Socialists Against Housing Market Correction
That would be the two panderers now left standing. Paul Thornton writes for Reason that the candidates, in a "concerted attempt to 'keep Americans in their homes,'" have called for billions in spending to curtail foreclosures and shield home buying speculators from the consequences of their risky investment decisions...which really sucks if you're a renter who aspires to be a buyer at some point:
Foreclosures boost the supply of housing at a faster than expected clip. With supply for potential buyers (i.e., renters) increasing, home prices stand to fall (albeit modestly) to less insane levels, particularly in overheated areas such as Southern California, the region I call home. That increasing supply of housing and those lower prices could be why a Zogby poll released in April showed that, despite the economy's tailspin, most Americans think now is a good time to buy a home....Obama stops short of Clinton's 90-day "moratorium," but the Illinois pol also wants to inject $30 billion into the mortgage market.
Until the middle of April, McCain was alone among the major presidential aspirants in calling bullshit on this idea. The Arizona senator's line on the mortgage meltdown--that he would refuse to "play election-year politics with the housing crisis," as quoted in the Los Angeles Times--showed such deference to the free market, it was too good to last. So it didn't. By April the straight talker was peddling his own multibillion-dollar borrower assistance package--which, he insisted, would help only "deserving" borrowers, of course.
Lost in the rush to help troubled borrowers is an understanding of what this crisis isn't: a situation in which "Americans are losing their homes." More accurately, borrowers who can no longer afford their mortgage payments are becoming--gasp!--renters. "Americans are living in other people's homes" doesn't quite tug at the heartstrings the same way, which is part of the reason you're not hearing about it.
...Also lost in the flood of campaign promises is the housing bubble's true crisis, which barely anyone in Washington cares to mention. In 2001 renters who wanted to buy a house in Los Angeles County could expect to spend about $200,000, roughly the area's median home price at the time. By the peak of the housing bubble in 2007, the median price had shot up to about $550,000, which the California Association of Realtors estimated would easily take more than $100,000 in annual pre-tax income for a family to afford.
Wrap your civic-minded intellect around that one: more than $100,000 a year to afford a modest home. Candidates, there's your crisis--and thankfully, the market is already taking care of it, through the correction of foreclosures and the resulting increase in the supply of available housing.
If I don't have to bail you out when you lose big in Vegas, why do I have to buy you a new house while I do the fiscally responsible thing and rent because I can't afford to buy? (I am still holding out hope the candidates aren't going to make me make good on your gambling debts.)
Amen. Too many have convinced themselves that constant home price appreciation is normal,bankable and needed. From the rating agencies like Fitch who admitted that their models broke down completely when HPA declines, to brokers and realtors, to each individual community and city that saw revues increase from development fees, transfer fees, property taxes etc., to investment banks and plain old homeowners.
One of the sick jokes about any bailout or tax help to those who are homemoaners(hahaha)or connected to the real estate professsion, think tax credtis to builders, will not work. It would be better to just have a national bbq using blocks of cash as fuel than to flush money down the toilet this way, but eh, politicians y'know?
This was a global liquidity bubble, and now it has popped and become a global liquidity crisis. shit, before israel bombed them back 20 years even BEIRUT was in the middle of a housing/building bubble. Nothing those pandering idiots will propose will stop this.
The municipalities, states, and the feds are buying depends right now because revenue will fall. hard. look at Vallejo Cali, just declared bk. Look at Jefferson County ala, getting burned by the debt bubble and will most likely default on billions of dollars in bonds. They are trembling, and scrambling for anything that might maybe possibly delay for as long a s possible.
In thelong run, ti will be a good thing to have lower prices for houses for renters now, and for homowners later tht want to move up. And for my future grandchildren when they come into the world.
One other bennie to a crashing housing market combined with tightening credit is a return to sane timetested stody mortgage underwriting.
Sorry amy, this is a hobby of mine and a passion obviously. I can go on about many interesting details of this issue. Oddly it is not just one issue, but many linked.
All I can say is all aboard the schadenfreudeville express!!
rsj at June 8, 2008 7:59 AM
I'll admit to schadenfreude and more.
I'm not just rooting for the unqualified buyers and greedy banks to get a smackdown.
People who took multiple mortgages to finance have-it-all lifestyles need a good kick in the ass, just as much as the over-inflated housing prices need a serious adjustment.
