why should the banks refinance when they have calls for bailouts coming from the right and left?

I want a check from the govt in an amount equal to the average bailout given to any home owner in my income bracket. What? we can't hand checks out to everyone? darn.

Sure thing. And would you like the thirty or forty years of debt that comes with that so called "bailout"? Or how about the back breaking monthly payments and the anxiety that comes with knowing you are a few paychecks away from being put out on the street?

The homeowners you speak of won't be receiving any checks. The luckiest will go from owing 110% of the value of their homes, to 100%. Or maybe go from a double digit loan to a single digit one. Watch what you wish for.

Mark, I know we all want to feel bad for people who may lose their homes. Its not fun. But its not true that foreclosures means people on the street. They will be temporarily without a home IF they do not plan ahead - its not like foreclosure happens in the middle of the night and they come and put you on the lawn without telling you. Of course there are some who will continue to live in their world of denial, which is how they in part got here, and may suddenly find their things on the front lawn. But people can declare bankruptcy, which can also help them avoid a tax penalty if the home is liquidated below price. Does bankruptcy suck? yes. Is it the end of the world? no. They are going to have to rent. Lots of people rent. There will be rooms for them, because lots of people renting will finally be able to buy a home at a reasonable price. You act like everyone was duped. I see a lot more Americans who were not duped than were.

If the person goes from owing 110% of the value of their home to 100% the value of their home they just made ~10% via debt forgiveness. That means they will have that much more in their pocket to spend on something else because they won't have to spend it on the loan - which they knowingly took. This is to say nothing of the fact that borrowing money is not free - it has real opportunity costs. The S&P500 is down ~11% over the past year. Do you feel bad for people who have lost 10% of their net worth for having bought into that? What if I had shorted the S&P a year ago, should I get that 11% written down by the govt so I can just owe 100% of my short? If these home owners had instead struck it rich, were they going to share their big gains with us?

There is a report in the NYTimes today, Citibank is planning to lower is mortgage and home-equity loans by ~20% over the next year! That tells you every clearly that mortgage investments are high risk right now. But you want the government to take on that risk, we don't even know how much you might be asking the government to guarantee.

Another interesting statistic in the NYTimes today as well, "the owners of 18 percent of the homes in foreclosure do not live in their properties, according to the Mortgage Bankers Association". 18%! almost a fifth of foreclosures right now are by speculators. So that's not even starting to count the numerous people who knew they were bighting off more than they could chew. That's just people who thought they were going to hit the big time. Any publicly financed compensation/write down/insurance programs need to exclude all these people, they deserve nothing, and they certainly don't deserve to benefit from lazy or rushed policy making.

Seems to me much of this problem stems from 2 things. 1) overly cheap money thanks to Greenspan running the printing presses overnight to bail himself out of his last huge mistake, the stock market bubble of the late 90s. 2) under-educated (or unscrupulous) borrows.

Number 1 I can't fix, Ron Paul has some ideas, but they won't happen. Maybe if the media would spend five minutes learning what is going on in finance then public pressure could keep the foxes in the hen house sedated. But I wouldn't hold my breath - since we're dropping interest rates again.

But on number 2 there are lots of things that can be done that would help prevent this from happening again, and they wouldn't try to do all sorts of crazy things with the market and require part of america to pay for the mistakes of another part. We could fund loan counseling centers - these would not have to cost much - let anyone, who wants a home loan reviewed, bring their paper work in and talk to a counselor for 20 minutes about it. Require banks to inform people about such centers when issuing a loan. Require banks to print simple charts that show what can happen to a person's debt obligation over 5 years with comparisons for a growth in value, flat, and slide in value. These kinds of charts are easy and cheap to generate and easy for people to understand. There are probably a number of disclosure/information requirements we could make on banks that would help educate people. Then people can take whatever risks they want and we won't have to have arguments over if they are responsible for their troubles, or not.

