I have a 23 year old friend that went to buy his first house with his new wife.

He had a great credit record, but didn’t quite make enough to qualify for the fixed-rate loan in the amount that they needed without having her on the loan. Because her credit record was just ‘alright’, once she was on the loan, they didn’t qualify for the better rates.

The person working on their loan with them offered some seemingly shady alternatives for ways that they could get enough money to buy the home – things that are very similar to the loans that are being defaulted on now.

My friend and his wife thought it over and decided not to buy until they were qualified for the type of loan they wanted. They felt there was too much risk involved in the types of variable rate loans they were being offered. So, they’re renting while less responsible people are getting bailed out by the taxpayers? That makes no sense!

Reward behavior that you want more of. If you want more instances of people taking out loans that they can’t afford, swoop down and rescue them right now.

If I have to bail out the bank, I expect to be put on the board of directors. And if I have to bail out homeowners, I expect a percentage stake in their house.

Corsair on May 12, 2008 at 2:02 PM

In the case of Bear Stearns and this housing bailout legislation the government is in a position to make a profit from the assets they are securing. So you will be getting a percentage stake. Unfortunately, it also exposes us taxpayers to downside loss and raises the question of whether the government should be exposing itself to market risk.

Bad public policy is bad public policy. It isn’t in the best long-term interest of communities to be filled with deadbeats who can’t make their mortgage payments without government bailouts.

highhopes on May 12, 2008 at 12:57 PM

The owners would still have to make scheduled payments at the new rate, and surrender some of the upside from possible price appreciation. The owners, in many cases, would have jobs in the area and children in the schools.

Foreclosures are expensive to the banks and to the municipality. Also, having boarded up houses lowers the real estate values for other homeowners.

Limiting the number of foreclosures can be in the interest of communities by keeping houses occupied and paying local taxes.

Bad public policy is bad public policy. It isn’t in the best long-term interest of communities to be filled with deadbeats who can’t make their mortgage payments without government bailouts.

Thanks again! Bookmarked the site. Trying to work my way back into the investigation side as we speak (I’m in Austin). When I was with my former employer, we rarely pursued occupancy fraud. If the borrower was remitting timely, we normally left it alone or just forced them to refinance elsewhere. The FBI, OCC and others won’t pursue the occupancy angle unless it’s part of a larger scam. it is costly to the taxpayers and the mortgage companies do not want the REO’s on their books. Personally, it makes sense to me. The mortgage lenders couldn’t be under any more regulation than they are and survive. The OCC and state regulators are all over us (OCC since bank owned) constantly – auditing, questioning, fining. They also knew the issues with “b” paper and “Alt A” before these loans ever adjusted.

Limiting the number of foreclosures can be in the interest of communities by keeping houses occupied and paying local taxes.

There were a lot of dumb borrowers and irresponsible lenders but many of the “2 & 28″ or “No Doc” borrowers are so far underwater that this package isn’t going to help them.

scalleywag on May 12, 2008 at 10:18 AM

Excellent link. Exactly.

Here’s an idea: Why don’t those Democrats who are so gung-ho for a housing bailout appeal to their mega-wealthy donors to bail them out with their personal fortunes? George Soros has hundreds of millions to devote to the left-wing agenda, why not give some to these so-called needy housing speculators?

Why doesn’t Obama go back to San Francisco’s Billionaires Row (the site of his “bitter” “cling” snobbish remarks) and ask those people to bail out the fraud-ridden borrowers and lenders?

Nah, it’ll never happen. If there are vote-bribable “needy” among us they’ll force me and you to pay.

The superrich Democrat donors don’t give money to help others. They only give it to help themselves.

http://www.housingwire.com/2008/02/06/occupancy-fraud-seen-as-growing-problem/

I just found these stories over the weekend. Several months ago, I spent many hours trying to find out how many foreclosures and delinquencies were for primary residences and how many were for investment or speculative properties. The answer: nobody knows. Why? Occupancy fraud. See the links above.

Not one person in the cheering crowd objected to the idea that taxpayers should bear the burden for this woman’s irresponsible and dishonest behavior.

AZCoyote on May 12, 2008 at 10:41 AM

And, how many, do you think, are actual net tax payers?

