Stuck in the Middle With You — Stealers Wheel
All bailout measures have embedded within them serious issues of moral
hazard. Both lenders and borrowers were extremely foolish during the
real estate bubble. To bail them out at the expense of the wise and
prudent will discourage fiscally responsible behavior and encourage
wild risk taking and speculation. For instance, lets say both you and
your neighbor bought a house in 1998 before the bubble inflated. You
both paid $200,000. You sacrificed and paid down your mortgage in the
intervening 10 years, and now you owe $150,000 on your house. Your
neighbor was lured by the free money accumulating as appreciation and
took out an additional $400,000 in home equity lines of credit and
refinancings and lived the good life. This neighbor was driving around
in new cars, taking vacations, buying expensive toys and pretending to
be rich. Now you owe $150,000 on your house, and your neighbor owes
$600,000. Your neighbor cannot make the payments and is asking for a
government bailout, principal reduction and a whatever other handouts
he can get. So now, you the taxpayer, is going to be asked to pay off
your neighbors bills. You, who was responsible while you neighbor was
not, are being punished for your responsibility while your neighbor has
no consequences. What will stop your neighbor from doing this again?
What will stop you from doing this next time? I profile individual
properties every day, and I can tell you
from the property records I view daily that this conduct was not the
exception, it was the rule. There is no bailout program currently
proposed or enacted that does not have this moral hazard issue.
Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.
There are provisions that could be added to a more wide-reaching
bailout proposal that might address some of these problems. In the
recent FHA bailout program, the owner must give up a percentage of
equity to participate. This is a great idea, and I have witnessed
homeowners who were in trouble pass on this option because they were
too greedy to give up future appreciation. Equity sharing needs to be
part of any bailout program. The programs enacted now are offering
workouts, but they are only dangling a carrot in front of borrowers,
there is no real stick to compel them. Ordinarily losing one’s home
would be enough of an incentive to do a workout, but when homeowners
are hugely underwater; their best financial move is to let the property
go in foreclosure. This incentive needs to be changed. Congress made a
serious mistake when they decided to forgive the tax indebtedness on
people who do not pay back mortgage debt. This simply made it easier
for people to walk away. It needs to be harder, much harder. If you
really want to compel people to participate in loan workout programs,
there needs to be serious financial repercussions for not doing so.
Taxing debt forgiveness is one potential incentive, but the bigger one
is to make this debt permanent — don’t let people discharge this debt
in a foreclosure or a bankruptcy. If walking away from their mortgage
debt benefits them in no way, people will not walk away.
I would propose the following: When Obama takes office we might see
a 90-day moratorium on foreclosures (by itself, this is a horrible
idea). Put all borrowers on notice, you have 90 days to begin a workout
plan with your lender. If you fail to do so, and if you then go into
foreclosure, you will pay taxes on the loss, and if you have capacity
to pay back the debt, you will be required to work out a repayment
plan. Bankruptcy judges already have the power to force people into
chapter 13 rather than chapter 7 bankruptcy, so this would be easy to
enforce. There is precedence for this kind of bankruptcy protection for
certain loans: government insured student loans are not dischargable in
bankruptcy. Since the government insures these loans, they ensure the
insurance program does not lose money by preventing forgiveness of this
debt. Now that the government is “conservator” of the GSEs, they are
providing a similar government-backed insurance to mortgage debt. They
should have a similar no-bankruptcy policy on this debt as well. The
effect of this policy would be to strongly compel those who need a loan
workout to get one. For those who fail to qualify for a loan workout,
they are exempted from these consequences.
This proposal would effectively force everyone into a loan
modification program who needed one to make their payments. It would
greatly reduce the number of foreclosures that are still in the
pipeline, and it would give the banks as much cashflow as they will see
as the fallout from this mess continues. However, this will not stop
home prices from falling. If stabilizing home prices is truly a
priority, there is no program that can accomplish this. Houses are too
expensive. Prices must fall down to levels of affordability before
prices will stabilize. There are only two ways to make houses more
affordable: either prices must fall or incomes must rise. The housing
bubble was about experimenting with financing terms to increase
affordability. That experiment failed miserably. Making incomes rise is
not something that can be accomplished through bailouts or any
government policy directed at housing. Since financing innovations
failed, and since raising incomes is not a viable alternative, prices
will continue to fall.
