Hillary and Bush agree: Government should bail out homeowners
Update: Next step…a lender bailout?
***
Here we go again. Earlier this summer, Hillary Clinton and the Dems started clamoring for a massive federal housing bailout. President Bush followed suit. Now, both sides are at it again:
Democratic presidential candidate Hillary Clinton called for a 90-day moratorium on foreclosures for homeowners who default on subprime mortgages.
The New York senator, is also seeking a five-year freeze on the monthly rate for subprime adjustable mortgages and a requirement that the industry report how many mortgages have been modified. In a letter to Treasury Secretary Hank Paulson, Clinton said she may consider legislation to protect lenders from lawsuits and let them convert certain mortgages into “stable, affordable loans.”
Paulson and Treasury officials are trying to craft an agreement with lenders to prevent a surge in defaults in the $11.5 trillion mortgage market. Clinton said any deal should include the provisions she has suggested.
“The administration and the mortgage industry must reach an agreement that matches the scale of the problem,” Clinton, 60, said in the letter released by her campaign today. “If you produce an inadequate agreement, or fail outright, the cost to our economy will be incalculable.”
Clinton also proposed a fund of as much as $5 billion to help communities suffering from high rates of foreclosures. The moratorium on foreclosures would be at least 90 days and only apply to owner-occupied homes.
The details of the Paulson plan are not quite clear yet, but he made general remarks this morning:
Treasury Secretary Henry Paulson said he is confident that an agreement will soon be in place to help thousands of homeowners avoid mortgage defaults by temporarily freezing their interest rates.
Paulson said the effort involves a “pragmatic response” to the worst housing slump in decades. The number of homeowners struggling to meet higher payments is soaring as introductory, lower rates are resetting. Paulson and other top Treasury officials have been holding talks with key players in the mortgage industry over the past several weeks. The plan envisions freezing the introductory rates to keep them from resetting to higher levels for a number of years.
(Update: Paulson’s full remarks are here.)
I’ve made my views clear about the unfairness and the danger of Big Nanny meddling in the housing market–made all the more perilous in an election year. This is also a good question:
What’s so bad about falling home prices?
This is a question I’ve asked before, but blogger and columnist Daniel Weintraub at the Sacramento Bee asks it more eloquently than I did: What is so disastrous about falling home prices?
Weintraub: “It is great news when the price of energy, food, transportation, health care and consumer electronics drops. But for some reason it is bad news when the price of shelter drops.”
More: “So now that housing prices have stopped soaring and in some places are dropping, shouldn’t that be good news? Shouldn’t we be seeing stories filled with anecdotes about formerly priced-out middle-income families finally getting their chance at the American Dream?
“I understand why foreclosures are bad news, and why the impact of losing a house when you can no longer afford to make the payments is a compelling story. But for every house sold because the buyer couldn’t make the payments, there is a buyer on the other end of that transaction who got a good deal. And for every foreclosure, there are probably 10 buyers of nearby homes who benefitted from the general easing of house-price pressure.”
Unfortunately, the demagogues in politics who represent aggrieved bailout-seekers screech much louder than responsible lawmakers representing responsible citizens.
See what others have said
Note from Michelle: This section is for comments from michellemalkin.com's community of registered readers. Please don't assume that I agree with or endorse any particular comment just because I let it stand. A reminder: Anyone who fails to comply with my terms of use may lose his or her posting privilege.
Trackbacks
Comments
You must be logged in to post a comment.
Categories: Subprime crisis
Hot Air
» McCain Ad: “Love”The Sundries Shack
» Just Call McCain “The Imaginer”.The Sundries Shack
» Go, Mount Shasta! Go Mount Shasta! Go, Mount Shasta, Gooooo!protein wisdom
» G. K. Chesterton on the political corner-cutting of socialists…(The Sanity Inspector)NewsBusters.org
» Matthews Foresees 'Howards End' in Wolfson Move to Fox Newsprotein wisdom
» While You Were Shopping [Dan Collins]Marginal Revolution
» What is mystery ingredient X?Weekly Standard
» CNN Poll: Gas Prices a Top Issue for VotersNewsBusters.org
» Chgo Trib's 'Honor Killing' Report Omits Islam Connection
More socialist dependency to strengthen belief in and dependency on a social welfare program and governmental interference and less rights for we the people. Always a bad move. How many historical documents do they need to review to see that this is highly illegal, not warranted and a strict violation of the limitation of powers allowed to the federal government by the Constitution.
Oh yeah, I am sorry. I forgot that most people today believe that the constitution gives rights to the people instead of its actual purpose of limiting the rights of the government.
YUK YUK PTOOIE
I will never get the sour taste out of my mouth from real good/feel good programs like this no matter what they are.
Look at this graph of historic home prices.
That LA Times question Michelle quoted hits the nail right on the head — I’ve been priced out of the market in the decent neighborhoods where I live until recently, and while I think it’s a shame that some people were convinced they could afford a house they really couldn’t, I’m not at all upset that I can start to afford a house that I would actually want to buy in a neighborhood I would actually like to live in!
i think people forget, that housing is still an investment. it’s a pretty safe investment usually, but it still has the ability to lose its value.
