Comments on: Are 40-Year Mortgages The New ARM? Or Our Way Out of This Mess? http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html Redfin Boston Sweet Digs Wed, 01 Feb 2012 20:27:32 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: mike.martin http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html/comment-page-1#comment-2320 mike.martin Sat, 16 Aug 2008 16:34:15 +0000 http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html#comment-2320 Again, I can't disagree. The bailout of Fannie Mae and Freddie Mac kind of makes Enron look insignificant, though it's a less sensational mess in a lot of ways. I just have a fundamental problem with private corporations getting bailed out when individual homeowners are getting clobbered. Bailing out the big boys won't do anything about reducing inventory and righting the market; I think bailing out the consumers (or forcing the banks to do something constructive to resolve this -- maybe the radical steps you mentioned) will go farther towards righting the ship. I'm guessing we're both fairly disgusted by the bailout we've already paid for. Thanks for commenting. Again, I can’t disagree. The bailout of Fannie Mae and Freddie Mac kind of makes Enron look insignificant, though it’s a less sensational mess in a lot of ways. I just have a fundamental problem with private corporations getting bailed out when individual homeowners are getting clobbered. Bailing out the big boys won’t do anything about reducing inventory and righting the market; I think bailing out the consumers (or forcing the banks to do something constructive to resolve this — maybe the radical steps you mentioned) will go farther towards righting the ship.

I’m guessing we’re both fairly disgusted by the bailout we’ve already paid for.

Thanks for commenting.

]]> By: max http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html/comment-page-1#comment-2316 max Sat, 16 Aug 2008 04:03:01 +0000 http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html#comment-2316 The fundamental problem here is that the people who are defaulting simply don't have the money. The only thing that can be done is to give them some. Reduce their mortgages, give them cash, whatever. They either default, or you bail them out. If you bail THEM out, it tends to happen at MY expence. And I DON'T LIKE THAT. Unfortunately, there's not enough of me to influence policy... The fundamental problem here is that the people who are defaulting simply don’t have the money. The only thing that can be done is to give them some. Reduce their mortgages, give them cash, whatever. They either default, or you bail them out. If you bail THEM out, it tends to happen at MY expence. And I DON’T LIKE THAT. Unfortunately, there’s not enough of me to influence policy…

]]> By: mike.martin http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html/comment-page-1#comment-2315 mike.martin Sat, 16 Aug 2008 03:02:49 +0000 http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html#comment-2315 Max, I definitely hear you -- but those limits go out the window when people are ALREADY defaulting. Creative lending that really seeks to give people better options than default might be in order. Max, I definitely hear you — but those limits go out the window when people are ALREADY defaulting. Creative lending that really seeks to give people better options than default might be in order.

]]> By: max http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html/comment-page-1#comment-2314 max Sat, 16 Aug 2008 02:27:17 +0000 http://blog.redfin.com/boston/2008/08/are_40-year_mortgages_the_new_arm_or_our_way_out_of_this_mess.html#comment-2314 We don't need more creative lending. Look where it got us. What we need is to get back the affordable mortgate. Which, historically, means 80% LTV, and 28% LTI. You can stipulate whatever you want in your loan terms, including yearly distributions from relatives and diet consisting of $.20 per serving Ramen noodles... But the reality is that if you lend at more then 28% LTI -- lots people are going to default. And if you lend at more then 80% LTV, you are going to have significant losses when those people default. It's quite simple, actually. If you don't want defaults -- lend reasonably. If that suddenly means that nobody can afford anything -- well, duh... We tried to step over these limits, and look where we ended up. We don’t need more creative lending. Look where it got us. What we need is to get back the affordable mortgate. Which, historically, means 80% LTV, and 28% LTI. You can stipulate whatever you want in your loan terms, including yearly distributions from relatives and diet consisting of $.20 per serving Ramen noodles… But the reality is that if you lend at more then 28% LTI — lots people are going to default. And if you lend at more then 80% LTV, you are going to have significant losses when those people default. It’s quite simple, actually. If you don’t want defaults — lend reasonably. If that suddenly means that nobody can afford anything — well, duh… We tried to step over these limits, and look where we ended up.

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