Trying to make some sense of it all,
But I can see that it makes no sense at all,
Is it cool to go to sleep on the floor,
Today’s featured property hass owners who would not mind the “carrot and stick” approach to solving the housing crisis: they were fiscally responsible. I see so few of these, that I would like to celebrate them when I do come across them.
Asking Price: $699,000
Income Requirement: $174,750
Downpayment Needed: $139,800
Monthly Equity Burn: $5,825
Purchase Price: $235,000
Purchase Date: 6/25/1994
Address: 15172 Nantes Circle, Irvine, CA 92604
| Beds: | 4 |
| Baths: | 3 |
| Sq. Ft.: | 2,550 |
| $/Sq. Ft.: | $274 |
| Lot Size: | 6,110
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Other |
| Year Built: | 1971 |
| Stories: | 2 |
| Area: | Northwood |
| County: | Orange |
| MLS#: | S553327 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 5 days |
LIVING ROOM AND DINING ROOM. MASTER BEDROOM IS HUGE. MATURED FRUIT
TREES. CLOSE BY IRVINE AWARD WINNING SCHOOLS. ONE OF THE BEST PLACE TO
RAISE KIDS. TOO MUCH TO MENTION. PLEASE COME AND SEE IT FOR YOURSELF.
PRICED TO SELL. HURRY THIS PROPERTY WILL NOT LAST!!! NO MELLO ROOSE!!!
NO ASSOCIATION!!!
Another crappy description in ALL CAPS and littered with exclamation points.
What is that over the kitchen? Is that the bat cave?
When these people bought the property for $235,000 on 6/25/1994, they used a $164,500 first mortgage and a $70,500 downpayment. The only other mortgage note in the records is a HELOC from 2000, that probably was not used (there is no pattern of borrowing here). I salute these people. They did not get caught up in the foolishness of the housing bubble. If they get anything close to their asking price, they stand to make a lot of money. Good for them.
{book}
Well I don’t know why I came here tonight,
I got the feeling that something ain’t right,
I’m so scared in case I fall off my chair,
And I’m wondering how I’ll get down the stairs,
Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.
Yes I’m stuck in the middle with you,
And I’m wondering what it is I should do,
It’s so hard to keep this smile from my face,
Losing control, yeah, I’m all over the place,
Clowns to the left of me, Jokers to the right,
Here I am, stuck in the middle with you.
Well you started out with nothing,
And you’re proud that you’re a self made man,
And your friends, they all come crawlin,
Slap you on the back and say,
Please…. Please…..
Trying to make some sense of it all,
But I can see that it makes no sense at all,
Is it cool to go to sleep on the floor,
‘Cause I don’t think that I can take anymore
Clowns to the left of me, Jokers to the right,
Here I am, stuck in the middle with you.
Stuck in the Middle With You — Stealers Wheel
Their property would show better if they removed half the crap on the walls and scattered on the floor (aka furniture). The one thing this place looks is cluttered with too much crap on the fridge, counters, ceiling and walls.
When we’ve moved, which as military and air line folk we have done more often than most, we always make three piles of crap. One to keep out, one to store, and one to donate to Goodwill. By the time the real estate agent would get to see the place it looked like anyone could move in.
Someone probably likes that carpet; I just ask myself why? This place needs lots of work; Irvine apparently has a long way to go if this is worth $699k. I think it’s worth about $407k based 4% appreciation.
As you can see, the Kool Aid is still flowing through this neighborhood.
Not to fault the sellers; I am sure that from their perspective, they need to sell it for whatever someone might be able to borrow for it. It would be stupid to just “give it away” by pricing it within the median income affordability range while lenders are still handing out money to knife-catchers left and right.
Nevertheless, I would agree with you that 400K tops is a pretty good call as this house was probably valued in the 375K to 400K range back in 2000 when the physics of Wall Street finance began to go crazy.
“I would propose the following…”
Ever think of going into politics IR? You got my vote.
Clowns and jokers = knifecatchers
Your topic today is such a sore point with me that honestly, I couldn’t bring myself to read the entire thing. I was hoping that what Obama was going to bring to the presidency was a huge emphasis on personal responsibility, but I haven’t heard that yet from him. That’s how Americans got into this mess, and in the long run, I think it would be the best way to get out.
We need to quit thinking that we all deserve to live like kings and queens and live up to our responsibilities. Thanks for posting the topic IR – maybe later in the day I’ll be able to come back and read the whole thing.
This is exactly the reason why I would not vote for Obama or McCain. Instead, my vote sits uncounted somewhere with Ron Paul’s name written on it.
