Should the Fed Help Fannie & Freddie?

[Frau_Blucher]

It could be an interesting circular argument about whether regulation was the problem or the solution. I've always leaned more toward free markets IF indeed the markets found ways to fully load the cost and impact of goods and behaviors. That sort of thing seems to require either truly minimal regulation (only safety laws and ones that account for costs like environmental impact) or vigorous regulation (if the government dictates certain activity, it should fully monitor that activity within set constraints and without outside influence). If you live with no rules, you have to be prepared to die with no rules, or if you live with the rules, you have to live within the rules.

If we accept that the sub-primes were a serious turning point and genesis of the current problem, it was the federal government trying to artificially stimulate loans to the unqualified - ie. "regulation" - the was part of the cause. Hmm, I wonder what cunts urged that? Their own idea or the industry/lobbyists? It's now the feds trying to come in and offer a bailout (and additional regulation) to fix the problem. The government seems to win no matter what. Lobbying would seem to compound the problem if that turns the regulators into influenceable stakeholders as well - the proverbial fox with the keys to the chicken coop.

It's weird that conservatives would typically argue for freer markets and less regulation and government, then lean to supporting things like oil subsidies and military adventurism. Also fucking weird that liberals would argue for more government then not have any discipline to actually govern. It's the absolute worst of both worlds. I guess what bothers me is that we're not hearing about what's next? After the bailout, do we go back to more regulation or less regulation? Do we eliminate the effect of bad influencers like lobbyists who tend to contribute to bad behavior? Is there anybody in charge who can offer a comprehensive vision?? (I'm not expecting an answer)

[phillyidol]

Me too swamp. I get calls all the time offering me a refi with equity loan.

As bad as it can get (and it might get pretty bad), if you own your house and have a steady income, you will be ok in the future. Real estate always goes up. Maybe very slowly but it does. The house I grew up in was built for $7000 and sold for $250,000. My house was on the market 20 years ago for $150,000. (I checked with the neighbors) I bought it 9 years ago for $240,000. The exact house a block away just sold for $650,000. No matter how bad it gets, I will hang on to my house. I would work 2 jobs and sell my car. Even get rid of all luxuries like cable etc. I think my house is my biggest and most important investment which I will hopefully pass on to my kids.




Worlds GREATEST Photographer!

[SwampThing]

I know several people who are thinking like you Philly, unfortunately there are many that are (were) enticed by the opportunity of pulling cash out instead of lowering their payments.

<font size="1">[b]Favorites of 2008 (so far):[/b]
Beach House - Devotion
British Sea Power - Do You Like Rock Music?
Cut Copy - In Ghost Colours
Crystal Stilts - Crystal Stilts
Elbow - The Seldom Seen Kid
</font>

[Frau_Blucher]

Even for those who weren't enticed, there are people who will lose jobs because of the economy (or illness like in the other thread). They then can't make payments and lose their home, often their only "stable" investment. Good luck to everybody and knock on wood, but those IFs become big IFs if the whole market and economy go in the shitter. Few are safe.

[coop41]

[quote][i]Originally posted by SwampThing[/i]
<br> They almost always included the option to take lots of cash out. I don't believe these were Freddie or Fanny offerings.


[/quote]


Most definitely they were. They purchased those loans and offered the products (Unless it was Jumbo financing, which acted the same way). They set the guidelines, continued to loosen them, allowed homeowners to take out 100% of their equity (heck, you could even do a 125% loan!). They allowed purchases to 100% even on investment properties and relaxed their documentation requirements to boot. Wall Street couldn't buy them fast enough as well! This made every Tom, Dick and Harry able to buy a home, which further inflated home values. I'd argue rates have a much less impact on purchases than many believe.
On a side note, I chuckle when I hear the argument- I'm a renter, what do I care if the homeowner who is behind on their payments gets foreclosed on or not?

[phillyidol]

Thank God we never took the cash out! I also know a lot of people that refied, and took the cash to pay bills and do stuff to the house. And when I refied, the encouraged me to spend that money. The guy was telling me to fix up the house or buy a new car. Now I have to thank god I never did anything with it.
Blir brings up a good point. You really never know what might hit you next in life. What if you get canned and can't find work? What if someone gets sick? Those things can change all your plans. So like he said..good luck to us all. All the best plans can be ruined.
I had a big scare this year. Against all logic, Mayor Bloomberg decided to restructure my field of work. We were facing doomsday but we were able to pull through it. But you never know.




