Mortgage Interest Deduction on the Slicing Block
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Red05
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Katrina was a major fail on all levels. Prioroties, right up the Executive decisions, were all screwed up in the distribution of funds to State and City Governments. Lack of proper maintenance and updrades to key levees, which takes meaningful funding, was a big part of the reason Katrina proved so devastating. Everybody involved hopefully learned a big lesson.
What does any of this have to do with mortgage interest deductions?
What you have described is typical efficiency for ANY government funded or subsidized program.
No he's not "raising" taxes....he's taking away deductions we USE to get. HOW IS THAT ANY DIFFERENT.
I agree with you. Wait for the tax increase on personal income taxes. Taxes won't have to be raised, they will simply let the Bush tax cuts sunset, it will be a tax increase without any broken promise.
No he's not "raising" taxes....he's taking away deductions we USE to get. HOW IS THAT ANY DIFFERENT.
Right back to wher they were when Reagan was in office.
Red05
Registered
Sorry, I was responding to Dennis' post here,
........so my post was out of context.
It's NOT Wealthy People's Fault we are in the Situation that we are in Now !!!!!!
It Lies in the hands of the Individuals who Bought Houses that they KNEW they Could NOT AFFORD !!!!!!!!!!!! PERIOD !!!!!!!!!!!!!!!
MOST Wealthy People are WEALTHY because they Made Better Decisions than Most of the Majority.............
Why PUNISH them for Achieving the American Dream while the Rest of Us Give Excuses why we DID NOT ??
Taking away the Tax Deduction for Owning a Home is SOO UN-AMERICAN and SO PRO-SOCIALIST..............
"Change" is what AMERICA Voted for.............CHANGE YOU GOT !!!!!!!!
It Lies in the hands of the Individuals who Bought Houses that they KNEW they Could NOT AFFORD !!!!!!!!!!!! PERIOD !!!!!!!!!!!!!!!
MOST Wealthy People are WEALTHY because they Made Better Decisions than Most of the Majority.............
Why PUNISH them for Achieving the American Dream while the Rest of Us Give Excuses why we DID NOT ??
Taking away the Tax Deduction for Owning a Home is SOO UN-AMERICAN and SO PRO-SOCIALIST..............
"Change" is what AMERICA Voted for.............CHANGE YOU GOT !!!!!!!!
This isn't entirely true. Our current financial crisis actually started back in the 90s. Remember the .com craze? Investors threw traditional valuation indicators out the window in place of counting page hits. The assumption was the sites with the most hits now would be the companies that were worth the most money in the future. So stock prices were artificially inflated and as companies lost millions of dollars, the stock prices continued to climb based on the artificial value of a hit. After a few years of this, the .com collapse hit the market because there was nothing real supporting the price of the shares.
The folks who saw it happening (or got lucky) and sold right before the collapse walked away with huge profits and needed some place to go with them. Concerned about the risk of new technologies, they turned to a more traditional and "stable" industry to invest, real estate. The .com profits flooded into the mortgage lending industry. The new found abundance of available cash for lending allowed the industry to make high risk loans. Add some Clinton administration legislation requiring lenders to make some % of high risk loans, and the stage was set.
Did individuals buy more house than they could afford? The answer is yes. Was the final decision to purchase the house and sign for the loan the individuals? Once again, the answer is yes.
Did the individual understand what they were getting into? In most cases, the answer is no.
So why didn't they know they were headed down the road to disaster? In a word, inexperience. Most are first time home buyers, who put their trust in lending agents. Right before the collapse, I had a lending agent try to talk me into an interest only ARM, explaining how much it would save me $20,000over the first 5 years until it adjusted vs a fixed rate mortgage. And since there were no prepayment penalties I could refinance it at any time. Since real estate always increases in value, refinancing at the end of 5 years using the equity in the house is guaranteed.
Sounds like a great deal. Get into a house and save money. Why not jump on that? Most people did. Fast forward to today. Real estate didn't keep going up. Why?
New buyers flooded the market for short term as individuals who didn't qualify in the past suddenly qualify causing a temporary shortage of available housing, artificially inflating the price. As more housing was built and there were less and less new buyers not in a home already, the supply caught up with the demand and prices started returning to normal values. The result is that the guaranteed equity in the home needed for the refinance wasn't there.