It’s like I said before, our Kumbayas for Obama are beginning to fade. It was a nice distraction for a little while to have the media change the headlines from “Worst Economy Getting Worse” to “Historic Election – First Black President Kumbaya Kumbaya”, but now we are back to “Worst Economy Getting Worse”.
My gut feeling is that the majority of voters voted for Obama for the wrong reason, whether they were mad at Republicans, mad at Bush, thinking it would “just be cool” to have a black president, etc.
For people like me who do not care about skin color or who do not vote the other way by default when mad at the current administration – we actually listen to what the claims for change are and my impression is that Obama is just as worthless to the economy as the previous administration.
He voted for the bank bailout (Strike 1), he is pushing for more economic stimulus nonsense (Strike 2), and he is not calling upon people to start living within their means (Steeee-rike 3!).
We cannot begin to correct the problem until we understand the path that led us here and all I see from politicians are smoke-and-mirrors efforts to cure the symptoms while ignoring the disease.
Rather than take personal responsibility for ourselves and vote for people with similar traits, our society acts like spoiled children demanding that our big brother in government “do something” to make us happy for the moment.
We get the government we deserve. If the majority of voters are stupid and ignorant, then we should not really be surprised that the people whom we elect treat us that way once they are in power. Right?
Absolutely! My qualm is that those that actually responsible get dragged down with everybody else in this mess. This is a government that many of us do not want. I hate being a member of a silent, unheared minority. Many of us talked of this painful recession to come a few years ago and many people just rolled their eyes. Now that our prediction has come true we are told by the same people that proclaimed that housing prices would never go down that we need massive government bailouts, and many of these same people dismiss our ideas. It is as if wisdom and reason has been entirely dismissed from societal norm.
What is especially sickening is to watch the lack of credit given to great minds like Peter Schiff and Ron Paul on various news shows. It is well documented that these two were precise on their predictions. Why can’t they be given credit when credit is due?
“Great minds” and “Peter Schiff” in the same sentence. Hmm. Interesting.
A MUCH BETTER example of a great mind who foresaw the bubbles of the decade is Robert Shiller (Irrational Exuberance).
Just so you know, you are not alone. There are at least 2 others (mine and my wife’s) sitting there with yours, a silent protest I suppose against a corrupt, broken system.
I find it absolutely laughable anyone would suggest Obama would stand for and support a policy of personal accountability. What would make him any different from any other elitist who thinks it is their duty to protect the stupid masses from themselves?
The current generation of Repulicrats that are leveraging future generations’ ability to enjoy the same opportunity they had is sickening. From swelling deficits and massive unfunded debt obligations, to the in your face “economic stimulus plan”, the limit to our governments barrowing at the expense of future generations is apparently unlimited.
Now we face an economic crisis the depths of which none of us have ever seen before. And we have charged this same group of “leaders” to navigate us through this sensitive time. In fact, this leadership thinks they have a “mandate”. If there is one thing we have learned during the initial stages of this crisis, it is that we cannot underestimate the extent to which government will interfere with what seems to be an inevitable collapse. Sacrifice was something our grandparents did. We are entitled to a good life.
Amen brother!
We now resume your scheduled financial catastrophe, already in progress.
I know the election is over, but come on!
Obama = personal responsibility?
What flavor of koolaid were you drinking?
Gindy, I agree about dividing the 3 piles. Good idea!
This house could also benefit from staging. When we sold our home, we had it staged and gave the stagers only one week to turn it from cluttered to fabulous. It was expensive but well worth it! We sold it in one week with only 1 open house. (This was in April ’07 in Santa Monica, which market is very different from Irvine, and we also priced it very competitvely-lower than the market, hoping someone would bid it up-which happened. Phew!).
My word submittal was “age 77” and that’s exactly what I thought when I viewed the pictures. This looks like the Asian version of a grandma house but at least it looks like a clean grandma house. Good luck getting Grandma & Gramps to spring for the cost of staging, much less removal of their “treasures”, as they come from the conservative era where this plain, unremodeled house was the norm, a time where you decorated with whatever accessories you acquired through the years, not with granite and crown molding.
This house is in The Ranch off of Irvine Center, not in Northwood. The same builder did put this same model in the Racquet Club in Northwood.
