Do Sales Merit An Auto Bailout?

[GasSavers_BEEF]

snax,

first of all, I agree with what you are saying. there are millions of people that are willing to do all of those things, but what about me? when I say me, I mean people like me. I bought a house that I can comfortably afford, I put a good amount in my 401k for retirement, I make regular deposits into my savings.

when I went to buy my first home, I was told that I could take out a 125% loan and I could afford twice the home than I ended up getting. I realize my budget and my bills and I knew that the mess does hit the fan from time to time. I also took out a 97% loan instead of the 125% only because I didn't have enough cash to pay more on it. my first home was a double wide trailer which I ended up selling because of the last downturn in the economy (at least mine) in 2001 when the technology industries took a downturn, I worked at ericsson which really got hit hard. when I sold my home, I had to bring a $13k+ check to closing and I did it. I didn't forclose on it because of my credit. my credit score is currently around 730 or so (I need to keep a better eye on it).

my current house, I could barely afford when I bought it but that is because I hadn't sold my previous house. I could barely afford BOTH. for about 2 months, things were a little tight but then the other house sold and I was good again. I wouldn't have bought more of a house than I did even if I didn't have the other house on me.

my question (to anyone that can answer it) is what about the people like me? everyone else is asking for baliouts and help because their credit is already crap and why not walk away from that loan. I have worked hard in my life to keep my credit score high and to save and have a good quality of life (that has been a hard balance). are people like me forgotten about or are there just so few of us left out there at this point for us to really matter.

[Snax]

Well here is the ultimate problem: It is the classic prisoner's dilemma.

Most folks have the ethical will to suck it up and go on paying for as long as they can, but there are people who do not. This imposes the quandry of having to choose between minimizing one's losses or standing on principle. Stay in it for the long haul and possibly never recover and or potentially lose it all, OR get when the getting is still good.

So while I cannot fault anybody for taking the moral high ground on the issue, can you say the same for those who face negative equities of 10s or 100s of thousands for not seeing a very bright light at the end of the foreclosure tunnel? Most foreclosees, although perhaps delusional in what they thought they could actually afford, were really just wanting a decent place to live that they could call their own.

I have to admit to being in the latter category. We had unexpected expenses and a reduction of income that forced us to take drastic measures with the credit we had available three years ago. We had enough income. We had fair enough credit. So the mortgage company gave us a variable rate loan which helped out the situation allot. In fact, we have been in a position to refinance our house into a good fixed rate 30 year term now for well over a year with a debt to income ratio and credit rating that would otherwise allow us to do so. We did nearly everything right for our situation, except for one thing, counting on our home not losing value while we were attempting to do the responsible thing in paying down our other debt. But now the market is reducing the value of our house faster than we can pay it down.

So now, here we are: Still in enough unsecured debt to make things uncomfortable, zero equity in our home and moving toward the negative, and a mortgage lender that refuses to negotiate our rate down to a reasonable one on a fixed term - who may end up actually jacking the rate up higher. So while you can hold onto the notion of what the right thing is to do, one must acknowledge the reality that people will always ultimately have to look out for their own future.

A foreclosure, although devastating to credit scores, is still explainable in terms of seeking future credit. Suffering along and slowly falling behind and or defaulting on everything else just to maintain a mortgage however is as bad or worse than filing bankruptcy. Not only that, but the period between ceasing payment and the foreclosure sale is instant income relief and an opportunity to make a major dent in cleaning up other credit problems. Further, with a continually declining market, continued frugality and clean credit for several years, foreclosees stand to be in a position to capitalize on a depressed market. (They'll probably have to actually put equity in to get a loan, but free of the massive debt service they face now, many will actually be able to do so.)

Getting back to the prisoner's dilemma analogy, it boils down to cutting one's losses. Losses that are going to occur nationally whether one chooses to take advantage of the circumstances or not. So, while I cannot fault people who like to espouse their ethical high ground and claim 'they played by the rules' getting upset at what we and countless others in this country are going to be doing, DO NOT EXPECT IT TO MAKE A DIFFERENCE!

