STOP USING MY MONEY TO BAIL OUT GAMBLERS

I purchased my home in 2005 which contained an introductory rate of 5.75% and then on January 1, 2008, my first mortgage turned into an adjustable mortgage. I qualified for the loan based on my income and I too, provided enough paperwork and backup information which nearly broke my copier! On January 1, 2008, my loan adjusted with an increase of approximately $800 a month. That's an increase that I cannot afford. Yes, I read my contract and understood the terms however, I expected the market at a minimum to remain the same and then, I would be able to re-finance my loan into a fixed rate at 6.5% prior to January 1. That is the gamble that I took and at that time, the risk was next to none. I believe the mortgage companies gave loans to individuals without verifying their income (stated rather than full docs) or to individuals who over extended themselves on full doc loans. In my community in Corona, California homes began going into foreclosure before the rates began adjusting which from my knowledge, is what caused what I call Phase 1 of the mortgage meltdown. Literally, 6-12 months after the new homeowners moved in, foreclosures were appearing, approximately 10% of the homes in my development. Bad loans were made from day one! Was my loan a bad loan? The answer is no. My income could clearly afford the payment, but my income could not afford the $800 a month increase. The way I see it, the lenders who made bad loans to people who couldn't afford it to begin with, started the down poor. If those loans were never approved, the real estate market would not have crashed and people like me who are in what I call Phase 2 could have refinanced their homes. I retained an attorney for $500, paid my lender $1000 to do a loan modification and no where during the process did they disclose that additional fees would apply. They gladly took my $1000 dollars. I applied for a loan modification in October of 2007. I called my lender every week (sometimes more often) asking questions, asking for an update etc. I was relentless with my follow-up. None of my phone calls were returned. Eight months after my initial inquiry and submission for a loan modification, I received the paperwork and my lender was requiring me to pay an additional $4000 and submit the monies to them within 5 days after receipt (essentially 1%, like a loan re-fi). I did not have $4000+ readily available to submit to my lender in 5 days. If they informed me of this requirement when the process began, I could have been prepared for this expense. In addition, after seeking legal advice and researching the various options including bankruptcy (chapter 13 to keep my home) or a short sale, it was determined the best solution for me is to allow my property to go into foreclosure and my credit will recover in 2 years. Lenders have no recourse to collect any debts from a homeowner whose property becomes bank owned. My remaining credit history is immaculate! I have no incentive to do a short sale, since I refinanced my 2nd mortgage in 2007 into a fixed mortgage and cashed out approximately $10,000 to pay off other debts. Therefore I would not qualify for the Bush plan approved in Dec of 2007 since a 1099 would be filed against me for the deficient balance and I would have to pay 30% in taxes, approximately $50k. Therefore, I am turning over my property to the bank. I do agree that we should quit bailing out the lenders. I’ve made my bed and am now lying in it, so should they! Lastly, any bailout approved by Bush for homeowners might help .01% of the population in this situation. Primarily the bailouts are assisting the lender. The time that President Bush has spent on such bailouts, provides no value to homeowners. So all of you whom keep complaining about such, please, just stop whining. P.S. I was interview by Fox Business news and how naive was I to think my lender was on my side. Now I am selling my appliances on Craigslist to recover the $1000 I sent my lender, who falsely mislead me throughout this entire process. Excitingly enough for me, my new home (as a renter) is larger, nicer, brand new and less expensive than what my mortgage was in 2005! Sincerely, A prior homeowner who was ticked off and now quit happy!

Dear Liz: Oh where to begin as to your question "Do I have this right?" My version of the answer is: "It's complicated". Yes ..people should buy as much home as they can afford, make their mortgage on time, and in general handle all their financial obgligations in a responcible manner.You a very fortunate person, had an excellent educatio,and parents that took the time to instruct you on the real world. Most Americans do not live in the same world as you, a large percentage of them are one or two missed pay checks from the street. People in America are told from a young age, that the American dream is to own a home, in most cases that it will be their biggest and most money making investment of their lives. So in 2002 when Alan Greenspan and GWB went into this Faustian agreement to use housing values to stoke the fires of the econoomy, and turn their backs on predatory lending practices, many people took the path of least resistance (human trait) and took a chance they could swing it...hell they somehow swing their credit cards. Liz stop for a minute THINK when 1/10 of 1% of the population holds over 50% of the wealth of the nation, who is at fault here? Perhaps your vision has been bent from too much time on the STREET, not enough with just plain folk. Get back in touch with Jim Crammer, he talks to real people out there every day.

AMEN to your article "STOP USING MY MONEY TO BAIL OUT GAMBLERS". I had the unfortunate experience of buying a house in Delaware about a year after the credit card laws had changed, and all the banks were moving people from NY. A $243000 investment, with $25K more in "improvements", and ended up selling 10 years later for $193000. No one offered to bail me out. And while I'm at at, if we are to bail out Freddie & Fannie, how about firing their execs, and replacing them with lower paid ones that will actually pay attention to what is going on.