Three quarters of a million bucks for a ranch house in the flats is insane. And yes, I'm shopping for property, so let the market crash ASAP.
Gog_Magog_Carpet_Reclaimers at June 8, 2008 9:55 AM
The whole thing just makes me sick to my stomach.
Here where I live, houses along the shore used to be low rent housing. The poor people lived here. The fishermen, the lower wage earners, because it used to be nobody who was "well to do" lived on the south side of the railroad tracks, near the water. Wrong side of the tracks, anyone? For the last 20 years, we've had rich snobs coming down here, buying these little cottages and turning them into 3-story showplaces, and commanding $1.5 million and more for them. And getting it! Even for what were the 3 season cottages, with rents going at $2500 - $3000 per week during the summer! And now these same people are screaming about flooding every time it rains, and wanting relief in the form of city funding. My theory is, if you have the money to buy the house, you damn well better have the money for the flood insurance. I can't wait for a hurricane this year, so I can watch these people totally freak out, crying about how "unfair" it is that the city won't subsidize their insurance. (I live near the beach, but I'm on a hill and not in a flood plain. I'm still from the "wrong side of the tracks", though.)
Flynne at June 8, 2008 10:49 AM
Hear, hear, to what all of you write above. I don't buy what I can't afford, which is why I rent.
Regarding insurance: If you live in the path of fire, floods, tornados, or other disasters, you pay the premium and the cost for the National Guard to come rescue you, thanks...the latter should be paid with fees by people who live in danger zones...not taxes paid by the rest of us. If you get weather-fucked in an unexpected place -- say, you get hit by a tsunami in the Detroit suburbs, well, we understand if you weren't prepared for it financially or otherwise.
Amy Alkon at June 8, 2008 11:42 AM
Yup, I just sold my house in the SF area and am currently renting.
After buying my ex out in the divorce, I was still sitting on a pretty good equity position, but once I saw the writing on the wall and the prices started dropping ( from $850K to $550K rather quickly) , I opted to sell rather than risk being upside down.No whining or moaning, just doing what I felt needer to be done.
mbruce at June 8, 2008 11:49 AM
One other thing I forgot to mention. One of the finer things about renting that will be a lifesaver in the coming years is mobility.
New job in another state? No problem, notice to landlord and pack n roll. If of course, you are a renter. Imsorry you own? Have to turn down the promotion because you are locked into an underwater homeloan in a declining neighborhood? ooohh. So sad. bye bye.
rsj at June 8, 2008 2:27 PM
Bowing before the great bitch-goddess of home values.
After moving to the DC area, my wife and I waited more than five years to by a home. We waited until A) we had accumulated enough savings to ensure we could make a big enough down payment to keep our monthly mortgage reasonable and B) until the absolutely preposterous prices of houses in Northern Virginia plateaued and then dropped -- all while others foolishly overextended themselves spending more than they could afford for houses that, to me, just didn't seem worth $600,000 even if I had the money laying around to pay cash - not big enough, no yard, etc etc. Just not not enough bang for half a million bucks, to me.
Bottom line, we were prudent, delayed gratification, and eventually the market and our finances matched and we were able to buy.
But that match point was delayed by the ridiculous real estate bubble in the DC market.
Now that the bubble has burst, all the politicians can think of is how to A) keep all the extravagent spenders in the houses they could not afford and B) How to prop up housing prices at the absurdly inflated level they have been at lately. The affect of both of which is to trap prudent people in renting.
When the dotcom bubble burst, it was pretty much too bad, so sad for all those people who had their life savings tied up in one company or who bought dotcom stocks at skyhigh prices regardless of whether the performance of the companies themselves indicated any objective basis for the stock price. When this bubble burst, the loss was on the stockholders and other stakeholders in these firms. But when similar behavior leads to a similar result in the housing market, everybody runs to the rescue, despite the fact that a drop in housing prices, while painful to some in the shortrun, will be a boon to those who most need and deserve a break in the long run - responsible consumers of modest means looking to buy homes.
Part of the problem is old-fashioned populism. A politician has to win votes, and he or she probably can't win any without pandering to the homeowning constituency. Even a politician of the highest integrity probably has to recite this shibboleth, as you can't do any good if you don't get elected. After all, Abraham Lincoln had to promise not to abolish slavery in order to get the chance to do just that.
