Obama’s Foreclosure Bailout Plan: Should There Be Help For Homeowners?

by Silicon Valley Blogger on 2009-02-1846

What do you think of Obama’s foreclosure bailout plan? It’s a whole separate plan that’s not part of the stimulus package details.

The issue of bailouts has always been a pretty contentious topic, with some people thinking it’s the only way to save our toppling economy while others insisting to let the dominoes fall where they may.

With all the rhetoric, arguments and debates I’ve been reading about this, I am no longer entirely sure where I stand on this either. On the one hand, I am a fiscal conservative who believes in the natural selection process that filters and shapes our financial and economic landscape, even if it means having to be subjected to the vagaries of our capitalistic society. Que sera, sera.

But that was before I realized just how bad things could get when capitalism goes awry. All the deregulation that went on in the boom years and all the stuff that’s happened unchecked in big business and the markets are what we’re now blaming for the deep mess we’re finding ourselves in.

Obama's foreclosure bailout plan, help for homeowners

There have been lots of casualties in this financial crisis — and one of the most unfortunate groups hit have been those homeowners in the grip of foreclosure. If you’ve read about stories of financial loss due to foreclosure, it’s hard not to feel badly for the victims.

Fixing this problem has become Obama’s current obsession. Let’s see just how he plans to do it.

Obama’s Foreclosure Bailout Plan

President Obama wants to allocate $75 billion to aid the approximately 9 million troubled homeowners who are still “salvageable” and who can conceivably still benefit from some assistance. Here are some of the main points from the plan:

  • The government is taking a “sharp departure” from how things were done under Bush, who left it to the service sector to voluntarily decide whether to readjust bad mortgages.
  • The plan will use billions to “entice” loan agents to rework mortgages for those people who’ve stopped paying. The lenders and mortgage holders get money if they modify bad loans and if borrowers stay current.
  • Those homeowners typically ineligible for refinancing since they owe more than 80% of their home’s value, may now qualify for refinancing based on some new regulations.
  • The plan will subsidize another sector of the financial industry — it will allow lenders to reduce loan balances and interest rates to make mortgages more affordable.
  • A $10 billion insurance fund will be set up to protect mortgage holders (e.g. banks!) from certain losses and housing declines.

Should There Be Help For Homeowners?

From this article, Can A Housing Assistance Program Prevent Foreclosure?, we find the personal story of someone who’s actually gone through the difficult experience of trying to resolve their housing and mortgage loan issues. Apparently, past housing assistance programs haven’t been very effective in helping out too many people, since lenders have been very resistant to working out loan modifications.

So will the foreclosure plan begin to grease the system a little more, and get things going down the right path, or are we simply sending out the wrong message to transgressors and villains of the subprime mortgage fallout?

Check out the Republicans’ response to Obama’s foreclosure plan. They ask some good questions — any expensive plan deserves some questions, checks and balances, after all.

  • Is this fair to the 90% of homeowners who play by the rules?
  • Isn’t the plan rewarding banks for setting up bad mortgage loans?
  • Will those homeowners who misrepresented themselves on their mortgage applications qualify for some of the bailout funds? (see Casey Serin)
  • Mandatory debt counseling programs notwithstanding, how can we be certain that debtors who are experiencing financial problems today won’t be in trouble again later, after receiving bailout help?
  • Obama’s foreclosure bailout plan simply shifts the debt to taxpayers. How will borrowing more money to pay for bad loans solve the problem?

I read Obama’s reassurance that this plan isn’t going to reward unscrupulous and irresponsible people, but how exactly can we ensure this? I wonder just how well the bailout plan will be managed. Like any other massive government backed plan out there, there will no doubt be inefficiencies, errors and things that slip through the cracks, so much so that the money may not all be put to their intended use.

So how do you stand on this? Do you think bailouts are the way to go? Which causes deserve funding and which don’t? Do you believe that this bailout will work?

Copyright © 2009 The Digerati Life. All Rights Reserved.