I fully agree with you! I bought my first home in 1996 and had to prove where every nickel i had saved came from, I was 32, a college graduate, years at the same co., Zero debt of any kind and they still wanted more proof. In 2003 at 39 years old i bought 3 new single family homes side by side in a new tract as a LONG TERM investment (my retirement). To get prepared to present my case for 3 loans from my bank, i prepared a short business plan with my management experience, the local economic growth of the area i wanted to buy in etc. I was approved and given a letter of credit to show the builder and they took my deposit. I could have put a minimum down and taken one of the teaser loans to make my life easier in the short term but i didnt. I put 20% down with 30 year fixed loans on each home to prepare my self for any down turns, as with this much down, my rents can be at apartment prices yet still pay the mort.,taxes & ins. I was cautious and now it is paying off. my homes stay rented, generate cash each month and will be something i can pass on to my daughter years from now. Some may call me a "speculator" i call myself a long term property investor. I applied this same thinking to a new home in a 55 and older retirement community in northern Arizona and I will wait for the Boomers to migrate. I live in a very wealthy town (Yorba Linda CA) but i dont drive a leased BMW/Mercedes but a 2 year old Taurus i paid cash for. Some might think this sounds like a cheap/tight way to live but i also own a 69 Corvette, 79 Trans Am, 05 F-250 all paid for! For those that buy more than they can realistically afford to look big to their freinds and family, i say, you get what you deserve and dont look to me and my taxes to help you out!

I mostly agree with you , but I rather pay some extra taxes than see this country going down the drain . At the same time what I would like to see , is to make those CEO 's accountable for creating these problems while at the same time receiving some good salaries ! Liz , when was the last time you signed a mortgage ? I mean when was the last time you signed 5 pounds worth of paper ? As a good Italian I rather sit with my friends drink wine and play bocce ball !!! The all industry needs to be regulated .

I wrote to both my Senators (NJ) and my Congressman with the exact same message. No response from any of them... I wonder how they voted?

You are right on. Here's another part of that puzzle that's even more unjust. If a borrower takes the bailout it requires the agreement of the lender. The lender must write the loan down to 90% of the current appraised value. The Federal Housing Administration (FHA) will insure these loans as to default and the loan covenants provide for FHA to recover any future profits, on a sliding scale with a low of 50%, if the borrower resells or refinances the mortgage. After 5 years that drops to 50% and stays that way. The borrower also pays a 3% exit fee. Now I have no problem with that, it seems fair, if there has to be a bailout. But here's the rub. We are also "bailing out" Fannie Mae and Freddy Mac AND their shareholders-- WITH NO RESTRICTIONS. First off, the shareholders should not be bailed out, I wasn't bailed out of my Enron stock, I took a large loss. But at a minimum, the same payback for future profits should apply and that's just fair, period. Without the bailout, these stockholders loose it all, the agencies are broke. The stock will rebound with a bailout so why not the restriction. The old stock could be required to be redeemed for a new restricted stock so when it does sell, it would be tagged to share the profit with the agencies bailing the holder out, namely, us citizens. Just shows how the government works, they don't really care about the small guy, just the large corporations and their shareholders.

Liz I agree with you and I'm one of those who gambled and lost. My condo in Orlando is worth less than half of what I bought it for. The government bail out of Fannie and Freddie goes against everything the free market and capitalism is all about. I'm going to take my licks and move on and your dad like my dad advised me not to invest as I did. It's not fair to those that are truly end users and those that stayed out of this mess now get to pay for our misfortune. Why should we get a "mortgage do over" when speculators (investors) like myself knew exactly what we were getting into.

You go, girl! Couldn't have said it any better myself. From Nobel Prize-winning economist and Columbia University professor Joseph Stiglitz: "What bothers me from the point of view of public policy is that Freddie Mac and Fannie Mae came to the American taxpayers, asked for the right to write a blank check and Congress gave them that right. What should have happened was corporate reorganization, keep the companies going but not protect the management, the shareholders, not even protect the creditors... The whole basis of a market economy is a system of accountability. You make decisions, you take risks, you get the upside, but you also take the downside. These guys that are supposed to be assessing and managing risks have repeatedly failed and I think that's what we really have to get our minds around. The fact that we had such confidence in these gurus of the financial markets... We turn to them about how to fix the system, but these are the guys that broke the system. The amount of potential liability that we undertook when we passed that bill with that blank check- we just don't know. This is the worst kind of public irresponsibility. "Quote For The Week" Boom2Bust.com, August 11, 2008 http://www.boom2bust.com/2008/08/11/quote-for-the-week-27/

liz your right too many people got greedy knowing they couldn't afford these houses but everyone else will bail them out

This is spot on. My wife and I made the same heart thumping decision seven years ago. We bought far less house than most of our peers and friends. This mortgage meltdown mess is a joke. As usual, people are rewarded for irresponsible behavior. Signed, Bohica

I agree with you completely! This is yet another example of "the Big getting Bigger and the Small getting Smaller", this time with the tax payers help. Our government feels the need to "bail-out" the big boys on the block and do minimal for the small. Our system would actually work if left alone. The housing market was a "bubble", most of us already knew that at the time. It was obvious that this country could not sustain the appreciated values that were happening, we just didn't know when it would come to a stop. The responsible (lucky) ones just kept doing what we do, pay our bills, pay our taxes and take care of our families. The irresponsible ones (unlucky) were looking to make a "quick-buck". Capitalism is a wonderful thing, we have a lot of smart people in this country, if we allow capitalism to do what it does without complete government intervention we WILL find our way!