In the meantime, these homeowners whose adjustable rates are frozen during a five year period, what do they do to prove that they are going to be in a better position to pay the rates once the freeze has been lifted?
There are two parties involved here. Yet, the only ones who seem to have to absorb the brunt of a deal gone bad are the lenders. A cursory review of this “agreement” looks as if those who shouldn’t have made the deal to begin with - are being rewarded.
why?!
Nice message they are sending there, “You were smart enough to cut your spending back to afford payments on a 30 year fixed home loan, so we’ll take your tax money and help the couple that bought the new boat make their house payments.”
The only ones to really benefit from this bailout will be the shifty lenders that bought these loans and are now stuck with them. The market correction of homes is a good thing allowing many people priced out of the market their chance at owning a home. Once again our stolen income will go to bailing out an industry basically rewarding them for shoddy business practices. Why should the American taxpayer suffer to bailout these greed corporations and the individuals that willingly signed on to these loans?
I’m feeling particularly magnanamous today…
If you’re willing to sell your house at 75% below market value, p’haps, we can strike a deal?
I agree the government should not be in the business of bailing out people or companies that make bad decisions as a general rule. I happened to hear Paulson’s speech this morning and much of what he wanted to see done was changes at state and federal levels, including the IRS, regarding various regulations being changed to allow more latitude in refinancing and other options.
Personally, I have a very simple plan to resolve the whole thing.
Take the current “sub-prime” mortgages that are having trouble and allow them to be converted to fixed-rate mortgages as follows:
1. The current sub-prime rate of the mortgage plus a rate increase based on ability to make payments becomes the rate of the fixed-rate mortgage.
2. The new mortgage is written at the new rate for a longer period than the standard 30-year mortgage (35 or 40 years comes to mind). The longer term allows the lender to make up the difference in the interest rates while allowing the homeowner to avoid foreclosure.
3. The new rate increase should be no less than 1 and no more than 3% based on ability to make payments.
4. In those cases where the lender can not handle any increase in the payments some assistance might made available to assist in refinancing. Those types would be determined on a case-by-case basis.
Obviously this would not be a perfect solution but it is a lot more than is on the table at the moment.
difference between those and shelter is:
energy/food - used and gone, you need to buy more so cheaper is better
) so again, cheaper is better
health care - used when needed, cheaper is better
transportation - unless it’s historic most vehicles depreciate in value (great reason to always buy used
consumer electronics - similar to energy/food but with a longer use before needing replacement, cheaper is better
shelter is different. it’s used to buy other things either through loans based on equity or by selling it to buy another shelter. a similar complaint could be held against transportation but the discrepancy is much less than in the housing arena. if the value of your house drops while you’re in it then it’s just as if the amount of dollars in your bank account suddenly went down through no action of your own.
that being said, if new houses were cheaper that wouldn’t be a bad thing
Most of the people who got those subprime loans are paying them on time and not going into foreclosure. Will they now also have to pay for the stupid ones with their taxes?
Instead of buying all the house possible, on a 30 year ARM, we instead bought a smaller home on a fixed 4.75% rate, 15 year mortgage.
Boy were we stupid! We should have leveraged ourselves to the hilt, knowing that if our risks didn’t pan out we can always look to our fellow taxpayers to bail us out!
This is proof that good judgement gets punished today.
#10 - your plan is very similar to one I thought up - except that the interest rate should be what the going fixed rate was at the time the mortgage was obtained.
And there should be a cap on the lender’s income so they don’t benefit from their own mistakes.
edit to read “if new houses were cheaper without screwing up the investment value of your current house that wouldn’t be a bad thing”
Home buyer A has their act together and qualifies for a 30 year fixed mortgage. Their monthly payments could easily be handled by their monthly budget. They can afford a nice large house.
Home buyer B wants it all too - the big house. But, they don’t have the income needed to qualify (due to income) for a mortgage for the same house buyer A is interested in. So, instead of waiting and saving up for a larger down payment or looking for a house that will fit their budget, they go in over their heads for a sub-prime loan. With loan in hand, they then get into a bidding war for the house buyer A is interested in. Buyer B ends up “winning” because buyer A knows their financial limits.
So, buyer A is priced out of the market by the likes of the many “buyer Bs.”
Now, the “buyer Bs” are in trouble because they bit off more than they can chew.
So, guess which buyer the government is going to help out. The ones who willingly got into trouble by taking out questionable loans or the responsible buyers who were priced out of the market?
I have a plan also:
1. Stop thinking “homeownership” is an inalienable right.
2. Stop rewarding bad planning by people who could not afford a home.
If I would have know this I would have bought that ultra-expensive mansion in Newport Beach I knew I couldn’t afford.
Yipee! I don’t have to be responsible the gubment will be for me.
A scam by any other name is still a scam.