Without the equity they told would be there, they were unable to refinance and the ARM adjusted the interest up and the principle payments kicked in. The jump in payments was more than most folks could afford, so the forclosures began. Y'all know the rest of the story.
With all that said, I don't believe its the Government's place to play Robin Hood to "fix" the problem.
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All of that is true, Dennis but we need to add one more factor to the equation. Those home loans, especially the high risk loans, were, "securitized." In other words, people were investing in the returns promised by these loans. The problem is, when people, er, rather, banks and investment houses bought and sold these securitized loans, they really didn't know how much risk was involved in these loans, ergo, how much quality existed in the underlying loans.
Banks who wanted to get rid of the loans, packed them up into little boxes and sold the boxes, unopened. More than that, they leveraged those loans, a great many times for as much as 30 times their base value. So, for a $300,000 home loan, they could borrow $9,000,000 bux. Didn't even matter that the loan was a sub-prime, neg-am loan or some other such fubar loan. Just that now the bank could loan out a LOT more money, then turn around and securitize and leverage all of THOSE loans. $9 million bux then turns into $270 million bux, eh?
So, when that first loan goes south and the new homeowner doesn't make a few payments, all of a sudden, not only is the original loan a write-off for the investors but the money man has to do a margin call on the $9,000,000 leveraged against it. Next thing you know, they are trying to sell the $270 million package of loans for a mere $100,000 just to save their butts and next thing you know, everyong starts to get wind of the idea that somethings not right out there in the hen house.
A few sharp or very lucky guys got out and took healthy bonuses. The rest were left holding the bag and are paying a price for it now.
Scary crap, eh?
What's really scary are three more things:
1. The 7 year ARM notes are only just now starting to hit. That means we are only about half way through the residential real estate crap. The gov't has spent $3 trillion bux trying to get everyone's equity back up to the artificially high levels they were at at the end of 2006 and 2007.
2. Commercial real estate problems have not yet begun to turn south yet. But they will. Talk about a huge hit. Commercial real estate is worth at least twice as much if not ten times as much or more depending on location than residential real estate. The $3 trillion mentioned above is chump change, essentially. The gov't can't help this problem at all.
3. Credit Card debt is just now starting to be a problem. More people are running up their cards in order to live. An unemployed guy will have to buy groceries somehow. When these bad debts start to really unwind, the credit card companies are going to holding out their hands in a big way for some kind of bailout. Then you'll see the courts being swamped with more b/k's than they can handle and the credit card companies are going to be a thing of the past.
The gun industries are doing a booming business right now because people are afraid that they are going to lose their gun rights. Probably they will in the next year or so. However if we have another tea party in the next couple of years, bear in mind just how many guns really are out there.
That's a scary thought, too.
What starts revolutions is hungry people. See how many people around you are getting really really hungry about now.
--Wag--
Banks who wanted to get rid of the loans, packed them up into little boxes and sold the boxes, unopened. More than that, they leveraged those loans, a great many times for as much as 30 times their base value. So, for a $300,000 home loan, they could borrow $9,000,000 bux. Didn't even matter that the loan was a sub-prime, neg-am loan or some other such fubar loan. Just that now the bank could loan out a LOT more money, then turn around and securitize and leverage all of THOSE loans. $9 million bux then turns into $270 million bux, eh?
So, when that first loan goes south and the new homeowner doesn't make a few payments, all of a sudden, not only is the original loan a write-off for the investors but the money man has to do a margin call on the $9,000,000 leveraged against it. Next thing you know, they are trying to sell the $270 million package of loans for a mere $100,000 just to save their butts and next thing you know, everyong starts to get wind of the idea that somethings not right out there in the hen house.
A few sharp or very lucky guys got out and took healthy bonuses. The rest were left holding the bag and are paying a price for it now.
Scary crap, eh?
What's really scary are three more things:
1. The 7 year ARM notes are only just now starting to hit. That means we are only about half way through the residential real estate crap. The gov't has spent $3 trillion bux trying to get everyone's equity back up to the artificially high levels they were at at the end of 2006 and 2007.
2. Commercial real estate problems have not yet begun to turn south yet. But they will. Talk about a huge hit. Commercial real estate is worth at least twice as much if not ten times as much or more depending on location than residential real estate. The $3 trillion mentioned above is chump change, essentially. The gov't can't help this problem at all.
