Time for a time-out?

TIme out costs money. Who's going to pay for it? The taxpayers.

What effect will it have? Almost none. The real estate market isn't going to suddenly bounce back to bubble levels in the meantime. And that's pretty much the only way of stopping foreclosures.

So we would be spending a lot of taxpayer money on nothing.

So I think its a fairly typical Shumer idea - nice sound bite, awe inspiringly stupid if one understands it.

The majority of people facing foreclosure are in that predicament because they bought a home they could never afford. How does a 90 day freeze which allows them to stay in a home who's debt they cannot service really help?

If these people go into foreclosure, it's not like they will be homeless, living on the street. They will go out and find an apartment to rent or a home they can afford. Isn't having a person live within their means a better solution than enabling them to live above their means? What is so bad about having a person get their finances in order even if it means losing their home?

Looks good to me. It will give the homeowners more time to lose their jobs and accumulate more credit card debt.

Addressing the volumne of foreclosures and achieving closure - in a timely manner - is probably a prudent plan of action for both consumers and taxpayers. The housing market can and will correct once lenders and investors work their way through damage control of historic proportions. Perhaps the leadership and staff at Fannie Mae and Freddie Mac can take on this challenge in an expeditious mannner. I'm an average homeowner with a mortgage. I've been paying it on time religiously for some 25 years. It's in my best interest not to have chaos in the marketplace for an extended period of time.

I'm no economist, but it makes sense to me -- if they can restructure the loans of a significant number of troubled borrowers to a point where the borrowers can avoid foreclosure. That's a big IF obviously, with a lot of open questions regarding numbers, but that's what Fan/Fred have to figure out.

If they can stop a large number of foreclosures, it's worth it, because fewer foreclosures helps put a bottom under prices, which allows everything else to stabilize. And stabilization is what everyone wants, right?

Obviously many borrowers just don't make enough to afford the loans. They can't be helped. But I would think others could be helped by shrinking the principle and fixing the rate. If the number of those people is large enough, I say do it.

In any other circumstance I'd be furious about this, because y'know, I'd like someone to shrink my principle too. But when you're in the middle of a crisis you do what you have to, and sort out the rest afterward.

Addressing the volumne of foreclosures and achieving closure - in a timely manner - is probably a prudent plan of action for both consumers and taxpayers. The housing market can and will correct once lenders and investors work their way through damage control of historic proportions. Perhaps the leadership and staff at Fannie Mae and Freddie Mac can take on this challenge in an expeditious mannner. I'm an average homeowner with a mortgage. I've been paying it on time religiously for some 25 years. It's in my best interest not to have chaos in the marketplace for an extended period of time.

Addressing the volumne of foreclosures and achieving closure - in a timely manner - is probably a prudent plan of action for both consumers and taxpayers. The housing market can and will correct once lenders and investors work their way through damage control of historic proportions. Perhaps the leadership and staff at Fannie Mae and Freddie Mac can take on this challenge in an expeditious mannner. I'm an average homeowner with a mortgage. I've been paying it on time religiously for some 25 years. It's in my best interest not to have chaos in the marketplace for an extended period of time.

If the timeout can save some struggling homeowners, I’m all for it. I do not see this as a real problem for the federal budget deficit. I have to admit that I don’t understand why Wall Street changes mood every second. Now that is a major problem. If we all calm down, everything will be alright.

Unless the government plans to force banks/mortgage companies to modify loans (which would open several different cans of worms), a 90 day delay really is just delaying the inevitable is the majority of cases.

I don't think a time-out is a bad idea. There are probably a number of people who are borderline in losing their homes, and could stay if they can get a loan with better (but realistic) terms. From a financial point of view, you loose a lot less money renegotiating a loan versus foreclosing on a house. It's in everyone's best interest (except for those waiting for prices to fall further), to keep as many people in their house, making payments, as possible.

Unfortunately, there are probably even larger numbers of people who have no hope. They simply had no business buying the house they bought (or were a victim of unfortunate circumstances - such as a job loss). For them, yes, a time-out is merely prolonging the inevitable.

