What about a universal fixed-rate 3%, 50-year mortgage?

[brentspeak]

Another DUer suggested this on another thread (sorry: I didn't catch which DUer). Would retroactively renegotiating every American homeowner's mortgage this way prevent a depression? And if so, why not do it?

[msongs]

1. only if there was no early payoff penalty nt

[gravity]

2. Well you screw over the banks who wrote those mortgages

The government will have to subsidize the banks so that they are able to support such low interest rates. It could be an alternative for someone who is facing foreclosure, but it really isn't a good idea to implement universally.

One of the points of getting a mortgage instead of renting is the idea that you will pay it off and own the house someday.

[thunder rising]

3. However, with property taxes the land is never truly yours. It's always contested by the state

[valerief]

5. Yeah, and there's that pesky eminent domain thing that businesses can now use. nt

[YellowRubberDuckie]

20. You know that banks have programs called Loss Mitigation don't you?

But here's the thing: you have to be able to AFFORD to keep your house. Since a lot of these loans were stated income, and the only thing that was checked was a credit report and no income had to be proven, a lot of these people got more houses than they could afford. Both sides were stupid in this thing. NEITHER side is innocent in this thing. Both sides caused this problem. Predatory lending and people not understanding how to live within their means got us into this.
Duckie

[pnwmom]

4. Does that mean universal interest rates of 1 or 1.5% to bank depositers over

the next fifty years?

Good luck with that one.

[trudyco]

6. I don't even think that keeps up with inflation

However, it seems that ARMs should be converted to fixed rates for everybody, and those that had a teaser rate could be adjusted to a 40 or 50 year loan to make up the difference???

Those who can't afford this can go to a judge and maybe get a guaranteed second job to make up the difference?

Nobody allowed to default on a mortgage?

Still the problem of commercial property loans.

[creeksneakers2]

7. It would drive the price of real estate sky high

So the people who can't afford it now still wouldn't be able to afford it.

[LeftyMom]

8. 50 years?

Here's an idea- how about we stop encouraging people to buy houses they can't afford? Most people aren't even going to outlive a 50 year note.

The market has to correct itself and come back down to sane pricing, so that people who work at normal jobs can actually afford a house without having to do "creative" scam financing or get some insane loan.

[BlooInBloo]

9. I take it you didn't bother to calculate the total of payments on a 300k house....

EDIT: Hint: 50 years is a LONG time for exponential growth (aka compound interest).

[gravity]

10. 966 a month

with the 3% interest rates.

[BlooInBloo]

12. $1.3 million.

EDIT: Not including inflation. Thank fucking god idiot DUers aren't in charge of much of anything.

[gravity]

17. Its about $580K

[BlooInBloo]

23. Oops - that's right - you're paying down principal as you go of course. My bad.

[brentspeak]

22. What was that you were saying about "idiots"?

[AzNick]

11. Mortgage loan rates should be capped...

Because they are secured. By a friggin house!!!

How about allowing a 2% rate adjustment on credit history, and cap the rate.

This starting rate could be adjusted for inflation on a year to year basis, of course. But only the starting rate.

Someone who has been paying his house loan on time could get his rate lowered if it was high at first, and this without even looking at the buyer's credit history.

It would be an ARM. ARM loans should be banned.

[gravity]

15. "Because they are secured. By a friggin house!!!"

That's the assumption that got us trouble in the first place. It was going fine, until the home prices started to go down.

[AzNick]

18. Which happened because of rising rates!

Rising rates forced people to foreclose, foreclosures put more houses on the market, forcing prices to go down.

That's what happened. People paying $1500 when they should be paying half.

[dkf]

13. Would you like to invest your $ for 50 years at 3%?

[marlakay]

19. I would do it if they didn't have prepayment penalty

and just pay what I do now and pay off the home quicker. My loan is 5.75% now and not bad but 3% I could handle that!!

[LeftyMom]

21. The point is that nobody'd write mortgages on those terms, because there's no profit in it.

Shit, T-bills make more than that, and they barely keep up with inflation.

[Thegonagle]

14. 30 years is quite long enough, IMO. I like the 3% part though.

[CoffeeCat]

16. There's nothing that can be done to stop...

...this economic train wreck.

The mortgage crisis is only one slice of the failed economy pie that we're about to be served.

I'm no economist, but the main problem I see--is that credit was used to fuel most of our prosperity
and economic growth--during much of the past 20 years--and that "play now pay later" behavior is no
longer sustainable.

People are not using credit cards like they once did. They are either maxed out or they're paying
off those cards or they're in savings mode, because they're scared. Also, many people used their homes
like ATM machines, taking out home-equity loans to finance vacations, more furniture and granite counter tops.
Those loans are hard to get now.

The party is over, folks. The hot air that propped up our economy is now coming out of balloon. The high
price of groceries and gas only exacerbates the problem--because people are spending more of their
budget on those items, and discretionary spending is being significantly cut due to the basics
being so expensive. Home heating oil is supposed to increase double heating bills from last year.

It's like we're being slowly crushed from all sides, as if we're all sitting in a trash compactor with
the walls slowly closing in.

The net result of this bursting Main Street bubble--is a seismic, downward shifts in the total demand for goods
and services.

Furthermore, while Bush relied on this hot air to inflate the economy--he did absolutely nothing to create
jobs or stimulate the economy in legitimate ways. It was all smoke and mirrors, with nothing behind
the smoke and mirrors.

Main Street is really going to be in trouble. It's all ready starting now. Retail sales are down,
and will continue to plummet. The unemployment figures are due to this bubble popping. Big Box
retailers are closing shop, laying off employees and many small businesses are suffering and laying
off people as well.

It's just going to continue to spiral. The bailout was inconsequential.

[TreasonousBastard]

24. Chaos would ensue because...

you can't have one sector of the economy with an artificial interest rate and the rest of it market rates without all hell breaking loose.

Fixed mortgages are normally written for a few points over the prime rate, which works just fine most of the time. The bank borrows the money at the prime rate and relends it to the mortgagee, with the spread being its profit. No problem, no dire straits for anyone when done honestly. If rates go up, the bank sells the mortgage and repays the Fed and might lose a little bit of money, but does OK in the long run. If rates go down, the homeowner refinances and everyone makes more money. ARMs, balloons, and other schemes are scams that only work when someone is speculating and flipping real estate and have no business being offered to homebuyers-- they are only offered when the buyer obviously can't afford the house.

Now, since we have all these bullshit mortgages out there, the banks can't renegotiate the screwy ones without fear of being sued by the vulture funds holding a lot of that bullshit derivative paper. They can, however, renegotiate if Federal law tells them to and they renegotiate going back to basic loan underwriting. Those who can't afford their houses are screwed, but if we adjust their interest rate to the market rate and they still can't pay, I'm not sure we should bail them out-- another program, or programs, should be set up to help them find housing.

[1]

25. as long as we are going all "fantasy" here, propose 0% over 1000 years...

prostitution is the oldest profession? bullshit. money lenders (banks) are the oldest profession. cave drawings in france and the old testament in the bible document examples of the what banks have always been doing since the beginning of recorded history. and if you think about prostitution vs a bank loan? its the same deal. you get fucked, and in the end you pay a lot for it.


a loan has never been nor will ever be structured to the benefit of the borrower.



a nice idea, but things don't work like that. never have. never will...