So much of this situation stems from our trade policy and the effect it has had on wages. We effectively outsourced slavery, pushing people to work harder for less, freed up credit to move the economy forward, and now face it's ultimate conclusion in nearly total economic chaos.

I'm going to say it just one more time: Be prepared.

The worst is yet to come - and our situation will continue to decline so long as our trade policy allows cheap unregulated labor and production overseas without tariffs to protect the rights and incomes of workers here.

[theholycow]

I continue to remain dumbfounded that people have ever thought a variable rate mortgage was a good idea -- doubly so that people thought it was a good idea when rates were at a record low.

[bowtieguy]

Snax,

it moves me to know of your dire straits. i wish you and your family well especially on this valentine's day weekend!

please do not be too proud to join a local church for spiritual and financial help. it might suprise you how well(efficient) a good church can help.

your family is in my thoughts and prayers.

[GasSavers_BEEF]

snax,

I understand the ethical and moral demema behind foreclosure but I look at it from a simpler point of view.

If I loan a friend at work $100, I expect them to pay it back. same concept. I was loaned the money with the understanding that I was going to pay it back. call it ethics call it morality.

I do understand that peoples financial situations change and that can lead to hard times. in that I do agree with you on. I work in a field that has already dropped me on my face once and my current company has already laid off around 500 people or so (globaly). I have those same concerns if something was to happen.

the ones I have issues with are the ones whose financial situations haven't changed. they just can't pay their house payments because they are too busy buying other things or they gambled on their home value going up so they can pay off that big SUV with the home equity loan they were going to get.

I understand that you must do what you need to in order to sustain yourself and your family even if it goes against your morals and principles. hard times do cause you to make hard decisions sometimes. I won't say that I will never do it. who really knows what tomorrow will bring.

my simpathy does go out to you and your family as you deal with your own demema. many times when I coment on this forum, I use my own life experience to share my viewpoint. I do hope things do turn around for you and yours. the housing market will take a while to turn around. I have friends that live in florida and have lost about half the value of their home. they have currently given up on selling it and are holding on to it until the market betters itself.

I hope you are wrong (sadly, I know you are probably right)

[R.I.D.E.]

Originally Posted by Snax

Well here is the ultimate problem: It is the classic prisoner's dilemma.

Most folks have the ethical will to suck it up and go on paying for as long as they can, but there are people who do not. This imposes the quandry of having to choose between minimizing one's losses or standing on principle. Stay in it for the long haul and possibly never recover and or potentially lose it all, OR get when the getting is still good.

So while I cannot fault anybody for taking the moral high ground on the issue, can you say the same for those who face negative equities of 10s or 100s of thousands for not seeing a very bright light at the end of the foreclosure tunnel? Most foreclosees, although perhaps delusional in what they thought they could actually afford, were really just wanting a decent place to live that they could call their own.

I have to admit to being in the latter category. We had unexpected expenses and a reduction of income that forced us to take drastic measures with the credit we had available three years ago. We had enough income. We had fair enough credit. So the mortgage company gave us a variable rate loan which helped out the situation allot. In fact, we have been in a position to refinance our house into a good fixed rate 30 year term now for well over a year with a debt to income ratio and credit rating that would otherwise allow us to do so. We did nearly everything right for our situation, except for one thing, counting on our home not losing value while we were attempting to do the responsible thing in paying down our other debt. But now the market is reducing the value of our house faster than we can pay it down.

So now, here we are: Still in enough unsecured debt to make things uncomfortable, zero equity in our home and moving toward the negative, and a mortgage lender that refuses to negotiate our rate down to a reasonable one on a fixed term - who may end up actually jacking the rate up higher. So while you can hold onto the notion of what the right thing is to do, one must acknowledge the reality that people will always ultimately have to look out for their own future.

A foreclosure, although devastating to credit scores, is still explainable in terms of seeking future credit. Suffering along and slowly falling behind and or defaulting on everything else just to maintain a mortgage however is as bad or worse than filing bankruptcy. Not only that, but the period between ceasing payment and the foreclosure sale is instant income relief and an opportunity to make a major dent in cleaning up other credit problems. Further, with a continually declining market, continued frugality and clean credit for several years, foreclosees stand to be in a position to capitalize on a depressed market. (They'll probably have to actually put equity in to get a loan, but free of the massive debt service they face now, many will actually be able to do so.)

