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View Poll Results: Who Has the Better Plan to Solve the Housing Crisis? | |||
Obama | 3 | 27.27% | |
McCain | 8 | 72.73% | |
Voters: 11. You may not vote on this poll |
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06-20-2008, 12:18 AM | #1 |
Uncle Phil
Join Date: Feb 2004
Posts: 45,256
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Understanding The Issues: Subprime/Housing Crisis
I'm sure you're all aware of the Housing/Subprime crisis. Here's a link to some news of arrests today that is probably much more serious than if Javon Walker should be spraying crowds with champagne
ABC News: Hundreds Arrested in FBI Subprime Sting So which candidate has the right idea on how to handle this mess? Obama - Provide a tax credit to homeowners, which would cover 10 percent of the interest on their mortgage every year. - Create a $10 billion fund, partly paid for by “increased penalties on lenders who act irresponsibly” to help middle-income "folks" buy their first home or avoid foreclosure, and develop affordable housing in mixed-income neighborhoods. - Mandate accurate loan disclosure to ensure consumers understand their loan agreements. Create a standardized scoring system to quantify the borrower’s obligation. - Backs legislation that would allocate 5 percent of Fannie Mae/Freddie Mac pre-tax profits to the trust fund, generating approximately $500 million per year, a campaign aid said. The money would then be distributed to state and local entities that would be responsible for selecting individual projects to assist. - Create new F.H.A. program to provide meaningful incentives for lenders to buy or refinance existing mortgages and to convert them into stable 30-year fixed mortgages - Fully fund the Community Development Block Grant program and engage with urban leaders across the country to increase resources to the highest-need Americans. - Work to eliminate law “that prevents bankruptcy courts from modifying an individual’s mortgage payments.” McCain - Initially opposed large-scale federal assistance, but more recently called for the government to help qualified homeowners with subprime mortgages refinance and get federally guaranteed 30-year mortgages - Eligible homeowners can apply to Federal Housing Administration to replace their existing “burdensome” mortgages for a F.H.A.-guaranteed “manageable loan that reflects their home’s market value. Homeowners would end up with a 30-year mortgage and an equity stake in their home. The new lender would receive a federal guarantee of the mortgage. And the taxpayer gets a benefit if the sale value ever recovers. - Justice Department should investigate lenders - Convene meetings with accounting professionals and top mortgage lenders. Says lenders should work together “to provide maximum support and help to their cash-strapped but credit worthy customers.” - Adopt policies to ensure that homeowners “provide a responsible down payment of equity at the initial purchase of a home.” - Opposes reducing the down payment requirement for Federal Housing Administration mortgages; believes the requirement should be increased “as conditions allow.” - Create a task force in the Department of Justice to look into possible crimes related to mortgage backed securities and predatory lending and other practices. - Favors taking a hard look at, and maybe changing, the controversial accounting rules that force big banks and others to "mark to market" their mortgage holdings -- that is, attempt to estimate the current value of loans and mortgage securities on their books -- in their public reports. Says when there are no good measures of the true value of mortgage bonds -- when no investors want to buy them and no index tracks them -- current accounting rules may make lenders' balance sheets look far worse than they really are.
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06-20-2008, 04:01 AM | #2 |
Living Legend
Join Date: Jun 2004
Location: VA
Age: 42
Posts: 17,553
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Re: Understanding The Issues: Subprime/Housing Crisis
gotta go mccain on this one. you can't just try to bail everyone out that decided to buy a house they couldn't afford with other people's money.