Another part of the problem is the unwarranted sense of entitled we feel about home values. Home values have so consistently risen for so long that we have come to believe that they must and always will do nothing but rise. Of course, if one carries it out to its logical conclusion, the absurdity of this notion becomes self-evident.
This unwarranted belief in continuously rising home values gives rise to the biggest fallacy of all - that your home is your biggest "investment." In reality, it is no such thing. Your home may well be your biggest ASSET, but it is hardly an investment, for two reasons. First, a house is a consumer good that we purchase to satisfy our physical (and emotional) needs and wants. It is a consumer good of remarkable durability, with physical characteristics that ensure that it will at least retain much of its value, but it remains a consumer good nonetheless. We have been lucky - unlike other consumer goods, houses have tended to appreciate in value for a long time. But there is no particular reason that this need be so forever.
Before sending me hate mail for challenging the received wisdom that a house is an investment, take a look at the financial facts of a home mortgage. Over the course of a 30-year mortgage, the aggregate interest paid on the loan will be almost equal to, or may even exceed, the purchase price of the house. That means that if you retain the mortgage for the full term, you have to sell your house for double what you paid for it to break even in terms of your total cash outlay. This is not an investment, it is an expense.
Don't get me wrong - buying makes alot more sense than renting if you can make the mortgage payment. If you buy, after you pay off your mortgage the house is yours, you no longer pay rent, and you can recover the value of the house, which is a major portion of your total cash outlay, in cash if need be. If you've rented all along, at the end of 30 years you have nothing but the need to keep paying rent.
Buying is the way to go - but viewing it as an investment upon which we are entitled to uninterrupted, risk-free growth in value is still wrong.
Dennis at June 8, 2008 4:48 PM
just a couple of comments here. First, just because the vlaue of a home went down doesn't mean the mortgagee is walking away from it. On the contrary, most people continue to pay their mortgages on time and retain their home, because it is jus tthat their home - much more so than an investment.
This bubble didn't occur because prices fell. the real Estate industry and the mortgage industry created this monster. Unsophisticated buyers looking for their piece of the American dream were chasing the housing market as prices outraced their ability to raise the dpownpayment required. Enter the sub-prime mortgag product. these financially uneducated consumers were put in fromt of a 'mortgage banker' who sold them the sub-prime mortgage. they didn't understand the terms and the banker certainly didn't explain the concept of introductory rates and balloon payments. In fact, the 'banker' gave them false information about how the property will appreciate and they can then use their nefound equity to refinance way before the rates wore off. These people are the victims of a greedy banking industrry and the commissioned 'bankers' that designed and s0old them these ridiculous products. the federal reserve and State Banking Commissions that allowed the products are also guilty of negligent oversight.
Do these people deserve protection. Yes. Do the land speculators that buy dozens of highly leveraged properties to sell for short term profits - no. Can the government tell the difference? No idea. But these victims need to be assisted - the victims are not just losing their house, they are losing their entire net worth in this transaction and will likely be doomed to total poverty for the rest of their lives as a result. Sorry, these people deseerve a break.
steveda at June 8, 2008 5:06 PM
"These people are the victims of a greedy banking industrry and the commissioned 'bankers' that designed and sold them these ridiculous products"
I HATE this bit of wordplay. People as "victims" of bankers?? Come on. If you are so stupid as to buy something you a) can't afford or b) can only afford if X, Y and Z happen or c) don't understand, then you deserve what happens to you. Period. If I buy a really expensive car, can't make the payment, and it gets repo'd, that's my fault. How is a foreclosure any different? Those people are not going to be homeless. They will just rent. It's not the end of the world. And unfortunately it's not even the end of their credit, b/c companies will still lend them money. My DH works a good job for pretty darn good pay, and we can barely, barely, barely, afford any kind of shack anywhere. It's absurd. I've yet to see someone driving a cheap subcompact, eating inexpensive dinners at home, get foreclosed on. No, these people still drive big new SUV's, and eat out, and buy new clothes, but "Oh, they can't afford the house payment!" Sob sob sob.
momof3 at June 8, 2008 5:55 PM
momof3 .. thats pretty cold.
let me tell you a personal story. A few years ago, sensing the end of my career in brokerage (operations, not sales) I decided to sell my huge center hall colonial in NJ and buy a more modest home in Pennsylvania - reducing my mortgage significantly and reducing my property taxes by over $11,000 per year.