One of the few remaining good things left about our capitalist system, is that you still have the ability to fail. Once the government takes that away, we will be like the Japanese, who went through an entire decade of recession in the 90’s because they refused to let any of the big conglomerates declare loans bad, and write them off.
I agree with everyone here who believes this is the top of a very slippery slope.
Wouldn’t lower home values also result in lowering the taxes that are based on property value?
Another good thing, no?
Sort of like Hillarys “we are going to take things from you…”
I have a 30 yr fixed rate loan on a house on which I made a 20% down payment. Give me my down payment back, and convert my loan to the same interests these people will get frozen at, and I MIGHT consider supporting a plan like this.
Frankly, I’m sick. To think that any Republican could support a bailout feels a lot like the last straw for me. I don’t know how I could ever vote again for a person or party that would do this.
The last two Republican administrations betrayed us, the Republican controlled House and Senate let us down, and now this?
I would like to relate this to something that happened here in Atlanta recently. A organization was collecting tosy for children to give out at Christmas time. Well some folks decided they wanted them more and stole about $50K worth of stuff. Of course the community was outraged and immediately began to donate to restock the pantry. Menwhile the crooks who did this can now sleep easy at night since this probably exactly the outcome they envisioned. In their minds now nobody got hurt. The toys are being redonated and they are free to do with the ones they stole whatever they wish.
Guilt free and responsibilty free.
I am not saying the toys shouldn’t have been replaced. I am saying the crooks probably went into it knowing exactly what the outcome would be so in their minds nobody got hurt.
I look at the Katrina “victims” still sponging off of handouts and playing the “victim” card when anybody challenges to start living a life and get off the dole.
I am tired of bailing people out, whether it is Palestinians living in “refugee” camps for the last 40 years or illegal aliens “hiding in the shadows” or people who get in over their heads financially.
Where was the help when Enron collapsed?
Okay, let me get this straight.
I’m a young professional in NY who has been waiting for a housing correction so I can buy my first house.
Now both parties want to take MORE of my money to make sure I can NEVER afford a house, by both decreasing my income and keeping the price of housing high?
Gaaaaaah!
They did this in Japan with 100 year mortgages that your children were responsible for paying off. Eventually sanity returned, they bit the bullet, wrote off their losses and their economy recovered.
Sorry Finneous, got to respectfully disagree. You say
and I say that’s part of the problem. You should “buy other things” with your income, not by taking out a loan against your equity. You can use equity (which in some investment scenarios makes sense since you get a tax deduction), but if you buy other things with your equity by getting a loan against it, you now own less of your home, you still have to earn income to pay the prices of the items, as well as paying interest on the loan. And there is no guarantee that you will have any equity when you sell, since prices can go down. This is where we stand - Hill and W apparently hate the free market.
Sort of? Check out the congressional record of 1963 Yeah, even back then they saw it coming. Today? Nothing to see here folks!
Venezuela 2008 right here at home for everyone to see. I hate even saying it, it sounds so conspiratorial but …
Just sayin’
How much of this homeowner welfare is going to go to illegal aliens? More than proponents would care to admit, I’ll wager.
All the more reason El Presidente Bush supports it!
Makes me sick
Krykee.
Quit the half-@ssed stuff! Let us all agree to deed over to govt. every single possible liberty & simply enact a full blown craddle-to-grave nanny state which protects everyone from everything - including their own stupidity!!
Death of the grown up, indeed!
So I played by the rules, bought a house I could afford pay on it for 30 years and end up with 500,000. Someone who buys a home they can’t afford pay’s very little gets a re-fi we bail them out and in the end they walk away with let’s say a cool million. HMMMM, Guess it really dosen’t pay to play by the rules and be middle class in the good ol USA…. This S—’s. !!!!!
AlohaGuy we may agree more than disagree. Most of the things I had in mind to be bought with equity were things *for* the home, improvements and such. Otherwise the increase of value in the home plus what has been paid into it is what folks expect to roll into their next home when munchkins come along (or they just want a bigger home which I won’t fault for, I just hope folks will be gentle with what can lead to greed)
OMG, Please Stop the Madness! The government teat has been made available for decades for virtually everyone to suckle-away their apprehensions, burdens and fears. And look what it’s gotten us: sloth, dependency and a new form of slavery. A home bail out? Is this socialism-lite in lieu of the full-blown offering?
May I Axe:
“Clinton also proposed a fund of as much as $5 billion to help communities suffering from high rates of foreclosures.”
What “communities” would that be?
It seems to me that freezing mortgage interest rates would facilitate a drop in housing prices as a result of the ensuing tightening of credit. And before anyone starts weeping over the fate of lenders, they have been yielding microscopic interest rates on depositors’ savings accounts for years, and with mergers and acquisitions rampant through the banking industry for years now, what makes anyone think the market is still free?
