Another thing is that if “underwater” homeowners are allowed a big reduction in the price of their large, in some cases, unaffordable homes, eventually the market will go up and they will benefit having a luxury home. However I will still have my modest homes.

The connivers will again benefit while the honest will pay the bill. I saw one posting from a divorcee who cannot pay her mortgage. Divorce is expensive and is clearly a choice with consequences.

I like the comment saying that homeowners are really house owners as it is so true. You can have a home anywhere. The power of language to deceive never ceases to amaze me.

Bill

Currently I am facing foreclosure and it is not because I got into a home that was way beyond my financial means or that I spent money irresponsibly. Actually, I did my homework, saved money, had excellent credit and always paid my bills on time. My situation is due to divorce and the loss of that extra income. I was able to keep up with my mortgage until the rate adjusted and because I lost that extra income, I was unable to refinance. Everyone is entitled to the American Dream. Wanting a better life for your family has nothing to do with “greed”. Most middle class people worked their butts off to accomplish the goal of owning a home. Reaching such a goal gives you as sense of pride.

If you are able to purchase your homes, cars and what every luxury you desire outright, then more power to you…it must be nice; but you should not look down upon those who are not as blessed as you. Unless you are filthy rich, you are not buying a home straight out. Since you bring up the subject of “greed”, why is it that even celebrities, who make millions, are having the same problem. Why would people making so much money need to take out a mortgage? Why not just buy the house with cash? If you ask me those are the people who are greedy..with multiple homes, and cars spending, thousands of dollars a day on nonsense. Some of these people are spending in a matter of minutes, what I make in one year. It is a shame that some of these celebrities have it so good and yet they need attempt suicide because they can’t keep it together, have to drink and do drugs because “life is just so hard”….they have no clue what hard is, they are pitiful.

Honestly, I believe the government should step in and the banks should work with people so that they can keep their homes…ultimately, they will lose if all of these homes are foreclosed on.

Why bailout? So these people can continue to show off their fake wealth. They never own those homes anyway, the banks owned them.

The faster we get these people out from “their” homes, the sooner our economy can start recovery.

1. You assume that all people in ARMS had “teaser” or unrealistic rates.

2. You assume that all ARM people in trouble did not put money down or into their homes.

3. You assume that all had bad credit because of irresponsibility.

4. You assume that they bought an expensive McMansion.

I , for one, am NONE of the assumptions above. I AM self employed. I could only get an ARM because, yes, my score was not a good one. WHY? Well.. I spent a good amount of time cleaning up my past due I was being responsible then right? Well, what I didn’t knwo was that NOT having any open credit lines would HURT my score.. how ironic!
Yup..I bought a home because I was afraid of being priced up and priced out of ever owning a home. So I bought before I was “priced out”. Had I known.. I wouldn’t have purchased.
Also. I bought a very modest home..actually a fixer upper. Idid put money down AND I ..well fixed it up over the 2 years I’ve lived here. In the meantime I’ve worked on my credit score to raise it..but alas not enough to qualify now as a self employed individual and at a 100% LTV.. cause guess what.. the equity I DID have is gone! I knew the mortgage would adjust, but I was also confident that if I followed all the suggestions I was given that I would be able to refi when I needed to.
Last, but not least, my starting rate was 6.95%.. NOT a low teaser rate. I’m paying MORE for my home then some who got a fixed (because they could) at prime. And i’ve proven over the past 2 years that I can indeed make a normal sized payment on my mortgage and ON TIME.. just like all my other bills are paid on time.
But. here I am now stuck in a mortgage I didn’t plan on staying in but have been boxed out, with the tighter restrictions, on a traditional refi. My rates will begin adjusting in Dec and then go up ever 6 month. Im’ looking at a 3% increase in the first adjustment and then 1% thereafter depending on what the LIBOR does. I could reach as high as 12.95%.. something I DEFINATELY CAN NOT AFFORD. I may survive the first adjustment, but I better figure out something thehelp me get out of this mortgage.
I don’t consider it a bail out…WHY? Because i will still owe a principal that , after all the adjusting, may be worth less than what I actually owe. I also have learned some valuable lessons wether i get to keep my house or not. I wasn’t taught about mortgages, but I learned from being in the trenches. So, if the gov’t decides to put pressure on teh lenders, which I hope they do, I will be glad. BUT if the lenders refuse to work with their borrowers, than I welcome any gov’t help i can get. After all, I’m a tax paying citizen as well. It’s not just YOUR tax dollars, but all those in these ARMS pay taxes too! And we will be hurting no matter what happens.. it’s just how hurt we all get .. and by all I mean those of you who are NOT in ARMS but are feeling the effects that this is having on our economy.
Besides.. the gov’t also helped create this issue, so the gov’t needs to also help solve it, don’t you think?