{ 46 comments… read them below or add one }

Miss M February 18, 2009 at 7:31 pm

Unfortunately it won’t help homeowners like me who have no problem paying the bill but want/need to refinance. You commented on my story last month, I called my lender and found out I would need $153,000 to refinance. That is nearly half of what I owe, prices in my neighborhood have fallen significantly since when I purchased in 2005. I never should have listened to my mother, she encouraged me to buy!

I’m not sure what I think of this plan, on the one hand I would like to see housing prices stabilized. On the other, why can’t I get bailed out too. Most of these people bought more than they could afford or cashed out their equity, their problem is not due to job loss or the poor economy. I should have bought a bigger, more expensive house. Then I would have a nicer house and get a handout. Instead I’m stuck for who knows how long.

I don’t think there are any right choices we or the governement can make at this point. I think only time will fix this mess.

Manshu February 18, 2009 at 8:29 pm

Miss M,
If what you owe is less than 105% of the current market value of the loan, then under this plan – you are eligible to refinance into a 15 or 30 year fixed mortgage.

Tim February 19, 2009 at 3:29 am

unfortunately, free lending to people who couldn’t afford homes to begin with was how we got into this problem. don’t know when people are going to realize that people who couldn’t afford the house to begin with still can’t afford the house no matter what you do–that is, unless you just buy the house for them.

it’s amazing the govt is screaming for banks to lend for mortgages to be free, when that is exactly how we got into this problem to begin with.

Ken February 19, 2009 at 6:26 am

I think some, not all of the prople in this mess, have bad money management skills. Their problems with foreclosure are a symptom not the cause of their mess. People in our society will take whatever the bank will give with no consideration of the true costs. In addition, banks preyed on their ignorance. I think mandatory credit counseling would be good for anyone restructuring a foreclosure mess. If you don’t address the root of the problem, they’ll be in the same boat 2 or 3 years from now.

Curt February 19, 2009 at 7:10 am

Housing prices are going to continue to fall no matter what Obama does. This plan is not going to change that or change the deepening recession that we are in. But, it could save a few home owners from foreclosure and that could provide a little confidence, which could help the entire market.

chris February 19, 2009 at 7:28 am

Terrible, terrible, terrible! But then again, what the heck, why not? We are already throwing away trillions of dollars, so what is a few more? We are one of the bunch who are paying off our mortgage early – we are one of the “responsible.” We did not take out home equity lines or second mortgages and we only purchased as much house as we could afford. Oh wait, didn’t Obama say this plan is there to help the responsible home owner? Hmmm…..I must be mistaken. At least I can say with pride that I did NOT vote for him.

Slinky February 19, 2009 at 10:05 am

I don’t support any bailing out of any entity that got themselves into their own mess. That is, the banks should figure something out or fail. The homeowners should figure something out or lose their home. etc. etc.

Whatever happened to a country where people stand on their own two feet and are proud of their personal responsibility? Whatever happened to failing or succeeding as a result of your own choices? Since when is it the government’s job to protect people and businesses from their own stupid mistakes?

Should we bail out Casey Serin while we’re at it?

Jason @ MyMoneyMinute February 19, 2009 at 10:24 am

A government stimulus should serve three fundamental purposes:

Fundamental #1: This is the taxpayer’s money. Be efficient, not frivolous.
Fundamental #2: Short-term cash injections must have long-term benefits.
Fundamental #3: Economic stimulus funds must reinforce & encourage good financial behavior.

I agree with Ken. Loan modifications don’t seem to reward good financial behavior, but reinforce poor financial choices. Rather, the mistakes & risk is just being transferred from the borrower to the taxpayers without much long-term benefit.

I propose the use of matching funds on down payments of homes. It encourages saving for purchases and allows the market to correct more naturally. Further, it lets those who exercised proper financial management reap the benefits and help lead us out of the recession.

I wrote about this on my blog in two parts. Feel Free to check it out.
Part One – http://tinyurl.com/cbxddr
Part Two – http://tinyurl.com/de4aq9

Travis @ CMM February 19, 2009 at 12:16 pm

How about instead of giving all this money to the people who’ve failed, give it to the one’s who’ve succeeded. Companies don’t give the best jobs to students who made D’s in college, it would be stupid to do that. Yet our government thinks that’s the way to solve the economic problem.

