# News President's Homeowner Affordability and Stability Plan

1. Feb 20, 2009

### mheslep

The recently announced $275B http://www.whitehouse.gov/blog/09/0...ne?height=220&width=370&inlineId=tb_external" states that it intends only to reach 'millions of responsible home owners'. Indeed, Press Sec. Gibbs said today that the bailout is for ''those who have acted responsibly, played by the rules...". Yet the Stability part of the HASP will apply to those with payments up to 38% of income. A debt load that high means it includes sub-prime borrowers. It includes those who took a flyer with interest only heavy back-end loans, of which they took no heed because they were initially intent on flipping the house. In the words of the plan: Now how can these recipients all be called 'responsible'? The wording of this plan is, at least, misleading. Compare: Borrower:$220,000 mortgage at 38% of income. Plan reduces interest payments by $400/mo by using taxpayer dollars. If borrower keeps making payments receives additional$1000/yr for five years.
Renter: nothing.
Old School home owner that bought humbly and paid off early: nothing.

What's the lesson here? Be frugal, and BTW shut up and pay your taxes? Or buy the biggest house you can possibly get, the government will get you a pass.

For those who might criticize the plan, note that http://www.whitehouse.gov/the_press_office/Briefing-by-White-House-Press-Secretary-Robert-Gibbs-2-20-2009/" [Broken] to heap condescension a CNBC editor: where and how he may live, and what he does for living:

Last edited by a moderator: May 4, 2017
2. Feb 20, 2009

### Ivan Seeking

Staff Emeritus
Predatory lenders.

Have you ever bought a house?

3. Feb 20, 2009

### edward

http://narblog1.realtors.org/mvtype/theweeklybookscan/2008/08/

In short a loan originator made more by writting sub prime mortgages. They all drank the Kool Aid.

Last edited: Feb 20, 2009
4. Feb 20, 2009

### mheslep

Yes they exist. How is that relevant to the above?
Couple of them. Relevance?

5. Feb 20, 2009

### Proton Soup

the problem may be that if you don't help these people keep their homes, then huge numbers of people will default and the government will be forced to either buy up the bad mortgages or let the banks fail. and the consensus seems to be that we don't want to let banks fail. so, even though this doesn't seem fair (neither is bailing out rich people to a bunch of poor folk) and shows favoritism, renters aren't carrying the same risk of bringing the whole house of cards down.

at least this way, you keep getting payments from them and limit your losses.

6. Feb 20, 2009

### mheslep

Yes there's the issue of what to do about foreclosures in general. For the moment I object to the baloney in the selling of this plan ala all the borrowers are 'responsible'.

7. Feb 20, 2009

### Proton Soup

i think that "responsible" implies intent, which can be hard to judge. people with 2 or 3 mortgages so they can buy jet skis and refinance credit cards are one thing. folks who simply lack the mental toolbox to do the math and understand the terms of just what the heck they've gotten into are another thing. but yeah, some of it is simply placating political language.

8. Feb 20, 2009

### mheslep

Both of which qualify for money under this plan (if they meet a) <=38% of b) simply underwater )

9. Feb 21, 2009

### Ivan Seeking

Staff Emeritus
You are assuming that everyone with a bad loan was irresponsible. Keep in mind that the average home buyer is not an economics expert or a real estate lawyer.

The point about buying a home is that the paperwork is overwhelming. It is easy to see how people could get snookered. Many people just sign the papers without even knowing what they're signing and trust that the loan company is representing the loan honestly - which they are legally required to do.

There are stories emerging about people who qualified for a standard loan, but were sold subprime loans anyway. They were deceived by the loan company.

Note also that the bailout only applies to a person's primary home. This helps to exclude those who were simply buying and flipping houses; who were taking advantage of the hyperinflated market; who were taking advantage of exotic loans in order to make a fortune.

When we bought our house, I had a hundred questions about prexisting conditions on the propery, what can and can't be done by the current owners before we sign the papers... I don't remember the specifics anymore but I remember having many questions. The answer generally given was that the mortgage company and the title company take care of those concerns.

Last edited: Feb 21, 2009
10. Feb 21, 2009

### mheslep

Not at all. I assume as stated that predatory lenders were out there and that some people were ripped off by them. I assume that many other borrowers were simply irresponsible, and they will none the less be rewarded by this plan. I assert that if individuals can not in large measure be held accountable for mortgages in good times and bad, then the entire mortgage system must fail, leaving housing only to the extremely wealthy or the government.

11. Feb 21, 2009

### Astronuc

Staff Emeritus
I am troubled/bothered by the government help/assistance on home affordability when it involves allowing people to keep ownership of their houses when they cannot afford payments. I'm also disturbed by people the claim that people were mislead by predatory lenders, because if these people did not understand the details of the financing, then they had no business buying a house and entering into a contract in the first place. It's a bit like making a promise and then claiming one did not understand the promise and therefore should not be held to the terms to which one agreed. Part of becoming an adult is to accept responsibility for one's actions. But I see a lot of irresponsible people expecting some forgiveness for their recklessness or irresponsbility. Bottom line is - if one makes a promise, one is expected to keep it or accept the consequences of not doing so.

I watched an interview with a home owner who could not afford payments on an $800+ K house, which had dropped in value by$200K. She and others like her are waiting for government assistance in order to keep their homes. Why in the heck is this woman and husband living in an \$800 K home in the first place? Why didn't they just buy something they could afford? Why should people expect to live in expensive housing they cannot afford?