Whether or not a time-out will cost us more than we save is matter of how many people fall into each of those groups. I have no real idea what the result would end up being, but the sympathetic side of me says we should take the time out and give some people a chance to rework their loans.

Blue sparkly ponies for everyone! Free houses for all!Consequences for none!

In case Schumer hasn't noticed, Fannie and Freddie just went into federal conservatorship because investors no longer believe their capital is adequate to meet their obligations. Now Schumer proposes giving away large portions of their assets--housing collateral--in one big Secret Santa jubilee.

Magically, two broke institutions will become healthy by giving away their money. And magically, people who can't pay their mortgages will suddenly win the lottery in 90 days.

Today, the Chinese, stubbornly resisting the charms of magical blue ponies, said they are going to pull back on their US dollar investments, having been burned by Freddie and Fannie. So not only will the taxpayer be on the hook for Schumer's laughable proposal, but our main loan shark has announced he's closing up shop. No wonder there is open discussion that the U.S. may lose its triple A credit rating.

As a result of all these events in the past couple of weeks, a lot analysts see an increasing risk that we are about to enter a Greater Depression. One would think, in these perilous times, the public would take this very seriously. But instead it seems far more interested in being entertained by its presidential election, with tabloid coverage, name-calling, and antics better suited to a seventh-grade student council race.

Perhaps we deserve a Depression. A decade of unemployment, malnutrition and homelessness could be quite character-building for our frivolous, irresponsible and spoiled citizens.

Addressing the volumne of foreclosures and achieving closure - in a timely manner - is probably a prudent plan of action for both consumers and taxpayers. The housing market can and will correct once lenders and investors work their way through damage control of historic proportions. Perhaps the leadership and staff at Fannie Mae and Freddie Mac can take on this challenge in an expeditious mannner. I'm an average homeowner with a mortgage. I've been paying it on time religiously for some 25 years. It's in my best interest not to have relative chaos in the marketplace for an extended period of time.

"I certainly don’t want to see thousands of people lose their homes."

How not to lose your home: pay the mortgage. If you can't afford the mortgage, you can't afford the house. Fortunately in life, there are enough "do overs" already. The mortgage holder can walk away: the IRS will no longer tax the forgiven debt. Wait three years, saving money while renting, and "buy" another house.

Imagine this: a woman named Stacey has $250,000 in cash sitting in her pocket. She loans it to a guy, we'll call him Michael, so Michael can buy a $250,000 house. Michael realizes a year later he did the math wrong and makes about $1000 less a month than the mortgage payments, so he can't pay Stacey back. Stacey starts trying to get her money back.

Then a bully steps in. We'll call him Deval. Deval says to Stacey, "Michael may not have any money to pay you, but you can't take his house back for a year."

So Michael gets to live in a house for free. And Deval gets 30 seconds of positive press because Michael isn't filling out rental applications. But poor Stacey is literally poor: she has no money for the next year. In a cutesy voice someone says, "here's a link to an article on Boston.com where you say, 'I certainly don’t want to see thousands of people lose their homes'."

So Stacey watches as her investment (interest and principle payments by Michael) is dead in the water, and then a year later she can finally foreclose on Michael and gets some of her money back.

Net score:
Michael: free house. Woohoo!
Deval: lots of votes. Woohoo!
Stacey: loss of capital and no desire to ever make a loan to anyone again. So she stops loaning money and one less person gets a mortgage in the future.

The end.

Addressing the volumne of foreclosures and achieving closure - in a timely manner - is probably a prudent plan of action for both consumers and taxpayers. The housing market can and will correct once lenders and investors work their way through damage control of historic proportions. Perhaps the leadership and staff at Fannie Mae and Freddie Mac can take on this challenge in an expeditious mannner. I'm an average homeowner with a mortgage. I've been paying it on time religiously for some 25 years. It's in my best interest not to have relative chaos in the marketplace for an extended period of time.

No Time Outs!

As a renter and potential first time home buyer, the only thing these 90 day freezes are doing is extending the housing bubble.

Either you can afford your mortgage, or you can't; and by the time your house goes into foreclosure if you had good enough credit and didn't refinance to take "equity" out of your house you should have been able to refinance.

