And just what is the administration supposed to do for those who gambled on rates and lost? Bail them out?

Or enact Hillary's idea to freeze interest rates?

I understand this is a huge problem with huge social impact, but doesn't it erode our faith in financial systems if everybody gets a break when things get rough? Aren't people SUPPOSED to lose sometimes?

And why should the rest of America pick up the tab via increased taxes? These "assistance" plans and "stimulus" packages designed to stave off foreclosures and a recession don't occur in a vacuum. Anything the govt does to intervene in the free market has a ripple effect for the rest of us. If they could maniupulate circumstances for the unfortunate consequence free, then I'd be all behind it.

Obviously the blood sucking sub prime guys need their asses handed to them. But not every loan in peril today is the fault of these lenders. Lots of people signed willingly on the dotted line with full disclosure and weren't the victim of some slimy lender. I don't want to pick up the tab for their greed. And we all pay when the govt decides to "help".

exactly...why is this the governments fault or responsibility?@dorkins:

exactly...why is this the governments fault or responsibility? who forced these people to buy the mcmansions?@dorkins:

Exactly! This is what pisses me off about airlines, every time they fail, we bail them out so they have no incentive to improve its the same thing here. If we bail eveyone out now they will expect in the future.

"Sure I can't afford this house, but the nice men from the government will just bail me out."

For once, I can't hold anything against these groups for lobbying. While most times lobbying is done to get their space at the trough, it seems here like it's more to cover their financial-behinds.

"refinance their mortgages at 100% of the current market value of the home"

So in effect, if you bought your house at the top of the cycle and the bank financed you $600k, you should be able to refinance for a $400k loan (current value) and the bank should just eat $200k? I can't fathom how this would be a good idea. Yes, times will be tight for individuals, but rocking the economy when banks are already hard-up for cash isn't the brightest idea in the world -- and this is just a pragmatic thought, not even contemplating the "justness" of it to families who don't qualify for this because they were good consumers when it came to financing.

"rewarding the high-risk lenders"

Trust me, they're not going to be "rewarded" when home-owners go into bankruptcy. Banks don't like holding on to unoccupied houses -- it costs money. Hence why pushing the bankruptcy deadlines back is actually a good idea. It gives time for the lender and homeowner to negotiate a balance/payment plan that works for both sides without anyone's ox being completely gored.

@sharki3232: Plus it will drive rates up for the rest of us, since forcing lenders to take immediate cash losses (thats what happens when you let people refi at current market) will shrink the number of lenders and force them to find profits elsewhere

I don't understand why nobody is reporting that there is very little acquistion debt being foreclosed. These people cashed out the equity and pissed the money away.

I LOVE 30 DAYS FREE RENT!!! Now that these financial wizards can go back to renting something they can afford, maybe consumption spending will get back to normal.

A fair number of people lied on their loans, why am I to feel sorry for them? Rather than buying I've lived in a rental with loud neighbors. I don't get to deduct my rent, I don't have the advantages of homeownership like being able to do what I want with the place.

So again, why am I supposed to feel sorry? Heck if I robbed 400 bucks from a bank with a gun the FBI would be all over me, if I take 400,000 with a stroke of a pen apparently I get everyone's sympathy and a government bailout!

In 2006, the FBI studied three million mortgage loans and found that 30 to 70 percent of early payment defaults can be linked to misrepresentations in mortgage loan applications.

The only way for this to happen was for someone to lie on a mortgage application. Some media stories have implied that it was lenders who did the lying and that most borrowers are victims of predatory lending schemes.

The truth is that borrowers did their fair share of lying too. More than 40 percent of subprime borrowers received loans without having to document their ability to pay. The borrowers simply 'stated' their income on the mortgage applications.

Almost 60 percent of stated-loan applicants inflated their incomes by at least 50 percent, according to the Mortgage Asset Research Institute.

These people can go DIAF
source: [tinyurl.com]

@timsgm1418:
Welcome to Consumerist, comrade.

Alright, so people who can't pay their mortgage may get a free month. Better than nothing.

@poodlepoodle: Along that topic, don't forget the other story here a little time ago where some were up in arms that not paying your utility bills might in fact damage your credit history.

Wow... Why do you guys hate America? Hah. No seriously, I think only the heartless conservatives are up and on consumerist right now.