On December 3rd, 2007 at 12:02 pm, Boomer said:
The only ones to really benefit from this bailout will be the shifty lenders that bought these loans and are now stuck with them. The market correction of homes is a good thing allowing many people priced out of the market their chance at owning a home. Once again our stolen income will go to bailing out an industry basically rewarding them for shoddy business practices. Why should the American taxpayer suffer to bailout these greed corporations and the individuals that willingly signed on to these loans?
BOOMER, I agree with you. This so-called “bailout of the poor pitiful homeowners” is actually going to end up being a bailout of lending institutions. When the going is good, do they keep their profits or do they give them to you and me? And so the reverse should also be true - when the going isn’t so good, they should go ahead and take the hit and hopefully learn from the mistake. The folks who make and buy these loans know up front that it’s a risky business.
By the way, there’s a second “issue” here, and that is what appears to be the need of people for the biggest and best whether they can afford it or not, when something in the middle would be perfectly adequate.
Irks me that some industries and people are given protection of state. A banker can make ungodly profits and if he makes some kind of stupid loan and mightg lose money, the feds will bail him out. Look at that silverado banking bailout- people who deposited money in accounts in excess of the FDIC limit, were also made good with tax dollars. Why should that be?
I made bad investments in stock market and ate some big losses. Government sure didn’t make me whole again. But whole industries are not allowed to lose money. There is so much leeway given for potential of waste and corruption.
Big housing stink here in S. Florida is the two-tier property tax system. If you are under the save-our-homes homestead protection, government cannot raise your taxes more than 3% annually. Others have to pay whatever the authorities want. There have been some reforms (which may not stand up to liberal court interpretation) that require local governments to spend less and resulted in some tax cuts. Mine went down a big $20 a year. Meanwhile the insurance industry is bleeding homeowners with huge rate increases despite no hurricanes past two years. The insurers are cleaning up big time despite what losses they entailed. My own insurance has tripled and is now perhaps twenty times what I paid in Philly area. Where is the competition? Free market, my dupa. And why aren’t laws enforced in such areas as requiring auto insurance for example?
Only in America. The politicians used to campaign on ‘a chicken in every pot’. Now it’s ‘a house for every illegal’.
And they expect the constituency to say ‘hooray?’
Hillary Clinton can call on a moratorium however the banks shelled out the entire mortgage amount up front. If they don’t get paid back, they lose. To hold a moratorium means that banks lose even more. If some of you are saying you don’t care, you should because if banks lose they will pass on those loses to you with higher rates in the future.
Hillary can put all of the moratoriums that she wants on these foreclosures however she won’t change the most important part of the dynamic. These people are in over their heads. They bought property they can’t afford. No moratorium is going to fix that. The reality is that these people need to be foreclosed on as soon as possible so tha the economy can take whatever hit it needs to take and move forward. Putting moratoriums on foreclosures only delays the inevitable and makes things even worse when the inevitable finally hits.
When I bought my home in 1999, I made a promise to myself that I would eat peanut butter sandwiches for the rest of my life, if necessary, but I would NEVER fail to make my mortgage payment on time or default on the note. In addition, I made sure that I had a clear understanding of the entire home-buying process and the associated paperwork. Now, once again, we are confronted with a situation where money talks and BS walks, where lenders who SHOULD have done their due diligence properly failed to do so, and people who SHOULD have read the fine print did not, and now the rest of us “will be asked” to bear the cost of a bailout.
Is there no requirement for personal responsibility in matters such as these?
Bigger picture: A contract is an agreement between two parties. The Banks and the borrowers agreed on the teams of the contract. What gives congress or the president the right to rewrite the contracts after the agreement? Any attempt by the government to rewrite these contracts is a violation of the constitution. In my mind they would be grounds for impeachment.
rlongenbach
The interest increases were something I figured would have to be worked out.
The income limitations were on the list of what I meant to have included in the “case-by-case” statement.
Otherwise it would at least be something positive.
I also think it should be a once in a lifetime option to prevent people from repeating the same mistakes again.
I also think it should be a once in a lifetime option to prevent people from repeating the same mistakes again.
Now this makes me feel better ;=)
Finneous, #30, I was worried you were buyin’ big screen TVs and trips to Costa Rica with your home’s equity. Investing in the value of your home is fine.
Another desperate “surge” to try to save Bush’s tarnished reputation.
Someone skipped their economics class.
ABSO-FRIGGIN-LUTELY!!! Same boat here…and those of us who were priced out it was also because of speculators….now they will also benefit from this, no doubt.
Unfair indeed!!!!
#41 - like Amnesty in the 80’s?
Exactly! Hillary wants to delay the inevitable so that the wave of foreclosures will accumulate, be much worse, and happen closer to the election. It is all about politics with Hillary.
AMEN! AMEN!! I am soooooo sick of STUPID being an excuse. If you can’t afford the payment or qualify for the loan on the Convential 30 year note, you cannot afford the property (do these fools ever consider taxes, utilities, cost of maintenance, etc??? Geez..Window treatments can cost you an arm and leg)! If you cannot support a child - use birth control (or, in some cases, morals), right down to what my Aunt who earned her living as a waitress always stated…”If you can’t afford the tip, you can’t afford the meal”. Bottom line - Americans need to use the brains/common sense and self reliance exhibited by our great grandparents. You get to the point you want to just tell people “If you are that stupid, starve!”…Guess I fit the Right Wing Ultra Conservative Mold, huh? Let Grandma Starve!!!! Ok, I’ve vented..I feel better.
