[Cynus]

Fannie Mae and Freddie Mac, the U.S. government-chartered mortgage companies, may raise as much as $20 billion in capital as part of an agreement that allows them to buy more debt securities, their regulator said. ...
"There's no specific number,'' [James Lockhart, director of the Office of Federal Housing Enterprise Oversight] said. ``There was a range of numbers. The best way is to say it's significant.'' The amount raised will be ``much more'' than the $5.9 billion of capital released by reducing the cushion, Lockhart said. ...
"The two enterprises have effectively become the mortgage market at this point,'' Lockhart said. ``Effectively they have become the lender of first, last and every resort.'' Bloomberg

[Denny]

Seeing so many business news items lately in magazines and the net about this issue. You'd think th roof was caving in. But, its not all bad.
First off, if you own a house, sure you are expecting it to go up in value, but only over time. What harm are a few dips along the way? Everybody knows that real estate has its dips as well as its peaks. I bought a new house in 1987, and saw it drop in value about 17% between 1989 and 1995. While it made me wish at times I had waited, or sold out in 1989, my prime reason to buy a house was to live in it, not flip it. So, I got what I bargained for, a place to live at a defined cost.
And, a good thing about prices dropping is that some younger workers can afford them.
So, a price drop really does not hurt you, except your pride, if you already have a home and it can help you if you do not.

[seahorse2]

Unless the home is used as collateral for a line of credit or a business loan, which is a common practice. Many small business owners will use homes as collateral on loans for their businesses, so, a drop in home values hurts them a lot, may mean their business goes down.

[jlw61]

Plus home loan laws fall under state law, and since I live in Virginia, I have nothing to worry about as long as I pay my mortage. However, I'm told in some states if the house value goes below the loan value then the bank can call the loan due. Further, as mentioned, if you're using your house as collateral on another loan and it's value falls below the loan value, again, you're sunk.

Finally, the problem is not that home prices are falling, the problem is that the interest rates have soared on adjustable rate mortages and people can not meet their obligations. The reason this happened is that the market cooled and it was no longer a seller's market. Thus, we had a two prong problem. First, foolish people purchasing at historically low interest rates using an adjustable rate mortgage (ARM) and believing the rates would not go up. Second, people buying and selling homes at a haphazard rate which in effect caused a situation not unlike musical chairs. The market cooled (the music stopped) and a lot of people got stuck with a long term investment that they did not want nor could they afford.
Moral: Caveat emptor.

[Cashmere]

Denny, do some research.
Most people who bought homes in the last 3 years with little or no money down are upside down on their mortgage.
They can't move for a job relocation.
They can't sell for any reason, really.
They are making payments on a loan they can't afford.
Lots of pain.

[Denny]

$this->bbcode_second_pass_quote('Cashmere', 'D')enny, do some research.
Most people who bought homes in the last 3 years with little or no money down are upside down on their mortgage.
They can't move for a job relocation.
They can't sell for any reason, really.
They are making payments on a loan they can't afford.
Lots of pain.

[heroineworshipper]

The media always pushes hard for welfare expansion & now there's $310 billion of mortgage relief on the table. They're going to milk the mortgage crisis for all it's worth.

[Pops]

Why the trauma?
First, because younger folks were convinced RE appreciates in a straight line forever and it never has - ever.
Second, deregulation and under enforcement allowed people who should have never been given a loan to get one with historically hinkey terms and qualifications and the result is we now have the highest homeownership ever - not to mention a very high percentage of mortgages approaching default.

Third, the housing market is way overbuilt now due to the easy credit policy noted above - which I'm thinking was an outgrowth of the "Get Over The DotComs" in the first instance and then "We are at war but don't worry; Just Shop!" mentality.
I stand to be corrected by Seahorse or other qualified poster.

[FoolYap]

$this->bbcode_second_pass_quote('Denny', 'W')ell, if houses generally are going down in price, and you need to move, then it would seem you could sell your house at less than you paid but buy a similar house with the proceeds

[wxman]

$this->bbcode_second_pass_quote('FoolYap', '')$this->bbcode_second_pass_quote('Denny', 'W')ell, if houses generally are going down in price, and you need to move, then it would seem you could sell your house at less than you paid but buy a similar house with the proceeds

[Denny]

I am sorry, I guess this term "upside down" is alien to me.
My point is if you sell your house bought at $400K for $300K and buy another at $300K elsewhere you are in the same predicament, not worse, except for transaction fees.

[Tyler_JC]

Don't forget, some loan forgiveness is income liable to taxation.



You lose your house and still get hit with a massive tax bill.

[MarkJ]

$this->bbcode_second_pass_quote('Denny', 'S')o, a price drop really does not hurt you, except your pride, if you already have a home and it can help you if you do not.

[seahorse]

$this->bbcode_second_pass_quote('', 'M')y point is if you sell your house bought at $400K for $300K and buy another at $300K elsewhere you are in the same predicament, not worse, except for transaction fees.

[smallpoxgirl]

$this->bbcode_second_pass_quote('Denny', 'I') am sorry, I guess this term "upside down" is alien to me.
My point is if you sell your house bought at $400K for $300K and buy another at $300K elsewhere you are in the same predicament, not worse, except for transaction fees.

[smallpoxgirl]

$this->bbcode_second_pass_quote('seahorse', ' ')Many homeowners are either walking away from the houses bc they can't pay or filing bankruptcy. In either case, the bank takes the house back and now has a bad loan on its book.

[FoolYap]

$this->bbcode_second_pass_quote('Denny', 'I') am sorry, I guess this term "upside down" is alien to me.
My point is if you sell your house bought at $400K for $300K and buy another at $300K elsewhere you are in the same predicament, not worse, except for transaction fees.

[MonteQuest]

$this->bbcode_second_pass_quote('Denny', 'W')ell, if houses generally are going down in price, and you need to move, then it would seem you could sell your house at less than you paid but buy a similar house with the proceeds elsewhere as long as you are not moving to a high home price area.

[big_rc]

$this->bbcode_second_pass_quote('Denny', 'S')eeing so many business news items lately in magazines and the net about this issue. You'd think th roof was caving in. But, its not all bad.

[Denny]

Well, if everybody just practices some patience, over the years it will blow over. Both the owners and banks need to relax and not be so quick to hit the panic button.
So, maybe it wil take 5 years or maybe 25, but no need to lose heart. If the bank overextended the loan, that mistake is in the past, no need to make a fuss now.