The mortgage company tried to sell me one of those mortgages, advising me to keep my cash invested and leverage my equity to allow more investment in the market - maximizing returns as he put it. Fortunately, my 30 years in financial services management told me he was full of crap and I took my nice conventional fixed rate mortgage.
A less sophisticated, knowledgeable person would have easily fallen for that trap. The Lexus SUV he was driving was a good indication that many had.
All i am saying is that to some poor schmuck that scraped together a minimal down payment and sat across from this "expert" may have swallowed those lines about rising equity allowing a refi before any of the negatives kicked in. Its pretty amazing how people will accept "wisdom" from someone they perceive as an expert.
Besides, using your logic, the Federal Reserve should have allowed Bear Stearns to fail, dragging Lehman Brothers, Morgan Stanley, Citibank, JP Morgan Chase, etc. with it. They should have allowed the entire banking and financial system to collapse - after all, they created the products and underwrote the bonds that the sheister was selling. If you are going to bail out one side of the transaction, you need to bail out the other.
steveda at June 8, 2008 6:42 PM
I'm kinda with Momof3 here.
This guy says that "financial services" is the largest sector of the American economy now. Got that? More people are trying to survive by manipulating other people's money than anything else. More people than in farming, more than in transportation, more than in manufacturing or construction.
Financial service isn't an entirely useless profession, but it has only one good use... They have to know whether or not something is a good investment. That's how they create value: They look at the long, murky list of people who want to borrow money and correctly decide which ones will pay it back. If someone can do that correctly, why would you argue with their profits?
Too many of these services seem to have done everything they can to remove their own judgment from the equation, so that all they had to do was sell/sell/sell... Someone else (the taxpaying readers of this blog, for example) would be left to mop things up when the mortgages came due.
Some of us just aren't cut out to own property. I didn't buy until my mid-40s, and even with the expanding bubble, it hasn't been an entirely comfortable experience. Being respon$ible for $tuff is often painful.
My feeling about this is kind of like during the S&L crisis in the 80's: I don't mind bleeding a little bit at tax time if it means these pathetic fuckers will be taught that DARWIN ALWAYS APPLIES. (I felt that way when my bubblicious mutual funds deflated during the internet correction of Y2K, as well.)
Crid at June 8, 2008 6:43 PM
Steve - Cold's what we do here.
Quite frankly, yes. After 9/11, the government should have let the airline industry go tits up.
Bear Stearns wasn't given a bailout, they were given a temporary loan to find a sucker, er buyer for their mistakes. I don't object to that, as they didn't get anything other than a very short term favorable rate on buying cash to stop the bleeding long enough to get bought.
And anyone who is dumb enough to sign a document without reading it deserves what they get. The only ones that I'll defend are the ones who were sold a loan fraudulently - like the people in (iirc) Santa Monica who suddenly found themselves with demand notes for $75,000 loans that they had never been presented with nor signed.
I bought a house I could afford (granted, I took advantage of the market and got a no-down mortgage), but I got 30 year fixed with a decent rate. I know that I can afford to make my mortgage payments so long as I don't spend more than six months with no work.
Why the hell should my taxes go up to keep some idiot in a $450,000 McMansion with a leased Lexus in his driveway when he can't afford it? We need foreclosures, failures, and prison time for those who used fraudulent measures to sell mortgages to the unqualified.
I'm sorry, but sometimes the only way a lesson is learned is in pain.
brian at June 8, 2008 7:06 PM
brian.. I am with you on the jail time for the brokers that put people in houses they knew they could not afford. The entire issue arose from the bad practice of using "introductory rates" to falsely keep the mortgage payment down and allow people to qualify. When the introductory rate wore off, the real payments were not affordable.
The problem in dealing with this issue is identifying the true victims from those that were in the market on spec and had no intention of living in the house long term.
I think the government has to make a good faith effort to identify who the true victims are and force the banks to renegotiate the mortgage. I am not necessarily advocating a subsidy. You - banker, and You - underwriter, caused this issue and now you must fix it. Simply force them to refinance the mortgage at a reasonale rate. The interest loss should be born by those that created the product. Forcing these institutions to take economic responsibility for their bad practices will definitely discourage similar practices in the future.