Whatever happened to personal responsibility? If we bail these folks out, it won’t stop here. What’s to keep them from crying wolf every time they get themselves into financial trouble?
I think someone not only forgot the economics class, but also the finance one as well.
On December 3rd, 2007 at 1:00 pm, mike volpe said:
Hillary Clinton can call on a moratorium however the banks shelled out the entire mortgage amount up front. If they don’t get paid back, they lose. To hold a moratorium means that banks lose even more. If some of you are saying you don’t care, you should because if banks lose they will pass on those loses to you with higher rates in the future.
Mike - I don’t deal with a bank, I leave the banks for the big guys. I am a member of a member-owned credit union, which in my view, is the ONLY way for us small folks to go if you want a financial institution truly interested in your welfare.
Why are we surprised that our government rulers seeks to exploit our desire to live a consequence-free life? It’s good business to foster the belief that government is a kindly Santa figure who will provide for all wants in exchange for a puny offering of money and freedom. (Note: By puny offering, I mean total surrender.)
Have promiscuous sex and get pregnant? Have an free abortion. Mismanage your S&L? Get Uncle Sam to bail you out. Make stupid financial decisions and take/offer risky loans? No worries!!! Why suffer? The Almighty Government will reward your recklessness with succor from the suckers who were sensible with their money management. To the polls!!! There is wealth to be voted away!!!
Telling anecdote: When my girlfriend and I went in for a mortgage pre-approval in Spring 2006, the mortgage broker joked that he asked a co-worker, “Hey, I’ve got a couple here looking for a 30-year fixed-rate mortgage with 20% down. How do you write that up?”
My suspicion is that there’s enough Big Money tied up from big and small banks to destabilize the US Dollar if these banks were to fail. The banks have borrowed money from the Fed. If they go under, the Fed doesn’t get repaid and “poof”, just like that, we’re all in trouble.
The Great Depression was launched when people were borrowing money “on margin” to invest “futures” on the stock market. When the market crashed (i.e. value of the futures fell because no-one was buying) all of that borrowed money hedged on futures simply disappeared and couldn’t be repaid. The people who borrowed it were broke and couldn’t pay. The banks who lent it were broke and couldn’t pay back the Federal Reserve, and they failed. When they went under, they took other folks savings with them. Not a pretty sight to see.
People aren’t worried about the prices of homes dropping in a few communities, they’re worried about the collapse of major banks who are all tied in to the sub-prime lending market. If people default on too many loans, AND the houses can’t be sold for enough to pay for the money loaned on them, then those banks take a HUGE hit. Enough hits and they fail; no more liquid assets. Would you like to go to your local Citibank branch and find out you can’t withdrawl your savings because they’ve simply closed? Think for a moment about how we use our “debit cards” to move money on a daily basis in our lives. Now imagine that you’ve got NO ACCESS to that because your bank has just closed.
A bail-out of a sub-prime lenders is a crappy deal for the US Taxpayer in general, but far less of a problem then the sort of collapse which could be caused by unsupported banks.
“W” gets good advice from people who know just how thin the ice really is. I’m sure Shillary, in her NY constituency base, has more than a few friends in the nat’l banking industry who have also bored into the ice and found it to be unsatisfactory.
We wouldn’t be “taking from the many” to establish a socialist system, we’d be working to protect the free market we already have from the stupid actions of lenders not bright enough to say, “That’s too much to loan on that piece of property, regardless of how much we think it MIGHT appreciate in value.”
It depends on how often the value of your home is re/assessed by the local government. You could be paying more taxes than you should if you really took a hit recently and the last assessment was when the housing “bubble” was at its peak.
I have absolutely zero sympathy for these people. When I bought my first home I educated myself on the types of mortgages available. When one of these great rate for only a short time was presented to me I said no. It wasn’t a hard thing to do.
Because these people did not read the fine print or understand fully what they were getting into is not my fault. Therefore, I should not have to pay for thier stupidity. It is a valuable lesson in responsibility and these people are just having to learn it the hard way. They need to stop their complaining and get educated on what their options are not to change the bad situation they are in.
rotarymunkey, you confirmed why I have been accumulating GOLD for 10 years now. People on Wall Street lie to us. They tell us that the DOW has gone up 30 percent in the last decade. But that is with dollars. Compared to an ounce of gold, the DOW has ACTUALLY gone down 50 percent.
Now we are hostage to the vageries of the banking system. Because of their bad loans our accounts are jeopardized.
TRUST is required, and right now I have none. Gold is the only investment that makes sense right now.
Hillary and George are wrong!
WRONG!
WRONG!
WRONG!
