How Fannie, and you, bought a hapless house

The hole in this story is this: The reporter says that the townhouse owner spent "some" of the home equity proceeds sprucing up the townhouse, and "15-20%" of it starting a new business. But what happened to the rest of the money?

Right now, we are sympathetic to the townhouse owner. But suppose we learn that the equity loan was spent on a DisneyWorld vacation, new wardrobe, and tens of thousands of dollars of luxuries. Certainly the townhouse owner had the right to spend the money any way she liked--but our sympathy to her might be changed by those details. After all, that money is gone--spent--and we are now left holding the bag.

When a reporter asks someone what they did with a pile of money, and they reply that 20% of it went into repairs, and "some" of it went into a business, doesn't it behoove the reporter to ask where the rest went? It does--unless, for the sake of the spin of the story, he or she doesn't want to know.

Look for thousands of repeats like this one once the bad mortgages are passed on to the taxpayers (hmmm, wonder who that might be??). You can bet the ranch (if you have one) that the more attractive and valuable properties will never make it to those assumed by taxpayers.

A house is like any other investment, you should be able to expect it's value to increase with the rate of inflation and any changes to it's location. Here is the problem.

The home values increased mainly over the last 15 years due to the increasing numbers of buyers. This was due to the social policies of everyone being able to get a home lone. These sub-prime loans were being originally written by government backed agencies, FAA, HUD, etc. As the market grew, private lenders entered the market, and started offering more & more risky loans.

The loans were bundled and sold to other investment houses. This was because everyone involved with them knew that if any economic event happened, these would be the first to default. They were playing hot potato and after the surge in oil prices hit this year. Everyone lost.

It is ironic that the people that caused the problems to start with, are now the people that are coming to the rescue. And we the taxpayers who made the stable finical decisions are having to pay the bills.

Geez is there any way to opt out as a tax payer as being part owner of fannie and freddie. :)

"I got a bad loan" Sorry no sympathy here forthe home owner, she made the decision to sign without reading the terms or maybe she did and gambled on the outcome. Either way she and the bank bears the responsibility

What a crock. The taxpayers foot the bill, but never see any of the profit. Sounds like a good deal to me.

So, let me get this straight. People made bad decisions to pull out equity out of their house and spend it on anything they wanted. Then, they could not afford to repay it. And, we the taxpayers, are forced to underwrite their spending.

This is insane. I know the credit markets need to get back on track, but America just got pickpocketed big time.

Home values started increaseing with the Internet Boon. You remember, that was at the same time our government made a huge surplus? We would have actually been fine if it were't for the fact that, over the boon years, Clinton didn't give any money to the Military and it was in disrepair, especially for the one super power world. Our military decided we had to be able to fight wars in three seperate arenas at the same time while playing police in every hot spot we deems was a threat to our interests. UNfortunately, our vise president was quoted as saying, ...what this country needs as another Pearl Harbor. The summer before 9-11, I knew we were going to be attacked and I even knew where. My husband and I actually cried about it and I also tried to tell a couple of Congressmen, to no avail. Who am I? No one. If I knew it, if I knew it, and I ain't no genius, tell me, how could our government not have known? THe millitary got most all the surplus. And they built a fighting machine starting before, duringa nd after the war. You do not lower interest rates and keep them lowered for over five years and then tell your people to buy, buy, buy during a war without reason. Doesn't anyone remember Bush telling us we were going to go to a stock driven market? Not gold, not silver, our money was goin gto be based on stock holdings. We were told to buy, we were told to use credit. It was purposeful. And all of it was purposeful to drive us down into a place where everybody in the world would be dependent upon everybody else. And if one went down, we'd all go down. And the Federal Reserve and the State Banks would effectively run the world. That is the New World Order and don't kid yourself who drove it, tHe Federal Reserve and the Bank of Britian. ONce again, the Federal Reserve is not a government institution; it is a private institution. But our media continues to talk about them as if they were. THEY ARE NOT. And the very story we are debateing right now is ripe with it. This is a sob story to pull at your heart strings. If it weren't for the fact that they are trying to bury Christianity, I wouldn't be surprised if they didn't pull the God strings out too. They have been trying to manipulate us forever, and they have been pretty successful at it until they became so d---ed tranparant. A majority of the people have said, let the chips fall where they may and they are still goin gto bail these guys out. Is that a government by the people and for the people? They have a plan and they are sticking to it, regardless of whether we want it or not. What does that tell us?

