What I don't get: When people complain that they are drowning because their house is underwater

[Anonymous]

I do feel for all the families with extraordinary circumstances - job loss, divorce, death, illness. If homeowners like that are underwater and can't get out of the house by selling, they are in a terrible situation.

I do not have one iota of sympathy for my neighbors down the road who just WANT a bigger house and love to have a pity party about why they can't sell. They have no need for a bigger house. They moved into the house with kids, have had no job loss, and in fact, make more money than they did when they bought, so they can definitely pay their mortgage. I meet people like this all the time who think that the world is unfair because they want to move but can't when they live in a perfectly good house.

[Anonymous]

My point is, I can see how someone could easily get caught up into buying more than they can afford or pushing their incomes. Then their adjustable mortgage goes up at the same time their house value goes down. And they can't refinance because suddenly their loan amount is worth more than their home. So they legally CANNOT get a loan for more than the value of their house. This is why people freak out when the value of their house declines. Because it impacts their abilty to refinance. I actually think this law/rule needs to change. If you have a mortgage on a house, you should be allowed to refinance for that same amount.

No matter what the current value of the house is? Sorry, but that's insane. After all the wailing and gnashing of teeth over those evil banks which gave out all these terrible loans (and I don't totally disagree with that, by the way), you suggest that lending institutions be permitted (or even required) to refinance a loan no matter what the value of the underlying collateral is.

You know what another definition of a bad loan is? A loan for which the collateral securing the loan doesn't fully cover the loan. The only way to do this is with significant government subsidies or insurance. As a business proposition, it's absurd.

[Anonymous]

And this all is why we are very happy renters. VERY.

[Anonymous]

Anonymous wrote:I do feel for all the families with extraordinary circumstances - job loss, divorce, death, illness. If homeowners like that are underwater and can't get out of the house by selling, they are in a terrible situation.

I do not have one iota of sympathy for my neighbors down the road who just WANT a bigger house and love to have a pity party about why they can't sell. They have no need for a bigger house. They moved into the house with kids, have had no job loss, and in fact, make more money than they did when they bought, so they can definitely pay their mortgage. I meet people like this all the time who think that the world is unfair because they want to move but can't when they live in a perfectly good house.

Yes, I totally agree. And I think that in the DC region, one of the reasons there's less sympathy/understanding abotu underwater houses is that there's a lot of people like this - educated, intelligent people who had good jobs in 2005, bought a house, still have good jobs today, but bitch and moan because they lost their equity, are underwater, and can't sell the place. After all, now they have kids and have to pay for daycare, or one of then wants to SAH, but they can't sell the place because they're underwater, and can't afford the mortgage payment on one salary, or daycare costs, or whatever. You know what? Tough. I have all the sympathy in the world for people who were defrauded, who were victims of unscrupulous mortgage brokers/real estate agents, who suffered a job loss, or who have had medical problems - there should be programs in place to help them, and we should prosecute anyone who broke the law. But there's not an inalienable right to have your property value increase, and sometimes it goes down. What everyone forgets is that any time someone gets relief from a mortgage, those costs are passed on to the rest of us, either in the form of taxes or increased costs from lenders. Let's help everyone who was wronged, or suffered some unforeseeable misfortune (and I do include job loss in there). But bailing you out because you made a bad decision on a real estate purchase, and now want to move? No freakin' way.

[Anonymous]

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote: Let's help everyone who was wronged, or suffered some unforeseeable misfortune (and I do include job loss in there). But bailing you out because you made a bad decision on a real estate purchase, and now want to move? No freakin' way.

But let's go ahead and bail out the financial institutions that put us in this mess? Sounds fair to me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: Let's help everyone who was wronged, or suffered some unforeseeable misfortune (and I do include job loss in there). But bailing you out because you made a bad decision on a real estate purchase, and now want to move? No freakin' way.

But let's go ahead and bail out the financial institutions that put us in this mess? Sounds fair to me.

Well, those corporate bailouts were made so the entire economy wouldn't tank. Distasteful, but necessary, in my opinion, although I realize others may disagree. But that's really not the issue here.