3. Credit Card debt is just now starting to be a problem. More people are running up their cards in order to live. An unemployed guy will have to buy groceries somehow. When these bad debts start to really unwind, the credit card companies are going to holding out their hands in a big way for some kind of bailout. Then you'll see the courts being swamped with more b/k's than they can handle and the credit card companies are going to be a thing of the past.
The gun industries are doing a booming business right now because people are afraid that they are going to lose their gun rights. Probably they will in the next year or so. However if we have another tea party in the next couple of years, bear in mind just how many guns really are out there.
That's a scary thought, too.
What starts revolutions is hungry people. See how many people around you are getting really really hungry about now.
--Wag--
Thanks Wag. I wasn't looking at it from the investor side which is what caused the banking indusry to colapse, thanks for the write-up on that. I was replying to the comment that is is all the fault of the individuals who bought houses they knew they couldn't afford. If someone who's supposed to be an expert in the industry shows you a way that seams reasonable to afford something, are they the casue or another victim. Like I said, ultimately they are responsible for being nieve about the risks and concequenses, but they weren't intensionally or deceptively getting mortages that they couldn't afford after the adjustment.
jdsbusa
Registered
Busawhipped hit it on the head....back in the 90's Clinton passed laws so that banks could purchase what's basically turned out to be worthless paper....some creative minds got together and sold institutions "crap" (excuse the term....but it is what it is) in the form of investments worth less than the paper they were written on....more or less insurance policies that could be worth a boatload in returns...IF they panned out. Well, they didn't pan out and surprise surprise...look where we are now.
The housing market was just part of the equation, but part of the blame also falls on the predatory lending tactics used by the banks. Face it, the average IQ of an adult is far and away from understanding complicated ARMs, balloons, etc. Legal terms are used in contracts to avoid complete understanding by the party signing the paper. Back when I was in real estate (mid 90's) ARMs were sold but we fully disclosed when and how a rate would go up, we didn't just tout a real low payment/rate to start and shovel the waterfall ahead under the rest of the paperwork. Look at the other junk that's been put out there...Quicken's "interest only" loans, now reverse mortgages for seniors (nothing like taking/stealing from the elderly). Banks need to be held accountable for their deception they used...now they're suffering for writing loans they KNEW should never have been written. They should be forced to write these ARMs back to a regular 30yr mortgage. The CEO's of these banks earning 30 million a year can just suck on no-raises for the next 4 years...won't hurt them one bit.
The housing market was just part of the equation, but part of the blame also falls on the predatory lending tactics used by the banks. Face it, the average IQ of an adult is far and away from understanding complicated ARMs, balloons, etc. Legal terms are used in contracts to avoid complete understanding by the party signing the paper. Back when I was in real estate (mid 90's) ARMs were sold but we fully disclosed when and how a rate would go up, we didn't just tout a real low payment/rate to start and shovel the waterfall ahead under the rest of the paperwork. Look at the other junk that's been put out there...Quicken's "interest only" loans, now reverse mortgages for seniors (nothing like taking/stealing from the elderly). Banks need to be held accountable for their deception they used...now they're suffering for writing loans they KNEW should never have been written. They should be forced to write these ARMs back to a regular 30yr mortgage. The CEO's of these banks earning 30 million a year can just suck on no-raises for the next 4 years...won't hurt them one bit.
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(This got longer than I intended. Oops.)
Bear in mind, and I think Dennis hit this at some point along the way, it was the government which was pushing the banks HARD to lend to more "disadvantaged" potential home buyers. Banks were being pressed and the more money they needed to lend to remain in the good graces of the U.S. Gub'mint, the more they relaxed their lending standards.
It used to be that you had to put 10% or even 20% down on a house and prove that you could make the payments and that your debt load was not too extreme to prevent you from buying the house.
During 2004 through 2007 and early 2008, all of that went by the wayside. Underwriters were barely even asking for a pay stub. The lady who bought the house I sold in CA mid 2006 was not making anywhere near enough to buy the house and I even brought it up to her at one point. She claimed that she was going to have her father and her husband help her with the payments so I dropped it. Sure enough, less than two years later, it sold again for 35% less than what she paid me for it. I suspect it was a foreclosure sale. The price has dropped another 8% since then.