I think that this house is much more attractive than most that are shown in this blog (yesterday’s as a prime counter-example). The furnishings are not to my taste, but there is no need to buy that if you buy the house. There is even a small bit of green in front and back instead of being built out to the sidewalk in one direction and the neighboring houses in all others.
Sure $700k is way too much, but compared to the other $700k follies in Irvine, to me it is better. And not paying some flipper goes down emotionally as well. I hope they find their knife-catcher.
Alan, I agree with you. At least it has somewhat of a backyard. The street behind the house thing is so UGLY!
FINALLY
Someone else sees that the real motivation for so many walkaways is that it’s so damn EASY…
makle the behavior not make so much sense and you’ll get less of the behavior.
As I said before your credit report is probably dinged worse for a judgement on a $10,000 credit card default than for walking away from a $400,000 mortgage obligation. For now… hopefully this changes drastically and soon.
Meanwhile pundits all over the blogosphere are encouraging all to quit paying their mortgages… envy of the criminals who are profiting so much by doing this now.
Civilization is built on trust. Encourage the disrespect of contracts and usher in the new dark ages.
I feel like watching Reservior Dogs for some reason. Everytime I hear “Stuck in the Middle” I start laughing hysterically and looking for straight razors, cans of gasoline, and guys in suits with skinny ties.
Or could it be I’m watching Reservior Dogs for real? I get confused these days.
Even if you bail out the whole world who’s upside down, they will likely turn around and default in another year or two anyway. If somebody makes an Irvine median $100K a year, and they are in a $700K loan, is somebody going to do a cram down to the $300K – max – they should of been able to borrow in the first place?
So much fiddling while Rome burns.
The people that got themselves in the financial mess got themselves in a financial mess. Why should others have to help them? Markets go up and down all the time.
Companies that aren’t managed properly also go out of business, this is a normal part of the business cycle.
Screw all the bailouts; if you’re an automaker or bank who didn’t manage things properly then you deserve to fail.
IR you forgot to mention one other possibility to keep housing prices the way they are:
Hyperinflation!
The rate at which the government is printing money you may very well see this as a reality.
IR-Your plan is the best one I have seen. If it is in our best interest to keep people in their houses and slow down the financial implosion, then do it but don’t be stupid about it.
I am ok with borrowers and their banks cutting whatever deals benefit them. That is not my business. I am ok with borrowers walking away. They will have to take whatever punishment comes with it.
But taxpayers need protection. Make the debt non-dischargable like other government debt. You can’t discharge your IRS debt in bankruptcy either. I hope they return to taxing forgiveness of mortgage debt soon. I thought that was just for the benefit of the upcoming election, but then it was extended with the summer bailout bill. Our goverment “Leaders” are idiots.
These same people looking for write downs are the ones that pretended to be financial geniuses during the bubble.
Lovey and Thurston Howell explaining the equity extraction and their latest trip or toy purchase.
I say that any ill gotten gains must be returned as well. Liquidate everything they own that is not a necessity. Plasma TV’s, Cars, etc.
Then if the equity extraction Financed a business that should be considered as well. Make them sell the business.
I wonder how many business’ were started with a couple hundred thousand dollars in equity that will survive but not make enough to pay for the inflated mortage. If the mortgage can be worked down they got themselves a free business.
Very nice! Thanks for the share Keep the good blog posts coming!
I the owners of this house spent about $1000 on paint and trash bags they might have a chance.
;-P
it is heartening to read posts from people already deeply dissatisfied with our new prez, a week later because he hasn’t done enough x or mentioned y.
perspective, people, we are like daylight-blinded salamanders after eight years of what that was. can we put down the adhd meds for a bit and recall that he ain’t even presznunt yet… puh-leeeeez
If we are going to get the silly federal programs to rescue homeowners and make their homes affordable, we should borrow a strategy from Habitat for Humanity.
“Habitat builds and rehabilitates simple, decent houses with the help of the homeowner (partner) families.”
You should be able to keep your opulent house if you can’t afford it. You should have to do something in order to keep it, aside from asking for help.
If you reduce principal, require something in exchange. Make the homeowner DO something. For example, get 8 hours of their time every week for the next 3 years. Depending on their health and skills, they might do anything from cleaning up area parks and roads, to planting trees, to volunteering at the local hospital.
Don’t cha just love a slick talkin MF’s who talks out of the side of their azz with shit like ” I don’t care for race or skin color ” but in the same racist azz breath, they’ll say some off the hand BS like Kumbayas for Obama are begining to fade.