As I said, let's help people who were really wronged, or who suffered some unforeseeable misfortune and are having a hard time. But "my house is worth less than I thought it would be," or "I can't sell my house for what I paid for it" do not, in and of themselves, constitute reasons to provide assistance to a homeowner. How is this remotely ontroversial?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

My point is, I can see how someone could easily get caught up into buying more than they can afford or pushing their incomes. Then their adjustable mortgage goes up at the same time their house value goes down. And they can't refinance because suddenly their loan amount is worth more than their home. So they legally CANNOT get a loan for more than the value of their house. This is why people freak out when the value of their house declines. Because it impacts their abilty to refinance. I actually think this law/rule needs to change. If you have a mortgage on a house, you should be allowed to refinance for that same amount.

No matter what the current value of the house is? Sorry, but that's insane. After all the wailing and gnashing of teeth over those evil banks which gave out all these terrible loans (and I don't totally disagree with that, by the way), you suggest that lending institutions be permitted (or even required) to refinance a loan no matter what the value of the underlying collateral is.

You know what another definition of a bad loan is? A loan for which the collateral securing the loan doesn't fully cover the loan. The only way to do this is with significant government subsidies or insurance. As a business proposition, it's absurd.

Yes there should be a way to allow people who have never missed a payment and have good credit to refinance to a lower rate regardless of home value. We are rewarding the idiots.

OK - what do you suggest? (And who, in this context, are the idiots that are being rewarded?)

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: Let's help everyone who was wronged, or suffered some unforeseeable misfortune (and I do include job loss in there). But bailing you out because you made a bad decision on a real estate purchase, and now want to move? No freakin' way.

But let's go ahead and bail out the financial institutions that put us in this mess? Sounds fair to me.

Well, those corporate bailouts were made so the entire economy wouldn't tank. Distasteful, but necessary, in my opinion, although I realize others may disagree. But that's really not the issue here.

As I said, let's help people who were really wronged, or who suffered some unforeseeable misfortune and are having a hard time. But "my house is worth less than I thought it would be," or "I can't sell my house for what I paid for it" do not, in and of themselves, constitute reasons to provide assistance to a homeowner. How is this remotely ontroversial?

Yes, it was a necessary evil - the other alternative was to have ZERO economy. Can you imagine the moaning and groaning if that had happened?

[Anonymous]

rewards those that have been paying on time and require a mod, don't reward these people

http://www.bloomberg.com/apps/news?sid=aVYxPZ56vjys&pid=newsarchive

By "these people," do you mean people who are delinquent on their mortgages? But aren't they likely to be the people who suffered job loss, or medical issues, and are the most deserving of help?

And "have been paying on time and require a mod[ification]" raises an interesting issue - if you've been paying on time, you can't really be said to REQUIRE a modification, right?

But all of that aside - once again, how would you suggest we go about this? Because you're suggesting that banks be permitted (or compeled?) to issue loans for which they KNOW they don't have sufficient collateral. So would you suggest a federal insurance program? Direct subsidies to the consumer, or lending institution? What?

[Anonymous]

I don't understand why people argue that everyone should be able to refinance. Refinancing is getting a new loan. If you aren't eligible or a good risk for the new loan why should the bank be required to give you a new loan if it isn't in their business interest to do so?

[Anonymous]

I understand the apprehension. We are not underwater and don't plan on moving for another 10 years so it shouldn't affect us but it does make me nervous.

For the risk adverse, equity is another layer of financial security. It means that you could downsize if circumstances changed drastically. It means that you have access to another source of loan if you need it. Its a form of savings. If you lost thousands from your retirement savings would you think oh well...I'll make it back up later? If all of sudden thousands disappeared from your savings account would you think Oh well I wasn't planning on using it anytime soon? Probably not.

For risk takers, many people are in a precarious situation where they can barely afford their payments. For people who looked at their house as an investment as well as a home, they are realizing that their investment is lost. For people who bought a starter house thinking that they would later upgrade its hard to keep paying for more than the value of an assett that you don't enjoy or want.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I do feel for all the families with extraordinary circumstances - job loss, divorce, death, illness. If homeowners like that are underwater and can't get out of the house by selling, they are in a terrible situation.

I do not have one iota of sympathy for my neighbors down the road who just WANT a bigger house and love to have a pity party about why they can't sell. They have no need for a bigger house. They moved into the house with kids, have had no job loss, and in fact, make more money than they did when they bought, so they can definitely pay their mortgage. I meet people like this all the time who think that the world is unfair because they want to move but can't when they live in a perfectly good house.