Scary.
We're getting back to the old days now of proving that you're a good buyer (er, borrower) but here's the soft concept, the philosophy of the whole thing: If a person can't be responsible enough to save 20% of the cost of the house in order to lay it out for a down payment, then they are not the type of person who can handle a $300,000 mortgage.
Another way to look at it is this: Some people are $35,000 a year people. They can make that much and no more. It's not because life is unfair but because that's the kind of person they are. That kind of person has no clue how to manage his money beyond. . .
. . .$35,000 a year. Give him a sudden windfall inheritance of $100,000 and he doesn't know what to do with it. A guy who is a $55,000 a year person can handle more but still not quite at the level it takes to handle a $100,000 windfall. It might not cause quite so much damage is all.
A millionaire is a yet another kind of person. He can handle a $300,000 home loan. Or more. The point is, different people are what they are. They can change themselves, of course, especially in this country of opportunity, but if they are what they are, no outside force is going to jolt them out of that position into suddenly becoming something else. They must do it for themselves.
If you're making $45,000 a year and you're disgruntled because you're not making $120,000 a year, guess what? It's because YOU aren't a $120,000 a year guy. It's a simple as that. If you want that higher salary, you have to change what YOU are and then, you become the kind of person who can handle that kind of money.
Go back to the millionaire. He can no more handle 100 million bux any more than the $35,000 guy can handle $100,000. It would ruin him just the same.
As my father-in-law used to say, "No matter where you're at, there you are." It's just the way it is. You have to become. Or you will remain.
Sooooooo, going back to the original problem, if a guy is being offered a $300,000 home just for his signature, practically, and if he is a $35,000 a year guy, he is NOT going to know how to handle the loan. The guy will be ruined. And that is exactly what happened to these people. On a micro-economic scale, these individuals were hosed, sometimes maliciously, but always because of one thing: They are the wrong kind of people to whom to be giving this kind of thing which amounts to nothing more than a handout.
Another way to look at it is when you give someone something, they appreciate it a whole lot less than if they earned it themselves.
Personally, I think the worst fallout of this whole mess is happening at the level of the individual. A lot of resentment has been created. People got burned and a great many of them do not even understand how or why. That's truly sad. Many of these same individuals are now in "gimme" mode. They expect to be taken care of and they will continue to sit and wish and hope for the grand things of life which they, more than likely, will never have again because they will not be able to see that they must change in order to have those things.
I just hope they get it together before they are permanently scarred. It may be too late for some.
I hope I didn't wander too much into left field with all of that. What we are overlooking here as a populace is that human factor of people who got hurt. They were hustled and lured into a situation over which they had no clear understanding or control and they (and probably their children) will continue to pay the price for that for years to come.
It's literally killin' me to see it.
--Wag--
Bear in mind, and I think Dennis hit this at some point along the way, it was the government which was pushing the banks HARD to lend to more "disadvantaged" potential home buyers. Banks were being pressed and the more money they needed to lend to remain in the good graces of the U.S. Gub'mint, the more they relaxed their lending standards.
It used to be that you had to put 10% or even 20% down on a house and prove that you could make the payments and that your debt load was not too extreme to prevent you from buying the house.
During 2004 through 2007 and early 2008, all of that went by the wayside. Underwriters were barely even asking for a pay stub. The lady who bought the house I sold in CA mid 2006 was not making anywhere near enough to buy the house and I even brought it up to her at one point. She claimed that she was going to have her father and her husband help her with the payments so I dropped it. Sure enough, less than two years later, it sold again for 35% less than what she paid me for it. I suspect it was a foreclosure sale. The price has dropped another 8% since then.
Scary.
We're getting back to the old days now of proving that you're a good buyer (er, borrower) but here's the soft concept, the philosophy of the whole thing: If a person can't be responsible enough to save 20% of the cost of the house in order to lay it out for a down payment, then they are not the type of person who can handle a $300,000 mortgage.
Another way to look at it is this: Some people are $35,000 a year people. They can make that much and no more. It's not because life is unfair but because that's the kind of person they are. That kind of person has no clue how to manage his money beyond. . .
