Just who are all these "responsible" homeowners, anyway?

[Bluebear]

Those smugly pointificating here that they busted their ass to make their house payments, somehow implying that there is something lazy or greedy about those in trouble because of these troubled times, do read on:


======


President Obama's housing plan is designed to save "responsible" homeowners from foreclosure by having taxpayers subsidize their mortgage payments.

The problem is, how do you define "responsible?"

In his speech, Obama said his plan "will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell. And it will not reward folks who bought homes they knew from the beginning they would never be able to afford."

It should be fairly easy to identify speculators who bought homes to rent or flip. But how do you prove someone bought a home they knew they couldn't afford?

I've spoken with many people who can't pay their mortgages and are desperate for help. All bought homes they thought they could afford and in many cases really could afford.

Most got into trouble by refinancing their homes - often more than once - and extracting every possible dollar of equity. The money went toward granite countertops, stainless steel appliances, credit cards, student loans, vacations, weddings, cars, etc. Then came a job loss or a divorce or the roommate moved out, and suddenly they couldn't make the payment. They tried to sell or refinance but couldn't because the home's value had dropped below the loan balance.

Responsible or reckless? Who's to say?

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/19/BUR1160C69.DTL&type=printable

:applause:

[lonestarnot]

1. How many of them could have afforded the joint before they lost jobs?

[Bluebear]

2. If someone says they need help, I can only take them at their word.

I would far rather bail out my neighbor than another investment firm.

[lonestarnot]

3. Damn straight!

:toast:

[Fire1]

7. Thank you!

[blondeatlast]

8. Word. nt

[leftstreet]

15. Right on!

:toast:

[flvegan]

4. "taxpayers subsidize their mortgage payments" I fail to see where that's the case.

[blondeatlast]

5. In this case, a rising tide raises all the boats. I'm a so-called "responsible"

homeowner (traditional fixed rate/big down payment) and when the next door neighbor walked out of the mortgage they could no longer manage--I don't even want to know what that did to my own property values. The respectable equity we had built up is GONE and it will be years before we have any hope of recovering it (no--we don't have any other debt right now, people).

Better that they were able to stay there, keep up the place, take care of the grandkids--and keep my own property value up.

[EFerrari]

6. People used their equity to make up for the lag in their wages.

[WorseBeforeBetter]

9. This sounds pretty damn reckless to me...

"Most got into trouble by refinancing their homes - often more than once - and extracting every possible dollar of equity. The money went toward granite counter-tops, stainless steel appliances, credit cards, student loans, vacations, weddings, cars, etc."

I wouldn't have included student loans in the above -- that speaks to the insane cost of college in this country.

Many DUers deny the granite/stainless, but I saw it first-hand while living in the DC area. When selling my condo, many 20-somethings sniffed at the older kitchen -- I'd like to know how many of them bought the $799K condos and are now whining about being foreclosed on.

Here are some of my measures of "reckless":

--Buying homes at insanely inflated prices.
--Taking on the risk of an ARM when you don't really understand risk.
--Assuming that housing prices always go up.
--Denying that this house of cards wasn't going to fall.
--Buying with no home inspection.
--Ignoring the 33% take-home income rule. (If your bank tried to force more on you, you had the right to say no. I did when World Savings tried to force a huge equity line on me...it's not that difficult.)
--Using your home as an ATM (beyond reason--$50,000 fairy-tale weddings is not "reason").

I'm not saying there aren't legitimate cases out there, but millions of people seemed to lose their heads and we're all paying for it.

[lapfog_1]

10. I'll tell you one story...

A good friend of mine. And a very sad story.

He has worked hard for 17 years, almost all of them at one company, moved his way up the ranks to manager.

He got married to a beautiful girl, she was 28, he was 35... 5 years ago. She worked hard, he worked hard. She
was a legal immigrant from Vietnam, he is from Sri Lanka. Both were US citizens. Her one dream, an American dream, was to buy a house. 2 years after they were married, she was diagnosed with cancer, a rapid form of lymphoma.