I agree that people made bad decisions, but there was a lot more than just consumers making poor choices. A lot of people could make their payments if they hadn't lost their job... If they didn't have to pay such high rates for health care...

Nothing occurred in a vacuum, and before all of you form a circle jerk with people struggling to keep their homes in the middle, maybe think about how a lot of other really shitty things have been happening in our economy.

Along that topic, don't forget the other story here a little time ago where some were up in arms that not paying your utility bills might in fact damage your credit history.

Yea that's the reason my bill is so high. I live in Phila which has some of the highest utility bills in the country? Why? Because there are so many people here who don't pay their bills that no company will do business here, so the city runs it. My bill subsidizes all the heat everyone else uses!

I can't wait for this policy to be true of a house I can't buy because I've been priced out by liars! Wow, what a country.

@AngrySicilian:

I have an idea, everyone who lied gets sent to jail. Then we can help out the innocent.

@AngrySicilian: no they linked this article to the wonkette.

@poodlepoodle: People are all just lazy bastards that don't want to pay "responsible bills" and rather blow their money on rims and gold teeth caps. Right?

I find it hard to believe that people want to ruin their credit by not paying utility bills and their mortgage payment. Maybe we should think about our goals as a society and what we really value.

Does a CEO's daughter need a 600k dollar sweet 16 party while people can't even afford to pay their utility bills....

Just a thought.

@snoop-blog: Crap... you're right, let's hope the paultards dont' invade :) It all makes sense now.

@AngrySicilian: LMAO!!!!!!!

I didn't realize that the Murrican Gubmint was in the business of subsidizing stupidity. In fact....shouldn't submint be staying out of business, period? They can't even manage to fill holes in the road with gravel and asphalt. that's something my daughter could do. Why are we trusting them to bail idiots out?

BTW, all those Evolution folks who think creationism is stupid, remember: Evolution depends on survival of the fittest.

They only people that should be given help are those who could afford said home via a government backed loan instead of the sub prime one they ended up with.

If their home falls within value limits, their income in the income limits and the home within the standards for HUD, FHA or VA then I could see giving them a break. But the house should be bought from the lender for the current devalued price plus a discount on that for all the problems it caused.

I also have no problem with cities taking forclosed homes that are being left to rot via eminent domain and then reselling them themselves.

The only people I really have limited sympathy for is those who bought a McCastle on an ARM or interest only loan, those who were flipping speculating or as investments.

Instead of giving lip service to these lenders they should be under investigation.

This whole mess started because of lack of regulation and oversight. We have regulation not just to prevent consumers from being taken but to prevent huge economic collapses such as this because when the get big enough they start dragging everything else with them.

The unrestricted free market just doesn't work because people can be evil and greedy.

For once I would like to see people take responsibility for their actions. You buy something you can't afford and you deal with the results, whatever they may be. Why should the responsible people be punished because of the greedy idiots among us.

@AngrySicilian:

Why? My friends keep their heat at 50 degrees in the winter because they're cheap. Why is it too much to ask that others do the same? If I'm going to be forced to pay your bills for you -- then you're something along the lines of a child and I should be able to dictate how you use those things I pay for.

Your CEO example is ludicrous and just begging for a tu quoque fallacy. You don't use anything you don't need? Buy makeup, wear nicer shoes than you absolutely need? Take an extra trip, eat more food than will strictly keep you alive? I mean some poor person in India could use that food or at least use the money you use to buy that food to stay alive.

Really how could you, you selfish, selfish person.

@bohemian: Amen. I'd love to post a followup but, like most people trying to keep their home, I'm off to my second job.

@poodlepoodle: Dude... I am a cheap person (and a guy who doen't wear makeup or spiffy shoes o.O ). I'm just saying that blaming the poor people doesn't make a whole lot of sense when the problem takes root in our society and, as a product of that, our economy.

We don't teach people to be frugal, in school, the media.. anywhere. Pecuniary Emulation, theory of the leisure class... though it has its problems, I think it applies. OK now I really have to go to work or i'm going to be late. Have a good weekend.

@poodlepoodle: SAID: "If I'm going to be forced to pay your bills for you -- then you're something along the lines of a child and I should be able to dictate how you use those things I pay for."

communist anyone? he wants to "dictate" in america?

@snoop-blog: I agree that people made bad decisions, but there was a lot more than just consumers making poor choices. A lot of people could make their payments if they hadn't lost their job... If they didn't have to pay such high rates for health care...

