From Money Magazine:
Housing bailout: winners and losers
Luis and Kelly Madera have done everything they can to save their house. They refinanced most of the $550,000 they owed on a risky, adjustable-rate home loan to a conservative 30-year fixed-rate mortgage. They emptied their savings accounts and pulled thousands out of their 401(k)s.
But the couple, who have a 15-month-old daughter, may still lose their three-bedroom Northvale, N.J. home to foreclosure. With gross monthly pay of about $10,000 ($6,000 after taxes) – he owns a trucking business, she’s an MRI – technician they can no longer keep up with the $4,100 house payments.
And Kelly, 31, now wonders why she and Luis, 34, were able to get a mortgage they couldn’t afford in the first place. “I expected that if we were approved for a loan, we would be able to pay it,” she says.
Should something be done to help the Maderas and other homeowners in the same fix? Banks, prodded by the Bush administration, have already put in place a program to rescue some of the neediest caught up in the mortgage mess.
Americans, however, seem conflicted about extending help to anybody. In a December CNN poll, for example, 51 percent of respondents said that borrowers had dug their own hole and now would just have to dig themselves out.
Before you join this tough-love brigade, however, consider how you might find your own fortunes tossed about in the rising tides of foreclosure. And make no mistake: A deluge is on its way.
“Before you join this tough-love brigade, however, consider how you might find your own fortunes tossed about in the rising tides of foreclosure. And make no mistake: A deluge is on its way.”
He’s kidding right? I have no sympathy for the bank or the borrower . the only reason I’m not in the same position is because my BASIC MATH skills stopped me from taking a loan that was more then my income.
that was BASIC MATH
“Who are you who are so wise in the ways of science?”
I have a GED and dig holes for a living! or is that wholes?
“BASIC MATH” coupled with “common sense.”
These are tools that were missing from the tool boxes of lenders, borrowers, and wall street financial geniuses.
******
“Who are you who are so wise in the ways of science?”
I know that line. Just having trouble fitting it into this context. Do I need more caffeine?
I know that line. Just having trouble fitting it into this context. Do I need more caffeine?
Was directed at the banks and borrowers who undoubtedly used a similar style of logic to determine whether to lend or buy (not crossroads).
Stories like this break my heart. But I don’t know how anyone could have not understood at least the basic risk of an ARM. I really don’t.
But the banks hold some responsibility here too. They knew their salaries, they knew they wouldn’t be able to pay once the loan adjusted. Why did they give them the loan? I think we can answer that one.
You know if folks read this site they would of thought twice, oh well.
Regardless, the majority of folks that used the low rates are investors, they are using a few examples, like illegals , to pull the heart strings. Bottom line is that they want to be bailed out with TAXPAYER money.
Instead they need to let it run its course and correct. But the Fed is bowing down to the smart people that got is in this mess.
Long Live Grim!!!
7 Out of NJ
If that is true, that most of the people that used the low rates were investors, they get little of my sympathy. That’s just business and the risk they took.
I still do feel a bit of heart for the average family that got themselves in a jam. The lenders knew folks making X amount of money wouldn’t be able to afford the adjusted rate payment. So why did they give it to them?
Ann,
I think then that the lenders, realtors, and whoever was liable, on a case by case , should be made to pay.
People to a degree have to be accountable. This is something that many people do not believe in any more. If they got dooped then they should go after the folks that did not tell them. But common sense and people took a risk.
If they made a ton of money would they give me some? I doubt it.
Out of NJ—-
$6000 after tax pay – $4100 house payments??????????????
and a baby and daycare expenses……………
what were these people thinking?
also, they only have one baby.
didn’t they think about the day that they may want to have another baby?
they’re already on both incomes, how were they going to swing that?
sorry, but why should all the people who thought out all the possibilities in life, and who decided to sacrifice and not buy a house be made to pay for these peoples dumb, ill thought out decisions.
now they become renters, is that so bad? it’s not as if they’re going to jail for defaulting.
On the bailouts that are being tossed about in conversation by our lovely pols, I was under the impression that were being proposed to bailout the banks and the markets, than out of any compassion for the regular families caught up in this.
