Feds bailing out home owners.....Follow

I hear Juvenal spinning in his grave.

Dammit! Now I've got to clean coffee off my monitor...

Except that by and large the lenders aren't the ones who got screwed. They've been collecting the interest payments (large ones) for years on those deals). If a foreclosure happens, they own the property and can re-sell it. They only run a financial risk if *all* they did was sub-prime loans. So maybe a few small mortgage brokerages are in trouble, but the "big guys" are not really affected. They can ride out the market and make a bundle in the long run either way.



Eh? I'm pretty sure there were no corporate giants hurt or particularly helped by this. I know it's a common theme to attempt to blame everything on "big business", but the reality is that the bulk of the sub prime loan abuse was committed by small private lenders eager to make some quick money in a fast moving real estate market. The big players know better.

It's the guys running a shady three desk mortgage operation out of a rented office space that sold those sorts of loans. Cause they got their cut off the top, collected the high rate interest over time, and didn't really care if down the line the loan defaulted (they can always declare their LLC bankrupt and they still got their big salaries for the years they were in business, something that actual big businesses never do).

Oh they're not happy about it. Didn't imply otherwise.

But none of those large lenders will go belly up as a result of foreclosures on subprime loans. That's the point I was making. The lending assistance program is really more about helping the buyers avoid losing their homes then preventing financial damage to these companies. There's good reasons to prevent foreclosures in both cases obviously.

Only something like 4% of subprime loans are in danger of foreclosure. And subprime loans only represent a small percentage of total loans in the field. The potential losses to the "big guys" is relatively small. They'll make it up and weather through this either way.

I think your original thought, that the Bush administration would rather there not be a bunch of working class folks tossed out of their homes, is a much more significant force behind this. The subprime market problems really aren't indicative of any sort of major market failure. GDP will still go up. Wages will still go up. Earnings will still go up. Unemployment will remain low. Inflation will remain low. However, the public perception when average folks lose there homes is that it *is* a problem (reasonable, since that affects them directly).


He's playing a pretty smart "middle road" course. You don't want to just throw money at the problem because that will introduce market problems (inflation specifically). But you can't just let people lose their homes no matter how stupid they were when they signed that loan (did people really think that they could afford a loan with zero down and starting at a rate they could barely pay?). He's fixing the perception issue while avoiding creating a real problem in the process. It's not a bad approach.

Or selective ignorance.

If by point you mean completely flawed argument that is hinged purely on desperation then yes, we agree to your 'point'.

The small bail out to stem the losses that the investors would have seen that would have reverberated throughout the economy causing the potential for a recession is not a bail. Sure sure.

I'm not saying its bad. But lets not call it what its is not!

Joph. You keep converting my statements that it's not about "bailing out" big business into some kind of denial that big business will benefit in any way from this.

I never said that. I simply responded to Nobbys question/implication that this *could* be a bail out for "giant corporations".

Bail out implies that they'd be in some kind of financial trouble if it didn't happen.

Let me repeat. The problem right now is that the "big lenders" have picked up as many sub prime loans as they feel they can safely handle. They *aren't* in any financial difficulty. The problem is that over the last 10 years a ton of sub prime loans were pushed into the market by smaller lenders looking to catch a quick buck. As the terms got worse and worse the borrowers have had to refinance. Of course, the little guys wont touch the sub prime loans anymore because they'll loose their shirts (those who hadn't already), and cant offer the borrowers better terms then they've got.

Which is where the big lenders have been stepping in. They've been picking up these sub prime loans in order to keep the market afloat. They've been doing this for the last 3-4 years. However, in recent weeks several of these big lenders have indicated that they will no longer pick up sub prime loans. This means that if you are a borrower and have a sub prime loan, and find yourself unable to make your payments, you can no longer find *any* lender that will refinance for you. You're stuck.

Hence the "crisis".


Bush is *not* bailing out the lenders. What he's doing is creating a federal lending fund that will pick up those sub prime loans. He's preventing foreclosure on those homes. He's *not* reducing the amount owed one penny, nor helping existing lenders with their terms one bit.


