With close to 25% of all mortgages underwater in the US, can owners reduce their principle on their home loan?

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Reducing home owners principle would immediately stimulate the economy more than waiting for banks to decide what to do with the 7 billion or more that they were given in bail out money.
Guidelines: The home must be the owners primary residence. Only 1 home per family. The home was purchased between 8 and 2.5 years ago since 8 years ago is approximately the time period that reflects a homes value today.
Why should banks be required to lower the principle value of a home? Because it was their investment practices in mortgage default swaps and the easing of guidelines to borrowers that caused inflated home values. Banks were giving loans to anyone who could sign a mortgage contract whether they had a steady job or not. That practice drove the demand for housing and the price of housing soared. It was the investment practices of banks that caused the housing bubble not the home buyer.
Can we provide some security for home owners?
We need people in their homes not in foreclosure.

4 Comments
  1. Reply
    Overnight
    May 16, 2011 at 11:20 pm

    Nice dream. But what do you think the government is more concerned with: ensuring consumers get to keep their homes, –or– ensuring banks turn a profit. If you guessed consumers, then all hope is lost for you.

  2. Reply
    jlf
    May 16, 2011 at 11:50 pm

    Nice rant – but this is not a question.

  3. Reply
    MSAD
    May 16, 2011 at 11:58 pm

    I purchased my house 7 years ago. It has not lost value. As a matter of fact, it gained. This is true for most of the homes in my area.

    The areas where homes are underwater are areas where speculation drove up the prices of homes causing a bubble. Buyers were then willing to spend ridiculous amounts of money on a house with the expectation that it would only go up. Then the bubble popped.

    The value of the house today is more likely to reflect the true value of the home.

    I see no reason for the federal government or tax payers like me who made wise buying decisions when we purchased our houses to subsidize 25%’s poor choices.

    Just because your home is underwater does not mean you should not pay your mortgage anymore. If you had the financial ability to afforded that mortgage when you purchased the house – you should still have the ability to pay that mortgage now. It’s just not as much fun since the house is under water.

    People that purchased homes as investments forgot…that sometimes investments go down. We don’t expect Uncle Sam to subsidize our stock portfolios so that we only see a gain and never a loss. The same should not happen with mortgages.

    If you are underwater on your mortgage then you need to pay extra to principle and buy the mortgage down.

  4. Reply
    reenzz
    May 17, 2011 at 12:16 am

    Banks/lenders are funded by stock/share holders. How do you think Wall Street and the stock holders would react if the government decided that borrowers should entitled to reduce their mortgage principle?

    Oh and btw….I purchased my home in 1991 for 135K. In 2005 it was worth 660K. Now it’s worth $ 536K. Am I entitled to any money back.

    Nice try, but 5 years ago…no lenders here were bitching that they gave out mortgages on properties that have now tripled in value.

    Real Estate is a risk….just like every other investment.

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