Lets pump money into the people that know how to manage it. Wouldn’t that make more sense?

fischer February 19, 2009 at 1:46 pm

Here are my responses to the questions of the Republicans:

1. No, it is not fair. But who says life is fair?

2. Not exactly. I am pretty sure when the mortgage loans were set up, neither party had any bad intentions. The loans turned out bad due to economic downturns.

3. Misrepresentation is a serious charge. Fraud est odiosa et non praesumenda which is Latin for “fraud is odious, it should never be presumed.” People who engage in fraud should definitely not be rewarded. But how do we determine who these people are? Where do we draw the line between misrepresentation and statements which later proved to be false due to circumstances beyond the person’s control.

4. We can’t really be certain. One has to be a fortune teller to be able to be certain. However, safeguards can be implemented to minimize the risk of trouble arising again.

5. This is a tough question to answer. I have always believed that it is wrong to use good money to chase bad money. However, when viewed from a different perspective, it can also make sense. Pumping money into a sagging or stagnant economy can have a “lubricating” effect to make the economy move. Now, whether it moves up or down remains to be seen.

Robert February 19, 2009 at 4:52 pm

FOR: Travis @ CMM 02.19.09 at 12:16 pm; SAID: How about instead of giving all this money to the people who’ve failed, give it to the one’s who’ve succeeded.
A: Yes to all those very successful Wall Street Bankers that already got 350 Billion to pump the economy but dissapeared the money… are you one of them?

FOR: Curt 02.19.09 at 7:10 am; SAID: Housing prices are going to continue to fall no matter what Obama does.
A: that is a REALITY CALL, house prices went UP due to GREED AND SPECULATION of Real Estate Agents, Morgage Brokers, Builders and Bankers, the prices are receding back to normal, were they should be.

FOR: Slinky 02.19.09 at 10:05 am; SAID: I don’t support any bailing out of any entity that got themselves into their own mess. That is, the banks should figure something out or fail. The homeowners should figure something out or lose their home. etc. etc.
Since when is it the government’s job to protect people and businesses from their own stupid mistakes?
A: I will be waiting for your opinion, three months after you get fired and your piggy bank is empty, due to “the economy” (not your fault either).

Mike February 20, 2009 at 8:44 am

Generally I dont support the idea of bailing out anyone – if you signed the papers, deal with it… If you have no equity you shouldn’t own a home (no down payment WTF). I worked hard to own my home outright – when I had a mortgage it came first on my bill list. Why should I feel bad for those that decided a pool in the back yard was more important than having equity – you gambled you lost… My grand childeren are not responsible for your mess.

There is one exception however – we should more than help national guard soldiers that are behind over making less money in the military than they made at regular jobs…

Also all the talk about how the housing bubble is the root of this recession – what about the billions we pumped into the Wars?

Rob in Madrid February 21, 2009 at 1:15 pm

Mike, what about those who were careful and put the requisite 20% down only to see house prices fall by far more than that. There are approx 4 million subprime owners and approx 20 million who are under water because house prices have fallen so far. Putting a 20% down payment, as many have done, is meaningless if house prices fall by 40! Not every homeowner in negative equity was a subprime buyer.

As an aside I don’t know anyone in my neck of the woods (Southern Ontario) who put more than 2-3 percent down. The lucky ones bought at the bottom of the cycle the unlucky ones at the top.

charleen February 22, 2009 at 9:23 am

I think the bailout for home foreclosures is a great approach to people like my husband and me who have nine people living in our house. Less income means less pay which leads to not being able to pay everything they need to pay and are barely getting by, so yes hopefully we can get the help we need because we have struggled long enough. We would like to get an affordable payment so we can stay in a house that we have been in for 24 years. I get tired of people bad mouthing the president for trying to help people like us at least he’s trying to to do something,that’s more than I can say about the last president.

