It's bad for everyone if the housing sector goes completely in the dumpster. Sometimes helping everyone helps a few undeserving people - of course, that claim is Duhbya's stock in trade. In this case, it's true.

Give owner-occupants easy terms guaranteed by the FHA. Most of the subprime market is people with poorer credit, not yuppies living above their means. For investors and house-flippers, sorry, you took the risk; pay the price.

But please let's not repeat the 1920s and 30s, when banks foreclosed vast swaths of property and turned people out of their homes. The foreclosed housing stock then produced no revenue for the banks at all, and that contributed to them failing, which might have been their just desserts but pulled the rest of the people down, hence FDR's attempts to help even the banks.

Duhbya probably is talking about saving the "poor" Gettysvue residents from their own bad decisions, but up here in Massachusetts a $400,000 house can be quite modest in some communities. If the local test of a housing market is wide enough, a high limit can be good policy. California and New York need it, too, at least in their cities.

Liberty and justice for all.

My new home

What LL said.

I hope you'll re-read the terms of this proposal

(link...)

it won't finance homes in Gettysvue, there's no way Knoxville will be designated a high cost market. Homeowners will have to have 3% equity and they have to have a history of good payments before their mortgage reset. This is not a program for the flippers or the $40K earners living in a $400K home. It's for my friend A who was told she could only get a variable rate loan because her credit wasn't perfect.

This program may just be PR and it's kind of like putting a band-aid on a gushing wound but it will at least help 800,000 homeowners who were duped into a variable loan or told that was the only kind available. Of course the key will be in the installation ... I mean implementation.

I understand your frustration about the mrtgage and RE industry running amok. Believe me, plenty of hedge fundies (and unfortunately pensioners) will be in a world of hurt with or without this program. And there's not enough money in the treasury to really bail out this debacle.

P.S. Back when I was an agent, I sold a lot of homes to perfectly fine, upstanding responsible people who only had the 3% down. Some of them got the money from their parents - many a "gift letter" had to be signed. The down payment on my first house was a gift (bribe). IIRC, the land under your house came from family. It bothers me to see you looking down on people who don't have 20% or even 10% down. The real estate industry worked fine for years with 3% down FHA money and 5% conventional. The difference back them was buyers had to qualify for the loan and income was verified.

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Less is the new More - Karrie Jacobs

There are several good points made here from both sides. The help provided in this program shouldn't be for those who speculated on the housing market by either planning to flip or living in houses beyond their means (based on the market they live in.) The focus needs to be to stop or slow the domino effect this will have on OUR economy. And last, once again we need educate each other. This time it is on the basic math around personal financial decisions. I remember a class I had in high school that taught basic economics of runnning a household. It wasn't home ec. It was a sociology class on life skills. Some might say those skills should be taught at home. If the parents were not taught those skills how can they teach their children. So this becomes a vicious circle of bad decisions and poor choices.

That's why education is the solution.