“This freaking irks me to work my ass off an pay rent for a shitty apartment while some a-hole that makes 5 times less than me that got a 1 million loan for a home will now be bailed out and will get to live happily in their 5000 sqft Santa Luz home for the same or less than what I’m paying for rent.”

I feel the same way you do, but I still don’t understand the bail-out process. What does it actually mean? If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage? To me, it is all so ambiguous. Could we all be exaggerating the truth in this matter. Please let me know because I am baffled.

“This freaking irks me to work my ass off an pay rent for a shitty apartment while some a-hole that makes 5 times less than me that got a 1 million loan for a home will now be bailed out and will get to live happily in their 5000 sqft Santa Luz home for the same or less than what I’m paying for rent.”

I feel the same way you do, but I still don’t understand the bail-out process. What does it actually mean? If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage? To me, it is all so ambiguous. Could we all be exaggerating the truth in this matter. Please let me know because I am baffled.

“This freaking irks me to work my ass off an pay rent for a shitty apartment while some a-hole that makes 5 times less than me that got a 1 million loan for a home will now be bailed out and will get to live happily in their 5000 sqft Santa Luz home for the same or less than what I’m paying for rent.”

I feel the same way you do, but I still don’t understand the bail-out process. What does it actually mean? If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage? To me, it is all so ambiguous. Could we all be exaggerating the truth in this matter. Please let me know because I am baffled.

Yes, the Fed will pay their mortgage but not in a direct way because it would be too obvious and infuriate many. They will buy Mortgage Backed Securities (similar to what they have done with Bear Stearns) and then those securities will fail and those losses will be dumped on the taxpayers. The mortgages will probably be discharged because the Fed isn’t in the foreclosure business.

Yes, the Fed will pay their mortgage but not in a direct way because it would be too obvious and infuriate many. They will buy Mortgage Backed Securities (similar to what they have done with Bear Stearns) and then those securities will fail and those losses will be dumped on the taxpayers. The mortgages will probably be discharged because the Fed isn’t in the foreclosure business.

If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.

If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.