BigWave February 22, 2009 at 7:50 pm

Good news for all the big bank money center CEOs: There’s a plus side to your salary compensation being cut to $500k. Since the monthly payment on the average Manhattan apartment (avg value today $1.6m) is about $16k (inc taxes, 15y fixed rate, excludes the fact you bought it at $2.4 million or on the other hand that the bank bought it and is just loaning it to you for free) it exceeds 31% of your income and you will be eligible to renegotiate your mortgage under the mortgage bail out plan. Yes, the mortgage to the bank that you are running.

We live in a very odd world.

Heaintheavyheismybrother February 23, 2009 at 1:31 pm

I think the debate on good mortgagors vs. bad mortgagors is academic B.S., and I am clearly in favor of putting some of our fiat money into the hands of the people — homeowners — who pay and make up the majority of our tax base. We have been helping foreign governments help their people in the form of economic aid for years; we have started wars to liberate foreign countries and/or peoples from tyranny in the form of military aid for years; and we have been helping large corporations with economic aid (handouts) for years. Isn’t it about time that we help our own citizenry. You do not have to be a Christian to know that it is the right thing to do — or do you?

Silicon Valley Blogger February 23, 2009 at 1:41 pm


I have a new post coming up that somewhat addresses your point. We are at the point when we need to turn inwards to help and support ourselves as a priority. But let’s not forget that we are a global community as well, so it’ll be a balance to navigate our economy and global obligations going forward.

Kristy @ Master Your Card February 23, 2009 at 10:01 pm

I think this is a terrible plan. I don’t believe in rewarding bad behavior and these people that need bailing out misrepresented themselves and put themselves in this position. Lending to people who don’t qualify is the reason for the mess in the first place, I don’t see how modifying an already bad loan is going to help. As others pointed out, unless the government is willing to buy the houses, this isn’t going to be a long-term solution. This is band-aid.

Unfortunately, I don’t know the answer. I know this isn’t it, but I don’t have anything better to offer. I’d like to see house prices stabilize. I’d like to see the home values go up again. But, I don’t think bailing out those who’ve goofed is fair. I say if they got themselves into the mess, they can get themselves out. Stick with tax breaks that will encourage people to buy properties.

Matthew bunsecure February 24, 2009 at 6:57 am

For the record, it is the homeowner who put himself on the line of foreclosure. Refinancing could be a good solution, but what guarantee can the homeowner give that he will be able to pay the mortgage when unemployment rate also now increases? More concrete plans should be laid out.

fathersez February 26, 2009 at 4:00 am

This looks to me like a subsidy. It may have noble aims and all that, but with humans at every step of the way being responsible for implementing this, I have my doubts.

There will be reckless siphoning. Probably as we speak, there are many hard at work figuring out the best ways to create a pipeline between this subsidy and their own private accounts.

I am so disillushioned with the concept of subsidies now. All it achieves is to teach people the shape of the spoon!

PS: No disrespect is intended towards the many who truly deserve help. Unfortunately, as in the case in my country, these would be the most ill informed and financially literate people. People just ripe to be taken on another wild ride.

adifferentposition March 4, 2009 at 4:20 pm

I live in DFW and in the last 5 years, our housing appraisals have continued to go up 10%, just like normal. Not to say we don’t have thousands of foreclosures. But from our market, the majority of these, are homes bought within the last 7 years. During the time builders competed with low interest rates and huge price cuts. To put more money in their own pocket, they approved ANYONE who was even close to the line of approval. This was a huge mistake, because to compete, lenders for regular homes had to do the same thing. Now anyone who was renting an apartment, could buy a home for nearly the same amount, but without the realization of the extra finances, possible baloon mortgages, expected slow appreciation, etc.

One thing that would help our area dramatically, would be to hault all builders. That would make current people moving to the area buy regular homes, thus many foreclosures would disappear, and there would be less competition to get the same home brand new at 10% less. In about 2-3 years, this would increase our home values dramatically. And when the values start to go up, homeowners will be more likley to continue to pay their mortgage every month.

Not to mention, I do agree with several people who have stated that all this bailout is going to do is possibly put home values back to where they should be, not necessarily where people want them. You can’t buy a home (traditionally) live in it for 5 years, and expect a huge investment.