My son bought his first home about a year ago and he didn’t particularly like the 30 year fixed rate when considering the alternatives. Fortunately he listened to the old man. 6.5 isn’t perfect but its a lot better than I got in the early ’80s.
To recap: morons and subprime predators will be getting a massive bailout.
As usual, law abiding frugal people get the short end of the straw. The moral of the story is that you should have fallen for the sucker adjustabel rate mortgage, gotten more of a house than you can afford, then sit back and wait for the feds to bail you out.
Where is my $350 a month reward for being smart and not ordering more than I can afford?
(crickets chirping)
#14 - why should there be a cap on what the lender makes? Other side of the same coin — bailout — it’s just as wrong.
As for the conversion of the loan well that is between the lender and the customer. (and the tax-man)
Beyond that homes ARE NOT INVESTMENTS. Too many people use that as an excuse to purchase more home than they need or can afford. Funny how in 3 generations a home has gone from shelter to investment.
Sadly until the country is bankrupt, this is not going to chance.
Exactly how we fell about it too. I was offered a loan $60K above the required amount the of house we were willing to pay for. We stuck to our guns and were able to get into a 1600 sq ft home (3 bedroom, 2 bath, with 3 car garage) for the price we were willing to pay in a custom built neighborhood. I guess my fixed rate 5.5% VA mortgage should be reduced too.
I realize this will be a bitter pill to take if these homes foreclose, but better now than this time next year or in the out years. The market will correct itself and home loans will be harder to get for those who should never of been given a loan in the first place.
If I’d have known the Gov was gonna bail me out, I’d have spent the ‘other’ $200,000 I didn’t have and bought a REALLY nice home, instead of the modest one I could afford.
Stupid me.
Would somebody please explain to me why it’s my job to house other people?
When the banks can’t raise the interest rate, in order to stay solvent, guess what they will HAVE to do, raise rates elsewhere and guess who gets to pay those?
Way to go government, make investment in the USA look even less attractive.
If they would just quit meddling in it, I’m sure the basic laws of supply and demand would weed out inefficiency, and bad decisions and what would be left is a wonderful economy for everybody else.
I live in Sacramento with my Wife and Child - and my Mother, in her house. We’ve looked for houses and condo’s even but didn’t sign up for that loan we couldn’t afford. I’m a civil servant for the state and she a GM for a retail store, we make decent money, but are obviously more realistic and smarter than most others around here about what we can pay. I laugh at ARM borrowers, they are getting what they signed up for.
Now that the prices are coming down, the ‘free-market supporting’ Republican President and he New York senator want to backdoor us.
Thanks Bush! Thanks Hillary!
I guess we’ll wait to inherit my mom’s house and just pay the Death Tax.
I think someone asked about credit unions. I don’t think their structure vis a vis mortgages is much different. What I would guess is that they probably stayed away from most of the problem loans.
That is a side issue. There are disastrous policy implications with this policy. This isn’t merely about taking care of people that some here have no sympathy for. The worst thing anyone can do in any policy area is make decisions based on sympathy.
There is good policy and there is bad policy and this is bad policy.
Here is how I broke down her policy
UUUUGGGHHH, I’m sorry I may be heartless but for those of you who did not buy within your means, stay within your budget and failed to read the fine print, I have absolutely no sympathy for you and if I and everyone else as a taxpayer have to bail your sorry butt out, can we all come over for dinner sometime? I mean we’re paying for the house too, a little gratitude would be nice, don’t ya think?
I’m looking at houses this evening and for the next four days. Our pre-approval for a mortgage is quite a bit but I’ve told the real estate agent that we want to keep it reasonable so that we can eat, have heat and a/c, go on vacation, etc like 98% of the country. You know, those idiots we know who live in Tampa have a rate increase due in March. These are the people who bought a home they couldn’t afford with next to 0% down, drive expensive Lincoln Navigators, their 16 y/o a mini-cooper convertible, and he’s a LTC. This may just work out peachy for them because she was telling me this weekend that they really couldn’t afford a Christmas for their teens and tweens because of the reset of the mortgage early next year. I just can’t get over this. Again, I’m sure the usual troll suspects will say how nasty and hateful we all are but when you do the right thing, it’s hard to get excited about taking care of those who don’t.
Well, as much as I hate to see the taxpayers bailing out another greedy industry (ala S&L’s in the 80’s), if I had my ‘druthers, I’druther pay for this then keep paying jizya to the palistinians, egyptians, pakistanis and any other muslim country that wants to kill me.
Not a bad analysis too bad Secretary Paulson is also on the same page with “she who must not be named.” Speaking of her I am listening to Hannity talking about her poll numbers starting to tank with women voters in Iowa things are starting to get interesting.