Nothing occurred in a vacuum, and before all of you form a circle jerk with people struggling to keep their homes in the middle, maybe think about how a lot of other really shitty things have been happening in our economy.

Yeah, but at the same time, the horrible things that happened to people, didn't happen overnight, either. Healthcare didn't all-of-a-sudden become unaffordable, it's been growing more and more unaffordable since the 90s. and people haven't been losing their jobs all-of-a-sudden, the job base has been eroding slowly, if at all.

do you remember when you were a little boy, and your mommy told you not to touch the hot stove? do you remember what happened when you finally DID touch the hot stove? lastly, did you ever touch the hot stove again? words to think about.

@snoop-blog:

I'd say making me pay for your heat in the winter is the commi thing to do. Me? I turn off the heat when the bills get high and use a blanket.

But what do I know, I'm a bitter renter being asked to bail out people who wanted to live like rich people.

I'd think forcing people to pay the bills of other people is the commi thing to do.

@poodlepoodle: sorry, what did you say? i was too busy reading the Daily Worker.

Well good for you fellow traveler! Keep reading, the revolution is nigh.

I don't agree with bailing out people who fell behind, but I have more of a problem with bailing out the mortgage companies. See, if the person falls behind on payments, the mortgage company gets the land. And if we bail out the mortgage company, then they're benefitting from the stupidity of accepting all these high-risk loans.

I believe the mortgage company has a reasonable option, and that is talking with the lender and structuring a different loan. But I don't see that happening, I see the mortgage company pretty content to foreclose and then cry to Congress. Having their cake and eating it too? More like grabbing people's cake and then crying to Congress that there should be more cake.

Many folks are going to lose their homes because they gambled and lost. Some gamblers have to lose.

But what about the folks who bought homes or refinanced perfectly good mortgages with brokers who lied, misrepresented loan terms, failed to get documentation of ability to pay (who's idea was the "no-doc" mortgage, anyway?), altered forms, etc...?

This melt-down is the result of greed. Some of that greed was contributed by individuals who tried to take advantage of temporary conditions to permanently enrich themselves. Mortgage brokers, bankers, bond traders, investors, etc... who cashed in on artificially favorable rates (at the expense of people they had a duty to deal with in good faith) are as much to blame, however.

Perhaps, instead of a bail-out, the role of government should be to broker a settlement so that those truly wronged by the mortgage industry can be compensated by those that did the harm.

Unfortunately, several years of relentless gutting of federal oversight and enforcement capabilities makes this a pipe dream.

@poodlepoodle: so you are against housing authority, and government assistance, and food stamps too right? seeing how its your tax dollars paying for that. how dare you have to help out the less fortunate like that.

i now bid you all good day.

In 1999 I purchased a house worth less than half of what my mortgage banker tried to convince me I could afford. I was ridiculed by some family and friends for "limiting my wealth growth potential." My house cost $140k and now is worth around $280k. So if I had only purchased a $280k house I could have one worth $560k now, doubling my profit potential.

What a fool I was.

For the shame of me wanting to buy within my means and have a comfortable cushion between my monthly income and expenses.

So now I get to share in paying for the great mortgage bailout of those who bought that $280k, who took out equity loans as it increased in value, and now are faced with high monthly payments and a house worth less than what they owe.

And the money I saved and invested instead of pouring into mortgage payments? Now it's earning less as interest rates are artificially lowered and stocks are losing value for fear of the great economic tanking that is bound to occur.

Who is going to shed a tear for me? Where is my handout?

Hey, way to not try to hide your liberal bias CAREY. You know, articles on this site would be a lot better if we didn't have mention of partisan politics.

On the topic at hand, I agree with most commenters. Something is better than nothing to find a compromise between both irresponsible lenders AND borrowers. However, the market is inherently risky, especially when you buy more than you can afford.

Sorry, but I think there's a very small minority of people that have been unjustly screwed in their mortgages. The rest took bigger loans than they could handle over the long haul by banking on a continually appreciating market. They gambled and lost. Let the market correct itself, and we'll all be better in the long run, even if it hurts a little more now.

@dorkins: CORRECT.. we have enough hand holding from our govt. People must LEARN and realize bad personal/business decisions cost you money!

When I financed my home back in 2003, I knew that I could get an ARM, and have a lower payment initially. I could have used lower initial payments as an excuse to buy a more expensive home that I really couldn't afford. But I didn't.