Getting back to the prisoner's dilemma analogy, it boils down to cutting one's losses. Losses that are going to occur nationally whether one chooses to take advantage of the circumstances or not. So, while I cannot fault people who like to espouse their ethical high ground and claim 'they played by the rules' getting upset at what we and countless others in this country are going to be doing, DO NOT EXPECT IT TO MAKE A DIFFERENCE!

So much of this situation stems from our trade policy and the effect it has had on wages. We effectively outsourced slavery, pushing people to work harder for less, freed up credit to move the economy forward, and now face it's ultimate conclusion in nearly total economic chaos.

I'm going to say it just one more time: Be prepared.

The worst is yet to come - and our situation will continue to decline so long as our trade policy allows cheap unregulated labor and production overseas without tariffs to protect the rights and incomes of workers here.

Snax, you may find it hard to believe, but your situations is heartbreaking for me. In reading your post I think you have stated the solution to your situation. The decision to create the solution is one I have never had to make, so take that with a huge grain of salt when you read the rest of my response.

I have worked for 4 years in my lifetime, following my dreams of self employment, and made less than $1 an hour for those 4 years. Success came eventually but at a very high cost.

When I built my two houses my wife paid the bills with her salary and I worked 3 more years without any wages whatsoever. Thats a total of 7 years in 58 of not making any significant amount of wages. In contrast in 1973 working as an employee, I actually maxed out my Social Security contribution at just over $13,000 for that year.

Go to your mortgage company and tell them exactly what you posted here. Let them know you are on the brink of walking away from an impossible situation. I would be willing to bet they are scared to death of loosing many of their customers just like you and they just might decide to accomodate you with a decent interest fixed rate loan. Their financial success is also heavily stressted by this situation and just maybe you can get them to walk a mile in your shoes.

Before you do this sit down and decide if you really want to succeed in your efforts with the mortgage company in the first place, expecially if your success will only result in your making ends meet with no increase in your net worth for possibly a decade. I used the example of my not really making anything for 7 years so you might not reject my advice based on a preconcieved notion that I have never been in a similar situation.

I may be time to really do an overall assesment of your situation, considering your age, location, and the situation all over the country. Possibly time for a move to a better location where your skills would be in greater demand. Possibly a time to change your skill set to make yourslef a better employment prospect.

Henry Ford went bankrupt 3 times before he got the Model T assembly lines working and 5 years later became one of the most wealthy men in America at the time. His career went from farmer, to inventor, to innovator. We only remember his successes and wealth, but he paid a terrible price to get there.

Whatever you decide I hope that 10 years from now you can look back at this time and say to yourslef. "Damn, I am glad I got out of that terrible financial quicksand pit trap that was set for me by those #$%^&*(*&^%. Believe me you will not be alone.

regards
gary

[Snax]

I honestly can't say that I would blame any solvent individual for not getting boiled over our situation. While one might aspire to higher ground, self preservation obviously must take precedent however. We have been part of the problem. Moving forward, we hope to be part of the solution.

[bowtieguy]

help for GM is on the way...

http://www.cartalk.com/content/features/cnn/

april fools!!!

[zero_gravity]

great topic and poll, but i do think that it being on this site will skew the results a tad

we're hypermilers...a.k.a. cheap bastards! might not be the total reason you do it, but saving money is a good chunk!

[dletm08]

I don't buy the crap about the economy crashing if one or two of the auto makers goes under. It might cause some problems for a while, but I think they will work themselves out.

The demand for cars and parts won't go away. It may slow down, but like one poster said, people aren't going to stop driving and use foot power.

Cars wear out, parts get replaced, people say f*ck this POS, i'm trading it in for a new one.

If Ford was the only one left standing, some of the business from the other two would go to Ford, some to toyota, honda, etc.

I like GM cars, but I say let them sink if they can't swim.

And chrysler is junk. They have improved some of their designs as of late, but too little to late.