He bought a house 1 year later so she could have a small flower garden and gaze at it from her living room couch,
given that she couldn't go outdoors while in chemo, nor could she have visitors.

She died less than 6 months later. The insurance didn't cover everything, including her traditional homeopathic
treatments... to their credit, his company insurance did pay over $1M to try to keep her alive. He paid another
$120,000... but he had to empty his savings completely, cash in his 401K, take up donations at work, and borrow
from friends and family. And he remortgaged his house that he had put 20% down and had a fixed rate 30 year. Now
he has a 100% ARM... and it's reset once already. They also cashed in both of their life
insurance policies to help pay the medical bills.

So there he is, living alone in a house that he can't afford. He just took a 15% pay cut (as all employees did), and he now has a roommate... but he lives in a very sad place. And the house is now worth 2/3rds of what he paid
for it 3 years ago. And he is late with his mortgage. He has cut every expense. No internet, no cable. The thermostat is set to 62 in the winter and 85 in the summer. He cooks every meal at home... and it's mostly rice
and beans with a little chicken or whatever is cheap. He drives a 12 year old Camry with 200K miles.

If he can save his house... if... this is what he has to look forward to for next N years... That's if
he can keep his job AND the company doesn't go broke.

A mortgage reset would help, a housing rebound would help more (he would sell it for what he owes, or even
take a loss, but the loss now is $100K and he doesn't have it).

Otherwise, it's jingle mail time (like the houses on either side of his).

He tells me that he wants enough money to buy the burial plot next to his wife... and that's all he wants now.

I hope he qualifies for some sort of bailout/reset/assistance. But I have no way of knowing if he will.


I'm sure some libertarian Ayn Rand type will be along shortly to say what a deadbeat he is, how he shouldn't have
bought a house, that he should have kept the life insurance policy, or that he deserves bankruptcy for his
"mistake" of buying his dying wife the house she wanted...

[Missy Vixen]

11. Lapfog, I'm so sorry for his loss

It's amazing to me how many on this site believe that they are immune from any kind of downturn or reversal of fortune. Those who sit on their high horse and lecture about "personal responsibility" and "buying below one's means" either do not live on the East/West Coast, work in an industry that is going down fast, or have never had a medical emergency that's not paid for or only partially covered by insurance.

We currently have no health insurance. It scares the shit out of me. My husband had an incident a year ago in December; we were COVERED by heath insurance, and after deductibles and other insurance company non-paying items, it STILL cost us almost two grand for a four-hour emergency room visit. We made payments.

I can't even imagine how desperate your friend is right now. I hope that he qualifies for the bailout, because if someone needs it, it's that guy. Bad enough to lose your loved one, but to lose his credit rating, his house and everything else? God.

[Bluebear]

16. You said it.

[Ichingcarpenter]

12. The River Flows

The river flows
It flows to the sea
Wherever that river goes
That's where I want to be
Flow river flow
Let your waters wash down
Take me from this road
To some other town

All he wanted
Was to be free
And that's the way
It turned out to be
Flow river flow
Let your waters wash down
Take me from this road
To some other town

Flow river flow
Past the shaded tree
Go river, go
Go to the sea
Flow to the sea

[Richard Steele]

13. People who haven't yet had 2 weeks worth of bad luck. EOM

[XemaSab]

14. Who is "responsible?"

:shrug:

D is 32 and makes 60,000 a year. She recently bought a house for 660,000. She is very responsible and pays her mortgage on time. She and her boyfriend are going to Australia on vacation next month.

C is 42 and recently started a business which is proving a little hard to get off the ground. Before he started his business he made minimum wage in a dead-end job. He makes 20,000 a year. He rents a room in a house for 800, but he spends most of the time at his boyfriend's house. He buys food for the boyfriend and the boyfriend's daughter, because the boyfriend has been unemployed for 6 months. C is currently in default on his student loans, and has to borrow thousands from his parents to meet basic needs.

J and D are 35 and 40. They have a combined income of 150,000, and they recently bought a 600,000 house. J is pregnant and will be taking time off from work to have the baby.