. . .$35,000 a year. Give him a sudden windfall inheritance of $100,000 and he doesn't know what to do with it. A guy who is a $55,000 a year person can handle more but still not quite at the level it takes to handle a $100,000 windfall. It might not cause quite so much damage is all.
A millionaire is a yet another kind of person. He can handle a $300,000 home loan. Or more. The point is, different people are what they are. They can change themselves, of course, especially in this country of opportunity, but if they are what they are, no outside force is going to jolt them out of that position into suddenly becoming something else. They must do it for themselves.
If you're making $45,000 a year and you're disgruntled because you're not making $120,000 a year, guess what? It's because YOU aren't a $120,000 a year guy. It's a simple as that. If you want that higher salary, you have to change what YOU are and then, you become the kind of person who can handle that kind of money.
Go back to the millionaire. He can no more handle 100 million bux any more than the $35,000 guy can handle $100,000. It would ruin him just the same.
As my father-in-law used to say, "No matter where you're at, there you are." It's just the way it is. You have to become. Or you will remain.
Sooooooo, going back to the original problem, if a guy is being offered a $300,000 home just for his signature, practically, and if he is a $35,000 a year guy, he is NOT going to know how to handle the loan. The guy will be ruined. And that is exactly what happened to these people. On a micro-economic scale, these individuals were hosed, sometimes maliciously, but always because of one thing: They are the wrong kind of people to whom to be giving this kind of thing which amounts to nothing more than a handout.
Another way to look at it is when you give someone something, they appreciate it a whole lot less than if they earned it themselves.
Personally, I think the worst fallout of this whole mess is happening at the level of the individual. A lot of resentment has been created. People got burned and a great many of them do not even understand how or why. That's truly sad. Many of these same individuals are now in "gimme" mode. They expect to be taken care of and they will continue to sit and wish and hope for the grand things of life which they, more than likely, will never have again because they will not be able to see that they must change in order to have those things.
I just hope they get it together before they are permanently scarred. It may be too late for some.
I hope I didn't wander too much into left field with all of that. What we are overlooking here as a populace is that human factor of people who got hurt. They were hustled and lured into a situation over which they had no clear understanding or control and they (and probably their children) will continue to pay the price for that for years to come.
It's literally killin' me to see it.
--Wag--
This proposal stinks. Its supposed to be taxing the RICH and not the middle class, but $205,000 a year for couples is the middle class. Especially in high cost of living areas like California.
This will only hurt the middle class(since the RICH are RICH) and decrease the value of their homes...
Maybe if it only affected couples earning over $500,000. That's above the middle class everywhere. That would be a decent proposal.
This will only hurt the middle class(since the RICH are RICH) and decrease the value of their homes...
Maybe if it only affected couples earning over $500,000. That's above the middle class everywhere. That would be a decent proposal.
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Still not feeling the Robbin Hood approach to Government, even with doubling the definition of wealthy.
This hits it perfectly on the head. People got into debt over thier heads by themselves. Now they rely on someone else to bail them out.
I've paid my mortgage every month for the last 16 years. Forgive me for trying to be concientious and actually pay back what I borrowed.
I've paid every credit card in full every month for the last 24 years. If I can't afford it now, I sure as hell ain't gonna charge it. Credit cards are utilized as an alternative to cash, NOT A LOAN. If I can't afford it, I'll work harder and wait for it.
I've had at least a part time job since my 12th birthday because I wanted the ability to buy things. I carried irrigation pipe across farm fields for $1.75/hr. in 95* heat and humidity. Now people scoff at manual labor. That's why the immigration mess is what it is.
I have what I have because I have earned it. My father left me some of what he earned when he passed(after what the goverment felt they had rights to).
I'm sorry America. Society has dropped the ball. Too many people have become fat and lazy. Now we must cater to them. There are jobs to be had, but why would people work when they can be given more sitting at home. Why would anyone want to excel when we will all be made equal.
I have "donated" too much of my kids college education money.
I have "donated" the majority of my retirement savings.
Where's my incentive to continue working and doing the right thing?
With 1.2 million jobs lost in the last 2 months I think you are over simplifying a little. While you have had a very good situation albeit through hard work not everyone can say the same, no matter how hard they work. What do you say to the 1.2 million hard working people just like yourself you are now jobless? You should have worked harder to keep their jobs?
Red05
Registered
. Couldn't agree more.Similar threads