Dan March 16, 2009 at 9:19 pm

I don’t support the idea of bailing out anyone – if you signed the papers, you need deal with it. I did due diligence, took my time, was not greedy … Why should I pay for your mess. Except for people, who always made steady and comparatively less income, like national guards, school teachers – they should be exempted.

jax March 19, 2009 at 8:33 pm

As long as they are bailing out the banks, I think it is appropriate. Because if they foreclose, we will end up bailing out the banks.

Glenn March 27, 2009 at 1:06 pm

The majority of people here are against helping out a home owner who took out a sub prime loan. No one here seems to realize that there are life circumstances that would necessitate taking out this type of loan such as losing a job becoming ill, having to be hospitalized and not having medical insurance. Not all people headed for foreclosure, if they cannot get help, bought a home they couldn’t afford originally. Some have been in their home for twenty years or more and paying an affordable mortgage payment until major glitches, such as those mentioned above happened. What is the harm of helping these people out? We have bailed out banks, we have paid over inflated amounts to health insurance companies and prescription drug companies, the oil companies, CEO’s. Why can’t middle class people who hit hard times be helped out? Why are Americans so selfish?

LM May 11, 2009 at 5:13 am

Bailout plan is good for economy but it should have come earlier. But we can say something is better than nothing.

PollywogTroll May 12, 2009 at 3:00 pm

“…believes in the natural selection process that filters and shapes our financial and economic landscape, even if it means having to be subjected to the vagaries of our capitalistic society.”

believes in social darwinism in which the “fit” survive and the “unfit” die, even if it means that thousands starve to death.

Silicon Valley Blogger May 12, 2009 at 3:16 pm


Do you have to be so true to your name? There’s no social agenda here and I vigorously disagree with your implied notion that capitalism equates to “thousands starving to death”. I believe in compassion for humanity first and foremost, but I also believe in capitalism — perhaps not so much as I did before the financial crisis struck, but I hang on to a faith in it, still. There is a natural selection here, but it isn’t completely a zero sum game. You may fail at one thing but doesn’t mean you are a failure at everything else.

If an entrepreneur fails at one venture, he just starts a new one and goes down a different path, where there is demand. That’s what I mean by natural selection. The whole “thousands starving to death” is just so much catastrophizing, brought on by those with a certain agenda.

I don’t believe in the “fit” surviving and the “unfit” dying. I believe in the “fit” adapting. There’s many ways to skin a cat and even many more ways to survive.

ACE June 1, 2009 at 6:24 pm

I do not consider myself religious but I believe in the lessons of the bible. Luke 6:42 states “first take the piece of wood out of your eye and then you can see clearly to take the dust out of your brother’s eye” We as a nation need to remove the stick from our eye before we can assist the rest of the world with theirs.

As for Obama’s mortgage bailout plan, is it the right solution I don’t know but I am tired of hearing of large corporations receiving money that is supposed to stimulate the economy while I watch my parents small business fail and them fall farther behind on their mortgage payment and waiting for the day when the bank comes to take their home, which my family built.

I am tired of working everyday so that I can make my mortgage payment on time; however the value of my home is falling faster than I can pay it off. This country has been run by the greed of few for far too long and we as a people need to demand better because we deserve better. Banks and insurance companies have blinded the American public with their legal jargon and endless loop holes. I blame myself for my ignorance in this manner but the fault is not all my own. The solution starts with education yet school funding has received the most cuts. Maybe we should take all the stimulus and bailout money and give it to the schools; at least we can provide our children with the means to dig themselves out of the $#!- we left for them.

marvin July 12, 2009 at 7:32 pm

There are still lots of billion of dollars left from the $700 billion bank bailout, and, according to news, there could be a debate in congress on how the remaining money will be dealt with. IMO, the bailout plan somehow helps some companies but there are still lots of them who are under crisis. I just hope that the remaining funds will be used wisely to lessen the economic crisis.

Obama Bailout Blogger August 17, 2009 at 6:28 pm

Certainly this plan stinks to the high heavens. I’m sure some of those who risked their equity to buy big homes with pools had good intentions about providing a good home for their expanding family, but still, most of them bought those houses because they wanted an appraisal. All the responsible non risk takers are going to pay for their risk. But really, what other measures should Obama do? Just let things play out? Let the Banks suffer from their own folly? Isn’t that going to put the economy into further ruin?

