Reducing mortgages by 100k with the stroke of a pen?

[HeIsTruth]

I was watching Glen Beck last night and he was saying that the Fed has suggested the possibility of reducing homeowners mortgages rather than lowering interest rates. Basically, he said if you had a mortgage for 350,000, the bank could say ok, you now only owe us 250,000. He said something about it giving instant equity so people could go out and spend it.

Why, he asked, would the banks not be yelling and screaming at this suggestion? He said because he thinks they both know what kind of situation we are all in and that their losses could be in the hundreds of billions or if they didn't go along they might be looking at a trillion in losses.

The fed knows they can't keep lowering interest rates because eventually the dollar would be worth nothing.

Basically, Beck's assumption is that we are in deep, deep financial trouble when the fed is suggesting the banks just write off billions for home owners to stop the bleeding.

[Issachar]

Re: Reducing mortgages by 100k with the stroke of a pen?

The banks would have to pay me an awful lot of money in order to get me to feign sympathy for them. (It would have to be feigned because I can't have any real sympathy for them.) This sentiment does not stem from anything personal, but rather because of how the whole banking/financial system is set up, including fractional reserve banking, compound interest and it's fiat currency. They made their bed, let them sleep in it.

Issachar

[Guest]

Re: Reducing mortgages by 100k with the stroke of a pen?

That would be cool!
Because I only owe $59K on my house.
So I'd get 41K back?
Do they need a pen, I'll be happy to supply them one.

[N1095A]

Re: Reducing mortgages by 100k with the stroke of a pen?

Dependiing upon the loan, they'd basically be crediting back the interest (depending upon how long it had been).

You could pay 8 years of $1000/mo or $96,000 but the loan only went down $15,000 or so (not real, just ballpark). So they credit you with $81,000 and the loan pays off faster.

Hang on ... the big one is coming I think ... maybe not in '08 ... unless there's war and gas shoots up even higher ...

[MoreThanConquerors]

Re: Reducing mortgages by 100k with the stroke of a pen?

yeah, that would be awesome!

[SAT]

Re: Reducing mortgages by 100k with the stroke of a pen?

I really hate to say this but ....if it seems too good to be true, it probably is. There has to be a catch in here.

[Glorify Him]

Re: Reducing mortgages by 100k with the stroke of a pen?

Frankly, I am apalled that anyone on this Board believes this is "free money" and that anyone is entitled to a reduction on their mortgage.

One of the biggest problems in this country is greed--people don't live within their means and want more and bigger and better. The chickens have come home to roost. Not every lender out there is evil and sucked people into buying a house. Many people over extended themselves because they "could." That shows to me, greed, and incredibly poor judgment.

Home ownership has been widespread in this country as in no other because banks could keep interest rates low because default was low--not so with credit card rates because of the high rate of bad and uncollectible debt.

Sorry, but this causes me great alarm and signals to me that we may very well be getting ready to hit the next Big Depression. It's just like the "free" money the govt is giving everyone this year--sure it's free--in your dreams.

[DUB & EVE]

Re: Reducing mortgages by 100k with the stroke of a pen?

That would be cool!
Because I only owe $59K on my house.
So I'd get 41K back?
Do they need a pen, I'll be happy to supply them one.

Man thats a good deal for you.

[N1095A]

Re: Reducing mortgages by 100k with the stroke of a pen?

It's not free money. It's the fact there's no discretionary income. When the homeowners go bankrupt, the house devalues all other houses. Which can't sell. So they go bankrupt. It starts a tidal wave that is already going. Then the apartments will skyrocket because of demand for places to live. Except the bankrupt folks may not qualify even for that. Scary....

The reason they're talking insane is because they know where this is going. Real Estate companies are closing their doors. That's an ominous sign.

I have a bill company that offered to wave ALL the interest and settle for principle only. That's how bad it is out there. They're offering 39% off the bill. I'm trying to see if I can do it but it would take a miracle. Yes my house really hurt me.

[Guest]

Re: Reducing mortgages by 100k with the stroke of a pen?

There'll be more 'unorthodox' solutions put forth, no doubt. I had heard this a couple of days ago - suggesting that banks simply go ahead and write off principle now. I don't see that as the silver bullet, tho. Politically correct? Oh sure. It'll make a sheeple feel good. Fiscally efficient? Not on your life.

It all comes down to cash flow in times like we're headed into. Cash is King. Actually, Jesus is King.

The banks are in big trouble. Today (it is reported) UBS (the Swiss bank) sold off $24B in "Alt-A" mortgage-backed securities - the next grade above sub-prime - for 70 cents on the dollar. Now my calculator says that (if the story is true - by the way, the story is here ) that's a $7.2B hit to their bottom line - on supposedly good paper. Why sell stuff like that? 1) the paper really isn't that good, and 2) to raise cash because something else in their holdings is even worse. I think they've got some old fish wrapped in that paper.

No sympathy for the banks, here. No sympathy for the borrowers who took out 100% ARMs, either. Nor for the folks who took out a second mortgage on their soaring equity - so they could take a vacation.

But in good time, our suited legislators will figure out that the socially responsible thing is for our Uncle Sam to just buy all the mortgages up and give the houses to the occupants.

[Issachar]

Re: Reducing mortgages by 100k with the stroke of a pen?

No sympathy for the banks, here. No sympathy for the borrowers who took out 100% ARMs, either. Nor for the folks who took out a second mortgage on their soaring equity - so they could take a vacation.