Bottom line is housing prices are still way too expensive. If I cannot enter the housing market by buying a decent single family home for less than $250,000 in the Boston area, i'll wait til I get a better job or move. If there are no first time buyers, the entire mortgage industry will be at a stand still because noone can 'move up'.

Housing prices still must come down to let first time home buyers enter the market. That is the only way we can turn things around.

Michael M.,
Thanks for you comment.

But, for the record, this woman named Stacey would never be so enamored by the prospect of a big fat commission check that she would lend $250,000 to someone who didn't have the FICO score and credit history to justify such a loan.

I think the lenders bear most of the responsibility for this mess. They've got way too many MBAs on their staffs and way too much research at their disposal to claim they didn't know they were granting loans that people couldn't repay. They didn't have to cut those checks. Many lenders and mortgage brokers were blinded by big fat commission checks and didn't think about what was going to happen to people they roped into bad loans.

So, I will offer no apologies for having compassion for borrowers who just wanted a shot at owning a home of their own.

Unless the government plans to force banks/mortgage companies to modify loans (which would open several different cans of worms), a 90 day delay really is just delaying the inevitable is the majority of cases.

The market is still overinflated.

Unfortunately, the people who did things the right way by purchasing a home they could afford with a downpayment and traditional fixed loan have to pay for the greed and stupidity of others.

We need a clean slate to move forward. The way to do that is to let the foreclosures happen so that the housing market can correct to the appropriate levels. Then, we as a nation have to stop borrowing and printing money that we don't have.

Those who lose their homes will have to rent for a while, then buy when they have the money.

Do people understand what Frannie and Freddie actually do? Both GSEs buy mortgages and mortgage-backed securities.

Some they re-sell as mortgage-backed securities with a guarantee, which is paid for by fees charged to the investors who buy them.

Others they keep and invest in for their own portfolio. They get the capital to invest in these mortgages by selling bonds. (These, apparently, are the mortgages Sparkly Blue Pony Chuck would like to grant a "time out.")

Why, precisely, did the feds step in to take over these agencies? Because they looked like they stood on shaky ground, and were struggling to persuade investors to buy bonds and give them more capital. And since they now represent around half the US mortgage market, this failure to find capital threatened to put an end to The American Mortgage As We Know It. So the feds stepped in and said, there, there, you can keep buying bonds, Mr. Peoples Bank of China and all the rest. We'll make sure they don't go under.

Blue Pony Chuck now wants to take a huge slice out of Fanny and Freddie's balance sheet by preventing them from foreclosing and selling on the collateral for bad loans. As charles said above, this costs money. LOTS of money. Money that Fanny and Freddie don't have.

Where is all this blue sparkly money coming from? The head of PIMCO stated flatly today that the US banking system simply doesn't have the capital to weather this credit crisis. The federal deficit is projected to hit $407 billion this month. And the Chinese, as I said earlier, are tiring of giving us the money to cover it.

So, it's nice to have "compassion" for reckless homedebtors. When the financial system fails--as it is doing right now--they'll find they can't eat compassion.

I rent because I can't afford to own and no lender or broker is going to make me buy a house that I can't afford. And I wouldn't expect Uncle Sam to bail me out if I were foolish enough to buy a house I couldn't afford.

I took a home buying class and realized buying wasn't something that I could afford to do.

How many people buy a house without an attorney? More than you would imagine. They don't know or care what they are signing. You need to understand the fine print, and most people didn't. I talked to a real estate attorney once after he finished a closing. (I was at the registry doing some research). I asked him how many people understand what they are signing. He said none. He tries to explain the documents to people and they stop him and tell him to just show them where to sign. Some don't even speak English. Yeah, I feel sorry for them.

I think most buyers bought out of greed.

Stacey - you're not wrong when you say that the lenders who made loans to people they knew could not repay them accepted the risk they wouldn't get payment, and as they sewed so should they reap.

But you're not right when you say they are more culpable than the persons who assumed the risk of taking loans they knew, or should have known, they could not repay without a continued spike in house values. They either accepted the risk of going forward with something they didn't understand while hoping for the best, or made a bet on the market that they lost. Both sides served to conspire against responsible, deserving people, and deserve whatever comeuppance they get.

