Bailing Out a Bus Driver with an $800,000 House
–An example of a McMansion (not the one in the video, but pretty close)–
BY: NCVIKING
One of the insidious things that occurred during the housing bubble was average schmos getting insane mortgages for McMansions. Now they are in trouble. It’s the mortgage brokers fault, Obama bail me out!
I am not sure what the husband of the woman in the below video does for a living, so her whole story is a little incomplete (Great reporting, CNN!); but this story may be indicative of the reckless behavior of many housing buyers during this time and their blatant disregard for responsibility and consequences. I am definitely not giving a free pass to predator lenders or the ‘buyer beware’ of no money down, adjustable rate and sub-prime loans they peddled, but at some point people need to have some common sense and own up to their decisions.
Michelle Malkin put it best by saying:
Tell you what, Mrs. Garcia. We’ll help you out with your bad financial investment when you agree to help the rest of us make up for our stock portfolio losses.
Cry me a river.
Here’s the video:
- Why Are We Still Listening to Ben Bernanke? - August 31st, 2010
- Favre Returns for One More Year - August 18th, 2010
- Mosque at Ground Zero and the First Amendment - August 18th, 2010
- NFL Predictions 2010 - August 10th, 2010
- Basil Marceaux ... Magnificent! - July 23rd, 2010
I dislike the great misrepresentations always posted in this blog. If you cannot win the argument by telling the truth, are you really being responsible to the American people?
The truth is that Obama’s plan will never subsidize Mrs Garcia’s McMansion. The plan is still not completely published, but as explained by the WH, the plan calls for the bank to modify a mortgage to 38% of the owner’s income. The feds will then lower the payments down to 31%.
Assuming that the Garcia’s make under $60,000/yr combined, 38% of their income would be principal and interest of $1,900/mo. That would mean that the maximum value of their home would have to be $316k.
If the bank feels it can foreclose this home and sell it for more than $316k, as is likely, it will. It would not write-down this mortgage to that level. I’ll explain what banks are looking further down.
Don’t fall for the obvious red meat that “someone is getting a free ride” here at your expense. This plan helps teh bank more than it helps the homeowner.
Here is how it works: The bank is holding a deed on a property that is worth much less than the note. There are only two choices: the owner stays and pays, or the owner defaults. If the owner defaults, the follow the only procedure available to them – foreclosure.
This plan gives the banks a new tool. Keep the person in the home at all cost. A bank will write down the note on any property whose value is already way below the value of the note. This keeps the cash flowing.
It helps the bank. It is also the reason why McMansion won’t be getting a bailout.
There are a couple of other beneficiaries. The owner gets a break, but the owner could get a break just by leaving the property, so the exact benefit isn’t that great. The owner’s neighbors get a break, because it sets a floor on home prices based on people’s income.
Yes, Mrs Garcia is crying poverty. She hasn’t taken responsibility. Don’t drag all of the banks and the economy down because of one woman with a delusion.
The post is not a commentary on the Obama plan, but on average schmos getting insane mortgages for McMansions and now catching a break when the investment goes sour. The Obama plan is one way to try and stop the pain but it’s a very hard pill to swallow for the large percentage of Americans who chose to be responsible.
I don’t think you have thought through this entire thing. You are going with a guttural reaction. Here are the facts:
a) Many people who acted responsibly are now getting seriously burned. It is an illusion to think that just mcMansions are the bad guys.
b) I can give you at least 10,000 examples of people who can afford homes in the $300k but who bought homes in the $220k (to be responsible) whose homes will never ever again be worth $220k.
c) Most of them live in their home, but some have to move: too small, job has moved. Most of them want to save money but can’t because they can’t refinance. Should we just throw them “under the bus?”
d) I don’t think you fully understand my post or that this bailout helps the banks more than it helps any particular home owner.
e) The bailout will not help Mrs Garcia, ever. She can kiss that home goodbye.
Still think that it’s all about McMansions? If so prove your case.