The basic laws of supply and demand simply don’t work in the banking and lending industries. That’s only in the case of consumer-driven product purchases. With a volatile housing market and high home-replacement costs driving housing prices up, there are other variables which apply other than simple “supply and demand” methodology. You could conceivably argue that lenders were actually SMART to offer these ARM loans because, if people are unwiling to allow their homes to be reposessed, the banks’ income will actually RISE. The naysayers are forecasting doom RIGHT NOW by saying that people won’t be able to pay, but in most cases, they will. By 2010, when the big BOOM is supposed to come, smart folks will have tried, and probably succeeded in refinancing their homes into lower-rate fixed interest rate mortgages using their years of good payments (hopefully).
Let me tell you what steams me most about what Hillary is doing here.
She is using a technique that I have used for years. In sales, it is always a good technique to put yourself on the same side of the perverbial table as the borrower against some villain. In my case, the villain is almost always the bank, which is easy since banks are really evil creatures anyway. (sometimes it is the government, the seller, the opposite lawyer, etc).
This is what Clinton is now doing. She wants to put herself on the same side of the table with the poor borrower against the evil bank. It take zero, and really negative, political courage to look at the mortgage mess and decide that the borrower is going to be the most sympathetic and side with them. That is so easy and takes no skill or courage. This is all she is doing. She is looking at the mortgage landscape and deciding that the poor folks will be the most sympathetic and siding with them.
It takes zero courage it is the most cynical and it almost always leads to the worst policy and this time is no exception.
This idea that she has is a microcosm of Hillary Clinton’s entire political persona. I hope that people will expose it.
i think people forget, that housing is still an investment.
Unfortunately, the trend of thinking of a house as more of an investment than simply a home, is one of the major fundamental contributing factors in this whole mess. It has led to disastrous speculation, drawing in those who would happily take advantage of said speculation. Rather than buy a home for its real purpose, to serve as shelter for a family and sufficient for that purpose, people instead have started to believe they must get into the largest home (or into a second home) they can possibly afford, in order to maximize their benefit when markets climb. Now they’re reaping the whirlwind.
The government should keep their hands off this one. Hundred of thousands of us who have been waiting to make RESPONSIBLE home purchases will be the benificiaries of the poor decision making that led us to this debacle.
The only people I feel sympathy for on this issue, are those who did buy responsibly, but are now seeing their home values drop because of those who didn’t.
#67 - I strongly disagree. Exactly why don’t the laws of supply and demand work with housing?
My translation of what you said so far it’s “It’s a bunch of mumbo jumbo that I don’t understand”.
#69 - yashmak - well said.
Only thing I might add - it’s called greed. People wanting to have something they really can’t afford.
Rus,
I agree. There is frankly very few industries that act more like a traditional market than real estate. The whole thing is driven by market principles. From appraisals, to interest rates, to interest rate models. Everything really comes down to a market.
The Portland BOregonian did a “mortage sob story” a few Sundays ago about a woman who “trusted” her loan officer so much that she accepted a loan on a home she could never afford (she was assured she could sell her home before the increase) and loaned her loan officer $25,000. Of course, the story was about this poor “victim” of a ruthless predator. I couldn’t believe the complete stupidity of this woman, who never once thought for herself or questioned what she was doing. I’m tired of feeling sorry for dummys. The same goes for people who wire $10,000 to some guy they met over e-mail in Antigua or wherever.
That piece is very similar to this by Bob Herbert of the New York Times
What everyone needs to understand is that the MSM is creating a narrative that identifies victims, heroes and villains and Congress follows up with legislation that exploits this narrative.
That is why the abomination that is H.R. 3915 passed the House.
This bill fit the narrative that the MSM has created. This isn’t merely about cynicism but awful policy based on this cynicism.
I wrote this piece about what happened to me in the month of August not because I wanted sympathy but because I wanted to show what the policy would be like if the narrative decided to choose another sympathetic victim. The reality is that everyone struggled as a result of this crisis, however some people get the sympathies of Congress and others get their wrath, and policy based on sympathies and wrath is very dangerous.
Here is a sad example of the abuses of the recent
housingpig trough bubble:Two (legal/illegal??) immigrant strawberry pickers, making $300 a week each, qualify for a $720,000 home. You can guess the ending.
My tax money is supposed to bail out them and their lender??
I think not.
Ummm…. let me get this straight…
These ARM loans are tied to the Prime lending rate… and the origional money for them was borrowed from the Federal Reserve bank (not the government).
The Prime is SET by the Federal Reserve Board… a non governmental agency.
Now, the Feds, are going to forcefully renegotiate private contracts between some companies, and some individuals…
So, the Federal Reserve Bank COULD lend money to the institutions in question at a low rate to cover these loans… but I’m sure it won’t.
It will be the Federal Taxpayer who will bail out these lenders, and companies, from their bad business practices by the President and Congress getting involved…
But, under WHAT Constitutional Authority can they do it? Isn’t Banking law a STATE run issue?
Romeo, with all due respect, most of what you just said is inaccurate. First of all, ARM’s are tied to all sorts of indexes: treasury bonds, Libor, etc. Very few are tied to Prime Rate. Prime Rate normally determines the rate on Home Equity Lines of Credit, which are second mortgages.
