Upside down in your house? on clarkhoward.com

New stats from Economy.com show that 1 in 6 homeowners owe more on their house than it's worth. On the positive side, those who are hurting are upside down in relatively small amounts. But that still leaves 7% or 8% who are frightfully upside down. Many of those will capitulate and send in the keys (aka jingle mail).

During last night's presidential debate, McCain made an unusual proclamation about a direct federal lending program with markdowns on loans to people who are upside down and a full payoff for the lender. Clark doesn't like this idea. The lenders should take a haircut. The whole concept of federal government taking over home debt on a loan-by-loan basis is a leap of faith into market intervention.

Clark is still struggling with how to best help individual homeowners and when we should help them. Those who bought in the last few years account for a big share of those who are upside down.

So maybe the best candidates for help instead would be those who have been in a house a near-lifetime -- those who got taken in a bad refinance deal after most of their home was paid off. But paying off a bank at 100 cents on the dollar, Clark can't hang with that. Why should the bank get off scot-free for having zero lending standards?

What others are saying

Upside down in house and losing business too
We decided to move our business to a bigger population base. Then we found out we are upside down in our house by the amount of the real estate fees and the closing costs... about 21,000. The other thing we found was that only 1.5 homes per month has sold in our small town. Some homes being listed in this area for more than 280 days. We need to move to a population base for our business but can't because of this... if we stay we will lose house and business. We don't know how to save ourselves and we worked so hard for so many years.
By Laurie Leeper @ 08/08/09 12:30:40 PMreport abuse
Negative Equity
I am not one of these people that couldn't afford to buy the house. In fact, I qualified for more but didn't want my mortgage to be over a certain amount. However, due to the market downturn and foreclosures in the neighborhood my house is now worth $80K less than what I owe. I believe the market will go back up in a few years but not to the level it was when I bought. Unfortunately, it will be many many years before I have positive equity and if I have to sell and move due to losing my job and not finding one locally then I have no choice but to try and due a short sale and start over. But that's life and I don't expect anyone to bail me out.
By Mike @ 06/17/09 07:30:46 PMreport abuse
Refi
We were planning on refinancing just in case and to eventually rent this out or sell and buy up, but since alot of homes in the area are foreclosure sales, our home value is less than what we owe after 7 years of more than minimum payment on a 15yr loan. We can't get refinanced. 810 Credit score, good income, and we get screwed for doing what was right. Feel like walking...
By R&R @ 04/07/09 08:53:41 PMreport abuse
so where's the upside/down money now?
The construction companies made the big bucks; the bank just took our loans and turned around and paid them. The bank got little more than closing costs.
By karl @ 02/19/09 01:58:58 PMreport abuse
Mortgages
The upside down homeowner only will lose money if they try to sell, right? I guess they shouldn't sell then until they aren't upside down. My mutual funds are upside down now too. Is the government going to make up the difference? Some people's car loans are upside down. Will the gov't pay for that? Whenever you buy into something, there is always the chance you will lose money. If you don't want to take that chance, don't buy.

Another thing: BofA reworked or is going to rework a lot of the mortgages it took on from Countrywide. Why couldn't the gov't have the other banks do that? I heard talk that the banks were looking into it months ago. Why did they wait? Did they see a better opportunity to get money from the gov't?
By Diver @ 10/09/08 10:45:49 PMreport abuse
Hey, that's capitalism...
Upside down in your house? Hey, that's capitalism. We have to take the good with the bad.
By Mark P @ 10/09/08 10:08:21 PMreport abuse
upside down mortgages
Hey Clark,