I still feel sorry for these folks. I’m betting they weren’t probably educated on what the loan they signed up for really meant. But who knows.
Haven’t posted for a while, but read the articles via Google Reader daily. I had to jump in on this one…
We were ready to buy a home in May of ’06 in Maplewood/South Orange. I had run my numbers and knew what we could afford, before talking to a broker.
I called my friend’s mortgage broker, discussed our income, downpayment, etc. and asked him what he thought we could afford, to get a second opinion. His answer?
“I don’t like to work that way. You find the house you want, and I’ll find you a mortgage that will get you in there.” Wrong answer.
That was the moment that we realized that the entire market had gone nutty and we wanted no part of it. Two years later we’re still happily renting.
To hear so many people claiming ignorance, that they had no idea they could not afford the loans they were signing is shameful. Yet, they have only themselves to blame.
These are the same people that caused the unsustainable run-up in home prices. A little due diligence on their part would have saved a whole lotta pain on the country’s part.
Caveat emptor, right Grim?
Dear Kelly Madera, if you do not have the very basic skills necessary to figure out the dangers of an ARM, and basic household economics, please DO NOT go near an MRI machine.
I expect very little from a Money Mag reporter, but your many of these comments are just as weak…
#1 Anne: read the article. They refied into a 30. They are not caught in a rising ARM- the fools simply can’t afford a freakin’ $550,000 mortgage! I have not one single iota of sympathy for people who thought they deserved a $600,000 house- more than 500% of their gross income. They should kiss the banker that let’s them walk from this massive brain fart.
#2 If these folks take home $6,000 on $10,000, they are going to have a massive refund in April. Luis “owns a trucking business.” As a small business owner, this dude’s accountant should be able to take the total tax bill (including self-employed SS/MC)to much less than $25,000..a bit lower than the $48,000 implied in this idiot’s article. Mortgage interest alone is approximately $44,000 on the implied 8.25% fixed 30.
#3 The value of a blog is to offer an alternative to the ridiculous laziness and corporate dominance of the media. Taking a Money Magazine article at face value suggests the level of discourse here is at a pretty low level. Linking to this trash is fine, but shouldn’t the commentary universally acknowledge the preposterous stupidity of the source. If it doesn’t, you might as well shut the whole shebang down..
#4 On a lighter note..will the school teacher in Cali (is it Cindy?) stop fawning over the other commentators. It’s tiresome.
Despite my crankiness, I really enjoy the site, Grim. My situation: 42, married, two kids. Bought our first house (Atlantic Highlands, love the town and the ferry to NYC!) in 2002 with a 15 year fixed at 4.75(from a refi in June, 2003). Peace.
# 15
What is the word with the future of the ferry?
Seastreak’s parent company (SeaContainers- London-based but they just pulled the Bermuda shuffle…) has been in bankruptcy since October, 2006. The boats are full and the route is profitable. They have had the Seastreak operation on the block for more than a year, but no deal yet. The Trinidad and Tobago rumors were typical APP nonsense- they reported that story using a Trinidadian weekly rag as their sole source. The route will have service regardless of Seastreak’s fate. If the boats were relocated, other ferries would be brought in since this is one of the few ferry routes on the East Coast that remains profitable in this high fuel-cost environment. I think the worst case scenario would be NY Waterways taking over the route, because they suck. They could even raise fares above the already costly levels; the majority of the core daily passengers can and will pay what it takes to keep the route profitable. A few would bitch and take the bus/train, but most of us would suck it up.
Strangely enough, service has actually improved since the bankruptcy; there seems to be more local control and service while SeaContainers tends to more pressing matters…like survival. The local staff seems fairly confident a buyer will keep the present operation more or less intact. We’ll see.
THIS IS ALL A BIG LIE!!!!!! MONEY MAGAZINE HAS LIED ABOUT THE STORYYYYYYY PEOPLE. They are victims of business FRAUD they are not loseing there house!!!!!!!!! Reporters LOVE to LIE!!!! They refinianced there house after Carvel Ice Cream franchise owner sold them a franchise that he was never allowed to!!!!!!!!!!!!!!! People should not comment on this story because it is NOT TRUE! I know these people!