There will be no recovery until there is a halt in the relentless rise in foreclosures. Foreclosures threaten millions of families with financial ruin. By driving prices down, they sap the wealth of all homeowners. They exacerbate bank losses, putting pressure on the still fragile financial system. Lower monthly payments are a balm, but they are no substitute for home equity. And until more Americans can find a good job and a steady paycheck, the number of foreclosures will continue to rise.
Amen.
Amen?? Excuse me?? You really want the government stepping in to stop banks from being able to obtain the collateral that is their contractual right to take possession of when a borrower stops repaying a loan that is their contractual obligation?
You know, I am sick and tired of people treating foreclosures like they are some kind of one-sided, evil, unilateral attack on innocent, blameless homeowners. This housing mess was caused in large part by an over-consumptive, grasping, lower middle class in this country. When a secretary and a prison guard collectively making $75,000 a year go out and buy a $550,000 home with a variable interest rate, no money down, and negative amortization, and think debt is something to be endlessly “refinanced” instead of retired, THEY are responsible for what happens next.
The fact is that millions of idiot homebuyers used ridiculous forms of loans that were bound to come back to bite them in the rear end, and in the process drove up housing to unbelievable prices — so unbelievable, in fact, that it became nearly impossible for someone who wanted to buy a home conservatively (i.e. 20% down, a fixed 30 year rate) to do so. I say bring on more foreclosures. Let an increase in housing inventory drive prices down, so those people who didn’t act stupidly and ridiculously in the last 8 years might actually have a shot a buying a decent house.
Foreclosed houses go back on the market, and people who do have a down payment can begin to think about buying. The people who lost the home move into an apartment, most likely. Sad stories, but nobody — until now — ever thought the government should guarantee people against unfortunate business decisions.
Ok, Ouroboros, I will NEVER use the word “Amen” ever again. đ
Ouroboros,
There are also plenty of banks and mortgage companies that enticed people to borrow more than they could afford and sold these questionable instruments to people that the banks knew would not be able to repay simply because of the ability to sell the mortgages to Fannie Mae or Freddie Mac. These banks need to accountable for their actions as well.
YBIC,
Phil Snyder
I am going to become the most reprehensible of bottom feeders, the real estate investor. I intend to negotiate short sales with the financial institutions for homeowners facing foreclosure so they might gain the benefit of having no long term blot on their credit report. Yes, the homeowner could do it themselves, but will they? I make money on the difference in the fair market value of the home and a negotiated settlement with the lender. Anyone have problems with this?
So Phil – how do we hold these irresponsible banks accountable? By giving them a bailout? By subsidizing their irresponsible borrowers? Why do all the taxpayers who acted responsibly and only bought what they could afford have to bail out the irresponsible? You want to help someone? Fine – let us help the responsible borrower who lost his job. Give him/her some time to get back on his/her feet. Defer payment of some of the debt to the end of the loan. I am for that. I am not for robbing from the middle class to support (once) rich bankers and their stupid (or dishonest) borrowers so that they can enjoy a standard of living beyond their means.
DaveG,
I never indicated any desire to help either the banks or the borrowers. Actually, I think that the government (thru Fannie Mae and Freddie Mac) are more responsible for this crisis that we or they are willing to admit.
The problem is that the institutions that provided the bad mortgages have already been paid for their dishonest dealings. The people who borrowed the money (knowing that they could not pay it back if any hiccup occured in their lives) are on the hook.
If I knew what to do at this point, I wouldn’t be commenting on T19. I would be solving the problem.
We had too much greed (a deadly sin) on the part of borrowers, lenders, and politicians. We built a system where fraud was rewarded and look at what we got – massive fraud.
