On mortgages…
May 7th, 2008
I am very sick and tired of hearing people whine about how the big, evil, Bear Stearns bank got bailed out, but the little guy - Joe Homeowner - is left out to dry and isn’t getting any mortgage relief. “It’s corporate welfare!!!” “It’s so unfair!!!”
Well, you know freaking what? Joe Homeowner isn’t being left out to dry by the bailout. You know why? Because there are a hell of a lot fewer stupid homeowners than reasonable homeowners who bought homes sensibly and are making their payments. So the average homeowner isn’t screwed over by the bailout, they’re helped.
You know why?
Because if a large firm like Bear Stearns goes tits up without any bailout, that affects the WHOLE national and international economy - negatively. That sends the dollar down in value. This means that everything else (especially imported goods) cost more.
In a perfect world, we wouldn’t have elected (TWICE!) the morons that caused the dollar to tank in the first place, so our economy would have been able to withstand the ripple from a bank failure. But an already compromised dollar? It can’t take it! The bailout was necessary to preserve not only the the big wigs, but also the average person who needs to buy food and keep a roof over their heads (even if it’s *gasp* rented).
Now, if some silly bastard takes out a loan that they can’t pay, and they can’t get out of the loan by selling their property because their house value dropped and their mortgage is valued higher than the house - they get foreclosed on. This means that they have to move out, get an apartment, and deal with a black mark on their credit record. Further, if the bank has to sell the house at a price lower than the mortgage was worth the time of foreclosure, the former homeowner does in fact owe the difference. This is part of the mortgage contract that was signed. This isn’t unique. This is how virtually all loans in the modern world work. If you can’t pay the difference (that you contractually owe), then you can declare bankruptcy and get a slightly larger black mark on your credit. This does NOT take away your ability to live within your means in apartment. It just means that you have bad credit and rent instead of owning.
I own a home. I bought within my means. And barring a very severe economic downturn, I’ll be able to continue affording it. In fact, even if I lost my job and had no money in reserve, my unemployment check alone would cover not only my monthly mortgage and utility bills but would even have room left over for other things, like gas and food.
That doesn’t mean I didn’t get a little jealous (and vaguely suspicious) when I saw acquaintances in my same income level purchasing far more expensive and luxurious homes.
But how many of those people are still in those homes? Just one - and he’s up to his ass in debt that keeps mounting.
In summation, if Bear Stearns went down without any bailout, it would affect the purchasing power of every dollar in the US - affecting everyone. Especially those that had even larger debts to pay off due to mortgage defaults. More importantly though, it would greatly affect all the people out there who made good decisions.
Come to think of it, allowing a financial failure that affects even those who made the right choices is just like re-electing George W. Bush a third time. Unconscionably moronic.
9 Comments Add your own
1. john75half | May 7th, 2008 at 12:04 pm
People who were tricked, lied to or truly taken advantage of have reason to complain. People who just made a poor decision and decided to take out a loan they couldn’t afford should stop going on TV and radio shows and claiming to be victimized. Their situation sucks, but unless they were actually lied to, it was still their decision to make.
Of course, I get to live in the house of a responsible homeowner while I wantonly spend money on things like tuition and food and DDR pads, so I don’t have the best perspective. :)
2. geekpdx | May 7th, 2008 at 12:20 pm
Of course. If you were lied to or taken advantage of - you do in fact have a reason to be upset.
However, no matter what was told to you - you did sign & agree to the “truth”.
I clearly remember the day I bought my first home and the day I sold it while buying my second my home. You sign a lot of papers. A lot of them are BS items, like signing off on a warning about potential lead paint or old oil tanks if the house is a bit older (like mine), but everything else stated the terms of my loan - and what happens when the rates adjust (my first home loan was an ARM), what happens if you’re late with payments, under what circumstances the bank can repossess your house, etc.
I also recall the title agent being a little irritated with me on both days, since I insisted on reading almost every document (excluding the ones about lead paint, radon, mold, etc.).
Based on those two experiences, I would say that neither of the two title agents I dealt with were accustomed to having their clients read the mountain of papers necessary to sign off on a loan. That seemed a little scary.
Who wouldn’t want to know the details of one of the largest financial transactions they’ll ever make? Lots of people, it seems.
On my first loan, I caught and requested corrections of at least half a dozen typos*. These seemed like they were most likely irritating nit-picks on my part, but I also know that a lawyer can read a document just about any way they wanted, and I figured it was best to protect myself from any ambiguities at all.
*Just to note, at one point Mrs. Geekpdx was referenced, and having already gone through a rather expensive and difficult divorce with the woman several years prior, I thought it best not to have her name on any of my house papers.
3. ryan | May 7th, 2008 at 12:21 pm
I agree with you buddy, with one exception. What I cannot stand is the hypocrisy of the Republicans who refuse to help out owners based on “we can’t possibly disrupt the free market”, but then blatantly intervene in that supposedly “free market” by bailing out Bear Stearns.
The (correct) action of the Bear Stearns intervention shows that we cannot and do not rely on a free market economy. People who worship the alter of the pure free market are living in a dream world.
4. geekpdx | May 7th, 2008 at 12:53 pm
I agree with you. We don’t live in a true free market, nor do I really want that.
Nonetheless, Republican hypocrisy always makes me feel a little extra sick.
If we hadn’t been wasting billions of dollars per year (month?) fucking up Iraq and Afghanistan for quite a while, I’d even suggest that the federal gov’t sponsor non-injurious refinancing for all the clowns stuck with foreclosure. Or at least a method of getting out without forcing them into bankruptcy.
5. johen | May 7th, 2008 at 1:41 pm
Agreed, except for one glaring problem. If the dipshit who didnt read the loan documents next door goes into foreclosure, it lowers the value of MY home. I’m not sure if that warrants a giant bail out, but it warrants a change in lending laws that requires a simple graph which unequivically shows what the monthly cost of the loan is, so that no one can claim ‘they tricked me!!!111one’.
My wife has a shit-ton of student loans. Those lenders send her a little book that has tickets in it, one for each month, that show what the cost is. It’s simple, and effective, and something similar should be mandatory for homes.
6. geekpdx | May 7th, 2008 at 3:05 pm
Well, a foreclosed home doesn’t really lower the value of your property for much longer than it’s on the market, does it? At least around here, assessed value hasn’t matched actual market value for 20+ years. This could be a Portland thing though…
And sure, foreclosed homes will stay on the market longer than we’d like - but that’s because prices are incredibly inflated and banks are trying to recoup their money (magic money, in the case of interest-only payers whose mortgages ware now valued far higher than their houses) and they all need to adjust downward slightly, or at least stop rising for a bit.
A change in lending laws?
I’m all for it.
Clarity in legal documents?
Sign me up!
Plain English summaries?
What’s not to love?
Graphed charts, showing the net effects of under/over payments?
FTW!!!
People who still won’t get it?
Plenty :(
7. Iain | May 8th, 2008 at 2:09 am
So I take it then that the news we see down here of the US housing market being in the poo is, somewhat, accurate?
I’m waiting for a similar thing to happen here: we don’t have subprime loans in the same sense as you do, and a majority of our loans are based on a variable interest rate (with some vague relation to the current Reserve cash rate) instead of a fixed rate or some kind of resettable ARM, but… there’s a lot of overvaluation going on, and something’s going to have to give sometime.
8. lazy8fx | May 22nd, 2008 at 4:36 pm
why don’t you tell us how you really feel?
9. UGG Bailey Button Fancy Boots | June 28th, 2010 at 7:51 am
Think for yourself,and don’t be limited by what others expect of you
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