Again. The "giant corporations" had already calculated exactly how many sub prime loans they could pick up and not hurt their long term profit goals. They are not in any danger, nor are they particularly "bailed out" by this. The only real benefit they reap is that they wont suffer the pressure to pick up these loans. Also, as time goes by some of their customers may refinance and get picked up by Bush's funding plan (taking some of the pressures off the big lenders). So yeah, it does benefit them. A little. But it's hardly a "bail out" for them.

And by far the people who benefit the most are those who actually borrowed the money and were faced with losing their homes as a result. Can we agree that they are the biggest benefactors here?

But none of those large lenders will go belly up as a result of foreclosures on subprime loans. That's the point I was making. The lending assistance program is really more about helping the buyers avoid losing their homes then preventing financial damage to these companies. There's good reasons to prevent foreclosures in both cases obviously.
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your completly backward on your thinking.

the buyers do not have a huge chunk of money invested in these homes, especially investors who usually put nothing down. it is the banks and other lenders who ponied up the cash for the house. they are the ones who stand to loose big if it goes to forecloser and sells for less than they paid for the property.

the low interest rates allowed buyers to pull the profit out of theri homes. it allowed them to buy property they would not normally be qualified for. and the biggie, they OUTLAWED ballon morguages 30 years ago because it was deemed to be predatory, and resulted in a large number of forclosers. an interest only loan IS a baloon mortguage with a differant name. the only differance is the adjustible interest rate, which was the hook for the bank. they were willing to offer it as long as the house prices were climbing and they could sell the house for what they bought it for.

they cant now. infact, now those interest only/ballon mortguages are the biggest reason there is such a panic. all of a sudden, these predatory lending institutions, ie, most banks in general, are finding themselves holding assets worth a hell of a lot less than what they paid for them.

if it goes to foreclosure, it is the lenders and investors who will loose the most. they are the ones that ponied up real money for the property.

this bill is there to protect the predatory lendors and investors, not the home owner.

the homeowner didnt get a balloon/interest only loan. they budgeted for and bought a LONG TERM home. not something they planned on flipping or refinancing in less than five years.

this bill is aimed directly at offering a lifeline to the very people who created the mess.

it is a bail out, and it is wrong.

they should let the MARKET determine who wins and who looses, as it SHOULD. if there are no REAL buyers for all that investment property hitting the market, let the prices crash and keep crashing untill the MARKET determines its TRUE value. if some banks and lending institutions fall, so be it. the ones that survive will become stronger and the new start ups will LEARN from the mistakes of the fallen.

if the government helps them out, ie, offers low interest guarentteed loans, adn drops interest rates to soften their fall, what will they learn? what will stop them from doing it again like they did 30 years ago with balloon mortguages?

here is what they will learn. if you have money, rape and pillage for more money. if you get into trouble, the republicans will make sure its the people who pay and not you.

***** saving them from foreclosers. let them fall. it is the banks that will take the hit because it is the banks that ponied up 500,000 dollars for a 200,000 dollar house, not the home owner. allowing the home owner to KEEP PAYING that 500,000 dollar loan on that 200,000 dollar house DOES NOT HELP the home owner, it helps the BANK.

the home owner just sits out his 7 years of bad credit, and has his wife buy that 500,000 dollar house from a realtor who bought it at auction for 300,000 less than they origonally paid for it.

this is a bad bill. the market is determining the TRUE VALUE of all those homes, but the government is offering up artifical support to protect their inflated value.

the moral majority working hard....for banks.....

What point are you making here?

One is linked to the other. If no one qualifies for this, then no one is helped (either borrower or lender). It's a wash and a pointless observation.

But of those who will qualify, the borrowers are going to benefit the most because they wont lose their homes (and their credit scores). The lenders certainly benefit to a point, but it's really about reducing the total "load" of outstanding loans on the industry then targeting and aiding any particular part of that industry.

Lol! Um... Sure... ;)

Basically, I wasn't disagreeing with you. My disagreement was with Nobby (and a couple others) who seemed to want to imply some sort of evil plot by "giant corporations" behind all of this.

I just don't see sufficient evidence in terms of the history of the current sub prime loan problems to justify that argument, and I said so.