy away from manufacturing to lower paid service based employment coupled with the sub-prime mortgage debacle which clearly deflated home valuation, many people now simple view a mortgage as paying rent to the bank rather than a landlord. If they default, they default. Life goes on.
  
  There is plenty of reckless stupidity to go around including government over and/or under involvement in the housing market, games played by greedy financial institutions to turn quick profits rather than sticking with tried and true lending principles, and shifting moral values on the part of borrowers.
• Con_Alma

  My father built his house when he returned from WWII. He died in that house. He never had a mortgage in his life. You're right. Moral values and approaches to money were very, very different than they are today.
• Manhattan Buckeye

  "True. Every economic decision we enter into bears some risk. "
  
  Well not if the bank values the house correctly (ok, there is some risk there). It is a secured asset. If there is a default the bank gets the house. Obviously in this recessionary maelstrom banks over-valued their performing assets.
• believer

  

  Manhattan Buckeye;829962 wrote:"True. Every economic decision we enter into bears some risk. "
  
  Well not if the bank values the house correctly (ok, there is some risk there). It is a secured asset. If there is a default the bank gets the house. Obviously in this recessionary maelstrom banks over-valued their performing assets.

  Yes but if the home owner has refinanced once or twice and the financial institution OK's the refine transaction (even though the home's value is less than the refinanced mortgage), I'd say the bank is taking a serious risk of loss. And there is PLENTY of that in today's mortgage market these daze. Hence your over-valued performing assets comment!
• Con_Alma

  Can someone refinance without a valuation being done on the asset?
• believer

  

  Con_Alma;829972 wrote:Can someone refinance without a valuation being done on the asset?

  Oh a valuation is always done but the financial institution is also party to rolling the dice that the home's value will appreciate over time.
• Manhattan Buckeye

  Con_Alma;829972 wrote:Can someone refinance without a valuation being done on the asset?

  
  No, there is always an appraisal. With Dodd-Frank it is becoming a problem, our lenders have found religion at the wrong time.