As for those spec buyers, or those that irresponsibly bought more than they could possibly afford (i.e. bought houses above the average median price for their geographic area) - I have no sympathy at all. The same way I have no sympathy for Evander Holyfield or Ed MacMahon who have both found their multi-million dollar homes in a foreclosure situation.
steveda at June 8, 2008 8:44 PM
brian, you bought health insurance, right?
Good.
Crid at June 8, 2008 9:21 PM
Actually, no. Nobody wants to sell me what I want. They've all concluded that I'm too old to be buying high-deductible catastrophic care insurance. Apparently at 38 I'm supposed to have dependents who have all kinds of expensive medical needs.
Which I don't. And so I'm a victim of both age bias, and marriage bias.
Which is fine by them, since I don't fit into any of their nice, neat acutuarial categories.
brian at June 8, 2008 9:47 PM
> Nobody wants to sell
> me what I want.
You're not haggling over goods, you're haggling over price. This is not a new expression of the human experience.
> Apparently at 38 I'm
You're not the spring chicken I thought you were, either. Please remind me to harass you about this in the days ahead.
Aw heck... No time like the present!
> I have no sympathy
> at all. The same way
> I have no sympathy for
Somewhere on this disk drive I have your promise to take your own life the moment you require expensive care. I'm certain you remember this comment. Would you happen to have a copy of that link at hand? Could you post it in a nearby comment? That'd be grand, just ducky, thanks.
Crid at June 8, 2008 10:05 PM
Hey - I'm still younger than you, and I've still got most of my hair.
so NYAH!
If I had the choice between taking the black pill or being in a state of uselessness, I'm checking out.
But I've never understood why people will go 40 grand in the hole for a Lexus, but not to fix a broken leg.
It's like they think they've got a God-given right to perfect health, and that just ain't so.
brian at June 8, 2008 10:15 PM
> Hey - I'm still younger than
> you,
Hey - Young people get sick too, which is why the responsible ones buy insurance.
> and I've still got most
> of my hair.
I got a mondo scalp. I had more hair on my head at birth than most guys have on their twenty-first birthday. Even today, it's thick, winsome forest of gently blended chestnut & grey....
> If I had the choice between
> taking the black pill or being
> in a state of uselessness, I'm
> checking out
Your internal calculations are your own beeswax... I'm trying to protect the rest of us from having to clean up the mess. It'd be like if someone sold you a mortgage that you couldn't afford....
Crid at June 8, 2008 10:49 PM
Fuck bailouts. I worked very hard to build up equity in the company I worked for in MI and with my landlord to create a reasonable life for my family. Then it became obvious that MI's economy was on the verge of a complete collapse and in spite of home ownership being a year or two away and being within a few years of taking over ownership of a successful roofing business, I came to Portland. As said successful roofing business was down a hundred grand last year, I made the right choice.
But that has meant building a business from scratch here. It has also put homeownership way the fuck off. It would take close to two hundred grand to get a "gut it to the studs" fixer upper in a lower middle to middle class neighborhood. Now that the mortgage crisis has hit, I might stand a fighting chance.
There are properties all over really nice neighborhoods to merely decent ones that are being repoed from speculators. Houses that have sat vacant and often partially gutted, because the speculator became too overextended. Other properties failed to sell or brought too little at too high a cost. These folks are the ones screaming the loudest for bailouts and they use the family of five that worked their asses off to get anything - mostly due to the artificial housing bubble said speculators created - as poster families for helping them.
Unfortunately, steveda, there are a lot of very decent people who fucked up and listened to the wrong people. I feel for them, really I do. But quite honestly, I do not feel compelled to help them out. I am barely scraping by, while trying to save the money for a down payment. It is a constant struggle to get by and not tap our savings when we're really hurting. I pay a lot of my income in taxes. I have no problem with helping people who need it. I support a drastically different, but ultimately more comprehensive welfare system.
I do not however, support bailing out people who have been taken in by shyster bankers. I do support protections for them, such as credit reporting exemptions. I support making it easy for them to sue the broker that fucked them over, if there was outright fraud involved. I will not however, support bailing them out. I also don't support subsidies for people like me, trying to buy their first home. I'll get there and before the youngest is finished with high-school (I hope). But it will be my partner and I who get there and we will not be taking the *tax dollars of everyone else to get there.
