Consequences of Massive Bailouts

[Andy A]

That's more for the people who are working the system, squatting in their houses after they have stopped paying, destroying the houses' interiors, whining about how none of it is their fault, flush with assets, and wanting to buy again soon.

Noone wants blood from people who are getting foreclosed upon due to hardship and who truly can't pay - though I do think if you are foreclosed upon you should not be allowed to buy a house for 10 years - no exceptions.

I have an issue with people choosing foreclosure to game the system, just as I have an issue with someone declaring bankruptcy to avoid creditors, yet being well off financially a year later because they transferred all their assets to a family member, then got them back.

Face it, SB44. Though you are absolutely right in this post and the other of your posts, human nature is human nature. Some people have absolutely no scruples when it comes to money and think only of themselves, and consequently, society as a whole, is damaged and pays for it. I guess it is part of being relatively successful, though it shouldn't be. I can live with it but it is unfair and I sure don't like it.

 

[DuneAHH]

That's more for the people who are working the system, squatting in their houses after they have stopped paying, destroying the houses' interiors, whining about how none of it is their fault, flush with assets, and wanting to buy again soon.

Noone wants blood from people who are getting foreclosed upon due to hardship and who truly can't pay - though I do think if you are foreclosed upon you should not be allowed to buy a house for 10 years - no exceptions.

I have an issue with people choosing foreclosure to game the system, just as I have an issue with someone declaring bankruptcy to avoid creditors, yet being well off financially a year later because they transferred all their assets to a family member, then got them back.

Scooty,
When the bottom drops out of your personal world in spite of careful planning & modest living, what is your game plan?

 

[Busta Hustle]

This all sounds very reasonable to me. I guess I had the impression that folks wanted more blood.

Actually- for many, the ability to start out from zero/with zero is like the promised land.

But please also be aware of another i-bank goodie called the deficiency judgement. Florida being a recourse state means they can take 5 years to file the judgement 20 years to collect and another 20 if they reup the judgement.

That's for the difference between the foreclosed/short sale cost and the resale price. Florida is the promised land for mortgagors.

 

[Geo]

Scoots,

So someone can lose everything trying to keep their home (including the home itself), have their credit destroyed, face the possibility of a deficiency judgement and you believe they shouldn't be allowed to buy another home for 10 years?

I believe that would be reasonable if each of the banks that helped create the situation where the home couldn't be sold be disallowed from lending money for mortgages for 10 years.

 

[Kayak Fish]

One thing I don't understand with all the talk of "upside down" and "walking away". If you are upside down in your primary residence and the estimated value is expected to rebound long before your mortgage is due to be paid off, why does it matter so much?

Aren't you just saving on taxes w/ a lower assessment in the meantime?

Are people just fixated on the supposed value of their "asset" when it is really a roof over their head?

Or I am just missing the point because the Scooterbug clan tends to stay in houses for decades/generations?

Another question - what happens if you stop paying your mortgage, then start paying again when your situation improves? Can you avoid the whole mess, but just have more interest racked up?

Because you are talking about paying double or more its value per year for something that is illiquid and in all likelihood will not return to the break even point for a decade or more. So what you are lighting money on fire because you want to appease the ethics police. If you have little equity this is honestly a no-brainer. As Dune-ahh pointed out, credit scores are a bogus construct. Don't buy things with money you don't have and they are worthless.

Many people can't stay in one place their whole lives and don't buy homes intending to live there for 30 years. They buy so that they don't "lose all that money paying rent". In an economy like this people lose jobs/businesses and have to go where the work is. Historically one could buy a house and expect that if they had to sell, it could be done within a reasonable amount of time, and certainly not at a 50%+ loss in two or three years.

Whoever's fault it is, who cares? A rational person needs to recognize the rules of the game, look for the best way through, do a cost benefit analysis and ethics police be damned. If you walk the lender gets a property it felt was good collateral for your loan. No one on either side of the table was doing anything out of good will. It's just business.

 

[scooterbug44]

Which one?

The hurricane destroys my house game plan? The fire destroys my house game plan (it's a different plan than the hurricane)? The unemployed game plan? The oil spill takes out the entire Sowal economy game plan? The I get sued somehow and loose all my assets game plan? The medical emergency game plan? The medical emergency if I lose my health insurance/they refuse to pay game plan? The how do I dress myself well if I go blind game plan? The my bank fails game plan? The entire economy melts down game plan? The identity theft game plan?

The absolute worst case scenario is that I fall back on one of my safety nets and use it to tide me over until I can get back on my feet somehow - insurance, family, friends, government handouts, you name it.

I've never been rich, so I don't have far to fall, don't worry about appearances, and I will do just about anything if necessary. Hell, I'll go to different Sowaller's houses and mooch dinner/wine on a rotation in exchange for chores if that is what it takes to stay fed.

I started out as an agricultural worker (machete provided) at $5 an hour and a babysitter back when you got $6 an hour for 5 kids and wages have gone up since then.

 

[Geo]

Andy, I know you believe you are describing people. But you're not. Your description better fits the corporations.

The little guy loses everything. The bank gets the asset, a bailout and then pursues a deficiency judgement. The shareholders get a dividend check. The executives get bonus check. And the little guy as a bonus gets your stigma and dogma.

 

[LuciferSam]

Scoots,

So someone can lose everything trying to keep their home (including the home itself), have their credit destroyed, face the possibility of a deficiency judgement and you believe they shouldn't be allowed to buy another home for 10 years?

I believe that would be reasonable if each of the banks that helped create the situation where the home couldn't be sold be disallowed from lending money for mortgages for 10 years.

The problem is that money is literally created out of thin air through lending. That would cause a full blown 1930s style depression.

 

[scooterbug44]

Scoots,

So someone can lose everything trying to keep their home (including the home itself), have their credit destroyed, face the possibility of a deficiency judgement and you believe they shouldn't be allowed to buy another home for 10 years?

I believe that would be reasonable if each of the banks that helped create the situation where the home couldn't be sold be disallowed from lending money for mortgages for 10 years.

I think a large part of this is banks lending when they shouldn't have, so I want something built into the system to keep it from happening again and again and the taxpayers continuing to pay for it that doesn't freeze up credit.

As it was pointed out, credit scores are hooey, so I think there should be another penalty to break the cycle. This takes potential customers away from the banks for a set time. No special cases, no FHA propping you up, no loopholes.

If you have just suffered such severe financial losses that you lost your home and had your credit rating destroyed, won't it take that long to regain your footing and build up assets enough to buy a house anyway?

 

[Busta Hustle]

A note on bailouts in general brings a quote from the 1800's to mind.

"The American republic will endure until the day congress discovers that it can bribe the public with the public's money."

A note on the fundamentals of Value. From the time property taxes were legislated in Florida (1940's???) it took all the way until 2003 (50+ years) for the Net Assessed Value of real property to reach 1.1 trillion dollars.

Four years later 2007 it had doubled to 2.25 Trillion. It took 4 years to do what it had taken 50+ years to do. No amount of building in the state could have made that possible.