E in Charleston. You have hit the nail on the head. I was approached to refi my home, and with it my car loan that was just about to be paid off, and 'any other outstanding loans i had' just tell us how much you need was the offer. I did not fall off a cucumber wagon though most people thing folks in Texas do that daily, i told her politely i was not interested and hung up. Soon more people were calling from the same company. I played along with them just to hear for myself what they would say. It was unbelievable. of course what no one would tell you was, that if you failed to make your mortgage payment, they would take your vehicle and anything else you had included in the loan.

Just about the same as a loan against your home. It was criminal. I thought then, where in the world are the protectors agains fraud in this????

Later i began posting foreclosures with a friend for several large mortgage companys. And time after time the homes are sold back to the lienholder. Some would be bought by bidders, but very few. Meaning the people would be foreclosed on and evicted if they did not make arrangements to bring their mortgage up to date.

The lesson is now and the fact is: The CEO of Countrywide got ought while the gettin' was good. He left with i believe $100 million dollars, while i working for another company that serves and posts the foreclosures was selling back to the lienholder the very homes that he had mortgaged with the fly by night loans. And he is not at this time under criminal investigation and he is not the only one. I wonder where in the world is the FBI. Where are the investigators with the IRS. This man and all the others who had sweet deals like this including FANNIE MAE and FANNIE MAC absconders also. They and many many others got multi million dollar disappear dollars. Those are the folks they ought to go after and make repay the taxpayers the money. Let's see how long it takes the 'authorities' to go after the culprits. Meanwhile, you me and all the other taxpayers will be biting the bullit once more and the same goes for the jerks on wall street who knew exactly what this meant and was still putting unsuspecting investors in banking institutions and financial companys which were up to their nostrils in stinky loans. There ought to be a law. $$$$$$$$$$$$

The only way to prevent this kind of thing from happening again is through education. We must insist that our school systems have a mandatory course on finance. A few weeks ago I read in an article where a student heading off to college admitted she did not understand how interest on her credit card worked.

There will always be "snake oil" salesmen out there. People need to have enough knowledge to resist the temptation to jump at the chance to get something that sounds too good to be true.

Give me a break. The townhome did increase. Everything goes in waves. If Phyllis would have SOLD that townhome a few years ago and pissed the money off no one would give a damn. The problem is she wanted both. The money and the townhome. She received upwards of $153,000 to start a business or use as she wished. Great and the bank required collateral. Now the collateral is worth less and that was the Banks risk, but should she still not be held accountable to repay her loan? She was given the money. The loan agreement was not "we give you money, you pledge collateral and hey, if the collateral declines in value, no need to repay us"??? If this was a SB loan she still be paying.

I agree with E in Charleston. This article is meaningless because details are missing. What is the amount of the new mortgage Jones got from Countrywide? What did she spend the entire amount of the loan on? If 20% on her business and 10% on repairs then is 70% in her savings account? Why can't she take the balance that she did not spend and pay off the mortgage?

I find the bulk of reporters (newspaper and TV) are incompetent.

We taxpayers are not partners with Fannie mae. We, the taxpayers, are the sugar daddies of Fannie mae. We will pay and they will get the benefits without doing anything for it. The United States has now become a third world country. The citizens of this country will soon learn how third world in a few days. It's going to come as quite a shock. Get your money out of the bank before the run starts. You might want to do that first thing in the morning.

We are the ones that need the sympathy vote - not the dead beats who squandered the money. As usual the taxpayers get robbed again. Some of the fat cats work with Obama and some of the lobbyist work for McCain. And they tell us they will "change" - only the name will change - it will be business as usual for Congress.

One bright side: If things get bad enough maybe - just maybe - illegals will quit sneaking in.

no,those parks have been given to the UN,,,,,

We need to give our own communities the right to sieze vacant property. Irregardless whether the owner is a Corporation, Bank, Investor, or private individual. Impose a time limit on them to fill the vacancy (by sale, lease, or rental), or risk seizure. Of course if they wanted to upgrade the property, stop the clock, but when they're done, start it back up. That would go a long way towards stabilizing the real-estate market and would force prices back down to where our out-dated wage scales can keep up.