Obama is not the President yet, so why don’t ya wait till the man is in office before you start runnin off at the mouth with the off the wall comments about what he ain’t doing or how’s he going to make things worse.
??? racist ???
Could you please explain to me how saying:
“Kumbayas for Obama” is racist? I understand the origins but you do realize that:
“It is a standard campfire song in Scouting, YMCA, the Indian Guides, and others. It was also commonly used in Catholic and “folk” masses of the 1970s.”
He is just going to read into it however he wants to.
Brotha Man is the actual racist in the conversation, but he does not even know it.
Yes, the racism is just spewing today.
The media has been singing Kumbaya for Obama since the end of the election because he is black. The talking points are about “How great America is because we now have a black President” followed by continuous on-air group-hugs and high-fives all around.
In the meantime, Rome burns, while we all stand around admiring how awesome we are.
Uh, Brotha…
You, I, your mother and God know that you’re a 15 year old white kid who listens to too much rap.
I don’t usually find myself disagreeing with what I read on this blog, but I definitely do today.
If some lender gave a million dollars to a hobo at the height of the bubble, why should we help him recover it? He knew what the bankruptcy laws were. If he made a bad loan, that’s his problem. Helping lenders get their money back now creates just as much moral hazard for them as loan forgiveness does for buyers.
And besides — and here’s a nasty little truth no one wants to face — foreclosures are NECESSARY. They HAVE to happen. There is no economic model in the world by which it makes sense for someone to live in a house worth ten times their salary. Bad mortgages are like bad marriages — staying in one only makes both parties miserable. The sooner we get the speculators out of these houses, the sooner we can get the next generation of responsible, reliable buyers into them.
good (and astute) comment Murph
I agree 100%!
Actually, I agree with you. I would prefer to see our politicians do nothing and let the markets clean up this problem on their own. Unfortunately, some kind of government intervention is inevitable, and if they are going to do something, they need to be careful not to create incentives that will have the opposite effect of what they intend.
I also agree that it is the lenders’ problem, at least in CA. CA made purchase money loans nonrecourse for a reason. The Legislature wanted to make it clear to lenders that dumb underwriting was first and foremost their problem. Inflated appraisals and turning a blind eye to obvious fraud are also the lenders’ problems.
I actually wouldn’t be opposed to standard language on loan forms where bank underwriters have to sign “I understand that we (the lender) cannot recover anything from the borrower except the house in case of default and foreclosure. I understand that I will not be able to seek additional interest, penalties, or damages. I further understand that home prices can go down, historically have gone down for sustained periods, and the value of the home may be substantially less than the remaining loan principal at any point in time.”
This could go along with my recommendations for the real estate exam.
Q: Can home prices go down over the short term?
Anyone who answers “no” fails
Q: Can home prices down down over a long period of time (e.g., 5 or more years)?
Anyone who answers “no” fails
Q: Is it true that home price appreciation has made homes a better investment than stocks or bonds over most of the last century?
Anyone who answers “yes” fails
So when Obama passes the 90-day moratorium next year, does that mean I don’t have to pay rent on my apartment for 3 months, and I can get a workout with my leasing office to lower my rent from $1600/mo to $800/mo?
What a deal!!!
Seriously, I wish I was foolish enough to go out and buy a house, make the first two payments, miss the next eight, and then while foreclosure proceedings are taking place, I get an extra 90 days of free loading, just to have the bank reduce the principle on my mortgage.
AZ, why don’t you just admit that you have a problem with a Black man being President of USA.
The song Kumbaya is an Africa spiritual song which means ” Come By Here Lord Or Come By Here My Lord ”
The song is from Africa, brought to the USA by way of a missionary and his family who sang it while touring America during the 1940’s.
This song has a part of traditional Black Churches and choirs for years.
Connecting Obama to Kumbaya, the slick shit way AZ did would be like me connecting the song ” Oh Danny Boy ” to John McCain
Again you ignore my point though.
Culture is fluid, the song itself has been taking over by the general masses. It may still be a song in black churches but it is also sung at campfires and in Catholic churches. In movies it is used to personify someone who is religious, which I believe is what AZ was meaning when he used it. It was merely suggesting that some individuals who follow Obama have a religious zeal for him, similar to any elected president and could also have been used for McCain if he had won the election. You know everything does not come down to color.