Logically, if one wishes the govt to punish lenders for their unsavoury, but legal, practices, then one must also allow that the govt has the right to regulate other areas of life that are outside of their purview.

This sub-prime mess was created by two, willing, groups – the lenders and the borrowers. Only they should bear the responsibility of managing the consequences.

The US government is not a co-signer for loans.

For years now, the government has been co-signing student loans.

But you know what? Between the deficit facing federal entitlement programs and the deficit facing state and local pension funds, our country will be bankrupt in the coming years. (According to WaPo, public employees should brace for a “breach of faith.)

So I wouldn’t worry about this little minor spending in the meantime. Our path is already set.

Equally as predictable, Clinton oohed and aahed and made sympathetic noises about the poor woman and how she’d been “victimized” by the evil bank. Not a word about the borrower’s own responsibility for her behavior. This was an adult woman who knew the difference between right and wrong, yet deliberately chose to lie about her income so she could get a loan she knew she wasn’t qualified for. And Hillary Clinton stood there and told this idiot woman that, of course, it was the government’s responsibility to bail her out of the mess she’d created for herself by engaging in fraud. It was unbelievable. Not one person in the cheering crowd objected to the idea that taxpayers should bear the burden for this woman’s irresponsible and dishonest behavior.

Try voters have HAD EMOUGH!

Enough of the high gas prices!

Enough of the housing market going to hell in a hand basket!

Enough of political wrangling on who can fill their wallets the fastest!

Enough of career politicians who serve in office for 4 decades or more and don’t do a damned thing in the process!

Yeah, we had HAD ENOUGH!

And on Election Day, we are going to show Congress just HOW MUCH we have HAD ENOUGH of all this nonsense!

We didn’t buy our first house till we where 40 and then used “sweat equity” to help. Some years later we refinanced took some money paid off some bills. We had a 2 year ARM, it got us a incredible rate. 2 years later we converted it to a fixed rate that was lower than my original. We made a promise to each other, we had taken all the equity we where gonna take. We could have refinanced again and again the offers came at us daily, but we didn’t.

My wife and I are not “Rocket Scientist” we are just average folks. We’ve worked hard and made mistakes, some of them huge, and NEVER expected anyone to bail us out. We live, we learn, we keep moving forward.

Why do so many people think their problems should become my problems? What is happening to our country?

NO BAIL OUT

The “currency exchange” type customer is one with little experience in dealing with traditional banks, have no understanding of contracts and are otherwise poor credit risks. Think of someone who takes their entire paycheck in cash each week and then wonders why there is no money left at the end of the month. I know several people who got caught in the sub prime mess and this is precisely how they manage their money.

Everyone involved in this scheme needs to suck it up. The government should be focusing on prosecuting the people who came up with this bright idea, not bailing people (suckers) out.

Great link. Thanks. Interesting to point out, I feel, that when I was investigating mortgage fraud on the A side, a very high percentage of the credit scores that were involved in it were in the 700′s. The subprime mortgages make the fraud more easily identifiable. In MANY instances, a quick peek at the loan application was all it took.

Interestingly, there’s lots of options if you want to skip out on a loan, but no one was very helpful in coming up with option to pay down the whole thing.

It’s a huge fu**ing mess and the government bailing people out simply isn’t fair to the rest of you who are customers in good standing.

Is it retarded to suggest that the banks take possession of the properties but be forced to rent to the subprime deadbeats at a reduced rate? I suppose that would just create a large population of deadbeat renters….

Our founding fathers thought nothing of the kind and must be turning over in their graves. This is where liberal-think, liberal academia and liberal-policy has gotten us.

A once proud nation of people who not only wanted to care for themselves, but thrived and prospered in an environment of self-preservation has sadly become a flock of unmotivated and lazy sheep bleeting for the government to take care of every obstacle or problem that comes their way.

Our ancestors toilfully participated in the rise of this great nation and we are witnessing it’s fall, as the sheeple twiddle their thumbs in ignorance and the MSM give their stamp of approval to the entire disgusting process.

Gilda on May 12, 2008 at 10:13 AM

GRRRRR is right! This is outrageous. Like the guy said, “it’s not yours to give.”