Government Bailout of SubPrime Mess

Mhillqt, I'm not sure how you can complain (to the government no less) about the affordability of real estate, based on affordability of NYC real estate. It is like complaining that you can't afford a car while walking around a BMW dealer.

actually, it appreciated about 2x in the last 10 years.
You can grab alot of new condos at 1-2years old prices now.
Check charleston for example...price is dropping like a rock and it's at around high $900/sq
I just feel horrible for people who had put their 10% 1-2 years ago, only to find out new contracts are closing at 5-10% less.

10 years ago I was looking at 1 bedrooms in murray hill for 120 and they are now 560+....it appreciated 5x....

Juiceman......i feel terrible for the people that overextended themselves and im all for helping financially strapped people....BUT i also feel bad for people that have been priced out of the real estate marked due to the HYPERINFLATED prices.......esp in markets like manhattan..

The gov't "bailout" will help far fewer people than the hype will lead you to believe. Urban Digs had a good post on this recently:

http://www.urbandigs.com/2007/12/mortgage_bailout_plan_subprime.html

To quote Noah:

Here is who the plan will work for:

a) ONLY loans made at the start of 2005 through July 30th, 2007
b) ONLY loans that will reset to higher rate between Jan 1st, 2008 through July 31, 2010
c) ONLY owner occupied borrowers (primary residence borrowers)
d) ONLY those borrowers who CAN afford 'teaser' payments & CAN'T afford resetting payments
e) ONLY those borrowers who CAN PROVE they cannot afford resetting payments
f) ONLY those borrowers who are making payments ON-TIME

So, completely eliminate speculative borrowers who used these teaser mortgage products to keep costs ultra low while they flipped their properties! Also eliminate any borrower who...

1) already had their teaser rate reset to a higher rate
2) already are missing payments
3) was savvy enough to avoid a teaser mortgage product but now pays a higher 30YR fixed rate

The Bush Administration is doing the least possible to interfere with the market. As currently constructed, this plan will only assist in giving the "impression" that the government is doing something worthwhile. The plan is looking to forestall the huge number of subprime mortgages that will reset in the future. This will be a life preserver for the local and state governments whose funds will be adversely affected if there is a run on the banks. However, this is definitely not a rescue boat. Let's hope that the Bush Administration does not mess this one like it did with Katrina! There are some really good values out there but you will need the capital reserves to survive a possible recession or depression in the worst case. I think our NY market will feel more pain if the Federal Government start penalizing "sanctuary cities" and starts mass deportations. Lots of legal and illegal people are buying properties in the city.

Sure, the bailout will start small. But have you ever known any government program to *stay* small? Once they have this bailout in place, I guarantee you that over the next election cycle, politicans will say the limits should be increased to apply to more and more borrowers until it'll eventually apply to anyone who says they can't afford their mortgage.

I have the same fear about the bailout starting small and escalating. The tax payers aren't footing the bill in the Bush plan, but we'll see how long that lasts. Hell, Obama is already proposing "tax breaks to help homeowners make their payments."

If this turns into a bail-out by taxpayers, I hope that there's a equally loud and harsh reaction nationwide.

As the plan currently stands, agree with luis5acc, right now it's pretty limited. It only targets a small cross-section of loans. In fact, from what I understand it addresses situations where little or no equity was invested. In other words, loans that are significantly underwater already, way above a 100% LTV. This is more a short-cut of the inevitable workout process for these loans, so a real benefit to lenders/investors.

"...tax breaks to help homeowners make their payments." We have that already, it's called the mortgage tax deduction.

Calling the Bush plan a bailout is a misnomer as it will only help a select few and not those who really need assistance.

And it won't help the people who borrowed against the rising values in their homes to purchase cars & vacations and now can't afford the payments. And it won't help the flippers who invested in homes only to see the values go down, so they foreclose and now the renters living in those houses are homeless.

There are many reasons for this mortgage mess, and this government 'bailout' won't fix it. Nor should it.