Is that so, now? Let’s take a trip back to last week.
https://www.irvinehousingblog.com/blog/comments/the-white-house/#comments
——————————————–
Astute Observation by AZDavidPhx
2008-11-04 07:32 AM
I think that Obama will be just as innefective on the economy as McCain would be. However, he will probably do a lot more in terms of pushing for health care reform and repairing the cowboy image of the US that the rest of the world negatively associates with us. Obama will be a better choice than McCain, but the better choice is Ron Paul.
Bush is a loser and would never have seen the light of day in politics if not steered into it by his powerful parents.
Bush also represents the failed Republican trickle down economics and shows what happens when you allow the greedy side of the free market to run itself into the ground unchecked.
So yes, the Republicans share a great portion of the blame. Sure, the Democrats are just as worthless, but you don’t tend to hear many of them preeching “the free market” this and “the free market” in order to hoard wealth.
——————————————–
Put that in your race-baiting pipe and smoke it, Brotha Man.
I’ll also add that the Kumbaya song is most commonly used in modern context to apply to any situation that is overly cheesy and sappy.
Brotha Man, you are the one that went into the bowels of history to find the smallest connection to Africa and blow it out of proportion just to expel some frothing at the mouth righteous indignation.
The African roots of Kumbaya never even crossed my mind when I made the comment, yet I have been convicted by you as having committed a thought crime.
I can see your argument in favor of political correctness. Unfortunately, I could not care less what you think is politically correct or not.
Per the Wikipedia article (which indicates that the origins of the song are in doubt, with perhaps the most likely original authors being African American):
“The song was originally associated with unity and closeness, but more recently is also alluded to sarcastically to connote a blandly pious and naively optimistic view of the world and human nature.”
Clearly that was the sense in which AZ meant “Kumbayas for Obama”. Determination to see him as a racist for saying that indicates more to me that you are the racist here.
DUH. Thank you.
Brotha Man, the next time you hear someone popping off about how Politcal Correctness, I want you to think about the lesson you learned here today and chime in with the following statement:
“I agree! I totally accused someone of being a racist one time and it was all because I found a non-P.C context to view their words from. Man was I dumb.”
People doing it righ FTW! Well if they would have done it 2005 it would have been FTUW…
anyways good luck
-bix
“Equity sharing needs to be part of any bailout program.”
Perhaps I’m old fashioned, but wouldn’t equity forfeiture until the house value exceeds the originally agreed-upon contract price be more “fair”?
Well, it is equity forfeiture for awhile:
“The equity-sharing arrangement goes like this: If you refinance or sell less than a year after getting the FHA loan, the government gets 100 percent of the home price appreciation. If it’s more than a year but less than two years, the FHA gets 90 percent. The FHA’s cut then decreases by 10 percent until the five-year mark. Anytime after that, the FHA gets half of the appreciation, no matter how long you have the loan or own the house.”
But yeah, it would be kind of nice if the degree of equity sharing were based on real numbers in the deal rather than arbitrary percentages and time periods.
BACK ON TOPIC
Do Santa’s Elves live there? Do magical gnomes and wood nymphs live there? What the hell kind of house is this????
It’s a house worth more than 400k, as other posts have suggested, or $156 sf when comparables have recently sold for $350 sf. Knife catchers? Maybe. $274 sf is replacement cost for the structure, never mind the land. That is what it’s priced at.
Didn’t mean to drag Obama into this…what I meant to express was my disappointment that this man, who has really inspired hope for the future in a lot of people, hasn’t said anything that I thought would be consistent with other things about personal responsibility that he mentioned or said while campaigning. Of all of the candidates, he seemed like the biggest champion of personal responsibility. I think everyone on this board wants change to happen, so to me it’s natural to expect this “candidate of change” to effect the change that we all are looking for.
Anyhow, I go back to my two mantras:
1. We cannot be a silent minority/majority. We must yell and scream and make our representatives follow us. They are not leaders…they follow whichever way the political wind is following. We have to yell louder than those asking for their handouts.
2. We must do what we can to save our own economy and thereby save ourselves. Save American jobs by buying American-made goods whenever possible. Why wait for our government to figure out some convoluted way to save our economy? We have the financial power in our own hands if we would just use it.