I say heck no to the time out. Not unless there is a plan implemented to immediately end the privatizing of profits and the socializing of losses, a commitment to be a creditor nation most of the time, tax and other incentives to save instead of spend, a strategy for finding more productive engines for growth than rampant consumer spending, and a consensus on what kind of person an American should be and agreement to cultivate and enforce the vision.

The value of a home isn't what an irrational market says it is, the value is what a predominantly rational market says it is. We need to do stop catering to delusionally exuberant, the criminal, ignorant, stupid, reckless, greedy, asinine, and complicit tolerators and enablers who created today's fraudulent home prices and start squeezing out the totally unfounded, worthless value they pumped in to prices so people who deserve to won a home can buy one, and people who don't deserve to, can't.

Why is it in everyone' best interest to keep people in their homes? If people can't afford the home and the home goes into foreclosure, there will likely be a buyer for that home. Remember, the reason we are in a credit crunch is because millions of people that could not afford homes bought a home. Now that they can't pay the mortgage, our financial system is crumbling. You don't solve a problem by continuing to engage in the very activity that caused the problem.

Marcus, I'm sure you are familiar with the saying:

"People get what they deserve, not what they expect"

It should be abundantly clear that most Americans expect our Goldilocks economy to keep chugging along and things to be a-OK. Unfortunately, what this country deserves, and is likely going to get is a painful Depression to pay for the excesses of the last 30+ years.

Got gold?

Who benefits if foreclosures are frozen?

1. The home owners who cannot afford their payments and are or about to be in default;
2. The home owners who pay their mortgages on time?
3. Renters who have been saving to buy?
4. Recent graduates with no money, low income and high school loans?
5. Overall economy?

Is there any way to acommodate all of the above? If not what is the rationale for picking one of these groups and not the others as beneficiaries of government help?

The banks and mortgage brokers deserve no compassion, true.

Neither do people who borrowed money they couldn't afford. Granted they might not be able to understand the documents they are signing. But they could very well do the simple "I can't actually pay this" math.

What happened is that a lot of people bought expecting never to have to pay, because they could sell to a greater fool before the note came due. That's gambling, and I see no reason for the taxpayers to pay for it.

Not that they can afford it, a key concept Barney Frank and Shumer don't get. Luckily, neither a republican nor a democratic administration is likely to agree to their inane ideas - we are already in the middle of a financial catastrophe, no need to use the powers of idiocy to make it worse.

Time costs money. Fannie and Freddie are broke. If they die all the way, US real estate goes down 90%. Why would we want to do that in order to keep people who are going to lose their houses anyway in them for 3 more months? Seems like a rather silly tradeoff.

There is no chance a "nice" home in the Greater Boston area will ever be only $250,000. (Unless by "Greater Boston" you mean Hadley, MA.)

If you're deciding between that happening and moving, I'd suggest calling AAA Movers, on Monday morning.

Incomes are too high and inventory too low for that to ever happen, again.

And if it does my guess is that no one would have a job that would pay enough to buy such a home.

Stacey: If you have that much compassion about homeowners that just want a home of their own, how about taking money out of your pocket than and just giving it to me? You write, "So, I will offer no apologies for having compassion for borrowers who just wanted a shot at owning a home of their own. "

Here's my story: I'm 35. Well compensated and have been at my current job nearly 10 years, as has my wife. We live modestly. Our TV is from 1992 and was given to us by a friend. We have one car that was purchased in 1999. Our hot date last night was pasta and watching a movie on tv. We have no kids, no debt, and 20% saved up - even in this housing market.

We want a shot at home of our own. But we also know a rainy day may come tomorrow. We might lose our jobs, have medical bills, or see taxes skyrocket to cover the current financial storm. So we sit on our cash as we watch inflation destory our savings; we pay a rent check on time every month as thousands of individuals reach a hand out to us knowing we have the money to pay their mortgage. We pay taxes on our interest income as others enjoy the IRS ingores thousands of dollars of tax on forgiven debt. How is that fair? The compassion you have for people about to lose their home rewards those who failed to comprehend the risks and punishes the folks like me - the very people you'd rather lend your hard earned money.