there's not enough cash and i don't want to be penalized and forced to pay for someone else's property because i was responsible with my money and they weren't. it's not like these predatory lending scheme weren't well known about two years ago. they sell them by telling you that yes, you can afford this huge house on a low wage job, just let me know if you'd rather pay 5400, 4600, 3400, or 2200 a month for it. (btw, the 2200 in this example isn't even a minimum payment). of course most of the victims choose the lowest payment, and after three years the 750k house loan (that they've paid the bank about 79k on) is now a 1.2mill loan with a higher rate... short version is, if you couldn't even afford a 600k home, and got talked into taking a bad loan for 750k home that you can't possibly pay down, how are you going to pay it off after it balloons to 1mill+? the guys that sold those loans got up to 40k PER SALE, and the banks were stupid and greedy to think that people without good credit and without financial means could possibly pay these things off after they got dug in so deeply. either way, i'm all for forcing the lenders to convert them to fixed rates or adjusting them to new "foreclosure invested" market value, but if there's a straight type of bail out - A) there's not enough money for it, and B) that's punishing those that didn't decide to buy things they can't possibly afford. to help people get into houses, you already have first time home buyer (anyone) and VA loans (military/ex military). i don't really know much about the bankruptcy laws, so i'd have to look up obama's last point to see if there's merit there. seriously though, this isn't a surprise and a simple 4 week finance class in high school could have prevented this... i'm shocked they don't teach basic finance in school, since it'd be the most important class you could take as far as life skills. the military forces you through the basics mutiple times and has finance counsel available (for those that have questions and those that are command directed to get help), and maybe more access to advisors and basic help/education is the best idea for future prevention. |
06-20-2008, 08:03 AM | #3 |
MVP
Join Date: Oct 2005
Location: lancaster,pa
Age: 63
Posts: 10,672
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Re: Understanding The Issues: Subprime/Housing Crisis
i support Obama. but im with McCain on this issue. lets make the lenders that are a major reason this happened, accountable. the only thing that worries me is that these guys are all big money, so whats to keep them from padding a few wallets, to keep out of trouble?
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06-20-2008, 10:18 AM | #4 |
Playmaker
Join Date: Nov 2004
Location: all up in your business
Posts: 2,693
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Re: Understanding The Issues: Subprime/Housing Crisis
I think I agree with McCain, as well, with one exception.
As others have said, there is not too much sympathy for those people who bought a $750k house while making $60k/year. That just doesn't pass the sniff test. However, I do feel for people who were talked into refinancing houses with subprime loans when they already had affordable mortgages on. These were often cold-calls to the elderly and the lower-middle class, and there is a lot of evidence that these people were lied to verbally and hurried through the process to avoid detection.
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06-20-2008, 10:20 AM | #5 | |
Playmaker
Join Date: Nov 2004
Location: all up in your business
Posts: 2,693
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Re: Understanding The Issues: Subprime/Housing Crisis
I also support the Deputy AG leading the investigation:
Quote:
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06-20-2008, 10:56 AM | #6 |
Living Legend
Join Date: Jun 2004
Location: VA
Age: 42
Posts: 17,553
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Re: Understanding The Issues: Subprime/Housing Crisis
thats cool onlydark. some people deserve to get arrested.
the other side i didn't mention is what made these mortgages so attractive to banks... cause these mortgages just didn't sell until someone created tranches out of the debt (where the less likely to pay/higher risk loans were put in higher interest tranches and sold as a bundle of high return debt - and these are the investors that'll lose the big money - but it's their own fault, and unlike the elderly that got duped, they have no real excuse or reason to get a refund). anyways, you had several categories of tranches, which are just different layers of debt you could buy from banks that got grouped together by how risky portions of the actual loans in those tranches were (and since these were terrible loans with no hope of getting repaid, some gave returns of 15%). the higher risk tranches got paid after the lower risk tranches were paid out, and a lot of banks and some hedge funds got a little overzealous in buying these things; having since paid for them with multi-billion dollar hits to the bottom line. i know i haven't really done the best job explaining it, but i've tried to avoid having to explain liquidity and going too in depth with specifics, since that'd take a bit longer to spell out completely. |
06-20-2008, 11:03 AM | #7 | |
Living Legend
Join Date: Oct 2004
Location: chesapeake, va
Age: 60
Posts: 15,817
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Re: Understanding The Issues: Subprime/Housing Crisis
Quote:
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06-20-2008, 11:10 AM | #8 | |
Living Legend
Join Date: Oct 2004
Location: chesapeake, va
Age: 60
Posts: 15,817
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Re: Understanding The Issues: Subprime/Housing Crisis
Quote:
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06-20-2008, 11:23 AM | #9 |
Playmaker
Join Date: Nov 2006
Location: Richmond
Posts: 3,261
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Re: Understanding The Issues: Subprime/Housing Crisis
I found this pretty interesting. The "riskiest" of the adjustables are still yet to reset.
