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Crap like this..

burns me. Today's article in the NYT about possible government bailouts of folks who bought more homes than they could afford, while unsurprising, really pissed me off.

Not one of the folks profiled in this article sounds like anyone who truly needs government assistance in paying their mortgage. They might be losing money on the deals they made but they are not claiming any sort of fraud in their mortgage or home loan...they just don't like the deal they got into. I see no reason why a couple making over 250k, a granny making over 100k, and a couple with 100k in savings should be coming to taxpayers for a handout. It's simply amazing how much our country has bought into the notion of the "privitization of reward but the socialization of risk". You can bet your bottom dollar if the tables were reversed and these folks and made a "killing" on their "investments" in their homes they would have bitched to high heaven about the taxes, if any, they had to pay on that "investment". Yet now that they are over extended on a deal that didn't work in their favor...woe is me. Bleh, articles like this make me ill.

The lawyer couple extensively profiled in the article are one of the true wonders of modern America. Over 250k a year in income and they can't get their financial act together? Oh wait, apparently they've breed like rabbits, gotten divorced, fleaced their cars, ran up credit card debt to all hell and, last but not least, taken a view of their finances that makes one seriously wonder if bailing them out will help at all (“I used to think,” Mr. Breakstone said, “that I would pay the piper later and enjoy life now. I’ve totally reversed that view.”) And I'm supposed to feel sorry for them?

Rant is over...

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( 11 comments — Leave a comment )
(Anonymous)
Feb. 23rd, 2008 12:27 am (UTC)
Isn't there already a mechanism in place to help these people?
2.5% decline in housing prices in Memphis, oh, the humanity! I'm sure the homeowners in Sacramento feel really sorry for these people.

The people in the article all did exactly what they were told not to do, buy more house than they could afford.

Don't we already have a mechanism in place to help people who owe more than they can afford? Bankruptcy or some such.



boaltie2004
Feb. 23rd, 2008 05:34 pm (UTC)
Re: Isn't there already a mechanism in place to help these people?
Yeah among other mechanisms bankruptcy would be one. However, if you notice from the comments, these people are not losing their homes, but rather losing money...which they are complaining about. They are honestly just entirely unsympathetic.
brewergnome
Feb. 23rd, 2008 12:47 am (UTC)
That's what makes me the angriest, that a lot of the peopel who "need bailing out" are the same ones who bitch and moan about socialism and oh my god national health care is so eeevil and communist
boaltie2004
Feb. 23rd, 2008 05:26 pm (UTC)
Yeah, like the folks over in Ohio who consistently vote republican cause they hate fags. I actually do have to say though, the Bush Administration is doing a small part to hold the line on the crazier bailout plans (at least according to this and other NYT articles). While they've been attacked for being too modest, the only way to keep this shit from happening is to give Wall Street a good lesson in how markets work. I'd also say I'm intrigued by the idea of doing the negative amortization certificate talked about in the article. That could allow the mortgage on these house to be brought down to a level the person living in the house could reasonably afford while still giving the bank an opportunity to earn back the money it loaned in the first place. I think the key would be ensuring that, if you set the certificate to be paid on the first sale after it's creation, you'd have to set up a monitoring program so you don't have fraud in that transaction. example - I currently owe 500k on my house, I get a new loan for 200k and a 300k certificate. I go and sell the house to my brother for 210k, 10k goes to the certificate but the other 290k is wiped out. Another good aspect of the certificate is it pulls the losses out over a longer period of time - allowing the banks to get back to some level of normal lending behavior. Of course, one could also argue that it just spreads unknown losses over a longer period making the current instability worse.
justanothergeek
Feb. 24th, 2008 08:41 am (UTC)
Amen! If I buy a stock and it goes down 10%, the government doesn't bail me out. Why are houses such a fundamentally different kind of asset? Houses are just like stocks, fancy paintings, gold, or anything else whose value is determined by the market. The only thing I can think of is that more people own houses than any other kind of asset, so the politicians think they can win lots of points with their constituents by bailing out the housing market, while they wouldn't get as much benefit from bailing out other markets.