what state are you living in? And I don’t mean “mental”. The worst of the mortgage problems are in California, Nevada, Arizona, Florida and Michigan. I live in California and I see, first hand, the carnage suffered by people who bought houses that they couldn’t afford, on the chance they would ride the real estate boom to a free home. My sister in laws relatives working at Costco bought a $675,000 house in a town that had never seen a home about 176k until the housing boom hit. Lost it when the bubble popped. Every piece of land available was being developed and there were Starbucks on all 4 corners of a couple of intersections. $6.00 for a coffee and “baristas” were being started out a $12.00/hr. All of this out of whack spending by people who should have known better and who do we blame? The mortgage broker or bank or lender who made it “too easy”. Bullcrap! Who doesn’t know how much they make and what they can afford to pay for? If I were to short an employee 15 minutes for showing up a half hour late, they would know to the penny, what they had coming. “I did’t know what I was signing?” What vision deficiency do you have when you can’t see this giant freakin’ house, especially when you have to drive through block after block of giant freakin’ houses, to get to yours? Come on. They tried to pull a fast one and got caught. Take your medicine and shut up. I am sick of hearing the whining of those who gambled and lost. My landlord has lives in a one million dollar (now 800,000) house up the road, has another house he rents out in town, has a $300,000 motorhome in his driveway, has a house in Tahoe, has a ‘56 Chevy Nomad in his garage, has 3 separate businesses employing probably 25 people, and he wants to be “bailed out” of the house I rent from him. He has let the house go 90 days delinquent because that qualifies him for the bailout program. We still pay him $2000/mo which he is putting in his pocket while he awaits Obama’s details. And he is not the only one. Check out this link to “Are you an idiot to keep paying your mortgage?”…
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/16/BUQR1442LQ.DTL
We are seeing people who knew better and still jumped in with both feet, being offered a rescue when alot of us saw that housing prices were to freakin’ high and realized that we couldn’t play ball. And at that time, I was told that I was a fool for not getting on board and now they are laughing again. We’ll see what happens but those of you who live in areas where people have actually played by the rules and fallen on hard times would be AMAZED at what is going on elsewhere.
To Mike:
Maybe I should have clarified by saying ‘my’ post instead of ‘the’ post was not a commentary on the Obama plan. I wasn’t referring to your comment. Or maybe you want me to prove that the housing bubble or bailout was all about McMansions, this is not what I said nor do I believe this.
I stated in the original post “(the bus driver’s) story may be indicative of the reckless behavior of many housing buyers during this time and their blatant disregard for responsibility and consequences.” Do you want me to prove this? There are tons of stories out there of this behavior occuring during the housing boom. Do you want me to argue with or disprove your comments? Here is a great debate about the issue at the Wall Street Journal’s website.
The Obama plan is being implemented and the jury is out on if it will help the economy or not. I and many others find the thought of rescuing a McMansion owner who irresponsibly got in over their head as a hard pill to swallow. This is what the post was about.
to mike horsley,
I agree with you 100% that people shown own their own mistakes. Those that blame mortgage brokers are just trying to evade responsibility.
The article you quote in your post SUPPORTS the point that the bailout will not get out of your obligations.
There are a lot of misconceptions about the bailout. The bailout won’t be paying people’s mortgages for them, not even your landlord’s and the bailout won’t save a home if the owner can’t or won’t pay.
According to the article, the bailout only applies to primary residences. Your landlord will get no bailout benefit for your house, which is his investment property.
Next, the modification is to the payments only – not the principal. It is either refinanced at 3% or higher, or for 40 years, or part of the payment is suspended until the end of the term. In other words, the entire amount financed is still due. Not much of a break.
Those that can’t afford the home, like the bus driver in the original post, are just going to be out of luck. They will lose their mcMansion home.
Your landlord may be trying to get the bank to rewrite the mortgage. To do so today, it requires that the property owner be 60 – 90 days past due. A lengthy process (8 wks or more) begins where the mortgage is rewritten at a lower price. He gets a break — but it has nothing to do with the bailout (and there is a real good money making reason why the bank would do it too).
You may have a much better plan as to what to do with mortgages than the rest of us, and if so I’d love to hear about it.
To NC Viking,
What kind of break is that? She gambled, she lost.
Explain the cool break Mrs Garcia is getting — she’s going to, as well she should, lose her home. She’ll be renting soon.
Mike
What she doesn’t tell us is that she owned at least 3 properties from 2006 to 2008. Poor woman.
She has owned a condo at 6001 Arlington #721, Falls Church, VA since 1999.
She purchased 3438 Charles Street, Falls Church, VA on 1/05/05 for $510,000 and sold it on 6/10/08 for $429,000.
Her current home – 1920 N. Dinwiddie Street, Arlington, Va -was purchased with her husband (Luis Guillermo Flores) on 11/16/06 for $800,000.
Looks like they just got greedy. Are these the poor people that we’re supposed to help????
To Mike:
If the Obama plan is the best course of action and equitable, the administration has not done enough to communicate this to the public.
We do not know exactly how much Mrs. Garcia put down on the house, what the terms of her loan are and how long she has been paying on the mortgage. Only that she bought the house for 800K, she guesses it is now worth 675K, and CNN says the mortgage is higher than what the house is worth. If it falls within that 105% range, then Mrs. Garcia may qualify for refinancing. A break.
In the end, we are both making assumptions about her situation to make a point.
