Should Sub-Prime Lenders be bailed out by the Gov't?

you have GOT to be kidding me! what to stop this from happening again in the future if they get bailed out? UGH!!!!!!!!!!!!!!!!!!!!!!

Subprime bailout? $120 billion
More than 1 million borrowers may be at risk of defaulting on their mortgages. Assisting them all wouldn't come cheap.

NEW YORK (Money) -- Want to pick up the check for every homeowner who got saddled with a risky mortgage? It's a big one - on the order of $120 billion.

Lawmakers and consumer groups in recent weeks have been calling for assistance for those at risk of defaulting on their mortgage.

On Wednesday, Congressional Democrats led by Charles Schumer (D-N.Y.) advocated steering hundreds of millions of dollars into nonprofits to help the growing number of homeowners who are having trouble paying their mortgage.

But economists and industry experts say the cost of a bailout would be significantly more than that.

Christopher Cagan, director of research at First American CoreLogic, says rising mortgage payments on adjustable rate loans will force 1.1 million homeowners into foreclosure over the next 6 years. He estimates the cost of paying off the debt for those borrowers would be $120 billion.

A spokesperson for Sen. Schumer says the senator is not suggesting the government should pay off borrowers' loans in full. The spokesperson says Schumer believes a mixture of counseling and restructuring of the loans would bring down the costs of the program considerably. He says Schumer hasn't finalized a plan, and that Schumer has said banks and lenders should foot part of the bill.

But even a partial bailout plan would cost far more than a few hundred million dollars.

Larry Litton, whose company Litton Loan Servicing oversees the payments on 400,000 subprime loans, says on average it costs his company $16,000 to put one of its customers through a "loan modification" program if which borrowers get moved into loans with slightly lower rates. That would put the price tag of a nationwide program to assist troubled borrowers at $17.6 billion, using Cagan's default estimates.

"The numbers are going to get very large," says Raphael Bostic, a professor of economics at the University of Southern California. "I don't think this is a feasible plan."
100 biggest markets - where the growth is

A historic rise in delinquency rates among borrowers with low credit ratings has raised concerns that a record number of Americans in the next few years will be unable to pay their mortgage. Many of those borrowers were put into loans with low teaser rates that are now adjusting upward, sometimes doubling their monthly mortgage payment.

Consumer advocate groups say those loans, with steeply rising payments, were pushed on borrowers who didn't understand the terms. Advocates say a government bailout, even a large one, is appropriate because regulators didn't do enough to stop predatory lending, and because of the high cost of foreclosures.

"The cost of not doing anything would be devastating to many communities around the country," says Lisa Rise, a vice president at the nonprofit National Fair Housing Alliance.

Rise notes that even a $120 billion bailout would not be without precedent. Economists estimate the federal government spent upwards of $150 billion to resolve the Savings and Loan Crisis of the late 1980s and 1990s.

Still economists say bailout could have the effect of causing more defaults. "If the plan is to pay off loans when people quit, then I plan to quit paying my loan," says Michael Englund, chief economist at Action Economics.

What's more, some economists say a bailout could encourage more risky lending in the future. "A bailout would validate what some of these lenders and borrowers did, which we now understand was reckless," says Carl Tannenbaum, president of the National Association of for Business Economics.

"I don't think that's what we want to do."

Message edited 4/13/2007 4:33:43 PM.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

um no. i shouldnt have to pay for people making poor financial choices. There is pleanty of free homeowners counceling avaliable.

banks are goign to work with these people, the last thing a bank wants to do is foreclose. let the idiots who underwrote these mortgages pay for it in terms of restructuting the mortgage.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Schumer what are they thinking????????????????????????!!!

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

I usually like Schumer too. but this is a baaad idea.

unless people had guns put to their heads to sign the papers for their mortgage, sorry, its your fault!

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

this morning they discussed this on NPR.
A huge lender nationwide EMB(I think that was the namw) has just started a special dept called the "MOD Squad" to help all of their borrowers that are falling behind. The staff is specially trained with special resources to try to save the homes from foreclosure.
A few other big lenders are setting up the same programs.
Most lenders now have what is called Loss mitigation & those people are not trained to encourage the borrow to get their act together. They are just trained to tell people they are about to lose their homes.
While it is certainly true that nobody held a gun to their heads, some of the hardest hit areas are the lowest income, where people are least educated & know little or nothing about loans & contracts.