So, Stacey: where is your compassion for me in my current situation? Or do I have to go mortgage a home with zero down and payments that exceed my income before you deem me worthy of owning a home?

I married with 3 children and with the economy the way it currently is, I am struggling to cover some of my monthly expenses. I was hoping to take a time out for a few months, or ask the government to step on to help me or even forgive my debt as my personal stock price has gone down significantly like Lehman Brothers.

As a buyer who has been sidelined for the last 8 years, thinking that the bubble was big back in y2k, this whole situation is very frustrating. I have watched friends make money on interest only mortgages only to let it ride on a bigger house & another interest only. Most of them continue to make money on it...unless they moved to the suburbs, where your dead anyway, so whats the difference. The borrowing phenomenon to me is fascinating..I don't know how these people can sleep at night with their mortgages, yet they are racking up flat-screen t.v.'s on their credit cards. I have rented a modest place during that time and managed to bank a few hundred k. The only problem is, with all these government fixes, the dollar has become worthless. The lenders make me sick, the over reaching buyers are even worse..damn you all!!!!!!!! That feels much better..thanks boston.com.

No is going to help the people who find away to make the payment every month and struggle to live paycheck to paycheck so why should we bail out people who can't pay their bills or worse people who don't care about paying their bills?

The problem is that people making $9/hr were given loans for $500,000 duplexes in Lawrence. End of story.

What people don't realize is that the problem here is the adjustable rate mortgages and the declinging property values. If the government wants to step in, a time out is not the way. The answer lies in getting these people back into secure, affordable notes, so the houses can maintain their value and avoid flooding the market with short sales and forclosures which drive neighboring properties down.

Two other people in the home buying process should also have to step up to get things back on track:. The appraisors, who had no problem inflating costs three years ago have now gone back into their shells. The underwriters at the lending banks are also hurting the process. I recently sold a home where the appraisal came in high enough, but the underwriter cut that down by another 10%, sitting in their office, in a different state. We found a different bank and things worked out great for us, but I can only imagine the problems others who are doing the right thing are facing as a result of those who are not. These two parties are now doing anything to cover their ass!

They should cap or reset all ARMS at 9% so anyone with a rate that adjusted over 9% is benefited and given the oportunity to make these payments. This should be for primary residences only, no help for speculators or investors! Anyone who is close to being able to afford their home would benefit, and it would wipe out the excessive greed from lenders. Anyone who can still not afford their payments, never had a chance and made a bad decission.

Agreed Terry (15). Why do I feel like I'm getting the short end as well. I saw the shoddy loan practices, and decided NOT to buy something that I knew I couldn't afford. So now people who had no sense got themselves into trouble and now we fly in and rescue them??? Geez, personal responsibility really is out the window. You're buying a house, not a pair of shoes...

There are greater indignities in life than being a renter. Folks gambled on homes they couldn't afford, lost and now have to start over. That's life. As someone who's been renting until he could afford to buy a home (the traditional way, with 20% down), I'm tired of Schumer and these other shmucks using my tax dollars against me to keep people in homes they couldn't afford in the first place. Isn't the definition of someone who lives in a home, makes payments each month and has zero equity in the home that of a renter anyway??? They're already there and they don't even know it.

All I know is that foreclosures in my neighborhood are killing local comps so much that nobody can refinance. I could lower my payments but my house value has dropped by so much that I would have to put twenty k down to refi. It is just not worth it. I can afford my mortgage but I have $250 per month that is going to the bank because I can not refi. That means there is less money for me to eat out buy durables etc etc. THAT in turn hurts the economy. My credit is perfect but I simply cannot refi because of the new tighter mortgage rules.

As for blame? I blame the lenders first. They were motivated by greed and commissions. The buyers were motivated because they were trusting that if someone was willing to give them a loan then they must be financially qualified. Blaming the borrowers is just so REPUBLICAN..... Blame the banks and mortgage companies. They provided the money. I didn't see them turning down anyone and giving up their big paydays.

For those of you who want these foreclosures happen, I hope they happen in YOUR neighborhood, not mine.