“you have 90 days to begin a workout plan with your lender”
Come on, let’s be serious, this will fail miserably. And not because people aren’t interested in negotiating a plan,but because of the utter desinterest of the mortgage companies. The real lenders are often unreachable, because the credit has been spread like minced meat across several different CDOs. And the companies handling the rate payments are more interested in their own profits, coming from late fees and other compensations for managing the account. They have no real incentive to care for the wellbeing of the customer, especially since negotiating plans would take a lot of costly staff hours at a time when they want to reduce their expenses. Really, this cant work as long as it only concentrates on the debtor’s side. The homeowners have no leverage at all to force giants like Countrywide into action.
What would be much better than any illadviced bailout plan would be legislation to reduce the horrible late fees and all those penalty payments that are used to squeeze extra money out of credit customers, not only home owners. Some of those methods simply have to be made illegal, and others have to be capped at a reasonable level. It’s the rapid deterioration of their financial situation once they fall behind with their payments that finally drives people into bankruptcy. And right now financial institutes have no real incentive to help their customers to stay up to date with their payments, and instead they are rewarded with bigger profits as soon as the debtor starts to struggle. That’s a crazy system, stacked against the customers, and this has to change. This would help those home owners who still have a chance to make it through the hard times, as long as they aren’t hit with additional bills that they can’t pay. Let’s reward hard working, responsible people by changing the rules to their favor, instead of artificially inflating the market by subsidizing unreasonable mortgages.
Btw, folks, the NYT just ran an editorial in which the editors stomped for a baliout plan. Lots of readers determinedly argued against it, making the reasonable point that prices have to go down much more to reasonable levels where responsible people can afford to buy again – exactly the point that IR an others here are making, too. Why not show the responsible commenters some love and support their resonable views?
http://community.nytimes.com/article/comments/2008/11/11/opinion/11tue1.html?s=3
I have been lurking on/off for about a year – following the Irvine housing market. Much as I now know better, I continue to be surprised that even in today’s NYTimes (per Gray’s comment) the on-going theme is “who-could-have-known” about the mortgage losses. It is still worthy of note that home prices may not stabilize until 2010! OMG! I don’t understand. Shouldn’t the journalists be embarrassed that they aren’t doing their jobs? (and thank you, Irvine Renter, for pointing out how long price stabilization is likely to take since at least early in 2008).
Wow, I just moved out of this floor plan 6 months ago… We were paying 2550/month, with original carpet, windows, electric water heater, and electric stove…
Damn that place was a s*hole.. lol
If these people seriously want to sell this house, they will clean that damn kitchen up ASAP, and remove all the refridgerator magnets and extraneous crap sitting allover the counters.
What is wrong with sellers and their agents that they let houses be shown and photographed with personal trash and mismatched or shabby furnishings sitting allover the place? You don’t need to pay a “pro” $3000 to “stage” the place, just remove everything that detracts from the appearance of the place for the photo shoot, and make sure the place is clean, clean, clean, and polished and sweet-smelling to boot.
I’m not so certain that house prices “must” come down even if we managed to keep people in their houses. There still has to be a mechanism. In CA the existing downward momentum may be sufficient to keep it rolling until rental parity and incomes suffice to justify buying, but in other bubbles that haven’t seen more than 5% declines in the high end market, there’s still a lot of koolaid.
Since banks are now the sellers, the lenders, the loss absorbers and the profit makers, if they don’t drop their prices who will? If high assessments get them high fees and high interest payments… what’s there to force their hand other than defaulting borrowers? Why shouldn’t they try to squeeze every penny of profit they can from the knife catchers?
People out here (in DC) still talk about foreclosures causing price declines, rather than recognizing that high prices caused the foreclosures. But there is some truth to what they say, without financial distress the market could take its own sweet time unwinding this leverage, to the point where the fact that it hasn’t “stabilized” becomes irrelevant for most families.
In that scenario, people could start thinking about houses as they now view cars, expensive depreciating assets.
Remember when this bubble started, Bush had promoted a down-payment assistance program at the same time he was happily promoting the outsourcing of middle-class jobs. The irony has obviously escaped this dimwit: the best down-payment assistance is to simply let someone earn it from his/her job. But to give tax-breaks to companies that outsource, then lament that homeownership levels aren’t high enough, is like selling your car for gas money.
Here comes Santa Claus,
Here comes Santa Claus,
Right down Bailout Lane;
Fannie Mae & Freddy Mac
A-pullin’ on the reins —
Gummint Gravy pourin’ in,
All is Happy and Bright,
Dream of condos to flip flip flip
‘Cause Santa Claus Comes Tonight!
Here comes Santa Claus,
Here comes Santa Claus,
Talking HOPE and CHANGE…