I rent, I don't see why my tax dollars should go to prevent someone else from doing so as well. Especially as I probably make a lot less money than they do.
* This may not work out as entirely true. My son has an interest in the navy and we had a lot of navy folks here for the rose festival. One of the pamphlets he got from recruiters was for the US Navy Reserves, construction/engineering battalion. I'm seriously considering it, because it would mean access to great health insurance cheap, VA backed home loans and education assistance.
DuWayne at June 8, 2008 11:09 PM
I say fuck bailouts as well.
After I got out of the army I worked as a loan officer for a mortgage broker, gave me flexable enough hours to fix all the medical and finacial crap I had to squabble with the army over.
It pisses me off to no end because I saw this problem comming down the road long ago, and let me tell you, most of those morons hpw got into bad loans deserve to lose it all.
I am willing to concede that some were duped, but I can gaurentee most went in eyes wide open.
I did everything in my power to get people to stick to a fixed rate 30yr, they didnt want to hear it.
"I'll be getting a promotion/Our old ouse will sell any day now/My girlfreind is going to get a job once the baby is born - by far the dumbest excuse and one I heard far too often
I am telling you these people did not want to hear that a no document loan, or a 5yr intrest only loan with a ballon payment was a stupid decision
It was always "Well, we will just refinance in a year or two when our house has increased in value and we both are working and intrest rates have gone down further
Most of those morons deserve what they got because they got exactly what they asked for
lujlp at June 8, 2008 11:55 PM
Oh, please, steveda! Ridiculous! Much as I'd love to own instead of rent I knew better.
But I once wasn't so smart when it came to love and loved badly, a relationship that cost me so much financially that I will be affected money-wise for the rest of my life. While throwing the pity party, how about throwing some of that good money after bad my way too after all I was naive when I met him and uneducated in how to recognize a shark when one was circling me. What? Crazy request! I agree. I learned from my mistake and have moved on and don't expect the taxpayers to compensate me. On the bright side, I'm no longer naive and vulnerable.
This is no different. Instead of having someone whisper romantic sweet nothing promises in their ear, they had some financial institution doing it. Why should they be compensated for falling for the line any more than someone should be when they found out that lover loved their paycheck and not them?
In fact, what exactly have these people lost? The downpayment and closing costs and some mortgage payments that it was their folly to shell out in the first place. (Just as it is your folly if you buy the gold-digger rubies and diamonds.) The mortgage payments are monthly payments just like rent, in fact, so sorry but they don't count. They're back to where they started from -- as renters -- something they should have remained to begin with.
This whole thing pisses me off big time. I had the sense to stay away and now rents are so over inflated and housing at a premium because they've abandoned mortgages or let the bank foreclose and glutted the rental market. But I should have some of my hard-earned money going to bail them out? I don't fucking think so!
Tell me again -- who's this not fair too! I'm screwed all around, yet again, for doing the right thing. This is some society we have that keeps rewarding assholes and letting them line-butt decent and hard-working. (Sorry, Brian, I loved your analogy on that; it was absolutely apt.)
Donna at June 9, 2008 10:34 AM
Compared to owning, renting is almost by definition a tremendous bargain at a time like this. That's doesn't mean you get to pay the amount of rent you want to pay, but that's a different question, isn't it?
Crid at June 9, 2008 12:17 PM
I am sorry Donna, where did I say that taxpayers should bear the burden of any bailout?
Listen when Ford designs a car with an exploding gas tank, or Firestone designs tires that don't quite grip the road, or Fisher price sells toys loaded with lead paint, does the government bail them out? No. the corporation that was negligent bears the cost of repairing the item or refunding the money to the consumer.
When a bank offers a mortgage to someone that clearly cannot afford it, and does not meet the indusrty standards of debt to income ratios they are as negligent as the manufacturers above. people that did not meet the industry standard ratios were not turned down, instead they were qualified using the subprime loan that offered lower introductory rates, then ballooned into high rate mortgages. The "financial professional" that approved the deal knew full well that the people being so approved could not meet the payments once the intro rate wore off. Just like Ford should have known its gas tanks exploded.
Its not that I feel a tremendous pity for the borrower (admittedly I do have some sympathy for some of them) but I have a real issue allowing the mortgage companies and the "bankers" to walk away scot free from the financial mess thay have made. Those companies should be forced to re-write the mortgages using a legitimate, fair market interest rate, and the homeowners should have the option of accepting the re-fi or walking away from the home. Government should not be stuck holding this bag.
