Gross: Bush needs to rescue homeowners

[cobra de capell]

Gross: Bush needs to rescue homeowners
Famed bond manager says a rate cut by the Federal Reserve won't stop millions of Americans from losing their homes.
August 23 2007: 12:51 PM EDT


NEW YORK (CNNMoney.com) -- Famed bond fund manager Bill Gross said the White House should bail out the millions of American homeowners who face the dreaded prospect of foreclosure this year.

"If we can bail out Chrysler, why can't we support the American homeowner?" Gross wrote in his monthly investment outlook on PIMCO's Web site.

With nearly 2 million homeowners at risk of losing their homes this year and with housing prices rapidly receding, Gross said President Bush, not the Federal Reserve, is the best hope for "almost homeless homeowners."

"This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hard-working Americans whose recent hours have become ones of frantic desperation," said Gross, a founder of the fixed-income investment firm PIMCO and a columnist for Fortune.

"Write some checks, bail 'em out, prevent a destructive housing deflation that (Fed Chairman) Ben Bernanke is unable to do. After all 'W', you're 'the Decider,' aren't you?" Gross wrote.

Many have called on the Federal Reserve for help with the worsening state of the housing market, including cutting short-term interest rates. While the central bank has been reluctant to do so, Gross warned that such a move would not necessarily guarantee that adjustable-rate mortgages would not keep climbing or that mortgage lenders would relax their lending standards.

More and more troubling news has emerged from the already battered housing market recently as foreclosures nearly doubled during the month of July from last year, RealtyTrac reported earlier this week.

Home prices have also been hard hit recently, falling 1.5 percent during the second quarter, according to the National Association of Realtors. While falling home prices "might be healthy", the decline could represent an asset depreciation not seen since the Great Depression, warned Gross.
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I hope that this idea doesn't go anywhere - I cannot image bailing out people for doing such a stupid thing - if we start to bail out people for making stupid financial decisions we may as well kiss all our money goodbye, and sell our Cobras.

[CobraEd]

Maybe these people shouldn't have bought houses they couldn't afford! It is no one's fault but their own. No one twisted their arm! But again, here in America, all the people who do the right thing will bail out all of the stupid and undisciplined

[trularin]

I'm with CobraEd on this one.

It is a matter of economics, if you can not afford to own it...don't.

The market is slipping, has been for some time, yet lenders are still willing to sign up people for a ride.

[J. T. Toad]

This shouldn't be breaking news for anyone. This has been on the horizon for a long time. We reap what we sow, and then everyone wants the government to subsidize it when the market price turns sour.

This reminds me of those people bawking about not being able to afford home insurance in Florida after the last hurricanes leveled their home.


no one has any accountability any more.

[J. T. Toad]

actually now that I think about it, the fed should probably raise rates to help out.

[4RE KLR]

Exactly
.....

[DAVID GAGNARD]

I was watching a show, 20/20 or 60 minutes or something like that a while back. they were talking about the "poor folks" losing their houses left and right. they interviewed one young (30ish) couple, can't remember what state, maybe Florida.they had 3 kids, mom had some minimum wage job, dad was a general laborer for a contruction company, they brought in less than $60,000.00 yearly combined, but bought a house that needed bigtime repairs, it was "her dream house", paid something like $275,000.00 and needed another 75k in repairs....hubby was going to do it himself as they went along, both driving 10+year old vehicles.....hubby lost his job, mom's job would not even pay the monthly bills, much less the note.........the whole story line was about how they were losing their "dream house"........

My wife has worked in the banking industry for 22 years now, the last 18 or so in loans.....she could not believe her eyes!!!!!!!!!! they could no more afford that home, than riding the space shuttle the next trip it makes.....What she could not understand was, who would loan them the money in the first place!!!! and second; how they ever figured they could pay the loan back and make the needed repairs to the house.....BTW: it looked way overpriced..........

She told me they turn down request everyday for home loans, especially from people who have no clue what's going on and have no reasonable chance of making the payments....The head loan officer has a statement he tells a lot of these young folks when they ask why they are being turned down for a loan to buy their "dream house"... it's very simple, he tells them and I quote:"You have to learn to live within your means." end quote...........

When I married in 1978, my dad co-signed for me and the little wifey to buy a 960 square foot wood frame home, that we paid off in half the time, and lived in for 10 years.....we saved all we could to buy our "dream home" and when the right one came up, we were able to put 50% down and paid off a 15 year note in 9 years.....we lived within our means!!!!!!!!!!!!!!! I drove an old truck for years, wifey had bought a new car months before we married and drove it 10 years, but it was ours....today the kids want new Z-71's,can't drive a "used" truck or program car..bass boats that cost as much as the truck and get used 4 or 5 times a year, then they cry when they get laid off and can't make the notes........sorry, I just have a hard time feeling sorry for people like that..............