This economic pandering is precisely why the government should not be in the real estate business. If a "time out" is a good idea, why not just forgive the mortgages! That surely would make overindebted homeowners feel better. Why not have the federal government go out and gift houses to people? Ban foreclosures altogether! Better yet, why not just send out gifts of cash! It will bring about eternal happiness! Government, mailing checks endlessly, to solve all our problems. (Oh wait. We've already done that. And the problems aren't solved!)

People seem to be confused about the federal government's current financial reserves. They are less than zero. In fact, the government unofficially is more than $65 trillion dollars in debt. That's $9 trillion in official debt, $8 trillion in Fannie and Freddie debt (newly a government obligation as of last week, thanks Barney Frank ) and the rest in entitlements that no one seems able to adjust.

Corporate bailouts are unforgivable. Consumer bailouts are shortsighted too. I didn't enjoy profits from whatever was Wall Street's last go-go Ponzi scheme (that now is collapsing), and I didn't participate in the real estate gold rush. There is no reason why I should pay the bill that has come due from those excesses. Government: bail thyself, and don't send me the bill.

Or, we could just let it fall apart. Which frankly would thrill me. Houses are still far overvalued with relation to average salaries thus they will continue to fall and every foreclosue just helps that wonderful process right along.

Every forclosure I read about warms my callous little heart. Out on the street? Good!

No way! So what, now those of us that *were* and *are* responsible with our finances get to pay the piper for those that wanted to dance?! Can someone please tell me what those of us that actually play according to the rules get out of this?

No one "deserves" to own a house; that right is EARNED. Make bad decisions and pay the consequences and that goes for the lenders as well. Enough is enough already.

You know what.... for me all that they have to do is give me the ability to ge tback to square one I would be fine. That could be a refinance to a lower rate, forgiving the two months I am behind, or putting those two months at the end of the note.

I freely admit that I got a loan at a time that I should not have. I am also not going to blame anyone else for my decisions but at a time where my income has tripled and my over all situation is significantly better I should be given an opportunity.

As for the taxpayer paying for the losses... that is just foolish. There are million of refinances that have happened to lower a mortgage payment. Nobody cried when the interest rates went from 10% to 5%.

All will be good. I just need to find someone refi to a lower rate. If not I will pay it off in advance and lower the total cost in the long run.

Not for nothing but if there is a lender out there that is interested in the few hundred thousand in interest that I plan on paying look me up, leave a name or number.

JC

What is this time for? If it is for the lenders to have more time to re-package the bad loans and try to get rid of the passive by selling it to the Government, it make sense and it would be a shame at the same time. If they think the market ' fundamentals' will change in mere 90 days, they believe and Peter Pan.

If a time out on foreclosures would increase the national debt then it's a bad idea. The debt is almost $9.7 trillion. Let's not make it any worse than it already is.

Fully agree with Michael M. My story: I came to this country in 1996 from one of the former USSR countries. Worked as a paralegal, went to law school nights in 2000. My wife and I were putting the buying decision off until after I graduate trying to pay law school bills. I too watched in amazament how people around me were buying houses and condos while we were busiting our chops trying to put me through law school. I graduated, went for another year to get an LL.M. By the time I was done with all my studies and got my first law job in 2005 the prices shot up so much that there was no way we could buy anything. So we decided we'd wait again till we save up some money with my newly obtained salary. We were doing all right, but the prices were pretty formidable even for our incomes. Now we have two kids and no desire to buy anything whatsoever. Why pay a lion's share of our incomes if we can simply rent? That way my wife can stay home with the babies (like in good old USSR days). And I don't have to be so damn anxious losing my job in this economy (thanks to all those no downpayment borrowers). One thing kind of gives me comfort. My LL.M. was on the subject of bankruptcy law. Something tells me I will have a filed day when I go practicing on my own (thanks to all those subprime borrowers).

Actually, John K. (in response to #26), homes could very easily plunge to $250,000 in Boston if the credit markets seize up. And given what's going on with the financial industry, in particular today's bloodbath on Wall Street, don't count that out as a possibility.

The massive expansion in credit is what fueled the bubble (that's called inflation) and a massive contraction in credit will cause prices to plunge (that's called deflation).