ACE September 17, 2009 at 10:53 pm

Majority of banks are doing fine now and showing profit, however the money they are receiving as “bailout money” is not finding its way to the American public who are having their homes foreclosed on. Banks are foreclosing on homes and evicting the residence and are trying to sell the homes but no one can get financing because the banks are not lending money unless you can put down at least 20 percent.

There are whole subdivisions that are vacant because the bank foreclosed on the people that owned them. Now the bank has bailout money and all these assets (land and homes), and the people are left without. And Obama Bailout Blogger you are correct: we non-risk takers are the ones paying to bailout everyone else but I rather have that money go to the people that need it rather than collecting at a bank enriching the few.

I myself am a simple layoff away from being one of those that cannot pay my mortgage, so I will simple not sit back and point the finger and say well they shouldn’t have taken risks because that is not the issue. The issue is coming up with a plan that helps the people in need and destabilizes the economy.

David Soffer November 19, 2009 at 8:39 pm

Considering how much money the government has spent on the Stimulus and bailouts, a lot more would have been accomplished if they had just paid off all the homes in foreclosure.
The root of the problem with the economy are the foreclosures. It is well known that the real estate market is the foundation of the economy and until it improves, the economy will remain in a recession. As foreclosures flood the market, property values decrease.
By paying off the homes in foreclosure, there would be an immediate effect on property values. In addition the banks would receive all the money owed to them. Giving the money directly to the banks with the expectation that they would provide loan modifications and start lending money, is a backward approach to the problem and creates such a bureaucracy and so much red tape, it is doomed from the start. The loan modifications have been a fiasco and the banks are not lending money as expected. Instead the banks used billions in stimulus funds for their own interests.
By paying off the homes in foreclosures the banks still get the stimulus funds, but at least the people get something for their money.
In addition the economy would be stimulated because with no more mortgage payments to make, people would have money to spend. This would instantly stimulate the economy. Furthermore the government could impose certain terms that would assist in other ways. For example, the government could make a condition that if they pay off your home and you buy a car within the next ten years, it has to be made by GM; maybe it has to be a Hybrid as well. Then the government might not have to bail out GM.
However, the government does not want to take this approach because they are corrupt. The goverment is more concerned about themselves then they are the American people. The people who run this country do not personally know all it’s citizens, so they are detached from the public. However the politicians do have relationships with the people that run the banks and the large corporations. Therefore they have much to gain by giving them money and favors. Yes, these people rely on our votes, but they have more to gain by helping themselves first and handling their image through public relations and the media.
If the goverment had paid off the homes in foreclosure it would have had an immediate positive effect on home values. It would have stimulated the economy right away and the banks would have received all the money owed to them. By giving the stimulus directly to the banks, they got the money and the homes. Then it was up to the banks to decide who they gave loan modifications to. In many cases these modifications were not much help anyway.
If the goverment had just paid off the homes in foreclosure, they could have turned the economy around. This is not rocket science. It is simple, but the politicians are removed from the same effects the recession has on the rest of the country. The goverment is very corrupt and chose to help themselves instead of the people.

sandra December 13, 2009 at 1:38 pm

I could not have said it better myself, you really hit the nail on the head. The only way the economy is going to get back and running is to help the tax payer, not welfare or the people who are living in government run housing. The banks got billions in bailout money but they are not using it for what it was intended for, they are pocketing the money and not helping anyone, therefore more people are losing their homes, jobs and the country is still in bad economic troubles and continues to be until they help the little people…..

Herb February 28, 2010 at 3:09 pm

I have a hard time understanding why individuals are blaming the homeowner for their troubles in paying their mortgage. Let me tell you what my problem is. I purchased my home three years ago with a veterans admin home loan guarantee, and was funded by countrywide home loans. My income was well above the requirements necessary. My credit score was somewhere around 460. The veterans administration, (Fed Government ) felt that the score was of no significance, and approved the guarantee. After about four months of on time payments, my employment went sour due to no fault of my own, and I became delinquent in my payments. After contacting Countrywide for some kind of relief, my payments jumped from $1700 per month to $2500 per month. Doesn’t make sense. If i am having problems with $1700, what makes then think that $2500 will solve my problem.

