40% Of “Distressed” Mortgage Holders Can’t Make Payments Even At 2% Interest Rate

Part of Obama’s plan to rescue us all from our own mortgages is pressuring lenders into refinancing those mortgages at lower rates. But the government won’t subsidize any refinancing that goes below a 2% interest rate. Supposedly this is to avoid bailing out people who took mortgages they never had a chance of paying off.
That appeals to my sense of personal responsibility, but here’s the problem: According to this CNBC report some 40% of distressed borrowers wouldn’t be able to make payments on their mortgages even at a 2% rate. Which begs all sorts of questions about what happens next if this plan from Obama fails? Do the taxpayers just buy up the homes and give them to the people?
Or would it maybe be time to finally admit that the government can’t fix this problem? Time to finally admit that all these government “fixes” we’ve seen passed over the last several months are little more than pain avoidance, and that eventually we’re going to have to let the market take its natural course?
It is time to admit that these government fixes won’t work, but I don’t think Obama and the Democrats are ready to let go of their of the idea that there’s no problem that can’t be solved by hiring bureaucrats and spending money.

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  • http://www.willisms.com/ Zsa Zsa

    SigFan. I do too! Somehow I doubt “Free Homes for Everyone” Applies to us. We are the ones who will be buying the homes for everyone else. I should have phrased that differently.

  • Mickey

    You can take the activist out of the ghetto but you cant take the ghetto out of the activist.

  • http://www.willisms.com/ Zsa Zsa

    SigFan, I love that disclaimer! HA! I could almost hear the voice. We just paid our house off in January of this year. I keep wondering how many people are paying their mortgages off early these days?

  • http://www.willisms.com/ Zsa Zsa

    When we are approached with another Socialist program we Must say No Thank you! We have enough. Our Politicians & future Politicians need to be made aware that we want them to SAY NO! NO MORE, NO WAY, NO THANK YOU! NO!!!! Enough!

  • http://www.willisms.com/ Zsa Zsa

    Next it will be Free homes for Everyone!

  • Hungry Bear

    I see a lot of this in my area. A lot of lower income buyers bought $500,000-$700,000 homes with the idea that they’d rent rooms to a lot of friends and relatives.

    The result would be a 4 or 5 bedroom house with a dozen roofers, painters, hotel maids and day loborers living in it. When construction stopped and hospitality slowed down, the poor guy who got the loan was left making the payment on a $ 1/2 million home. If this guy happens to be an unskilled worker, there’s virtually no chance he could afford that home at even 1 % interest.

  • SigFan

    Zsa Zsa – I already have a nice home that’s paid for, can I just have my tax money back instead?

  • SigFan

    Zsa Zsa – No, you’re phrasing was right on – you just forgot the disclaimer part. Free homes for Everyone!
    (this offer does not apply to hard-working taxpayers who live responsibly and within their means).

    My disgust with this whole situation leads me to be much more sarcastic than usual. Glad to hear you’re in a stable situation also. I paid off my house about ten years ago and have never looked to finance my way up the ladder again. Getting out of debt takes hard work and discipline, but man it does feel good when you get here.

    Obama and company do not want this to work, they are simply doing everything they can to bring down capitalism and install socialism in it’s place. They are throwing up smokescreens to make people believe that they are doing all they reasonably can to “save” us. And when that doesn’t work (it’s coming failure should be obvious to anyone capable of analytical thinking), they will say, well, we tried, but now we have to really take drastic action. By that point the masses will be so shell-shocked they’ll let the government do anything to stop the pain.

    There is no other logical conclusion you can reach to explain the actions of trying to get us out of debt by massively increasing the debt through deficit spending. Kind of like cutting off your left ear because you’re going deaf in your right ear.

  • http://twitter.com/r0ckH0pp3r sayanything-3285

    Here’s my take on this.

    We will find that many, if not most of these homeowners, who purchased homes between 2002-06 had no business being homeowners.

    A $350k home on a 30 year mtg. with ZERO interest is still $833.00 per month, not counting taxes, insurance and all the necessities to keeping a home maintained.

    Everyone kept believing that their home values would rise 10-15% per year, and when the homes DID rise early on, many took out HELOC loans.

    Now they are drowning in debt to a HELOC loan, and that $350K home is now worth only $250k or less.

    So throwing these homeowners a 4% loan is not going to do a damn thing for them, since they are so far over their head they are already on the last gasp of life support.

    Lesson learned?

  • richNJ

    IMHO Obama is making his plans by using Chavez’s handbook. Please the poor and you will be elected forever. By the time the middle class wakes up, most of this plans will be in place and the laws will have been changed. This guy is all Chicago Machine Politics. I do not think this guy has any moral fiber at all……..scary.

  • http://SayAnythingBlog.com The_Whistler_ofnd

    Nobody has explained to me why the losers deserve to have their homes handed to them.

    I mean my house is a lot less elaborate than others have that I KNOW make less money than I do.

    Why should I be subsidizing them to live in luxury?

  • jimmypop

    how is it news that poor people cant afford things?

  • sc

    I HAVE A PLAN TO SAVE THE HOUSING INDUSTRY. Set up a donation program, where the Hollywood Left, etc can donate money. That money would than be used to keep people in their houses, that have no business being there. No tax dollars just donations. I wonder if they would get a dollar?

  • HG

    The banking queen says that if we don’t subsidize defaulting mortgages then property taxes will drop due to foreclosures. And of course we can’t just subsidize property taxes, that would be too obvious. So we’ll borrow future tax reciepts to pay mortgages the market will not sustain to ensure property tax revenues continue. Yeah, that’ll work Barney.

    Oh what a tangled fiscal web liberals weave.

  • http://suitepotato.blogspot.com/ sayanything-4808

    Well if I’m easily handling my mortgage at 8-9% and they can’t at 2% one wonders how big that principle is. Let me guess… pushing towards $500K on a 30 year?

    Overpriced houses in overpriced neighborhoods are a prescription for disaster. People need to practice some self-control and common sense.

  • http://suitepotato.blogspot.com/ sayanything-4808

    This is why I’ve advocated for years that people buy into the inner city. It’s time for white/black/latino/money flight out of the city to bank hard, turn around and go back and clean it up. They don’t have any money to refuse us and our votes count for ever more as we are the ones revitalizing the neighborhoods, not liberals handing us stolen table scraps.

    For thousands of years humans when faced with disasters within settlements have scattered from those settlements outwards in almost circular rings, resettling in sparser settlements farther out as what they left behind rotted and died. With plagues, social change, etc., humans have run. We need to stop.

    We of the middle class paying bills and taxes still have the power in the end. Not the poor who live off table scraps the left hands them as leftovers from the much larger amount they stole from us. Not the truly few rich because rich is a static wealth measurement, not a dynamic income flow measurement and we the middle class have the dynamic flow that makes this country work.

    Buy into the sub $200K market in the smaller cities, refit and renovate, move in and come to stay. There are rental properties that even in today’s climate are on the market for $150K, have three apartments, and it would be a $20K investment up front for renovations, and rents would fetch $600-$1000/month/apartment.

    A LOT of the multifamilies recently redone in my neighborhood were redone by latinos, most of them immigrants. If people from Mexico who came here with little money can bust ass to become landlords raising their families well, why not everyone else?

    People have a right to no more than they can afford. If they can’t, they simply don’t buy it. This system of underwriting the unaffordable on the backs of everyone else so that some can enjoy status symbol homes they otherwise wouldn’t only leaves poverty behind for the libs to seize power over. Give up on those strongholds and you get Detroit. Time to come back and kick ass.

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