I knew that interest rates were relatively low (my 30 year fixed is 5.5%), and they really didn't have anywhere to go but up. I did the responsible thing, and limited myself to looking at homes I could actually afford.

Why should the rest of us be forced to bail out those irresponsible enough to buy homes they could barely afford in the best of circumstances? What ever happened to personal responsibility?

I must have missed the part where Carey said the gov'ment should bail out all the poor sub-prime mortgagees. I'm of the opinion that forcing people into bankruptcy, while being "fair" will have disastrous effects on both the finance and real estate markets, and our economy would be better off if we find a way to refinance the loans, allowing the borrowers to continue making payments and eventually pay off their houses.

The banks are agitating for some sort of federal bailout plan right now. I'll be pissed if that happens. Banks don't want to deal with the fact that their loan making strategy sucked. They didn't want regulation, now they don't want to deal with the mess that they made.

Bring back regulation. Consumers can't get in over their heads and businesses can't fcuk over the economy with their greed.

As opposed to bickering about political sides of the argument I think it would be wise to step back and realize that any blanket statement on either side is rife with fallacy. It could be wise to evaluate the situation on a case by case basis, rather than lumping every sub-prime, predatory, forclosed on together.

I am sure many of these are the fault of an uninformed or overly optimistic buyer, likewise I ma sure some of these are the result of questionable lending practices by lenders and/or brokers. With how epidemic this issue is it is impossible to treat every situation in the same way, and any plan that tries to handle this through simplification is no better than the flawed lending/borrowing practices that started this whole thing off.

Ultimately I feel the lenders need to bear a good portion of the brunt, as they were the ones who risked billions of dollars by essentially giving money to any Tom, Dick, or Harry without crossing their t's and dotting their i's. The banks have hauge responsibility, and they failed. All they would of had to do is decline mortgage apps that were falsified, undocumented, or otherwise a poor risk factor for the lender.

That said, did many people make short-sighted bad decisions before taking out these loans, yes.

@MsClear:

As much as the conservative in me wants less government intervention, you're 100% correct. When individuals and corporations continually make poor judgements and prove themselves to be irresponsible in f-ing over the economy, it's time for the government to lay down some more rules.

@AngrySicilian:

Part of good financial planning is having an emergency fund for things like losing your job, medical bills, etc. If you are just a few thousand dollars or a couple months of unemployment from losing your home - YOU COULD NOT AFFORD THE HOME AND YOU SHOULD NOT HAVE BOUGHT IT

Many people borrowed more than they could afford to borrow, but do not forget the banks who apparently loaned out more than they could afford- all the while knowing what they were doing was high-risk behavior akin to daytrading or gambling in its risk to reward ratio. These bankers are/were well versed professionals lenders. Now how many borrowers are professionals at borrowing, and well versed in the nuances of mortgage lending?

@B: Why would that be unfair. A glut of foreclosed houses on the market will make the American dream of home ownership available to many younger people who right now have no hope of owning one due to the artificially high prices, but with lower prices could then afford one and hopefully learn from idiots before them and actually buy a house for the purpose of living in it and not expecting to flip for profit in a short amount of time.

In every market movement there are winnings and losers.

@ johnson1

Is it not part of the banks' responsibilities to also be adept at financial planning??? After all, that is supposed to be their business. Should they not have seen market trends, and the insustainability of the lending practices they were pushing??? Maybe saved a little cash for when the bottom fell out of their ponzi scheme??? It is a 2-way street, and failure to acknowledge this is part of the problem when trying to formulate a solution.

Both parties are guilty, and both need take responsibility. The gov't took care of the banks through bail-outs and rate cuts. meanwhile the consumer has to "face the music."

@snoop-blog: I think there are some people who truly need assistance, and might need to rely upon the charity of others of the can't do for themselves. Those who won't do should suffer. Using taxes for these programs tries to force people to be charitable, which is wrong. I believe the line is 'promote the general welfare' and not 'provide the general welfare.' The latter is the socialist/communist belief.

Anyone else think it wrong that the government forces you to pay more than most religions require? I'd gladly up my contributions to charity if the government cut taxes. The government needs to stay out of the charity business as that is the job of the churches. Whatever happened to the separation of church and state?

Did you enjoy the irony of that last line? Use their own argument against them.