They decided to foreclose anyway, and to stop the foreclosure, i have filed three consecutive chapter 13 bankruptcies within three years. During which time i have been trying to get some kind of assistance from anyone that would listen. No one seemed to care, and now there is a foreclosure sale date scheduled within the next forty five days. I have lost my job in the mean time, and had to retire with a pension, and the pension does not cover any mortgage payment. Cannot sell the property. Owe more than the house is worth. Property value is down approx. 20%. My only option is to walk away, and further erode my neighbors’ home value. However, i can sustain a mortgage payment of $1500 with no problem, but no one wants to listen, including the Veterans Administration. So, what are my choices?

Silicon Valley Blogger February 28, 2010 at 3:28 pm

You are no doubt in a very tough situation. If it were me — and this is just what I would do (your mileage and views may vary) — I would just get it over with and start afresh. What does this mean? I would walk away. Take my losses — better yet, cut my losses. Why? Because I believe this real estate market is going to be slow for a while longer. If there’s no way you can meet these higher payments anytime in the near future, then you really have no options.

Given that, I think it’s actually a better deal to rent instead of buy a house these days, especially in more expensive areas. Imagine the freedom you feel when you don’t have the weight of an upside down mortgage on your head. Renting a place sounds like a great deal — especially when you can live stress free and focus instead on your future and rebuilding your credit and financial life.

Anyway, that’s just me. I would wipe my slate clean, start from scratch and build up. I don’t want a massive albatross around my neck. Life is too short. I’d focus 100% of my time on rebuilding my finances.

This is purely my opinion, not advice. Anyone reading this — please make up your own mind about where to go from here. I wish you luck!

KEM April 17, 2010 at 7:58 am


(credit score was somewhere around 460. The veterans administration, (Fed Government ) felt that the score was of no significance)

They don’t think that way now. I cant get the VA loan because of my credit. I have a totally useless VA home loan certificate. And all I want to do is get out of this dump of a house my husband bought before passing. he got it because it was his only chance of owning a home He did not know he would not be around to get it fixed up. bad thing is the mortgage place don’t report any of there clients to the credit bureau. I don’t even qualify for the bailout refinance program because I’m never late on my payments, And this bail out is helping a lot of people. I would like to know who besides banks and other corporations.

Eric Erenfort April 26, 2010 at 5:11 pm

It’s hard to say what I think about how Obama has done so far overall, including the point that this blog discusses. I feel like I don’t trust the guy anymore. However, on the face of it, a bail-out plan for people who’s homes are in foreclosure seems better than bailing out the “too big to fail” banks!

Nancy Graham September 28, 2010 at 5:19 pm

The bailout for foreclosure should have gone to the consumers; the government should bail us out to help us hold on to our houses. Does Obama not realize if one payment is missed, your credit score drops, so why is this a criteria for getting help? People are losing jobs and businesses are closing. This is so bad! What they want the consumers to do to increase income in such short notice? If the Obama administration would have taken the billions of dollars they gave to the banks, mortgage companies etc. and gave $125,000 to the 62 million households in America, this would have put the economy back together. If the consumers would have gotten the money they would have bought homes and cars and not to mention furniture and clothes. By giving it to the banks and lending companies they gave bonuses to employees and the rich got richer and the poor just got poorer.

Bob E January 11, 2011 at 10:50 am

“Survival of the fittest”. The animal species, in which individual struggle has been reduced to its narrowest limits, and the practice of mutual aid has attained the greatest development, are invariably the most numerous, the most prosperous, and the most open to further progress.

We the people should have been allowed to vote on the bailouts of car companies and banks not pay for their risk taking and mistakes.

Janice March 19, 2011 at 1:05 pm

I really do feel sorry for the homeowners in foreclosure.

