Interesting Article - One Final Bailout That Still Might Happen (homeowners)

[Storm]

I'm not sure I agree that it would be a good idea.  I think the more bailouts of homeowners the longer they put off fixing the problem, but I suppose it is appealing to a policy maker to be able to give a homeowner a couple hundred bucks back in their pocket every month through a government backed refi...

The US government seems to be like a young kid that doesn't want to feel the pain of tearing off a bandage too quickly, so instead, he peels it off slowly, crying and experiencing much more prolonged pain than if he were just to tear it off...

http://www.usnews.com/news/blogs/rick-n ... ght-happen

[Jan Van]

Made me think about this article:

“Debtors’ Prison”?: Bob Kuttner on the Costs of Rentier Rule

The creditor class views anything less than full debt repayment as the collapse of economic civilization. In fact, however, debts are often not paid in full….Bankruptcy ingeniously provides orderly relief from past debt so that the productive enterprise is not needlessly destroyed….But the same business elite looks askance when others—homeowners, small nations, the entire economic system—seek relief from punishing and economically perverse debt….

[MediumTex]

Arguably, current mortgage rates are already a gift to any homeowner who wants to refinance and can qualify.

If you can't qualify to refinance because you are too upside down on the house, I would say there isn't much point in refinancing anyway.  Sooner or later that debt is going to be defaulted on.  I think a better program would be to provide some orderly and streamlined mechanism for liquidating ALL of these mortgages that are significantly in excess of the value of the underlying property.

BTW, I am refinancing my house with a no cost refi and my rate on a 15 year note is going from 4.25% to 4%.  I am very happy about that.

I think that one of the realities that few people want to recognize is that a typical 30 year mortgage is a lot more like renting than owning.  The fact that there have been periods in recent history where a 30 year mortgage could provide a means to easy gains in a rising market has simply obscured the fact that for most people a 30 year mortgage is just a rental contract in drag.

The fact that there happens to occasionally be an opportunity for big gains within a 30 year mortgage structure is offset by the jolting revelation that there are also opportunities for big losses in this financing structure as well.  On balance, I wish that people didn't see their dwelling as a speculative asset--it seems like over time not much good can come of that.

I believe that people should buy homes based upon what they can afford using a 15 year mortgage, but that's just me.

[Storm]

The creditor class views anything less than full debt repayment as the collapse of economic civilization.

If you can't qualify to refinance because you are too upside down on the house, I would say there isn't much point in refinancing anyway.  Sooner or later that debt is going to be defaulted on.

Great points, and I agree with both of you.  The banker class seems to have this fantasy that if somehow we can make the debtor classes monthly payments low enough, they will forget how indentured they are and happily be wage slaves, chipping away at their debt on an underwater asset for the rest of their meager pauper-like existences.

This seems unrealistic at this point.  I remember how shocked I was the first time I walked into a car dealership as a young man and instead of asking me how much I could afford to pay for a car, the salesman asked me "how much do you want your monthly payment to be?"  Once they figure out how much you can afford monthly, all manner of trickery can be used to hide expenses and gouge you for extras.

The average man is starting to re-learn the lessons that their grandparents tried to teach them - save money and don't buy more home that you can afford.  This is a tough lesson a long time coming, but we will look back on our grandparents who lived through the Great Depression with new found understanding and respect.

[MediumTex]

I am at the point in life and understanding right now where even zero percent loans are not that interesting to me.

I just don't want to owe anyone ANYTHING.

People start talking to me about 0% financing, and I sometimes have to explain to them that it's not the financing that's the problem, it's THEM--I just don't want to have a relationship with these banker idiots AT ALL.  I was on the phone with someone once who was trying to sell me some variety of servitude and I kept saying no to whatever she offered me and when she finally asked me why I didn't seem interested in anything under any circumstances I simply told her: "because I don't trust anyone in the industry you work for, and I don't do business with people I don't trust."

I think we are seeing a resurgence of a modern version of 1930s-era thinking about debt and the role of financial interests in society.  This will hopefully continue for a long time.

I love it any time I can end one of these dysfunctional relationships.  I recently paid off my car and when I received the title in the mail I felt like I had freed a family member that had been held hostage by a group of dimwitted kidnappers.

This is just me, but I don't REALLY start to enjoy something until I have paid for it in full.  I still owe on my house, but I am sure that I will enjoy living in it a lot more once it is paid for.

[moda0306]

I recently paid off my car and when I received the title in the mail I felt like I had freed a family member that had been held hostage by a group of dimwitted kidnappers.

I am not quite as "anti-debt" as you, MT, but I completely understand that feeling... it's like you've found one of several items needed to free yourself from a financial prison...now onto the next.

That said, I'm not above interest-rate and tax-rate arbitrage using tax-deferred accounts and tax-deductible mortgage interest.  Even so, whenever I buy something that's "0% interest for 24 months" I wonder if I'd rather just pay cash and never have to deal with another debt product pusher again.  Often, they're trying to sell you on a dream based on consumption, and living in that world is a bit sickening, even if you can bleed it of a few bucks.

[Odysseusa]

I have been diligently paying off my personal debt since 2008 until now and by 2012, I should pay it all off. I got into debt heavily during the period of 2002 to 2007. I learn a lots about money and finance during this past decade.

[dragoncar]

I was just recently looking at a 0% credit card offer and thinking "this would have to be a negative APR offer to make it worth my while" (i.e. they would pay me)

[Jan Van]

Recently I did buy a car on a 0% loan, and put the money in Vanguard precious metals and mining. We'll see how that works out...
I'm still thinking about opening an Ally checking account, seed it with the money I owe them, and automatically pay the Ally loan from there. That way they would be paying me interest on the money I owe them. Would be kind of fun...