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Originally Posted by Larry in MO  Well, Gene, I'm going to have to respectfully disagree. I have more than a little problem w/ the idea that people were "screwed". If it were me it probably would have occurred to me that I would not have qualified for a house because:
a. I didn't have a job
b. I didn't have any savings
c. I didn't have any down payment
d. I'm up to my neck w/ credit card debt
e. I owe money to the check cashing places and pawn shops
f. My car has been repossessed
g. I never could afford a house before, why can I now?
Or some combination of the above--lots of people were simply
not qualified for home ownership never mind the idea of home
ownership for everyone.
I think people should be more aware, act for themselves, and look out for themselves w/out waiting for the government to do every single thing for them. |
Larry, what seems obvious to you is not obvious to lots of less sophisticated people. Your example does not cover everyone who got a subprime or Alt-A loan. It probably is a very, very small group that resembles the guy you describe to make your point (no, I don't have the statistics and I'm not sure anyone does).
Mostly they are people who believed what they were told by people pushing loans to satisfy their bosses at crazy companies like Countrywide. If someone who works in the industry tells you that you are qualified, why wouldn't lots of people believe it? Obviously they did and does that make them bad people? This could be criminal or civil misrepresentation or fraud; there are lawyers starting to take this on, but it's only a piecemeal approach. Some may have been told the terms of the mortgage were different than they actually were (how many people can understand all that paper at a closing), and perhaps something was changed just before closing (all that really did happen to some people). Maybe they were dumb, maybe they were lied to, maybe they just believe what people tell them when they appear to be honest (but aren't). Some were people trying to flip houses. That latter group took their chances and it's ok with me if they got caught in it. But for most, they are victims of their lack of knowledge who were trying to have the American Dream, encouraged by the gov't (remember the "ownership society"?).
So what do we do? If you, as a smart guy with a 20% down payment, bought a house in "Happy Acres" and about 25% of the people there paid too much a year later for a house because values kept increasing, and another 25% got loans they thought they could afford, but couldn't for any number of reasons, what would happen? Some people will want to move (Americans are always moving generally at the rate of 20%/year) and have to sell at a loss. Maybe they'll just walk away, maybe their corporate employer will take the house and sell at a loss, maybe they'll list it cheap, but can't sell it, or can. Others will default because the interest payment goes up or they lose their jobs or they are maxed out on their credit cards or their just kinda dumb. Some will cut back on food, medications or landscaping.
Pretty soon there are some houses that look uncared for because of the landscaping problem. Others are abandoned or taken back by mortgagees who don't keep the property up. Some teenagers break into one and have parties there; maybe it burns down because they started a fire in the fireplace and left it. Now you have been offered a job in another city at a big raise, but can't sell your house because it now looks like Unhappy Acres, or because your house is worth less than your mortgage and you can't afford to make up the difference. The whole neighborhood starts to look bad—only 5 or 10% of empty houses has a big effect. A lot of "for sale" signs tend to lower prices too. The local gov't has two choices because property tax revenues (maybe sales tax too) are dropping—raise the millage and you pay more, or cut services. Maybe they close the nearest fire station (no wonder that party house burned down), or lay off 10% of the cops, or close the nearest school or don't fill the potholes or don't clear the snow as often. Then Happy Acres is even less desirable. You did all the right things, but now you are a victim. Your only way out is to buy flood insurance and blow up the dam just upstream.
Solving the mortgage crisis is not easy and parts are hard to swallow. Some people who do not deserve to be bailed out, would be bailed out because it can cost more to distinguish who's bad from who's dumb. Whole communities will suffer because a relatively small number of people were wrong or dumb or foolish. But we are all in this together. It is a community and what happens in one part, affects the neighbors. I have to pay for this too. I'm not only advocating spending Hampstead's tax money and yours, but mine too, because I think it's the only way out of this without much worse consequences. I'm also angry that we are in this mess, but we may be angry at different people or groups. But whomever we are angry at, the problem and the consequences are the same.
So, Larry, I respectfully disagree, and I hope you don't live in Unhappy Acres.
Gene