Calculated Risk portends the next wave of delinquencies and foreclosures - prime borrowers who used adjustable-rate mortgages (ARMs) as a tool to overstep their affordability boundaries. As adjustable rates reset higher, borrowers become unable to pay. The riskiest adjustable mortgages, option ARMs, in which a borrower can choose to pay less than the monthly interest cost, only to have that difference added back to the principal of the loan, thus eating into their equity, are yet to see the majority of their resets occur. This graph shows the coming resets, and given the difficult refinancing environment and tight lending standards, it will not be pretty for the housing market. Graph: IMFresets.jpg (image) |
06-20-2008, 12:09 PM | #10 |
Franchise Player
Join Date: Feb 2004
Age: 45
Posts: 8,317
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Re: Understanding The Issues: Subprime/Housing Crisis
I don't know which candidate has a better plan, but the lenders and borrowers were dumb. The brokers may have been slimy with the borrowers, but the lenders did not want to see people lose their houses. The lenders wanted people to borrow as much money as possible without going into foreclosure. As others have noted, the borrowers often got ARMs for houses they couldn't afford and now they are paying for living beyond their means. Sure, there are exceptions, but I that those sweeping generalizations pretty much capture what's happened.
Going forward, I'll support any plan that helps the economy (helping the borrowers/lenders is just gravy). Unfortunately, I have no clue what that plan would entail. |
06-20-2008, 12:13 PM | #11 | |
Playmaker
Join Date: Nov 2004
Location: all up in your business
Posts: 2,693
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Re: Understanding The Issues: Subprime/Housing Crisis
Quote:
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06-20-2008, 12:17 PM | #12 | |
A Dude
Join Date: Feb 2005
Location: Newtown Square, PA
Age: 45
Posts: 12,421
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Re: Understanding The Issues: Subprime/Housing Crisis
Quote:
In some cases, lenders did prey upon the elderly. Still though, being old is no excuse for signing something without knowing exactly what you're getting into. Borrowers have to take the responsibility for making decisions without fully thinking it through, or failing to understand the risks. It takes two signatures to enter into a mortgage contract. Both sides need to act responsibly.
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06-20-2008, 12:17 PM | #13 |
Living Legend
Join Date: Jun 2004
Location: VA
Age: 42
Posts: 17,553
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Re: Understanding The Issues: Subprime/Housing Crisis
paid, and paid well. 25-40k per sale and a "if i don't do it someone else will" rationale... bad mix. we need more people with the "let's not screw people over just because we can" moral compass.
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06-20-2008, 12:20 PM | #14 | |
A Dude
Join Date: Feb 2005
Location: Newtown Square, PA
Age: 45
Posts: 12,421
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Re: Understanding The Issues: Subprime/Housing Crisis
Quote:
But in the majority of cases, slimeballs or not, the borrowers still signed deals without knowing enough about them. You gotta stand up and look out for yourself, because you can't assume others will.
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06-20-2008, 12:47 PM | #15 |
MVP
Join Date: Feb 2004
Location: Seattle
Age: 45
Posts: 10,069
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Re: Understanding The Issues: Subprime/Housing Crisis
I like McCain's plan though I have serious misgivings he will follow through with it. Dude has the same people that perpetrated the problem advising him on how to solve the problem. UBS Bank is helping to craft his mortgage policy...this is the same company that tells it's executives and senior employees not to travel to the US because they might get arrested.
p.s. I don't like the idea of wolfs guarding the sheep.
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