I agree it is so aggravating to experience and it is to wonderful to hear someone articulate my thoughts and felling. You Rock!

I am equally frustrated by all of this. The is not a partisan issue - it is a total failure on the part of all of our elected officials. The worst of it is that by rewarding this behavior we are ensuring that it will be repeated. I do have some sympathy for the people who got in over their heads with a loan they can't handle. The problem is that the bailout will not help them. We also had to submit evidence to verify our assets and income before being approved for a loan. I would hesitate to borrow from a lender who didn't ask for that documentation. And I wouldn't borrow any where near the amount they tell me I am qualified to borrow. I think the best thing we can do is stop re-electing career politicians. We should stop voting for anyone who has been in an office for 2 terms.

Amen. Geez, I should have signed a stupid mortgage and have the government buy my house for me.

You are absolutely right. What ever happened to "common sense". Our politicians, both Dems and Repubs have been 100% worthless, to say the least. We MUST vote all of them out of office, the American people have to take back this country. We are NOT represented in any way, shape or form. This must stop. Socialism, here we come. Unless......unless the American people rise up. Both Obama and Mc Cain are useless in this battle. Obama would no doubt, do the most harm....Keep blogging. JMScales

Yes Liz, you have it EXACTLY right!

Liz, This Green-eyed boy agrees, 100% Uncle Sam where was my hand out when I was living on pork & beans and pbj to get my mortgage payed off??????? Hey I'll even take it retroactive please. All these bail-outs are going to do is create a bigger problem when the next big get rich scheme comes along and wall street and those that feel cheated again scream for help, and poin to this as presedence. My thoughts,Rob

Where's the money going to come from? There is no money to bail these GSE's out. Money will be created as debt. The government will issue worthless t bills for the "federal" reserve to purchase with money the create by making a simple book entry into their computers. Welcome to fractional reserve banking. The Creature From Jekyll Island. Must be great collecting interest on money created out of thin air. Where do I buy some federal reserve stock? Get rid of your paper dollar "assets" now while they still have value. Trade them for actual goods, services, and items you can barter with. The only way the government can make good on it's debts is to print money.

It hurts to see those crying over their home loan, sitting in their living room with the 60" palsma TV, custom furniture, and fire place. I agree with you liz, if you cant pay for it, you shouldn't buy it.

Liz you're not alone. Honestly I don't like the idea of bailing out Freddie and Fannie let them plummet in the free market place. Like the documentry IOUSA I believe it's time for a film/video documentry on the houssing downturn and the subprime mortgage debacle to see how it all got cause. But like you I don't like the idea of bailing these GSE's out. Is this going to quadruple the national debt now? But the leaders of these GSE's need to be disciplined. But these mortgage banks in my opioin need to suffer like thier sister banks in the fanicial sector. Cody W. and I we don't like baiiouts becouse throwing money at a problem doesn't nessecerrily mean u solve it. Becouse it's not going away. Question did they play with the mortgages on the stock market too like thier sister banks? I believe thier should be expose on Frannie and Freddie which explores thier background how they were created and why. Becouse if thier history is out in the open and then one get better grasp of their problem and how they got into this problem. But hoenstly let these GSEs fail in the marketplace becouse they deserve it and the public is in no mood for another bailout. I stand by my words.

Absolutely correct. It makes me want to go out and get a huge mortgage I can't afford just to get some of this windfall the gamblers are getting. As a nation, we just need to stop bailing everyone out, take the lumps, and keep on going. It's happened before and it'll probably happen again. Continuing to build the house of cards ever higher may just result in a worse crash in the end.

LC: Of course you have it right! The honest folks like you and me are making our mortgage payments on time and in my case paying more each month to pay it off early. Your Dad gave you sound advice and I have passed much the same thoughts to my red-head (albeit curly) daughter. There are two problems: First, the people running our financial organizations are not honest and have lined the pockets of our Senators and Representatives. This is not illegal, but it should be. As a result, outrageous laws to bail out Fannie Mae and Freddie Mac get passed. What do we do when the foxes are guarding the henhouse? This is directly related to the second problem: Americans are too busy watching American Idol instead of marching in the streets with pitchforks and torches and voting these guys out of office! The only people we have to blame are the ones staring back at us from the mirror each morning. Keep asking sharp questions and make sure the ones you interview give straight answers.

Liz, YOU ARE SO RIGHT! The idea of individual responsability is non-existant. Rep. Bachman calls it the punishment of the responsable. Thanks, Ty Peterson

Nope you're definitely not alone... I'm with you all the way and I couldn't have said it better myself. Keep it up!