They can't be required to do anything. The government can't interfere with people's right to contract....they can't go back and systematically reform contracts after they've been signed. If the contracts were against public policy to begin with we'd have something. If the mortgage companies committed fraud against individuals then those individuals would have actionable fraud claims. But I dont' believe the government can systematically go back and re-write contracts entered into by private entities.
Max, I know this is mainly the "bully pulpit" and I'm glad Bush is doing something. If he's going this route, though, he sure isn't helping a heck of a lot of people. Those who end up being helped, good for them, but the vast majority appear to be left out in the cold. Trim Bush!
I hear ya. And I'm not a fan of Bush or defending him in any way, really. I just don't think there's much else they can do about this, frankly.
this issue is more complicated than this. this mortgages are now investment products. do you notice that no one is really fighting this
Shouldn't people also take some responsibilities for their own actions? For as big a decision as buying a home, shouldn't people try to fully understand what they are getting themselves into? How could people not understand that teaser rates of 2-4% is not going to last? There should be zero sympathy for people who tried to invest in the housing market!!
It just started. And already they're telling us it has no teeth. A contract is a contract. Private parties have a right to contract that the government is not to interfere with. I agree that people were taken advantage of. I won't argue that...in fact I'll argue with you in that regard. But the government can not re-write contracts between private entities. And they're already telling us they realize that by acknowledging that it's not binding.
This program will help me tremendously. I did not buy too much home (bought one for $121K when I was approved for $160K) for my income, but my credit is not good at all. I expect that by the time the five year period expires, my MBA and time will have helped me to improve my credit to the point that I can refinance, but if my rate resets to the point that my payment goes from $1000 to $1300-1500, I could lose my home. I have never missed or even been late on a mortgage payment (thanks to my monthly paycheck) and wouldn't even be worried about it unless I knew that Aames would probably reset my rate in May. Some of us truly did get bamboozled by the mortgage broker (mine told us that our rate was fixed right up until the day of closing) and did not get more house than they needed. It sucks to need any help from the government, but without it, I could be forced out of my house next year.
Because they're not told that. They're told they can get in to a house for the same price or less than they're paying rent. And the mortgage broker, who makes more money as he facilitates more loans, has zero incentive. I've represented banks where the lendors themselves had no idea what the loan agreements meant after the fact.
The financial impact of this is stunning, the target audience is supposedly about 1.2 million. Assuming that each mortgage was for $100k, this affects at least $120bn in investments, double that when you factor in interest over the life of a mortgage. damn...
I believe that people have been able to sue in the past and change the terms of predatory lending agreements. I don't know the full extent of the whys and wherefores, but it is not entirely without precedent that the government retroactively alters loan agreements. Obviously doing it on a mass scale instead of a case by case, prove it first individual basis is something different, but loan contracts are not so sacrosanct that the government will never get involved.
That's people suing civilly. No doubt. Private individuals can bring a suit against their mortgage company...you'd primarily seek reformation of the contract in accordance with state law. The mortgage usually specifies which state law controls. All sorts of consumer laws out there in each state...but you gotta sue, prove the case and ask for the contract to be reformed. That's very different from the government just saying, "hey, we're gonna change this agreement for you right now." The right to contract is real...and the government can't just step in. And again...I think that's what you're seeing acknowledgement of in No Worries' posts.
I know they are not told that, but shouldn't they find out? I mean it is all over the internet, newpaper, TV, etc that the interest rate is a historical low of 5-6%, do they just think the banks will give out charity rates of 2-4%? Where you can turn around and put in the money in CDs for higher rates? I mean people should be just a little smarter than that, I know some are not for whatever the reason. If they don't understand, they should ask some friends, family members, etc. I mean you are making the biggest investment in your live!
Again...I've represented banks where the lendors don't know what the loan agreements mean. These are documents written in legalese that are usually pretty extensive. If someone could afford it, I'd suggest they hire an attorney to review the document before they sign it so they can understand what they're getting in to. There are predatory lendors out there. They make all sorts of promises and say all sorts of things...true or not...to get people to sign the line. Because they make money when they do.
Its really a two way street, the investors could either get the higher interest but at the cost of high default rate. (which means they might not get any payment). Or they can accept the lower interest rate but more reliable payments. I can see some big conflicts between the AAA holders and the B note holders.
you don't understand what i'm saying, the borrowers aren't the only ones benifiting from this. that's why no one is complaining. the rewriting of contracting is benifiting both parties, as well as the investors who are holding investments in defunct mortgages. no one benefits from these mortgages being foreclosed upon.
That's my concern as well...To clarify, yes, it isn't a blanket cut for everyone, which is a VERY good thing... Take it a step further...In this market and for the near term, let's say they sell...They'll sell below what they paid and lose $$$? Let's say they don't sell, unless they get a HUGE increase in wealth, they're delaying the problem as they still won't be able to afford it...House of cards... Sorry if I'm late to the game, but Deckard, what's Trim Bush mean? I like Trim, I like Bush...
oh sure...they can agree to whatever they want. the parties can come back and modify their own agreements, no problem. if they agree to do that...great. all i'm saying is that the government can't unilaterally come in and alter the contract.