I disagree with the idea of only bailing out those people who are in their house near-lifetime who got a re-fi. Where did the money for the re-fi go? That's right, the borrower spent it. Technically, he's not upside down, he just took out a loan which he now owes. In other cases (my own) I bought in 04, not my first house, put 20% down and pay additional principle monthly. Now I'm upside down because I bought during a grossly inflated market which was inflated because of bogus lending practices which flooded the market with buyers. I'm not very happy with this because my goal is to be mortgage free before I reach retirement age, which is looking like about 85 at this point. Anyway, I love your show but I do think you have to consider who was actually hurt and who made moola on these &^%&^%&^%^&%&^% shenanegans. I'm still waiting for a politician with sufficient manhood to suggest anyone who knowingly made money through shaddy lending practices be held leagally liable and appropriately fined. Thanks for listening.
By Paul Smith @ 10/09/08 05:12:45 PMreport abuse
Learn to Read
Apparently taxes did not reach the schools to be able to teach people how to read and to be capable of doing math. My problem is that I cant even afford to buy a house in my area (Bay Area) and I gross 80k a year. These problems arose due to greed in my opinion and a lot of those people are paying for it or on the way to pay for it. But I do have sympathy for the children that will be out of a home due to irresponsible parents. As the saying goes only the strong survive. Or unless your rich as hell. Hail free market.
By Ryan @ 10/09/08 04:20:03 PMreport abuse
Don't be so mean to Scott
I agree with Scott. I don't need the money, in fact, I'm making double mortgage payments each month, but if the government is going to give money away to all the screw-ups who got into houses they knew they couldn't afford, why shouldn't the responsible people get some money thrown at them as a little thank you for doing the right things?! I'm sick of this welfare state we live in. That's our government...reward the irresponsible in exchange for a vote this November! Maybe all of us responsible people should just stop paying and then they can help us too.
By Michelle @ 10/09/08 01:55:02 PMreport abuse
Stuck in Upside Down Mortgage
It's easy to stand on the sidelines and be critical especially if you are not caught in this situation. I am stuck in an upside down mortgage not because I borrowed more than I could afford, but because of where I live. I live in Clayton County..where home values have gone down considerably. Am I to be penalized because of where I live? I can't even refinance with the lower interests out there because I have a 2nd mortgage. I can't sell my house because I would still owe if I was even able to sale the house. I accept the responsibility of being stupid and taking out an ARM in one of our refinancings. I'm going to have to get a 2nd job [if it's even possible in this economic climate]. I'm looking at cutting what expenses I can. I want to be responsible and not have to go into foreclosure.
By John K @ 10/09/08 01:26:19 PMreport abuse
Unbelieveable, Scott Francis wants "help"
Scott Francis said "Rather than the government giving huge amounts of cash to any business/bank/etc simply setup a program whereby the government will set aside ~15-20k for each mortgage holder."

Oh that's a good one Scott - someone will just give you $20K because you can't afford to live in a place you probably should never have purchased in the first place! Do you want a free Happy Meal every day too?

I have a better idea. How about the bank forecloses on your irresponsible butt, kicks you out, and then sells the property to somebody who can actually afford to own it? What a concept! And taxpayers won't have to "set aside" any money to cover for your foolish decisions. Who knows, you might even learn something in the process -- pain is a great teacher.
By Fred C @ 10/09/08 12:19:34 PMreport abuse
Checklist for Irresponsible Dolts
Checklist for idiots:

1) See a house that costs 10X your income
2) Decide to buy the house anyway
3) Get a stated income, option-ARM loan
4) Make no down payment (or borrow it)
5) Get a HELOC at closing
6) Make the minimum payments (neg-am)
7) Realize 12 months later you can't afford the house
8) whine and cry it's "unfair!"

I'm sick to death of fools who think their stupid decisions are somehow MY frikkin' responsibility. They blame, the banks, politicians, loans officers, anybody but themselves, and it's truly amazing.
By Fred C @ 10/09/08 12:06:00 PMreport abuse
Mortgage Thieves
My mortgage payment went from the mid 800's to over 1500 a month, my principal payment monthly is about 60.00 tell me that is not A CRIME!!! I am going to loose my home that I have been in for about 15 years, I am a single mother with a son.
By Kathy @ 10/09/08 10:13:52 AMreport abuse
Upside down in Your Home
The banks, their officers and lenders should be indicted for their greedy carelessness. Public trust bankers opinion on how much house a person can buy, as they trust their doctor's opinion on health matters. Bankers SHOULD NOT get away with this. the discuussting extravaganza of AIG hunchos lately , spending over $400,000 of taxpayers money on a resort junket under guise of working on the problem is unexusable and criminal. Though I applaud the government's plan regarding mortages, the above mentioned accountabuility must not be swept under the rug.
By Henry B @ 10/09/08 09:12:19 AMreport abuse
Helping out mortgage holders
I had an idea a while ago based on the sheer size of these bailouts. Rather than the government giving huge amounts of cash to any business/bank/etc simply setup a program whereby the government will set aside ~15-20k for each mortgage holder. This money is used to pay their mortgage at up to half the payment until it runs out. They can then use this time to try and sell/negotitate down/whatever. I know that those really upside down will mail their keys in, but this would keep foreclosures down quite a bit. It would also help house prices as the foreclosure rate continues to drive prices down and it is actually beneficial to the average person.
By Scott Francis @ 10/08/08 05:42:07 PMreport abuse