Yes, I totally agree. And I think that in the DC region, one of the reasons there's less sympathy/understanding about underwater houses is that there's a lot of people like this - educated, intelligent people who had good jobs in 2005, bought a house, still have good jobs today, but bitch and moan because they lost their equity, are underwater, and can't sell the place. After all, now they have kids and have to pay for daycare, or one of then wants to SAH, but they can't sell the place because they're underwater, and can't afford the mortgage payment on one salary, or daycare costs, or whatever. You know what? Tough. I have all the sympathy in the world for people who were defrauded, who were victims of unscrupulous mortgage brokers/real estate agents, who suffered a job loss, or who have had medical problems - there should be programs in place to help them, and we should prosecute anyone who broke the law. But there's not an inalienable right to have your property value increase, and sometimes it goes down. What everyone forgets is that any time someone gets relief from a mortgage, those costs are passed on to the rest of us, either in the form of taxes or increased costs from lenders. Let's help everyone who was wronged, or suffered some unforeseeable misfortune (and I do include job loss in there). But bailing you out because you made a bad decision on a real estate purchase, and now want to move? No freakin' way.

I think this was one of the best responses on this thread and I agree with everything you said except the bolded. People who were "victimized" by unscrupulous mortgage loan officers or bankers are not in the same category. You're talking about people who were talked into buying property beyond their means and were lead like a horse with a carrot. I think that people who are going to be purchasing the largest purchase of their lives buying something that will take 30 YEARS to pay off have to take some responsibility for making the financial decision to do so. They need to do some research and not just listen to the snake-oil man who comes telling you that you can afford the elixir of life that will take 20 years off your appearance. It's the same thing. These people were conned, but they let themselves be conned. There is a TON of material out there on the web, in libraries, and in resource books that you can buy at bookstores (if you can afford a house, you can afford a book) about how to purchase, how to evaluate your worth and how much you should spend. Why anyone would get an interest-only mortgage, or get an ARM without being able to afford the interest adjustment or without planning what to do if they could not refinance is NOT in the same class as someone who has lost a job, suffered a family disaster or illness, or been defrauded. That person gambled and lost. Just like Las Vegas, there is no guarantee that your home value will increase. There is no guarantee that you'll be able to refinance to a better rate. There is no guarantee that you'll get a raise and be able to afford the home you should not have bought. These people need to just take responsibility and stay in the house until they can afford to get out of it. I agree with mortgage bailouts for people with exceptional circumstances including family illness, job loss, military deployment, etc. But people who don't have an exceptional circumstance, but just no longer want the house they're in, no, I don't support bailing those people out.

[Anonymous]

Anonymous wrote:

My point is, I can see how someone could easily get caught up into buying more than they can afford or pushing their incomes. Then their adjustable mortgage goes up at the same time their house value goes down. And they can't refinance because suddenly their loan amount is worth more than their home. So they legally CANNOT get a loan for more than the value of their house. This is why people freak out when the value of their house declines. Because it impacts their abilty to refinance. I actually think this law/rule needs to change. If you have a mortgage on a house, you should be allowed to refinance for that same amount.

No matter what the current value of the house is? Sorry, but that's insane. After all the wailing and gnashing of teeth over those evil banks which gave out all these terrible loans (and I don't totally disagree with that, by the way), you suggest that lending institutions be permitted (or even required) to refinance a loan no matter what the value of the underlying collateral is.

You know what another definition of a bad loan is? A loan for which the collateral securing the loan doesn't fully cover the loan. The only way to do this is with significant government subsidies or insurance. As a business proposition, it's absurd.

I agree. Absolutely. I find it amazing that so many people who are underwater on their loans blame the banks. The banks did not lower the housing market so that home prices depreciated. The absolute worst are the people who took cash-out refinances, but even the ones who took bad loans or bought homes they could not afford because they didn't plan for market depreciation, just assumed that the market would appreciate, created the problem. Why should the banks be losing money for home owners bad decisions? Sure, they can afford a handful of defaults...but no banks prepared for millions of home owner defaults. That's where the crisis came. The sheer number of people and the total cost of the loss cost the banks billions of dollars. And those recommending strategic defaulting are also contributing.

So, if your home is only worth 75% of the outstanding principal value on the loan, why should the bank be forced to refinance for a LOWER interest payment? Whose going to pay the bank for that loss? The original contention that the law should allow you to refinance for the same amount as your current mortgage is ridiculous. Why are you, the homeowner, allowed to cut the amount you agreed to pay to the bank? Why should the bank be forced to lose money on a transaction? The banks only refinance when they can make money off of it. If it is profitable for banks to refinance, they will. If not, they won't. And that's as it should be.

[Anonymous]

+1