Worlds GREATEST Photographer!

[Frau_Blucher]

Like the great and unimpugnable political commentator and sportscaster Keith Olberman would always say, "The injury is day-to-day...we're all day-to-day!" [:o)]

[phillyidol]

And lets not forget this is world wide.
I feel real bad for small business. People that put everything into what they do only to lose everything. The American dream has just taken a punch to the gut.




Worlds GREATEST Photographer!

[phillyidol]

OK, new vote tomorrow! Lets see what happens.




Worlds GREATEST Photographer!

[MARV]

With the U.S. economy going south, we may be forced to do what the Germans and Austrians did during their incredible inflation after World War I: Each city and town designed and printed their own emergency (or ersatz) money called <a href="http://en.wikipedia.org/wiki/Notgeld">Notgeld</a>. [i]See below:[/i]

<a href="http://s7.photobucket.com/albums/y271/marvymarv/?action=view¤t=459119257_c2a86f1747.jpg" target="_blank"><img src="http://i7.photobucket.com/albums/y271/marvymarv/459119257_c2a86f1747.jpg" border="0" alt="Notgeld 1"></a> <a href="http://s7.photobucket.com/albums/y271/marvymarv/?action=view¤t=GermanyNotgeld-StadtApolda-25Pfenni.jpg" target="_blank"><img src="http://i7.photobucket.com/albums/y271/marvymarv/GermanyNotgeld-StadtApolda-25Pfenni.jpg" border="0" alt="Notgeld 2"></a>

<a href="http://s7.photobucket.com/albums/y271/marvymarv/?action=view¤t=laage50pf-a-t.jpg" target="_blank"><img src="http://i7.photobucket.com/albums/y271/marvymarv/laage50pf-a-t.jpg" border="0" alt="Notgeld 3"></a> <a href="http://s7.photobucket.com/albums/y271/marvymarv/?action=view¤t=laage50pf-b-t.jpg" target="_blank"><img src="http://i7.photobucket.com/albums/y271/marvymarv/laage50pf-b-t.jpg" border="0" alt="Notgeld 4"></a>

<a href="http://s7.photobucket.com/albums/y271/marvymarv/?action=view¤t=not135_b.jpg" target="_blank"><img src="http://i7.photobucket.com/albums/y271/marvymarv/not135_b.jpg" border="0" alt="Notgeld 5"></a>

It turned out to be a wonderful opportunity for designers to start from zero and create unprecedented currency. The value of the Mark or Pfenning in Germany and the Heller in Austria may have been worthless, but the bills were extraordinarily beautiful and often witty.

Incidentally, the city of Great Barrington, Mass., has been circulating its own Notgeld or barter money called <a href="http://www.reuters.com/article/newsOne/idUSN0530157720070619">Berkshire Bucks</a> for the past year.

[Frau_Blucher]

[quote][i]Originally posted by marvymarv[/i]
<br>Incidentally, the city of Great Barrington, Mass., has been circulating its own Notgeld or barter money called <a href="http://www.reuters.com/article/newsOne/idUSN0530157720070619">Berkshire Bucks</a> for the past year.
[/quote]
LOL, I have some Berkshire Bucks!

This could possibly bring up the tangent discussion about the impact of such crises on globalization versus more nationalistic focus and even extreme localization (like Berkshire Bucks). If you're completely localized in a self-sustaining economy, some anarchists and other fairly unrealistic idealists argue that we'd escape the rat race of free market capitalistic states. In practice, the genie is likely too far out of the bottle.

[KYYX4ever]

[quote][i]Originally posted by SwampThing[/i]
<br>Didn't the low interest rates also play a part. I know several people who were habitual at re-financing everytime the rates went down a quarter of a percent (and took equity out of their home each time).

Also I received no less then 2-3 offers to re-fi in the mail daily during a 5 year period. They almost always included the option to take lots of cash out. I don't believe these were Freddie or Fanny offerings.
[/quote]

yeah, I know lots of people here who constantly refinanced each time the rates went down, and/ or cashed out on their equity. I think folks thought it was "free" or "easy" money. To be honest, I always thought those offers were junk mail, and tossed them out anyway. It just seemed too easy, too convenient.

Anyway, I am wondering how much we are supposed to worry. As was posted above, if you have a secure job, own your home, and have no or little debt (like us), should you still worry ?

Also, are IRAs safe ?