Upside down in house and losing business too

We decided to move our business to a bigger population base. Then we found out we are upside down in our house by the amount of the real estate fees and the closing costs... about 21,000. The other thing we found was that only 1.5 homes per month has sold in our small town. Some homes being listed in this area for more than 280 days. We need to move to a population base for our business but can't because of this... if we stay we will lose house and business. We don't know how to save ourselves and we worked so hard for so many years.

By Laurie Leeper @ 08/08/09 12:30:40 PMreport abuse

Negative Equity

I am not one of these people that couldn't afford to buy the house. In fact, I qualified for more but didn't want my mortgage to be over a certain amount. However, due to the market downturn and foreclosures in the neighborhood my house is now worth $80K less than what I owe. I believe the market will go back up in a few years but not to the level it was when I bought. Unfortunately, it will be many many years before I have positive equity and if I have to sell and move due to losing my job and not finding one locally then I have no choice but to try and due a short sale and start over. But that's life and I don't expect anyone to bail me out.

By Mike @ 06/17/09 07:30:46 PMreport abuse

Refi

We were planning on refinancing just in case and to eventually rent this out or sell and buy up, but since alot of homes in the area are foreclosure sales, our home value is less than what we owe after 7 years of more than minimum payment on a 15yr loan. We can't get refinanced. 810 Credit score, good income, and we get screwed for doing what was right. Feel like walking...

By R&R @ 04/07/09 08:53:41 PMreport abuse

so where's the upside/down money now?

The construction companies made the big bucks; the bank just took our loans and turned around and paid them. The bank got little more than closing costs.

By karl @ 02/19/09 01:58:58 PMreport abuse

Mortgages

The upside down homeowner only will lose money if they try to sell, right? I guess they shouldn't sell then until they aren't upside down. My mutual funds are upside down now too. Is the government going to make up the difference? Some people's car loans are upside down. Will the gov't pay for that? Whenever you buy into something, there is always the chance you will lose money. If you don't want to take that chance, don't buy.

Another thing: BofA reworked or is going to rework a lot of the mortgages it took on from Countrywide. Why couldn't the gov't have the other banks do that? I heard talk that the banks were looking into it months ago. Why did they wait? Did they see a better opportunity to get money from the gov't?

By Diver @ 10/09/08 10:45:49 PMreport abuse

Hey, that's capitalism...

Upside down in your house? Hey, that's capitalism. We have to take the good with the bad.

By Mark P @ 10/09/08 10:08:21 PMreport abuse

upside down mortgages

Hey Clark,

I disagree with the idea of only bailing out those people who are in their house near-lifetime who got a re-fi. Where did the money for the re-fi go? That's right, the borrower spent it. Technically, he's not upside down, he just took out a loan which he now owes. In other cases (my own) I bought in 04, not my first house, put 20% down and pay additional principle monthly. Now I'm upside down because I bought during a grossly inflated market which was inflated because of bogus lending practices which flooded the market with buyers. I'm not very happy with this because my goal is to be mortgage free before I reach retirement age, which is looking like about 85 at this point. Anyway, I love your show but I do think you have to consider who was actually hurt and who made moola on these &^%&^%&^%^&%&^% shenanegans. I'm still waiting for a politician with sufficient manhood to suggest anyone who knowingly made money through shaddy lending practices be held leagally liable and appropriately fined. Thanks for listening.

By Paul Smith @ 10/09/08 05:12:45 PMreport abuse

Learn to Read

Apparently taxes did not reach the schools to be able to teach people how to read and to be capable of doing math. My problem is that I cant even afford to buy a house in my area (Bay Area) and I gross 80k a year. These problems arose due to greed in my opinion and a lot of those people are paying for it or on the way to pay for it. But I do have sympathy for the children that will be out of a home due to irresponsible parents. As the saying goes only the strong survive. Or unless your rich as hell. Hail free market.