YBIC,
Phil Snyder
Phil, what you say has a certain ring to it until you pry up under the edges. What does it mean to say banks “enticed people to borrow more than they could afford”? And why is that even something to blame them for? Every day I am “enticed” to do “more” than I should. The candy aisle “entices” me to consume more calories than are good for me. The mall “entices” me to spend more money than I have. And yes, banks continually “entice” me to borrow more money than I can afford, whether in the form of credit card offers, car loans or home loans. Unless you can show me a true case of fraud — where the bank told a borrower, for example, “this is a 30 year fixed rate” and then the rate in fact changed — then the responsibility lies with the borrower, plain and simple.
The problem is that the banks refused to hold the bad mortgages they wrote. They sold them off as quickly as they could. They also charged heavy fees (tacked on to the mortgage).
I am not trying to absolve the people who took out the loans, but when there is a power imbalance, it is morally encumbant on the person with the greater power in the equation to look out for the person with the lesser power. Mortgage bankers know about finances and interest and the like. The people who took out the sub-prime loans were just happy to get a house and often were not financially savy enough to really understand what they were doing. They were often lied to (housing prices will always increase!) and pressured into making bad decisions. They still made the decisions, but the banks are also morally culpable.
But even more culpable than the banks are those in Congress who put up road blocks to the investigation of the soundness of our housing industry and the Freddie Mac and Fannie Mae institutions.
YBIC,
Phil Snyder
Be careful with the word “enticed”. After Hurricane Katrina, I was homeless and jobless. So I got a job in Memphis and bought a house. We longed to get back home so we signed a contract on a second house back on the coast. Then I got fired. Whoops, no way the mortgage company will give me another loan with NO income. Not so: they gave me a liars loan…..no documentation needed. I didn’t even have to beg….they didn’t want to lose the fee income. Was this some fly by night outfit (depends on your definiton)….no, it was Countrywide. I asked why they would do this????? “Oh, we just sell your paper to the government”.
Son of a bitch…..what a great country!
People who bought homes that they thought they could afford but couldn’t, have themselves to blame for their foreclosures, along with the unscrupulous lenders who saw that they could make a quick buck. I could excuse the borrowers to some extent because so many of them were desperate to buy a home, but I cannot excuse the lenders, who are guilty of usury and corporate greed. They should go to prison for what they did.
Nope, not going to let this fly. Cennydd, I am in agreement with you most of the time but not now. Usury laws are clear and defined and none of the adjustable rate mortgages, wacky as they were, qualify as usurious. If they did, they would be void by operation of law and they are now. “Corporate greed” is not illegal in this society, nor should it be. Be careful who you are clamoring to send to prison. We do not imprison people in this country on a whim. Tomorrow it could be you.
I am tired of excusing people “desperate to buy a home.” Please. I am a lawyer married to a surgeon and we RENT. There is no entitlement to a home. This kind of thinking is exactly what got us in this place to begin with.
Here in San Diego, we’ve seen stories in the paper of people with lower class income buying two or three houses thinking they would “strike it rich” as house prices continued to go up. Somehow they never considered “what if prices go down?” and “how can I possible handle three houses on a store clerk’s salary?” So far no fraud involved, just human greed. In some cases, the buyers are illegal aliens, so they just head back to Mexico and leave the house.
While there were plenty of examples of buyer misconduct, the overwhelming fault here is the banksââŹâ˘. (The ratings agencies provided the incentive for banks with ââŹĹsee no evilââŹÂ ratings that created massive demand for the banksââŹâ˘ trash.) Most people are unaware that there are millions of loans (defaulting at a high rate) into which borrowers were indeed enticed with low payments and deceptive documentation that complied fully with Federal and state lending laws, such as RESPA and TILA, yet failed to disclose actual interest rates or costs. Moreover, it takes only two pages for each borrower to prove that many banks engaged in an actual conspiracy to violate Federal lending laws. Yet enforcement activity, at least on any broad scale, against the banks, has barely scratched the surface. Meanwhile, we have thrown hundreds of billions of dollars to the very banking industry that created this mess. Emboldened by the TARP funds, banks are now seizing the opportunity to try to establish an oligopoly in home loans It is as if the cons have become the jailers.