Rate freeze is bullshit

[archenemy]

What's amazing to me is that the same people who say they are against overconsumption are just fine with this. I don't get it.

[Hugh Conway]

I have a hard time with New Orleans. I think New Orleans should be abandoned becuase of the geographic location--Mother Nature is going to win the battle. But what do I do?

 

By that same token Woodinville, Chealis and Centralia should be abandoned.

[archenemy]

So should White Center. Just out of principle.

[Hugh Conway]

So should White Center. Just out of principle.

 

If we are removing things on principle Tacoma and Detroit are way ahead of White Center

[EWolfe]

I am surprised you didn't register as Hugh G Rection 8======D

 

 

[Dechristo]

I am surprised you didn't register as Hugh G Rection 8======D

 

[SemoreJugs]

Wow, this thread made it three whole pages as a well-reasoned discussion. And then there was page 4... myself included. My 2 cents: I ran up $30,000 in credit when I first moved here, had serious health problems that prevented me from holding down a full-time job, and just ignored the idea that one day I would have to face the debt created by this "easy money". I had perfect credit before then, always paid my bills, didnt overspend, blah-blah-blah.

 

The funny thing is, despite my lack of income, for at least 3 years, my creditors still continued to lend me money and even raised my credit limits a few times. I was doing minimum payments which kept them happy because I was really racking up the interest. I knew eventually I would hit a wall. But I was between a rock and a hard place. I needed to pay my rent, treat my medical condition, and buy food. My income was only about 1/3 to 1/2 of what I was spending. Shame on me for overborrowing. But shame on my creditors for giving the money in the first place to someone that obviously was headed toward defaulting.

 

Result: I have an atrocious credit rating. I have defaulted on 30,000 in loans. After the nipple of free money was taken away, I managed to make enough and live within my means (coupled by the restoration of my health). My creditors are out $30,000. Well, I guess they really only lent me about $22,000 and the rest was interest. Then they sold the debt to collectors so maybe they recovered about half of it. Now the debt collectors are screwed. It will probably be at least 5 years before I could possibly settle this debt.

 

Analysis: Both myself and the creditor made a poor decision. But I have learned from my mistakes. Have they? I probably should have declared bankruptcy three years ago. I have learned how to plan a budget and stick to it (as long as life does'nt throw any more curveballs my way in the near future). So yeah, a little pain hurts, I wont be able to get a loan on a car or house for a long time, but thats okay. I don't need to have a brand new car. Rent is still relatively cheap. I am mobile and dont want the burden of a house even if I could swing the payments. SO let them eat their mistakes now so those mistakes don't snowball on down the road.

[JayB]

More on the topic here:

 

http://calculatedrisk.blogspot.com/2007/12/ten-things-to-know-about-freeze.html

[Stefan]

I have a hard time with New Orleans. I think New Orleans should be abandoned becuase of the geographic location--Mother Nature is going to win the battle. But what do I do?

 

By that same token Woodinville, Chealis and Centralia should be abandoned.

 

Good point. Becuase I do not believe in FEMA. Especially for all those hurricane folk. If you decide to live in the path of hurricanes, then you gotta pay for it. Your choice.

[chucK]

Thanks JayB,

That link makes it look like this whole thing is not really about helping the stupid-loan homeowners at all. The amount you owe has to be 97% or more than the value of your home; i.e., it only instructs the banks to work more on the loans in which they'd take a total bath if they foreclosed. The punch line is great, "This is all about getting the homeowners to answer the phone calls from the bank" (who desperately wants to improve their situation getting a five more years of payment out of these people because the collateral is worth less than the loan).

 

So I guess now the way I see it is that this whole thing, is not doing much at all.

 

EXCEPT...it is doing the bad thing that Archy is worried about in terms of sending a signal that irresponsibility has no consequence. Even worse, is that it will have a consequence anyway, just removing the bad press. Sheeesh.

 

Oh well, I was all convinced that the stupid Bush administration was actually doing something sorta right, and I could burnish my non-partisan credentials by arguing as such. No such luck.

[Kit]

I don't really see the harm. This is not as big a deal as everyone is making it.

 

My neighbor and I both recently bought similar houses. I was conservative and went with a traditional loan. Why should I get all upset if her lender freezes her initial ARM rate, should she be eligible under this program? Will she be paying less for her house than I will be for mine? In terms of payments, yes! But in terms of total cost, no. She'll pay more over time as long as she keeps paying down the principle more slowly than me.

 

If this allows her to stay in her home until her son is grown and she has more income to spend on principle, I'm all for it.

 

Doesn't cost me a dime. The only way it could affect me is by possibly keeping her house (and all the others like her) from foreclosing in the next couple of years and flooding the market, which would drive down the price of my house. Of course, not that many people will actually fit all these eligibiliy req's and the effect on the market won't be that great. (IE I won't be surprised if the value of my house stagnates or even falls). But, its something.

[Kit]

Now let's see the perspective of the renter who has been responsible and has shyed away from buying a house for a couple of years. Should they benefit from houses like my neighbor's foreclosing and driving down the price of housing? Yes!

 

But... the market will really have to fall hard to tip the tables for them. It would depend on how long they've been shying away from buying, and how far the prices fall, and how fast.

 

This renter could have been responsibly holding out for only a couple of years and the market might be buoyed tremendously (specifically) by this rate freeze. In that case, the rate freeze might hurt this renter.

 

Does anyone feel that this is really going to be the result given the the small number of people who will actually take advantage of a rate freeze?

 

 

[SemoreJugs]

I have a hard time with New Orleans. I think New Orleans should be abandoned becuase of the geographic location--Mother Nature is going to win the battle. But what do I do?

 

By that same token Woodinville, Chealis and Centralia should be abandoned.

 

Good point. Becuase I do not believe in FEMA. Especially for all those hurricane folk. If you decide to live in the path of hurricanes, then you gotta pay for it. Your choice.

 

Yeah, those selfish bastards. I mean, any population has the means to go live anywhere they want. The Indians should have just abandoned all of America when Europeans began driving them off their land. Obviously, it was a losing battle. Who cares that they spent their entire lives there, that their ancestors lived there, that they truly felt connected to that piece of the Earth. Same goes for New Orleans. All those poor folk should just hit the Trail of Tears and go live on a reservation for the underclasses.

 

Its one thing if you build a mansion on a Sea Cliff and think you should have the government bail you out when it topples into the sea. Its another thing if you have grown up in a place all your life, have all your family there, and dont have the means to move somewhere else and actually have a better life for yourself. And of course there would be ample jobs waiting in this new place to accommodate all of them.