By Ryan @ 10/09/08 04:20:03 PMreport abuse

Don't be so mean to Scott

I agree with Scott. I don't need the money, in fact, I'm making double mortgage payments each month, but if the government is going to give money away to all the screw-ups who got into houses they knew they couldn't afford, why shouldn't the responsible people get some money thrown at them as a little thank you for doing the right things?! I'm sick of this welfare state we live in. That's our government...reward the irresponsible in exchange for a vote this November! Maybe all of us responsible people should just stop paying and then they can help us too.

By Michelle @ 10/09/08 01:55:02 PMreport abuse

Stuck in Upside Down Mortgage

It's easy to stand on the sidelines and be critical especially if you are not caught in this situation. I am stuck in an upside down mortgage not because I borrowed more than I could afford, but because of where I live. I live in Clayton County..where home values have gone down considerably. Am I to be penalized because of where I live? I can't even refinance with the lower interests out there because I have a 2nd mortgage. I can't sell my house because I would still owe if I was even able to sale the house. I accept the responsibility of being stupid and taking out an ARM in one of our refinancings. I'm going to have to get a 2nd job [if it's even possible in this economic climate]. I'm looking at cutting what expenses I can. I want to be responsible and not have to go into foreclosure.

By John K @ 10/09/08 01:26:19 PMreport abuse

Unbelieveable, Scott Francis wants "help"

Scott Francis said "Rather than the government giving huge amounts of cash to any business/bank/etc simply setup a program whereby the government will set aside ~15-20k for each mortgage holder."

Oh that's a good one Scott - someone will just give you $20K because you can't afford to live in a place you probably should never have purchased in the first place! Do you want a free Happy Meal every day too?

I have a better idea. How about the bank forecloses on your irresponsible butt, kicks you out, and then sells the property to somebody who can actually afford to own it? What a concept! And taxpayers won't have to "set aside" any money to cover for your foolish decisions. Who knows, you might even learn something in the process -- pain is a great teacher.

By Fred C @ 10/09/08 12:19:34 PMreport abuse

Checklist for Irresponsible Dolts

Checklist for idiots:

1) See a house that costs 10X your income
2) Decide to buy the house anyway
3) Get a stated income, option-ARM loan
4) Make no down payment (or borrow it)
5) Get a HELOC at closing
6) Make the minimum payments (neg-am)
7) Realize 12 months later you can't afford the house
8) whine and cry it's "unfair!"

I'm sick to death of fools who think their stupid decisions are somehow MY frikkin' responsibility. They blame, the banks, politicians, loans officers, anybody but themselves, and it's truly amazing.

By Fred C @ 10/09/08 12:06:00 PMreport abuse

Mortgage Thieves

My mortgage payment went from the mid 800's to over 1500 a month, my principal payment monthly is about 60.00 tell me that is not A CRIME!!! I am going to loose my home that I have been in for about 15 years, I am a single mother with a son.

By Kathy @ 10/09/08 10:13:52 AMreport abuse

Upside down in Your Home

The banks, their officers and lenders should be indicted for their greedy carelessness. Public trust bankers opinion on how much house a person can buy, as they trust their doctor's opinion on health matters. Bankers SHOULD NOT get away with this. the discuussting extravaganza of AIG hunchos lately , spending over $400,000 of taxpayers money on a resort junket under guise of working on the problem is unexusable and criminal. Though I applaud the government's plan regarding mortages, the above mentioned accountabuility must not be swept under the rug.

By Henry B @ 10/09/08 09:12:19 AMreport abuse

Helping out mortgage holders

I had an idea a while ago based on the sheer size of these bailouts. Rather than the government giving huge amounts of cash to any business/bank/etc simply setup a program whereby the government will set aside ~15-20k for each mortgage holder. This money is used to pay their mortgage at up to half the payment until it runs out. They can then use this time to try and sell/negotitate down/whatever. I know that those really upside down will mail their keys in, but this would keep foreclosures down quite a bit. It would also help house prices as the foreclosure rate continues to drive prices down and it is actually beneficial to the average person.

By Scott Francis @ 10/08/08 05:42:07 PMreport abuse

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Oct 08, 2008 -- Upside down in your house?

What others are saying