Thursday, September 30, 2010

Bailout for Homeowners -- Is It Working Where You Live?

Living in one of the states hardest hit by the recession, I've seen first hand how many people are facing the ugly reality of losing their homes. It's awful to see friends lose their homes because of a job loss or cutbacks at work. Still, I have to wonder if all of these mediation and bailout programs are working. Nevada has received nearly $200 million from the feds for various programs but from what I can tell it hasn't made much difference. The dead lawns persist and many homeowners are still underwater in their mortgages. Our house is worth at least $50,000 less than we paid for it six years ago and we bought at the beginning of the boom not at the peak. I would love to walk away from it but that's not just the right thing to do. So we continue to make the payments and hope that one day the value returns. Our house has essentially become a forced retirement savings account since we probably won't be able to sell it until we're 60.

I was in favor of the bailout for the banks as I thought that letting them fail would have devastating consequences for all of us. And I'm for bailing out homeowners to keep them from losing their homes. However, I am not for bailing out those who gambled on the market as investors or who kept using their home equity as a credit card. If you gamble, sometimes you lose. And then you pay. Anyone who's ever been to a casino or the track knows what I mean.

The sad reality is that whether or not these bailout programs are working there is little choice but to keep going. Just like the banks, the alternative is too frightening. What we're doing may not be working but don't you think that failing to do anything would be even worse?

4 comments:

  1. Another sad reality to the whole housing market right now is that banks got greedy. They did give a loan to almost anyone, if they could afford it or not. I also think houses during the peak of the boom were going for way much more than what they were actually worth. I think now you'll see houses going for what they should be worth now and hopefully it will stay that way. The bay area has been hit some but not nearly as hard as other states. Here's to hoping things work them selves out in the long run and we don't make the same mistake again.

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  2. Agreed Joanne and thanks for the comment. I agree that banks hold some of the blame but I always come back to the homeowner. We all know about shady car salesmen getting you into a car you can't afford -- what happened with housing was very similar. And bottom line it's up to people to manage their money and live within their means. Just because the banks made it easy doesn't let homebuyers off the hook.

    When we went to refinance our ARM into a fixed rate the mortgage broker tried to sell me all kind of stuff -- telling me I could use that extra few hundred bucks each month to fund my retirement. When I asked him who actually did that, he kind of stopped for a minute and had no answer. Because nobody does it and he knew it. Everyone can try to sell me a raw deal but it's my fault if I buy it.

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  3. I live in the SF Bay Area and its bad here. My income has gone down by 2/3 and I waited 16 months for a modification. We ended up getting a fixed rate but the payment is still the same. Based on what I'm hearing out there I feel lucky to get anything!

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  4. Thanks for the comment and the follow hungrigyrl. I have friends in the Bay Area and have heard it's awful. Glad to hear you got your mortgage modified and hope it works out for you. From what I've heard you are very lucky -- a lot of the modifications aren't happening and people who really need some help aren't getting it. It's very sad. I just hope things turn around soon.

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