For one thing, not everyone is as educated as most of you here. Many of these were low income and first-time buyers and you can’t ignore the fact that from the banks and lenders to the realtors and appraisers, there were MANY inequities and deceptions offered to people did’t have the wherewithall to know better. Yes, these borrowers should have to be accountable, but so should the so-called “professionals” they hired and trusted to give them fair and correct information based upon professional knowledge. It seems the fiduciary duties of many of these professionals slid down right along with the interest rates.

Many people saw home pricing skyrocketing and felt they would not have an opportunity to buy if they waited – so they extended themselves to get their piece of the American Dream. Much of this hysteria was fanned by the real estate and lending industries, not to mention the rates. Then there are those with unexpected circumstances, and those affected by the overall dip in the economy in general. Many types of businesses have fallen off – that equates to lost wages all around.

Don’t be so quick to judge or throw insults – these people will pay for their mistakes for years to come.

I have been in the mortgage industry since 1986, received my CA DRE sale license in 1985, and my brokers license in 1996. I am a Graduate of Pepperdine University, Gradziadio School of Business, and have held several Management and Senior Management positions with various lending and finance corporations before starting my own brokerage firm in 2005. I have been responsible for Wholesale and Retail production and operations, and have run local and nationwide lending activities. I’ve been in the business long enough to have seen mortgage cycles come and go . . . and come again. I was also around when FICO scoring was introduced, and when the sub prime market was created.

Your quest for understanding of YSP should have been initiated by Rep. Barney Frank before introducing a bill that could eliminate opportunities for businesses and consumers alike. Yield Spread Premium is the vehicle by which “wholesale” operations work. The industry of “Mortgage Lending” is no different than any other industry in the world. For any product you have the following flow: Manufacturing > Wholesale distribution > Retail distribution. Manufacturing creates the product and sells to wholesale distributors, who offers wholesale prices to retailers, who then sells the product to the consumer.

In lending the:

Manufacturers are; The Investors i.e. Wall Street, private investment groups,FNMA . .etc. They create the product, and the guidelines for which to sell

Wholesale: The companies who deliver to retailers. Note: Banks and Finance companies usually have Wholesale, Retail, and correspondent business units. Each unit typically operates independently of each other and are identified as “profit centers,” who establishes independent pricing of the same product offered by the company to the channels.

Retail: Company retail or broker/wholesale relationships

Wholesale offers the product at a “wholesale” price to the broker which is naturally a price lower than the retail price. The broker determines the “price choices” to the consumer just as wholesalers offer these same price choices to the broker.

For example: 6.5% @ 99.0, 6.75% @ 100.00, 7.00 @ 101.00 where below 100 is a “cost” to offer the price, and above 100 is YSP. A broker will then offer these prices to the consumer based on the brokers desired “profit margin.” For the example, if a broker’s pricing model states they are to make 1 pt on a transaction, the rate and corresponding cost “to the consumer” would be 6.50% @ 2.0 pts, 6.75% @ 1 pt, and 7.00 @ 0 pts.

Price gouging occurs when unreputable brokers make unreasonable “per unit” earnings.

Note: the same company will also have these same type of pricing differentials between their own retail and wholesale business units since they have been offered the price from “The Manufacturer” to be distributed between their various business channels.

Removing YSP will only remove options to the consumer and prevent the consumer from being able to get 0 pt loans from retail brokers. The problem we face is NOT a result of YSP . . Nor is it a result of Stated Income transactions. The problems we face is a result of many factors that will be emphasized and exaggerated by removing OPTIONS for the consumer. Foreclosures have been multiplied by the removal of the jumbo market lending . . .an option taken away . . .and people who were not in danger previously were now placed in danger. Foreclosures have been multiplied by taking away sub prime refinance opportunities . . And people who were not in danger previously were now placed in danger.

There were abuses from both businesses AND consumers; what industry doesn’t have some level of abuse? And it too irritates me that there are those who have abused the system and abused the consumers. The sub prime market stemmed from opportunity. The opportunity of giving consumers who needed another chance; that second chance. I personally know of no brokers who have made $15k to 20k on a $300k transaction. This would be usury and a violation of section 32 (perhaps it was an exaggeration), however, I don’t doubt it hasn’t happened. These are the thieves who will not be around through this cycle. Unfortunately, if the proposed legislature gets passed none of us will be around. We must NOT let them throw out the baby with the bathwater. As one of my previous SVP’s once said: You must identify the beast before you saddle it up and ride it.