Lastly, I would be in favor of the govt doing at least two things right away. The Govt could get the major banks together to come up with a program for renegotiating loans so that they are all working on some sort of level playing field. I don't have the foggiest clue how that would work exactly, but getting banks to do this on their own would be better than legislators, like Hillary Clinton, fixing interest rates. Second is increase financing for counseling to help people avoid foreclosure, or liquidation tax debt etc. Society should accept responsibility for not having educated its people well enough to avoid this stupidity in the first place.

er.. biting, not bighting. don't know how i did that; not so smarts I am.

But its not true that foreclosures means people on the street. They will be temporarily without a home IF they do not plan ahead - its not like foreclosure happens in the middle of the night and they come and put you on the lawn without telling you.... Does bankruptcy suck? yes. Is it the end of the world? no. They are going to have to rent. Lots of people rent. There will be rooms for them, because lots of people renting will finally be able to buy a home at a reasonable price. You act like everyone was duped. I see a lot more Americans who were not duped than were.

Coupla things. I'm in the middle of writing a series of posts on this subject over on my blog (parts one through five are up, with more to come). I'm working on an installment that covers a the points above.

First, bankruptcy does suck. It sucks even more than it used to because of the change in personal bankruptcy laws (which lenders lobbied for). For many homeowners, due to the nature of their loans (again, lenders have themselves to thank for that), it's actually easier for them to recover from foreclosure than it is to recover from bankruptcy.

The latter used to be an opportunity to start over -- not without pain, I know because I saw a roommate go through bankruptcy 15 years ago, but an opportunity to start again. Now, there really is no second chance for a lot of people when it comes to bankruptcy. (Interestingly enough, the bankruptcy laws for businesses and corporations were untouched in 2005. Only the personal bankruptcy laws were toughened.)

So, people are choosing another option, which is what I'm working on a post about now.

Second, renting isn't quite so easy now. In some areas hit by the subprime crisis, there are fewer rentals on the market. One reason is that when apartment buildings go into foreclosure, the bank usually wants the tenants out. Most get 30 days before their evicted, even if they've always paid their rent on time.

So, they have to find new rentals. But not only are there fewer rentals, they are also joined by foreclosed homeowners. So, demand is up, supply is down, and... you can guess the rest.

So, it's okay that mortgage brokers, appraisers and lenders have committed fraud? Appraisers lied about property values. Mortgage brokers, who weren't even licensed, lied about incomes and charged exhorbitant fees. Lenders pretented they didn't know what was happening and let these loans go through. You can't tell me they didn't know most of these loans were destined to fail. They simply didn't care, and they still don't care about the damage they are responsible for. The loans in most cases were sold immediately after the closing. Greed was the motivating factor. We wouldn't be in this mess, if the appraisers, mortgage brokers and lendors had any ethics. They're criminals and should be treated as such.

The innocent suffer with the guilty. I am not looking for sympathy. I just don't want my tax dollars to go to a bail-out of the greedy and the stupid, both individuals and corporations. Personal accountability seems to be missing in our society.
Here's my situation:
In 2005 I bought a house. The mortgage lenders tried to push me into an interest-only or subprime so that I could 'buy more house'; I bought what I could afford for 10% down with a 30-year fixed mortgage at 6.35%. Now I can't refinance for the lower 5.25% rates because MY HOUSE IS WORTH LESS THAN WHAT I PAID FOR IT!
I've had to relocate to another state for work. My company isn't covering my mortgage. No one's buying. After 1 year I have a renter for 2/3's of my mortgage payment. I can't refinance.
No one's bailing me out!
Don't bail-out the greedy idiots who bought more than they can afford with my tax money!
Don't bail out Wall Street [Bear-Stearns] with my tax money!
Don't bail-out the banks and mortgage companies with my tax money!
Don't use my tax money to bail-out the stupid and the greedy!
The federal government isn't Santa Claus for individuals (like the Democrats believe) or for the corporations (like the Republican's believe).
Why won't any of our leaders stand up for hard-working, honest, middle-class American's like me?