I bought a house that my wife and I could afford, and as time went on, the monthly payments have been about 20% or less of pretax income (taxes have about doubled or tripled since we bought the house, but we also doubled the size), and our house is still worth way more than the remaining principal. We rejected ARMs and other plans in favor a 30-yr fixed rate mortgage with a reasonable rate - as low as possible. We refinanced once after we used a construction loan to add a second story, and replace the old driveway which had deteriorated.

12. Feb 21, 2009

### Staff: Mentor

Agreed.

13. Feb 21, 2009

### Staff: Mentor

Absolutely agree.

I am completely against a bail out, with my tax dollars, for irresponsible people that bought homes they knew they could not afford . Why do these people deserve my money when millions of people are in danger of losing apartments due to losing jobs? They did nothing wrong, they didn't try to spend beyond their means. Yet now they are being told that they have to hand their tax money over to people that wanted things they couldn't afford?

I do not understand how this is even being considered.

14. Feb 21, 2009

### rootX

I think they trying to invest too much in very limited amount of time ...

15. Feb 22, 2009

### Gokul43201

Staff Emeritus
Saying adults should take responsibility for their actions and I'm not going to bail out a bunch of irresponsible people with my money is okay for a philosophical argument, but becomes useless when it comes to implementing a working government policy.

Or else, you should stick with that argument, but take it to its logical end, and refuse to pay for the fire service that hauls someone out of a burning house because they screwed up and left the iron on. Refuse to fund FEMA's post Katrina operations because people weren't responsible enough to leave when told to. Going further, close down Social Security, shut down all welfare programs, stop funding public health initiatives, eradicate all import tariffs, and so on ... eventually you will find that you'd probably have to throw out most of Government if you take the "personal responsibility" argument to its logical end.

The way most modern governments work today, they are continually making life easier for people by drawing out of a common pool of money. In dozens of different ways that translates to people being bailed out by others for one reason or another. In that respect, the current bail-out of homeowners is different only in shape and size, but is still essentially the same as scores of other continuously operating bail-out programs that few people will question because they've become an ingrained part of our lifestyles.

16. Feb 22, 2009

### Astronuc

Staff Emeritus
Maybe it's time to end the subsidies by the government, and develop a fair and sensible policy that will mitigate future occurrences of what is now happening. Clearly the Bush administration policies failed, but so did the policies of his predecessors.

I agree with Reagan's concern about people developing a dependency on welfare programs, but he and others did not address the problem effectively - and we still have dysfunctional governments and welfare systems.

Many poor in New Orleans did not have the means to evacuate, or a place to where they could evacuate, but then the local (city), state and federal governments failed to protect them. That failure was simply a consequence of an evolution of dysfunctional governments, including simple basic corruption.

One of the systemic flaws in the American economy is a gross inequality/disparity in income (and wealth) - and I'll post about that later.

17. Feb 23, 2009

### mheslep

I see where you're going but the analogy is flawed. The problem w/ bailing out the mortgages is that it encourages people to do the same in the future, without consequence. Burn your house down through stupidity or even from the most unpredictable accident and you will at the very least lose some irreplaceable property, and likely someone's life will be endangered. In addition the government can bring civil or even criminal charges if they can show you were really stupid/intentionally reckless, like storing certain banned incendiaries on the premises. Last, you might face increased home owners insurance premiums down the road. Clearly there are many disincentives in place for people to be reckless w/ burning their houses down, and no incentives caused by sending in the fire department to help them out.

18. Feb 23, 2009

### Staff: Mentor

One doesn't imply the other: a home foreclosure does not put one at risk of imminent death and a rescue from a fire does not provide an incentive for the person rescued to start another fire.
Agreed. More generally, government bailouts of people who build homes in flood prone areas are a disgrace.
Agreed.
Most - not necessarily all.
Again, most, but not necessarily all.
and again...
Yes.

Have you never considered these possibilities before? Personal responsibility is the driver of the conservative philosophy!
Yes, that's correct: modern western governments today are actually quite socialistic and generally moving even further to the left. The US is actually one of the furthest to the right. But the fact that they work that way doesn't automatically make it right. To a conservative, the socialistic nature of these governments is essentially slapping a yoke onto the backs of the productive to pull the unproductive with them. It is the antithesis economic freedom which is one of the more important freedoms on which western government was originally founded.

19. Feb 23, 2009

### Ms Music

Have these "responsible" buyers ever thought about selling their home and buying something they COULD afford? What if government became real estate dealers? "You can't afford THIS house anymore, so I will just let you have this smaller one instead"....

The ONLY people I can sympathize with are those who have lost their jobs and unemployment in their town is high, their house has been on the market for sale for months, but all bids fall through, but they are TRYING to make payments. Those who have too much debt are just plain NOT responsible. And helping them isn't fair to me.

I feel like I am being punished.

I hate this subject........ Why did I even post?

20. Feb 23, 2009

### Astronuc

Staff Emeritus
One problem for many is that they owe more on the mortgage than the value of the house in the current market, so they'd lose money if they sold the house, and therefore would not qualify for a new mortgage. I'm not sure of the proportion of mortgage holders in this situation, but it may be as many as 30 to 50% in some areas.

Here's some more on the mortgage problem - Former HUD Chief Weighs In On Foreclosure Crisis
http://www.npr.org/templates/story/story.php?storyId=101027916

Links to other articles on the matter.