[Frau_Blucher]

[quote][i]Originally posted by KYYX4ever[/i]
<br>Anyway, I am wondering how much we are supposed to worry. As was posted above, if you have a secure job, own your home, and have no or little debt (like us), should you still worry ?
[/quote]
Fuck yes. It's that "secure job" bit. Even if you're a government worker or school teacher, if your municipality isn't collecting any taxes, there will school budget cuts, classroom sizes will grow, programs will be cut, teachers will be laid off, etc. It's the great circle of fuckedness.

I don't mean to be all doom and gloom...just saying we're all tied into this.

[coop41]

[quote][i]Originally posted by KYYX4ever[/i]
<br>[quote][i]Originally posted by SwampThing[/i]
<br>Didn't the low interest rates also play a part. I know several people who were habitual at re-financing everytime the rates went down a quarter of a percent (and took equity out of their home each time).

Also I received no less then 2-3 offers to re-fi in the mail daily during a 5 year period. They almost always included the option to take lots of cash out. I don't believe these were Freddie or Fanny offerings.
[/quote]

yeah, I know lots of people here who constantly refinanced each time the rates went down, and/ or cashed out on their equity. I think folks thought it was "free" or "easy" money. To be honest, I always thought those offers were junk mail, and tossed them out anyway. It just seemed too easy, too convenient.

Anyway, I am wondering how much we are supposed to worry. As was posted above, if you have a secure job, own your home, and have no or little debt (like us), should you still worry ?

Also, are IRAs safe ?
[/quote]

Most likely you are luckier than the majority, as a homeowner, here is what you have to worry about:

Let's say, for ease of discussion, your home is worth $100,000.
This past month the [i]average[/i] decrease in home values was over 16% but to simplify things we'll say 10%. Now mind you this obviously doesn't apply to all areas, some far worse, some better.
So now your home is worth $90,000. Next month, let's assume things improve and the decrease is only 5% (I know that's quite a stretch and flies in the face of what is really going on) so now your home is worth $85,500. How many months does this go on before you are upside down? Heck, even Georgie, who owns his mansion free and clear should be shaking. As the values continue to decrease, homeowners in your neighborhood who aren't as stable in their job lose them or struggle to make the payment on their meager earnings. There becomes a point where they decide the struggle to make their payment each month is pointless, heck, they owe way more than their house is worth because they did refi at every chance. So they let their home go to foreclosure. Now, the bank needs to get out from under this additional debt so they sell the home for less than it's worth (after many many months) further pushing down values.
Neighborhood becomes more and more rundown as no one keeps up their property due to cost or vacancy. If you live in a community that has a Homeowners Association, someone gets to make up the difference from all the non-paying homeowners.
Renters, who are living in homes and who have made every rent payment on time and are having no struggles suddenly find themselves displaced when the landlord can no longer pay the mortgage.
There are many more ways that you could be impacted but until something is done to stem the rising tide of foreclosures, it's going to get worse. I know lots of people who say "Well, my area hasn't lost any value or has only gone down slightly". They are usually kidding themselves, are unaware or are in for a shock.
Another thought, all of these people who are allowing their home to go to foreclosure, doing short-sales, etc. are eliminating themselves from being able to buy a home 4-7 years from now at best. Mortgage guidelines are tightening, not relaxing. Mortgage applications were down a whopping 23% nationwide this month. I can tell you first hand, the people who did apply are far more likely to be turned away now.

[birdmadgirl]

[quote][i]Originally posted by coop41</
Renters, who are living in homes and who have made every rent payment on time and are having no struggles suddenly find themselves displaced when the landlord can no longer pay the mortgage.
[/quote]

I worry about this. So far, so good on my end, but many, many a renter here in Las Vegas has had the rug jerked out from under them, waking up one morning to find an eviction notice on the door because their landlord has lost the house.

On one side, I'm glad we didn't end up buying a house early this year. I lost my job back in April (it was tied to the housing market). I'm self-employed now, but my work is still closely tied to the housing market. Thank goodness for Mr. BMG's job. (Or not. He's an exterminator, and his business is suffering, too. People can't afford "luxuries" like pest control right now.)

On the other side, it sucks that we weren't able to take advantage of the falling housing prices. Even if the economy and housing market magically straightened out tomorrow, no one is going to give us a home loan with me being self-employed for less than a year.

I feel like we're stuck in some no-man's-land and there are no right answers. The only answer seems to be to just hang on, which is not very re-assuring.