S is 55 and makes 40,000 a year. She pays 500 a month for rent, and there were recently mass layoffs at her workplace which she escaped. She and her boyfriend went to Brazil 6 weeks ago, and in 6 weeks they are going to Panama.

Who is responsible? Who isn't? :shrug:

[blondeatlast]

17. Ya know...

Yeah--you said it very very well. :thumbsup:

[NashVegas]

18. I Say We Call For Surprise Inspections

Any home with a granite, marble, or cement counter-top - no bailout.


Any home with a polished cement, hardwood, or marble flooring - no bailout!

Any home with Wolf, Bosch, or Aga appliances - no bailout!


:evilgrin:

[Missy Vixen]

21. We have Pergo downstairs

Does this mean we're declined?

:evilgrin:

[NashVegas]

23. Busted, Busted, Busted

Sorry, missy.

[Missy Vixen]

26. And here I thought that we were being responsible because it was more affordable than carpeting!

:cry:

[Bluebear]

28. :)

[carlyhippy]

19. I have watched "House Hunters" for years on HGTV

and constantly asked how the people on the show, with the jobs they claimed to have, could afford a 800,000 mcmansion. I have a 49,000 mortgage and I think the payments are high, I must live in a place where wages are lower than other parts of the country I guess. I often wonder just how many of the folks on house hunters are still in their homes today.

[alarimer]

20. I don't want my tax money paying off anyone's house when I have to rent.

Where's my bailout? My rent has gone up dramatically because of higher property taxes, yet I can't even claim that on my tax returns.

I have been responsible and not bought a house I couldn't afford so why are people who did being rewarded?

[Missy Vixen]

22. What if I don't want to pay off whatever it is you might need?

Banks? We use a credit union, and have for years now. Why should we support the FDIC? Our credit union isn't failing.

Schools? We don't have kids there. Why should we pay for your kids?

>I have been responsible and not bought a house I couldn't afford so why are people who did being rewarded?

You think that losing a job through no fault of our own, despite years of responsible behavior, is "irresponsible"? Jesus.

Why don't you reread what you wrote and think it over? The clue phone's ringing, and it's for you: There are now millions of people who've lost good jobs, can't find another despite diligent and daily effort, and it's not a choice of whether they want to rent or not. It's a choice between living inside and homelessness. Nice to know that you are so angry over the fact you haven't bought a residence that you believe those who have (and are now out of work,) deserve to suffer.

Figure it out.

[treestar]

24. It is for the stability of society - what would happen if millions

foreclosed? We'd all be renting from the rich. I rent too. But it's about more than just me.

[Missy Vixen]

27. Millions are foreclosing. Right now.

There is a "rocket docket" in Florida, for instance, that is churning out 1,000 foreclosures a day. Yes, you read that right. One courthouse, one state. One thousand per day.

It'll be a great marketplace for buyers. After all, how low can the foreclosed houses go for? At the same time, the misery will be off the charts.

[malta blue]

25. I hope I can benefit from the new program

The STBE Mr MB up and left with with a mortgage that was twice what I paid when I was a single mom. And now I am a single mom again. My mortgage eats up my entire paycheck each month, and I have to rely on child support for my expenses, food and utilities.

I have never been late on a payment.

I have never missed a payment.

I would call myself "responsible". I would call him the biggest asshole on the planet for doing this. He has not given me a penny toward the mortgage, although the is the primary borrower. But see - the foreclosure would not hurt him - he did not put a penny in. I used all the equity from my single person home and invested it in this. I would lose 75k in equity alone.

What do I do?

[PVnRT]

29. It's not even that easy

Some homeowners could have afforded to buy the fancy stuff at one point, or have it paid off; do we judge the "responsibility" based on whether or not their houses look fancier than ours? My mom retiled her kitchen floor, but didn't refinance for it - yet, according to this author and others on this thread, without knowing that, she would be "irresponsible."

[Rage for Order]

30. The litmus test for this is pretty easy

If you bought a second home, investment property, or did a cash-out refinance you get nothing. If your loan was done for the purpose of purchasing a primary residence or a Rate & Term refinance (cash-out is limited to < $500 in these refi transactions) then you are eligible for assistance.