This is true. As I've said in the past, the problem is not George Bush or Alan Greenspan, the banks or the borrowers ..... it is the human race in it's fallen state; selfish. It's all about "how can we get the most". The sinful nature seeks to satisfy the desires of the flesh because that is what it believes will bring rest, contentment ... fulfillment. The flesh is too ignorant to realize that things made out of matter can not do that. Believing it will though, when the flesh gets something, it is a relatively satisfied for a brief time and then it wants more. Surely the problem of discontent must be a matter of not having enough things, it reasons. So goes the neverending cycle of get ... not satisfied, get more ... still not satisfied, get even more ... still not, etc.forever. Forever until one is born again and finds contentment in Christ. That is a part of what makes us separate from the world. They seek contentment in things; we find it, in Christ.

...... something like that.

Issachar

[N1095A]

Re: Reducing mortgages by 100k with the stroke of a pen?

Could be they sold them for the aggregate principal value taking into account interest already paid. They, in effect, get all their money back, PLUS they get to write-off the loss which reduces their taxes.

If they made $100 billion and are taxed at 50%, then they get $3.6 back in taxes. Not the money they would have made of course, far from it, but they got free from the risk.

[RollingAlong]

Re: Reducing mortgages by 100k with the stroke of a pen?

The Feds must be desperate to suggest something this insane. Asking the owners of mortgages to forgive and write-off a portion of the principal? We are talking about contract law here. Can you imagine the lawsuits? The court systems would be bogged down for years. I can think of all kinds of problems this would create. What about the homeowners who are current on their mortgage payments but due to drop in home prices the mortgage is more that the house value? I could see all kinds of discrimination issues popping up. No way this could be administered fairly in the eyes of all who would be involved.

Bernanke Urges Banks to Forgive Portion of Mortgages (Update6)

http://www.bloomberg.com/apps/news?p...Vv8&refer=home

[Guest]

Re: Reducing mortgages by 100k with the stroke of a pen?

I would just like to remind people here that circumstances such as job loss or medical issues can really put a responsible person in bad shape.

Greed is a huge problem in our country and I think a lot of young couples were roped into buying homes they could barely afford on two incomes. One of them loses a job and mortgage payments can't be made.

The company my husband works for is having another round of layoffs today. Jobs are going over sees. This company hasn't given employees raises in a couple years now and well, that looks like a continued trend at this point. His friend went in for his "review" with the boss and was rated a number 1, best of the best. Then his boss leaned over and said to him, I'm sorry, even though you're our best, our department is going to be hit hard with layoff, so get your resume ready.

My husband's department will have layoffs in May. I pray that he will not be laid off in May. He is the best of the best in his department, but as you can see that means nothing when greedy companies can go over sees for cheap labor.

We live in a modest house and have a 15 year mortgage of about $40,000. Every month I pay double the principle and anything extra that I can add to that principle to try to cut our 15 years into more like 7. But if my husband loses his job, it can be rough. We do have the money to pull out of the bank and pay off the loan, but heck, just property taxes alone are as huge as a house payment anymore. If he lost his job, eventually there goes the health insurance and I have health problems and boy, nothing can get you in debt faster than that. There are lots of things that get people in huge debt.

I did get a job and can pull in about $1,000 a month to help out, (kid in college next year and that won't even cover the monthly cost of sending her to a state school), but when your property taxes are about $600 a month in a rinky dink town you can find yourself in financial trouble really fast. The price of everything keeps going up every year except for our incomes. We have to live in a "need" society instead of a "want" society. "Do I really need this before I buy it?"

I just wanted to say it's not just the mortgage companies duping young unknowledgeable couples into buying more than they can afford, it's our economy and the greed of large companies shipping jobs overseas. The corporate higher ups of these companies are making hundreds of thousands, if not millions of dollars and giving themselves raises every year..., that's greed. The common folk don't get raises and are just grateful to be employed.

A lot of things can throw a person into debt fast, but yes, we are a very greedy country.

[Issachar]

Re: Reducing mortgages by 100k with the stroke of a pen?

Denise, a very thought provoking post. I will keep your husband's job in mind and prayer. I can attest to losing a job being no small matter.

I think that this issue is so all encompassing. The (mandatory) indoc ....er, education system takes our children for 13 years and turns them out into a world totally not having a clue about finances or the economy. They don't know what profit is, they don't know what it takes to start and run a business, many cannot even balance their own checkbooks .... this all in a supposed free enterprise, capitalist system. Then they go to college and don't learn much more, especially as far as economy is concerned, get out, get married and prepare to purchase a house with all the complexities that go into that. It's no wonder that the banking system can so easily pull the wool over the collective eyes of American's.

If one researches the establishing of the education system in America, especially concerning John Dewey, the so called father of modern education, (he was a socialist), it can be discovered how things got to be how they are today.

Company exporting production and even design and now even tech support out of the country? heh-heh .... greed on many levels. They must compete or go out of business. To compete in a global economy, they have to go where labor costs are cheap. They could also cut down some on CEO perks to where they only make a living instead of a killing. American's in general will buy according to price. If the foreign made products are cheaper than US made products, that's what American's will usually buy. Why? They want more, same as the heads of companies want more, same as corporate heads want more, same as share holders want more .... etc.

It is a blessed life to be content.

Also, you touched on medical issues. Any major illness can definitely lead to bankruptcy, loss of house, etc. If one has no insurance or inadequate insurance, it doesn't have to be a major illness.

Issachar