Here’s the rub:
I have trouble paying my rent now, and just meeting daily expenses since my hours were cut at work, due to this crisis. I work in retail, and have been reduced to two (2) hours per week. I have been applying for other jobs, but what a job market!?

My Social Security, that I still pay into, has been frozen for the past two years, even though I’ve been contributing to it for around 50 years.

I get some pension money from companies I took early retirement from, but I have trouble even making decisions at the grocery store, and sometimes have to return an item to a shelf instead of purchasing it. I have begun to relate to the author/character portrayed in “Any Human Heart.” (He ate dog food).

My next step is to apply for some help from the city I live in or from the Federal Government, which I am loathe to do, but I am bailing them out, with the rest of us who really had no choice but to do so.

Bart Cleveland March 31, 2011 at 11:13 pm

I think we are missing the point on this whole thing. We must continue to keep rates low in order to allow the middle class to recover from this debt. The only people that benefit from the large bailout packages are the banks.

Holly SInkhor July 8, 2011 at 11:25 am

This “modification plan” does not help anything because it is not permanent. As soon as your information is updated with new material, the rate and what you owed previous to the modification is then owed in full. It is not something that is permanent. It does not help the middle class man get out of foreclosure. It is only temporary.

steve February 11, 2012 at 3:38 pm

Obama’s bailout plan is only going to help very few people. So many have already lost their home and all they are going to see is $1500 dollars for their trouble, that is a rip-off. What pi$$es me off more than anything is that the Federal Govt. is not prosecuting the loan companies and the people who knowingly defrauded others with these loans to begin with, billions (with a (B)) of dollars gone — where the hell did it go?! Countrywide, Bank of America, Citi Corp should ALL be in jail: this is total bull$h*t.

There are a lot of angry people out there who have been totally screwed by this and nobody is being held liable for it… What a total sham…

Mikey February 15, 2012 at 2:52 pm

Just like the government. Reward those who are not responsible and forget about the ones who are! Where is my money (oh yea, I don’t get any because I managed my finances well)?

When we purchased our home, the real estate agent wanted us to by bigger — MUCH bigger. After all, we “qualified” for a huge loan. But we were responsible. We looked at possible future downturns and decided to purchase what we could actually afford, long term.

What a huge mistake! I should have bought that oversized house, then just let the government bail me out when we were no longer able to afford it.

Now here I am stuck in a small house that we can afford, with no government money coming my way to help me achieve that American dream. All because I was stupid enough to be responsible and think about the future.

Am I bitter? Yes! People learn by making mistakes, getting up, brushing themselves off, and starting again. Why is the government taking my tax money away to subvert that process? Let people lose their homes and go to a rental unit for a while. Good lesson! In a few years, when they are ready to buy again, they will understand that “what you qualify for” is not the basis of what you can actually afford.

Oh yea, then I would get my rewards for being responsible. I would be able to confidentially purchase a great rental house with my good credit, then rent it easily to the people who need to find a good rental house.

Josh June 18, 2012 at 10:26 am

Why should I pay for other people’s stupid greedy mistake. I could not buy a home in 2006 because I did not have enough money and I knew that. Other people whom I knew made me feel stupid for not taking advantage of the easy loans being handed out but I still did not buy a home because I knew I could not afford it. I made the right decision and lived within my means. Even now these foreclosure types are asking for handouts and are doing MUCH better than myself financially living off of credit cards they do not intend to pay off. Why should I pay for that??? Why is there no recourse or accountability?

Silicon Valley Blogger June 18, 2012 at 12:12 pm

Thanks Josh. I agree with you that there is a whole lot of coddling going on with regards to those who are squatting and/or going into foreclosure today. It seems as if irresponsibility continues to be rewarded at this point. In my mind though, I still believe that you are taking a risk by living on the edge and by using debt to finance your lifestyle. Case in point: if you have bad credit or bankruptcies in your records, most things become more expensive for you. There are hidden expenses and penalties for those with bad credit that we are not seeing on the surface. If you are saving your money and have good credit, then in the end, you will have more leverage which you can use in any way you want. You have more flexibility to use your savings and good credit to do as you wish. It’s up to you what you decide to do with it.

Leave a Comment