David

[bomelia]

Originally Posted by CobraEd

Maybe these people shouldn't have bought houses they couldn't afford! It is no one's fault but their own. No one twisted their arm! But again, here in America, all the people who do the right thing will bail out all of the stupid and undisciplined

True, no arm twisting...but lots of sled greasing. Ultimately, the lenders in the sub-prime market bear an enormous amount of responsibility for creating products that sucked people in, people who could not afford the risk.

Mike

[aharris]

Originally Posted by CobraEd

Maybe these people shouldn't have bought houses they couldn't afford! It is no one's fault but their own. No one twisted their arm! But again, here in America, all the people who do the right thing will bail out all of the stupid and undisciplined

Assolutely....!!!!!

Andrew

[trularin]

Maybe it is best that nothing is done and the whole thing runs its cycle.

[cobra de capell]

Originally Posted by bomelia

True, no arm twisting...but lots of sled greasing. Ultimately, the lenders in the sub-prime market bear an enormous amount of responsibility for creating products that sucked people in, people who could not afford the risk.

Mike

Mike - I'm in the banking world - actually, it was the Mortgage Brokers that created this mess, along with non-banking management/executive types that created/approved sub-prime products and sold them on the secondary market - stuff like 1% teaser rates, no money down, interest only payments, negative amortization, 120% loans, arranging for 2nd's to come up with a down payment or to also finance cars and boats - tons of money was made with mortgage brokers all over the place in store fronts - they are not considered bankers and very often a bank was never involved as loans are often sold directly to the secondary market - Wall Street, specifically to hedge funds. Some of the big banks were also involved as they have mortgage brokers on the payroll - at least they did.

[J. T. Toad]

how many of you have seen "flip that house" or "DIY" or watched a realtor still claim that real estate is a fool proof investment?

They make it look sooooo easy.... like Hedgehogs, tulips, ostriches, authorized cobra replicas

[TampaFla]

If the Fed does "bail out" the housing industry/mortgage industry, 90 percent of the bail out will go to investors, 5 percent to banks, and the rest to those who "appear" to deserve it. Within 5 miles of here there are over 400 condo's in foreclosure, not 1 is occupied. That's were the bail out will wind up, not some family with 5 kids, an income of $50,000 living in a $400,000 house with an interest only mortgage.

[DAVID GAGNARD]

That's were the bail out will wind up, not some family with 5 kids, an income of $50,000 living in a $400,000 house with an interest only mortgage.

A family with 5 kids and an income of $50,000 doesn't belong living in a $400,000 house to start with!!!!!!!!!!!!! that's one of the problems with this whole mess right now..............

David

[392cobra]

David,
RIGHT ON !!!

[Scott S]

How many of the rest of us here have 20 something kids that forgot the house they grew up in?

I have the most difficult time explaining to my kids (one of which closed on a home yesterday)((really funny that he works for me and the loan office called for an emloyment status check a couple of hours after he signed the papers)).

Anyway how is it our kids want the house they moved out of and not the one they were started in?

I have bought pickups recently that cost more than my first home, a 10.5% VA mortage that was at that time a bargin(1984).

On another thought I had recently, what would happen to the housing market if we deported 15 million illegal aliens? Can you imagine how the market would react to the extra 150 empty homes?

Scott S

[Excaliber]

While Home owners have to accept responsibility for bad financial decisions there is NO DOUBT many mortage brokers were offering sucker deals and not disclosing the risk. I've been telling my friends for years, well before the current home market boom, just because the bank WILL loan you X amount doesn't mean your smart to accept it.

And now a serious question:
My home loan is through Countrywide Mortgage, 5 point something percent, fixed, small amount, I'm happy! There assuring every thing is fine, no problems, blah blah while their stock is falling through the floor and their bleeding money and can't BORROW anymore. IF they go bankrupt, how will that impact ME?

[HI Cobra]

Ernie,

You know how popular the 'blue top specials" along the beach here are?
Naw - hopefully some other bank will buy the mortgage from them before
they crash.

[Bill Bess]

Well Boys and Girls,

It's simply about greed, not living within your means, outside pressure from friends, advertisers and the lending industry that tell us we should be living like rich people.

Everyone has to have everything...Now!... Not later when you can afford it.
I couldn't afford an original Shelby Cobra ($7000.) back in 1966 because I was raising kids and feeding the dog. Now I'm done with all that and still can't afford an original. Big Whoop! I'm happy with my replica and who cares anyway.
The best medicine is to get real people.

Best Regards, Bill

[CobraEd]

It is human nature to want everything you can get. But it must be tempered with logic and reality. I guess thee people just have $hit for brains.

.