In the cases where there was actual fraud, then of course the homeowners deserve compensation. But if they were just stupid or made a bad bet on the direction of housing prices, why do *I*, as a taxpayer, owe them money?
justanothergeek
Feb. 24th, 2008 08:45 am (UTC)
Oh yeah, the other thing that drives me crazy is when the media coverage of the housing market implies that people who can no longer afford their mortgage payment are going to go homeless. Hello! Have you ever heard of renting, folks? I'm in my 30s and have rented my entire life. It's not the end of the world!

Aaaagh, the topic drives me completely bonkers...
boaltie2004
Feb. 24th, 2008 08:45 pm (UTC)
In essence many of them were renting. they got negative amortization loans, paid the minimum amount which didn't even cover their interest payments, and then when they maxed out the loan to the point that the payment went sky high, they cried foul and cried that they were "losing their home". It was never their damned home to begin with, the bank owned and and subsidized them to live in it for 2-5 years. What is truly shocking is when you look at the "payments" they were making, they are often lower than comparable rental rates. So not only did these folks not "own their home" they really didn't rent it either. And to make matters worse, once foreclosure started because the STOPPED making payments, they lived there RENT free for 3-12 months.

Somehow I have a sneaking suspicion this is why 65% of American's in polls say they don't want the government to bail these folks and the banks out of this mess.
justanothergeek
Feb. 29th, 2008 07:49 am (UTC)
Check out this site, mentioned in a NY Times article today!

http://www.youwalkaway.com/
boaltie2004
Mar. 3rd, 2008 04:29 pm (UTC)
can you believe that? i love the name too. just walk away girl...walk away.
being_boring
Feb. 25th, 2008 06:09 pm (UTC)
I'm inclined to agree with you. Certainly, I can't know the situations of every person out there who are in that boat, but I don't like the idea of a government bail-out for a bunch of poor decision-making on the part of mortgage companies and individuals. I think both parties share the blame for where we are.

When Zhenia and I went to buy our house in 2005, we were appalled by the amount we qualified for (IIRC, it was somewhere in the neighborhood of twice what we actually bought and felt we could afford comfortably). One mortgage broker put a lot of energy into trying to pressure us into going with an interest-only loan that later converted to an ARM. He extolled the virtues of investing the money we were "saving" on our house payment and that tying up the money in equity wouldn't make us as much money as it would in investments. We did not appreciate this line of "logic", and ultimately went with a different broker, who was quite content to give us a 30-year fixed rate loan.

I'm sure the first broker's pitch probably worked on a lot of people who hadn't done as much homework and budgetary hand-wringing as I had. I think unsavory sales tactics combined with a widespread lack of financial education in this county have contributed to the mortgage crisis. That said, I don't think that ignorance is an excuse for bad decision-making, but it does help explain it. I do feel bad for people who are in this position, but I don't necessarily think it's fair to bail them out simply because they made a bad financial decision that happens to involve their home. I did a lot of research when we bought our house and tried very hard to understand what level of risk we were comfortable with and the ramifications of our decisions about how much house we bought and what kind of mortgage we got. It hardly seems right that someone who didn't gets bailed out precisely because they didn't understand the potential consequences of their decisions.
boaltie2004
Feb. 25th, 2008 06:17 pm (UTC)
Indeed. Your comments on the broker's pitch are a right on. I should be clear that in a general sense I do feel for people who fell for such sales tatics but at the same time one does have to take a step back and ask - why didn't they do the research you did. The information to educate yourself is easily available at the public library, on the internet, from consumer groups, or even from the folks in your life - should you choose to do no review outside your circle of friends. Considering a home purchase is one of the biggest purchases many folks will ever make, to not even educate yourself a little bit makes no sense. Moreover, once you do that education - which usually can amout to reading two pieces of paper on the topic supplied by a consumer group - you will see that the brokers have a vested interest in hosing you over along with the banks.

I'm very happy to hear you guys played it conservative. Ohio is getting spanked by all this mess.
( 11 comments — Leave a comment )

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