Foreclosures To The Extreme Literally: Will The Government’s New Bill Bail Americans Out?
Posted: Wednesday, July 30, 2008
by Abigail Richards
People seem disgusted as news released yesterday announced the foreclosure of one of the homes built by the show Extreme Home Makeover. The mini-mansion was built in 2005 as a gift to an Atlanta-area family, appears headed for foreclosure.
Three years ago Milton and Patricia Harper of Lake City, accepted the keys to a small castle, plus enough money to pay taxes on it for 25 years. Seemed their future would be secure, right?
According to the Associated Press, the family that owns the house took a $450,000 loan against its value to start a construction business that ultimately failed.
Their story is a sad story, losing a son to a choking accident. Then they bought a house that was a dump, which led to Extreme Home Makeover building their house. With the first purchase, maybe the crew should have given some sort of business counseling with the new home. Of course, they probably would have never imagined that the family would still feel the need for more after receiving the largest house the show ever built.
Today, the news is no different. President Bush signs a bill to offer relief to homeowners who can not afford their homes. My question is does it benefit to continually bail out those who most likely don't have the money to own that home.
I know what it is like to be in need. I also know that the longer I was bailed out, the easier it became to run up the debt. I never had to face consequences for bad financial decisions. The truth is eventually every person does have to face those consequences. So is this new bill just prolonging the inevitable?
After all, it will send the government into great debt in order to provide homes for those losing their homes. Critics have also been upset about the lesson it teaches those who do not take care of their finances. I can tell you from personal experience, when you are given a house that you really don't deserve or can afford, you tend to not have the resources or sometimes the care to take care of it and keep it up.
The new law creates a $300bn rescue fund to help thousands of homeowners get cheaper loans. It may also be used to bail out the struggling mortgage giants Freddie Mac and Fannie Mae, which own or guarantee around half the nation's mortgage debt.
According to the US firm RealtyTrac, the number of homes going to foreclosure continues to grow. The study showed that one in every 171 US households was in the process of losing their home - up 121% on last year.
I am not saying something does not need to be done and done fast. I just think this is evident of a larger problem in our society. It is a mindset that everyone needs to "own" a home. I propose some people do not.
I wish every day we would have rented just because we can not afford the upkeep on our home. People will say that with buying I am not throwing away my money but instead earning equity.
In the eight years I have owned my house, we have earned maybe $100 in equity. Our credit was not good, so we pay interest every month. Refinancing when times are hard is not an option because we have no equity and lowering interest rates are not done for people who struggle to pay on time as it is.
How is this bill supposed to help? It is going to allow those in foreclosure the option to refinance. Although, many say it will not be up and running until next year and will still depend on the banks willingness to write the loans and take a loss.
Eligible borrowers must have spent more than 31 percent of their monthly incomes on their mortgages as of March 1, 2008. The troubled loan must have originated no later than Jan. 1, 2008, and be on the borrower's primary residence. And the borrower's income must be verified.
This option is really only for those planning to stay in their home for the long term. If you sell during the next five years, you must agree to share 50 percent of any profits from the resale with the government. What's more, homeowners can only retain equity gains based on a sliding scale. The homeowner would have zero equity from a sale in the first year, with the amount rising 10 percent in each succeeding year and capping at 50 percent from a sale in year five and thereafter.
The equity must be repaid because the maximum amount on the new loans will be capped at 90 percent of the current market value, which automatically gives the previously troubled homeowner 10 percent equity in the home.
That is more equity then I currently have in my home, so I guess that would be a benefit, but when the housing market goes back up, you again might lost quite a bit of money.
I agree a solution needs to take place. I just hope those who do take advantage of the bill are explained the full effect of it on their finances as well as some counseling on budgeting. I am also not saying all those who borrowed brought this on their self. I realize our entire economy is crumbling. I just think it is now that our society step up and realize the issues are actions cause.
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Top-level comments on this article: (2 total)Are you irresponsible, non credit worthy, have credit card debt, have had a returned check, your debt to income ration bad, laid off, can't pay your bills, struggling to survive. The answer is all too clearly written in the signs and symbols all about. Make $150,000 a year, are an investor, have decent credit, have money to invest, well your a ok. The problem how many foreclosed homes can you buy and who will rent or buy from you? No pay, can't pay, can't pay no credit, no credit can't buy, can't buy = you god it Nada, nothing, zero, zilch. Someone has to pay and you got it, those who have will. It is simple economics. Yes and many want more of the same.
I don't make anywhere $100K annually, much less $150K, don't invest, and have fair credit. I was able to buy a modest home last year after making sure I could afford the monthly payments and promising myself that if I couldn't get a fixed-rate mortgage I wouldn't purchase. The house isn't the high-end home you see on the home makeover shows on TLC or HGTV, but it's nice and it meets my needs. I lost my first home several years prior when I lost my job. Nobody bailed me out, fixed my credit, gave me checks, or made me any deals. I had to work hard and work out everything myself. Now I am expected to pay increased taxes so somebody who can't pull their head out of their rectal opening can keep a home they never could have afforded in the first place. There is something wrong with the system here.You are correct and you noted you lost your home and no one bailed you out. Well it is a bailout of those who have. Private investors they are, those who have and can afford. Now the fact is people are being taken to the cleaners each and every day through usury, breaking laws, exploitation and it is rampant. Your "job" may not be too safe in the future and even the immediate future if things keep going the way they are. Also, they have to get the money from some one and you evidently you fit the profile. The fact is there are no more choices and even if they do this it is uncertain. Look it is that bad out there and it has nothing to do with making bad decisions. It is all about jobs and the ability to pay and there are no jobs so people can't pay. What is the alternative? It is time to forget about yesterday it is gone and worry about now. We should be giving these politicians all the boot but we won't.
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