I've said it before & I'll say it again-loan officers are salesmen NOT financial advisors....too many people did not recognize that.
This country has Buyer's remorse clauses & bailouts for everything else, they'll come up w/something for this too.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

I believe that we should assist people who were victims of predatory lending, which is very common. I am not saying to grant them money, but the government can assist in the form of loan restructuring. In some cases, the banks can be fined to help with costs, depending on the situation. Many of the victims are middle class people who are ineligible for much other assistance, yet some of them are not educated enough to have understood their loans. I do not agree with the person who said that banks do not want to foreclose. They could care less.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Posted by SweetestOfPeas

Posted by ssdbk

I believe that we should assist people who were victims of predatory lending, which is very common. I am not saying to grant them money, but the government can assist in the form of loan restructuring. In some cases, the banks can be fined to help with costs, depending on the situation. Many of the victims are middle class people who are ineligible for much other assistance, yet some of them are not educated enough to have understood their loans. I do not agree with the person who said that banks do not want to foreclose. They could care less.

victims of predatory lending? no one put a gun to their heads. when you're taking out a loan for $100's of thousands, shouldn't you be smart enough to know what you're getting into? Sorry, but if you don't, maybe you aren't fit for something so complex. JMHO

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

NO- this country is going down hill fast

freedom of speech is gone- anything you say can hurt someone feelings

there is no personal responsiblity anymore- if you fall - sue, if you take out a mortgage on your house to buy a boat and go on a dream vacation- the government will bail you out

enough already

and if you can't read- then take a class and learn- there is no excuse for that

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Posted by ssdbk

Posted by SweetestOfPeas

Posted by ssdbk

I believe that we should assist people who were victims of predatory lending, which is very common. I am not saying to grant them money, but the government can assist in the form of loan restructuring. In some cases, the banks can be fined to help with costs, depending on the situation. Many of the victims are middle class people who are ineligible for much other assistance, yet some of them are not educated enough to have understood their loans. I do not agree with the person who said that banks do not want to foreclose. They could care less.

victims of predatory lending? no one put a gun to their heads. when you're taking out a loan for $100's of thousands, shouldn't you be smart enough to know what you're getting into? Sorry, but if you don't, maybe you aren't fit for something so complex. JMHO

You'd be very surprised at what goes on. I have a client who has worked his *** off his whole life but guess what, the guy cannot read. He brings me every legal document. He has a decent home in a middle class neighborhood. Are you saying that he never should have taken out a mortgage when he bought the house. At some point he had to trust someone. He wants to retire and move now but it is very scary that someone can take advantage of him so easily. He's in his 70s.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Posted by lilacwine

Posted by Meaghan729

um no. i shouldnt have to pay for people making poor financial choices. There is pleanty of free homeowners counceling avaliable.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Posted by SweetestOfPeas

Posted by ssdbk

Posted by SweetestOfPeas

Posted by ssdbk

I believe that we should assist people who were victims of predatory lending, which is very common. I am not saying to grant them money, but the government can assist in the form of loan restructuring. In some cases, the banks can be fined to help with costs, depending on the situation. Many of the victims are middle class people who are ineligible for much other assistance, yet some of them are not educated enough to have understood their loans. I do not agree with the person who said that banks do not want to foreclose. They could care less.

victims of predatory lending? no one put a gun to their heads. when you're taking out a loan for $100's of thousands, shouldn't you be smart enough to know what you're getting into? Sorry, but if you don't, maybe you aren't fit for something so complex. JMHO

You'd be very surprised at what goes on. I have a client who has worked his *** off his whole life but guess what, the guy cannot read. He brings me every legal document. He has a decent home in a middle class neighborhood. Are you saying that he never should have taken out a mortgage when he bought the house. At some point he had to trust someone. He wants to retire and move now but it is very scary that someone can take advantage of him so easily. He's in his 70s.

this client of yours has the intellect & foresight to bring you his legal docs for you to look over, so he would not fall into the category I was referring to.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Message edited 4/13/2007 7:04:53 PM.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

most of the sub-prime loans in question- are re-fi's

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Message edited 4/13/2007 8:14:58 PM.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

not everyone that has a subprime loan has bad credit.
we needed to do a no income check/stated asset loan because my DH is self employed & doesn't take a big paycheck & we had most of our money tied up in properties in Florida that were being sold at the same time.
We took a higher rate, but its fixed & its still much lower than people have gotten over the last 100 years.
We also could have gotten 175k more-with NO PROOF of our income....I still can't even believe that they'll let people w/500 Ficos take these loans.
We were pitched every ARM & I/O under the sun, the broker even told us we were "wasting money" by taking a fixed rate. Luckily we have knowledge about how these things really work.
Since I've been in my house, my LIPA bill has almost doubled due to surcharges, my health insurance went up 20%, my oil bil has been as high as $500 p/month, our taxes went up, my homeowners went up.
Its easy to see how people with those ARMs that had no understanding of future expenses would get screwed.
Its really bad business & I've been saying for at least two years this would happen.
I do not feel bad for the lenders, I do not feel bad for all the people that stepped in $hit by getting in on the boom at just the right time as brokers, processers, whatever, I don't feel bad for the flippers that got burnt, I don't feel bad for the "smart" people that thought their equity was a never ending money tree.
I do however feel bad for the FEW people that really just wanted the american dream of homeownership & were taken advantage of by people that KNEW these people would get screwed.

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

Re: Should Sub-Prime Lenders be bailed out by the Gov't?

well since I'm telling you I paid a full precent MORE than anyone I know that had full documentation at that time...even though our scores are good I feel that catagorizes it as sub-prime.
We did not go through a bank, we went through a broker because our bank wasn't interested in doing a low doc loan.
So you tell me, does that make it a PRIME loan, I certainly didn't get a PRIME rate for 2004.