Why These Particular People?
People have been defaulting on mortgages for all of recorded history. In Roman times, such a default could well result in the mortgage-holder getting sold into slavery, so things have improved a bit. But seriously, people default on their mortgages all the time. So what makes those currently in default more deserving of taxpayer aid than those before them or after them? I mean, other than the fact that the press is paying attention to these particular defaults? A similar question was reasonably asked of 9/11 victims who scored government compensation when victims before or after of other transportation accidents and building fires have not been so rewarded.
I challenge any politician to answer this question with an answer other than "well, these people are in the media spotlight right now and as a politician, I want to be in the spotlight with them."
Update: More analysis here, including the bright side of the burst housing bubble:
Countrywide wants to be able to take its loans that the market won't accept and refi them under FHA or FNMA. That's what this is all about. Don't forget that.
It's not about homeownership. Let's look at the latest 25th percentile (starter homes) list prices for a range of CA cities, compared to the price in January 2007:What you see above is great news for all the people who would like to buy homes without going bankrupt a few years down the line. It's VERY bad news for banks and financial companies that made the original bad loans without bothering to check whether the borrowers could pay the danged loan. You figure out who this country should reward - responsible aspiring home owners or stupid banks.
LA: $365,000/ $429,920
OC: $414,900/ $499,000
Riverside: $259,900/ $335,000
Sacramento: $229,900/ $316,477
San Diego: $325,000/ $392,279
San Francisco: $380,000/ $468,376
San Jose: $489,950/ $580,589
Santa Cruz: $489,000/ $577,400
Posted on January 24, 2008 at 12:29 PM | Permalink
I wonder what percentage of these foreclosures are people that had no business being in the homes in the first place?? 90%, 98%??
Of course you'll have some people that just had bad luck and fell on hard times, but I'm guessing that a large percentage of these people shouldn't have even been in this position in the first place. Only way the banks and borrows will learn their lesson is if you don't bail them out.
Posted by: tk | Jan 24, 2008 1:31:21 PM
Baring people who were subject to some sort of loan fraud and lack the resources to take recourse in the courts people are no more deserving now than before. However, there’s going to be some societal cost to large numbers of foreclosures. At some point the number of foreclosures will be large enough that my taxes will have to go up more to deal with those costs than the costs of a bail out.
Posted by: Joe | Jan 24, 2008 2:41:56 PM
Mark Gilbert over at bloomberg.com makes a 'pithy' comment; http://www.bloomberg.com/apps/news?pid=20601039&sid=akcLU5Y7iJN0&refer=home
"Realtors appraised homes at fictitious levels. Lenders granted mortgages to people who couldn't pay. Bankers created Frankenstein instruments they couldn't value. Traders invented prices they couldn't justify. And investors bought securities they didn't understand."
All of the players above were following the "Invisible Hand" by acting in their self interest. The middle men were chasing fees and commish, the investors were chasing yield, and the aforementioned "responsible, aspiring homeowners" were doing what the huddled masses always try to do, get "something for nothing".
My point being that there are no or very few hapless victims here.
Posted by: mikepoo | Jan 24, 2008 2:42:45 PM
'Baring people who were subject to some sort of loan fraud and lack the resources to take recourse in the courts people are no more deserving now than before. However, there’s going to be some societal cost to large numbers of foreclosures. At some point the number of foreclosures will be large enough that my taxes will have to go up more to deal with those costs than the costs of a bail out.'
No matter how the gov't bails out the buyers and lenders, its going to cost too much. Remember, this is the same US Gov't that buys the $600 hammer and the $400 toilet seat.
The assessor's valuation of your 1200 sq foot house was premised on the big increase in assessed valuations he could just get you to move so someone who understands the true value of real estate, and how it appreciates 20% annually ad infinitum would tear your house down and build one of those 3500 sq foot ATM's with tropical hardwood floors and granite countertops to be bought by someone else with vision but no money down.
Appeal your assessed valuation.
Posted by: tribal elder | Jan 24, 2008 7:53:42 PM
"'Baring people who were subject to ..": I'll grant you that that is a less extreme punishment than enslaving them, but would surely be a harsh punishment in the colder states?
Posted by: dearieme | Jan 25, 2008 12:49:53 PM
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