NC Viking,
I am not making any assumptions. It is clear she can’t afford any home above $320k. If she put $480k down, she would not need or be entitled to any break. In that case, your post would be intellectually bankrupt since it would have to read, “Woman does the right thing: buys home she can afford.”
The only way your post makes sense only if she signed away on loans she COULD NEVER AFFORD. There is no way she could get to 38% of her income unless the bank drops the price by $480k. A bank will never do this. It would never give away $480k when it could recoup $675k.
Banks are number crunchers. I know this personally in my profession.
Sherry,
Thank you for posting this. As you know, Mrs Garcia wouldn’t qualify. I posted the numbers why.
I wouldn’t want Mrs Garcia bailed out. But we shouldn’t post ridiculous stories pretending that she is getting something she isn’t.
To Mike:
Your first comment made assumptions about their income, upon which you have based much of your argument. Further, you assume they are actually in foreclosure, they are not. According to the report they only received a warning letter, which may make them eligible for the refinancing option in the plan assuming they qualify.
Now you are just trying to split a hair in order to avoid backing up your argument.
The article is that this husband/wife team are bus drivers. The word assumption in my first post is rhetorical. Bus drivers don’t even make that kind of money. Next, my post said, clearly If the owner defaults, the follow the only procedure available to them – foreclosure., hardy an assumption.
The bulk of these discussions are about how your article does not in any way show how this couple would benefit from Obama’s plan – a point you should be addressing if you intend to defend your post.
We would all benefit from a discussion of who benefits and who doesn’t.
To Mike:
You said you were not making any assumptions, when your whole argument is based upon lots of them, which is perfectly fine. Far from splitting hairs.
I have addressed in my last comment that this particular couple could benefit from Obama’a plan through the refinancing option (see second FAQ from The White House website on the program).
Now back to the meaning of the post. The post is not a commentary on the Obama plan, but on average schmos getting insane mortgages for McMansions and now catching a break when the investment goes sour. Even the very liberal San Fransisco Chronicle in a supportive editorial admits that the plan will help some people who don’t “deserve” to be helped. The Obama plan is one way to try and stop the pain but it’s a very hard pill to swallow for the large percentage of Americans who chose to be responsible.
I’ll give you the last word this time before ending the thread.
The 105% to refinance provision in the plan is specifically designed to help the average American family who has been living responsibly and who now has seen their home market values drop below their equity. That would be people who purchased with some money down or purchased before prices went crazy.
Other provisions in the plan helps those whose home mortgage payments are close to 38% of income.
These two provisions are designed to exclude people whose cannot afford their homes by any means. That would be every one making $12/hr and expecting to finance a condo, a bus driver, or most other examples of outrageous lending.
If after these adjustments the owners still cannot afford their home payments, then basic economics says they will lose their homes.
These provisions are designed to help the bank much more than individuals. It is the bank who will be holding a property they don’t want and one that is likely to be losing value. Allowing you to stay in your home is a better option for them. For a home owner, the better option is to own a home you can comfortably afford.
I still believe McMansion posts are all about stirring emotions and not much about the real math driving the plan. I find that type of post as misleading and not very helpful to Americans.
Husband is a construction worker; wife is a bus driver. I thought your mortgage was supposed to equal 2-1/2 times your salary. To qualify for an $800,000 mortgage, your annual salary needs to be $320,000. You don’t need a college degree to drive a bus or swing a hammer – you don’t even need a high school diploma. Why would I go to college, get a degree and teach school for $35,000 a year when I can drive a bus and get an $800,000 house? What a country!
PS – Thanks for the info that she owns/has owned other properties. CNN seemed to have left that info out of their report. Wonder why…..
What are you people arguing about? Are you sorry you did’nt get a subprime mortgage on an over priced house? Why did’nt you! No one was stopping you. Why not be irresponsible like the people you are complaining about!
Her & her husband are in the Construction Business. She’s not a bus driver. I’m in a similar situation. But my home is much much less expensive. Due to health problems, I have been out of work for a year. My bank lowered my interest rate 2% so we can pay our mortgage. The Gov’t has not bailed me out, my lender helped out. I think that’s what she’s seeking
Trackbacks
Bailing Out a Bus Driver with an $800000 House | The Great Illuminator - ezineaerticles
Uplifts » Blog Archive » 545 People Ruining America
Leave your response!
Our Growing Debt
Countdown Timer
in 26 months, 0 weeks, 3 days, 0 hours, 35 minutes, 31 seconds
Latest Illuminations
Subscribe to Posts
Categories
Authors
Archives
Center Links
Conservative Links
Great Forums
Liberal Links
The Great Illuminator
Most Commented
Tags