After all, its only really worth what someone can afford to pay...........

Another thought: Wouldn't this be just as fair to homeowners who face deadlines and risk seizure by foreclosure? Or Renters who risk eviction? Think about it, isn't just as fair to put them in our shoes by imposing time limits/risk of loss? This idea is a mechanism to level the playing field for both sides (for the first time)..... It doesnt mean these people can't do business and make money. It does mean they need to stay focused on keeping the property occupied and/or in good repair. It will weed out predators who have time on there side.......

Its time they either MOVE IN, or MOVE ON!!!!!!!!

Next problem will be pay or wage bubbles in areas with housing bubble. How can you justify higher wages and cost of living to receive higher wages in these ares with the housing bubble. I live in central part of US where housing prices and wages raise at a slow but steady pace. Most people where I live buy homes to live in and take out conventional fixed rate loans. To many people trying to play the system to make easy money.

Do you all not think that in some ways we as THE AMERICAN TAXPAYING CITIZENS are responsible also...I mean we voted in these Politicians over and over again and they are thieves, rapos murderers..Now we are complaining because the dem. and rep. have profited off of this..Who do you think pays the politicians off..The mortgage giants and Big business, Lobbyists give out donations and gifts to them all the time...Do you think that if these politicians were not paid off in stocks that they would be rushing to Bail these guys out...Nope the only ones to blame is ourselves...

Quaizywabbit I agree with your first comment about the banks not wanting to give small loans because it would take to long for the pay back. Back in 20003 I received a work comp settlement for a nice sum of money. I found out real quick that I was out price in the housing market. I found a quaint little HUD home that was for sale for $40,000. I had a twenty percent down payment but couldn't get a bank loan (Bank Of America) because anything under $35,000 was considered a personal loan not a home loan. You could have knocked me over with a feather. I was wanting to buy a house within my means but I was denied, but my friends were buying homes that cost over $100,000 and didn't have a job or nothing. Needless to say now they (my friends) sitting on the streets homeless.

I dont care if taxpayers are buying up foreclosed properties from Fanny and Freddy as long as those properties will be sold for top prices. Taxpayers can afford to hold out for as long as possible until buyers start throwing in the towels and pay up more... unlike automobiles and trailers which lose value and should be sold as soon as possible to get best prices... Real estate is like stocks that you can invest and hold for a long time until greedy buyers give up waiting you out and start coming in droves... If taxpayers get impatient and sell at whatever prices, this will depress the rest of our properties... I cant help but wondering whether our government is a savvy investor or a bleeding heart liberal not knowing how to play the number games like we do at Wall Street... This is the big difference. I have nothing against our government acting as investors as long as they know how to play and win... If not, the issue is a moot.

If our government is more interested in creating jobs by selling out foreclosed properties for cheap, then taxpayers are taken advantage of! Simple as that... We can unload the thrased out properties in the seedy parts of towns for all we care. But we should hold the pristine properties for as long as possible... You see, our government waited too long to buy oil for Strategic Petroleum Reserve until oil prices shot to $145 barrel recently. I am not sure how much our government paid for oil for SPR in recent years. Was it $70, 80 on average .. ?? We couldhave done that for much less earlier like at $40 or so.. You see, Our govenrment got to be an uncanny investor or it is better off shaking all of us upside down for taxes...

The reporter missed the point entirely. Ms. Jones is presented as another unfortunate loser in this deal, but she comes out as the major winner. She had the brilliance to refinance at the peak of the real estate market. She drew out about $150,000 cash for her own use (pure profit no income tax on loan proceeds) then let the bank keep the home. She passed all downside market risk to the bank and kept the upside potential and rental cash flow. New IRS regs passed by Congress forgive her from paying tax on the written off debt. She is brilliant and perhaps should be considered to replace Paulson at Treasury.

Everyone involved assumed that the housing market would continued to go up and up and up. Unmitigated greed is what drove this situation.

I pulled 150K out of my house and lost it gambling in Vegas!

BUT, I expect the American taxpayers to GIVE ME BACK MY 150K.

WRITE ME A CHECK NOW or the world will end!

I don't care whether you, the American taxpayer, has 150K, but I EXPECT you to GIVE me that money NOW!