This is not a subsidy, it is government living up to its responsibility and making business accountable for their negligence. And granting these loans was nothing short of out and out negligence. Instead, the government seems to be more concerned with the bond-holders and the fact that their investments would be impacted.
steveda at June 9, 2008 7:20 PM
People - Gees - look at the reality of our curent economic situation. We are fucked. "We" meaning any person who is not in the top tiers of economic wealth. This figure does NOT include those who make $30,000 a year (poverty level); or those that make $200,000 per year (the quoted "middle-to upper-middles class). The people who make MILLIONS of dollars per year do so at OUR expense. OUR meaning - me you, the other guy.Get that fact.Obama 'gets' that fact. He has been one of us. He only recedtly paid off his student loans. Why whould you think his student loans are any different than your own loans?People - you ARE the voice. Barack IS one of you. Gees.Plus, he's my cousin. So if you don't like that, blow me.
Inquiring at June 9, 2008 7:44 PM
Crid - one major benefit to owning your own home:
You can change it as you see fit. I'm going to talk to the gas company tomorrow, as I'm told they have a promo going where they will subsidise a good portion of the installation of natural gas to the house if you convert most of your stuff to it.
With oil heading to $5 a gallon, and electricity at 18.5 cents a kWh, I stand to save over $1000 the first year just moving heat, hot water, and clothes dryer to gas.
brian at June 9, 2008 7:47 PM
Hey, SteveDA --- I think I love you.
Inquiring at June 9, 2008 7:47 PM
Steve -
One problem with your assignment of blame. It ultimately lands on Congress.
See, Congress has been threatening the banking industry for years, citing complaints from all kinds of civil-rights groups that not enough minorities are getting mortgages, and that this is evidence that banks MUST be racist.
So, Congress says "get more minorities into houses or we'll investigate you". So, the banking industry starts coming up with all kinds of creative financing programs, and giving loans to anyone who can fog a mirror.
The realtors see this, and all of a sudden housing starts going up at 5% per annum in some markets. And between them, the dishonest mortgage brokers (who sell the mortgages the instant they close), and the scared banks, people were sold on the idea that they'd be able to afford this house they were buying because they could refi before the adjustment, or they'd get that big raise, or they'd probably sell and buy a bigger house before the principle came due.
And most of them got burned when reality intruded.
So, at least in part, we ought to be punishing Congress for this. Garnish their wages, take their lobbyist perks away. Then go after the dishonest realtors and mortgage brokers that resorted to creative truth-telling or outright fraud to make their numbers.
And then let these poor slobs who bought too much home go rent for a few years until they realize that you can't have everything all at once.
brian at June 9, 2008 9:32 PM
I, too, am without pity. People who make $38,000 a year and think they can afford a $700,000 house are living in la-la land, and if this is the kind of thing that has to happen to them before they educate themselves, so be it.
I will *never* lose my condo. I have more than 30% equity in it, which makes it very unlikely that I will ever owe more on it than it is worth. And even if that DID happen, I agreed to the payments so I would keep making them. If I lost my job, I'd get another one. My payments are so low that I could take a giant pay cut and still make my mortgage payments. And yes, I'd wait tables or serve fries if that was all I could find. I should have it paid off in another 9 years or so.
Dennis above is absolutely right. Your house is a place to live, an alternative to paying rent, and people should be buying well within their means instead of taking a day-trader approach to it.
Pirate Jo at June 10, 2008 7:55 AM
Brian, you really have a thing with Congress... LOL. And while I am with you that they have been derelict for years on numerous topics, this isn't one of them.
Now, if you wanna substitute the federal Reserve Bank, Comptroller of the Currency and the State Banking Commission, I am with you 100% . There was clearly regulatory failure there as well. Bad financial products can have a serious impact on the overall economy and the above regulators are charged with guarding against it. So lets whack some of those guys, take some of their perks, and make them eat some of the dirt. Oh ... and I gues if you wanna throw a few congress-types in there, i won't fight ya too much!
... by the way, the banking industry was definitely racist for many years. Maybe not so much anymore, but the laws passed were definitely justified.
steveda at June 10, 2008 7:02 PM
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Roofing Contractor in Oregon at January 7, 2011 3:20 PM
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