Second, the Fed has nothing to do with any of the specific mortgages. The mortgage terms were created by the individual banks and agreed upon by the borrowers when they signed their closing documents. This is a private contract.
The Federal Reserve is the government, or at least it is an agency of the government. It is impossible to determine where the original money was borrowed from or if it was even borrowed. Banks by nature have lots of money of their own though they often borrow from the Fed mainly because the Fed gives them such a good rate.
I think your overall point is accurate though. It is not the role of the federal government to step in to renegotiate a private contract.
Just stating the obvious but frankly I’m getting tired of bailing out people who made a “bad decision” when it came to financing a home.
I’m no genius but if they would take the time to educate themselves, do some research and create a realistic budget they may not be in this mess in the first place. Just a little personal responsibility goes a long way.
I eat tv dinners and sandwiches because I choose to, I take all the overtime I can because I choose to. I do odd jobs on days off because I choose to. I drive a twelve year old car because I choose to. I save all I can because I choose to. When I pay my house off early it was because I chose to.
Sorry for the rant.
I once thought Bush was at least a moderate. This however smacks of pure socialism.
Wonder if he will make it possible for others to make my Lamborghini payments soon. Gosh its a nice car but those payments.
Unfortunately, most writers aren’t telling the whole story:
- The subprime mortages allowed an enormous number of speculators to jump in the market, regardless of credit/net worth qualifications. They were flipping their houses in under 12 months and making huge profits.
- The lure of these huge profits brought more speculators. Lots of buyers meant prices were appreciating in many markets at over 20-30% per year.
- When the market slowed, the speculators couldn’t unload their homes. If they were not rented (or the rent was less than the adjusted mortgage payment), these speculators found it easier to just walk away from the loan rather than find some way to pay the difference.
- As sales volumes declined, so did prices. More speculators walked away from their loans. In many markets, 85 to 90% of the foreclosures are SPECULATORS. (google it)
Yes, that means that Ma & Pa Kettle are only being hit by 15% of the foreclosures. All the rest of those foreclosures belong to the greedy get-rich-quick crowd. So, when the bail-out refinances the loans of the 15% who are poor folk (and people who re-fied and spent the money on a boat), the rest of the bail-out will be used to help the get-rich-quick crowd. They will only be interested if the value of their property has not declined too much and if the renters are covering the full cost of the mortgage pmt + taxes. Many of these speculators are holding 5 to 10 properties, and will only re-fi if they have no negative cash outlay. So, many will likely still foreclose and the banks will still have to eat it.
And then we’ll all grumble cuz this bail out really went to help some greedy Trump-wanna-be, not the down-on-their-luck family.
To All
I agree as I was able to retire after making a profit on property that was financed for an obsene amount (business) not homes. This was 20 years ago. Does anyone remember the banks who loaned $ to mexico because they were willing to pay ridiculous interest. Aren’t these the same banks?
Does anyone think that bad decisions won’t recur if there is no penalty? Of course the taxpayer pays but who cares about him.
I just keep shaking my head about this. I too have the perspective that if I had known the imperial federal gov’t was going to confiscate money from the taxpayers to bail me out, I too would have bought a house I couldn’t afford instead of a modest home well within my means. Actually I wouldn’t have, but such a statement points out the absurdity of the bail out.
I’m in a real estate related business (not a lender) and the “insider” info I keep hearing indicates that a lot of this foreclosure and lending problem is related to (dare I say it) loans to illegals who had a consular id, a checking account at BOA and other large lenders who in turn assign the illegal a credit number that is reported to the credit bureaus. Problem is that unlike the rest of us who have our credit tied to a SSN and can’t walk away from a credit problem, they can. They simply walk away from their homes, go down to the corner, get a new fake consular id, new checking account, and start all over again with no credit history (which is better than the bad credit any of us would have and it doesn’t last as long).
I don’t have proof of this beyond the statements of people in a position to know these facts as I haven’t seen it published in the MSM (surprise surprise), however, if one looks at foreclosure rates by state and county and compares them to maps of areas of saturation by lenders known to provide these credit id numbers and not only loan to but also actively pursue illegals as customers, and cross reference it all with concentrations of illegals, there is enough of a correlation to validate the suspicion if not the fact.
And BOA made a big deal about how it was going to loan money to illegals. Ditto Citi.
Bank of North and South America - an FDIC Institution.
Keep in mind kids, the majority of the loans don’t belong to any “bank” or “mortgage company” any more. They were sold off to investors, reits, pension plans, funds of all types. If you freeze the interest rate (change the contract terms) for the borrower, what happens to the investors who now own the bundles of mortgages?????????????
They get HOSED…..Anybody think of them??????????????? Hillary?
The big loser in this situation is government (surprise!). The increase in property taxes from price run-up has in California averaged 10-12% per year for the last ten years. IOW, the higher the prices go, the more politicians can spend–without raising taxes.
It benefits the homeowner almost not at all, unless you want to cash out and move a thousand miles away into the bush somewhere.