Posted on 08/27/2007 4:06:37 AM PDT by Notary Sojac
I know people are going to hate me for saying this, but I'm not sorry that foreclosures nearly doubled last month and are increasing every day.
I'm not sorry that real-estate prices are creeping down by the glut of desperate "for sale" signs all over Southern California.
I'm not sorry that all those developers building lofts downtown and in Hollywood and North Hollywood with no parking might have to eat their investment when they find they can't get half a mil for the 400-square-foot corner of a former sweatshop.
I'm not sorry that people who kept taking the "free" home-equity money from the banks beyond all reason are now finding out how not free that money was.
I'm certainly not sorry that the huckster mortgage companies and banks that thought it was a good idea to make subprime loans to people with bad credit ratings are now taking a bath. I only wish it involved some sort of public humiliation involving glue, sand and glittery body paint.
I'm not even sorry that people will lose their homes and be forced to give up the Hummer they bought with a home-equity loan, and move into a one-bedroom apartment in Panorama City or, worse, in with the in-laws in Porter Ranch because suddenly their adjustable home rates adjusted higher than they can pay and they can't unload their McMansions for $1.3 million, as was the plan, despite the newly installed horizon pool and cork flooring.
I tell people I am sorry, but I'm really not. I am, in fact, gleeful.
And I'm not the only one.
Most everyone who is not employed by a mortgage company or is not a real-estate agent or is not trying to sell a house or can't pay the mortgage anymore feels the same. We are secretly dancing little happy jigs because it seems that the insanity is about to, finally, end and the snake-oil hucksters will fold up their tents, take their sleazy subprime offers and slink out of town.
Then maybe life can slowly come back to normal, and regular people with regular incomes can buy regular houses again without agreeing to loans so abusive they ought to be handed out of the back of gangster bars. We don't even care that it means our own property values will drop, if it means we might avoid another block of luxury lofts.
It's a relief, too, because we all knew this was coming, just like you know the Poppin' Fresh dough carton is going to make that loud noise when you pull the tab, and you can't really relax until it comes. Even people like me with math anxiety could work out that at some point the hot real-estate market, built in part on risky loan deals, was someday going to reach critical mass and start to crumble.
Well, here we are, and it's beautiful. And that's why I must implore all the well-meaning politicians proposing bailout measures (You know who you are, Richard Alarcon and Hillary Clinton) to just go away and work on curing cancer, or something that will actually help humanity, not enable it to continue on its financially irresponsible path.
Homeowner bailouts, as warm and loving as they seem, are, in fact, bailouts for mortgage companies, and they don't deserve it. But bailouts play well on the news, and everyone from L.A.'s Alarcon to state legislators to U.S. senators are proposing deals to help people continue to pay their mortgages.
Sure, some poor grandmas and inner-city families will get to keep their homes, at least until the next rate shift on their interest-only loans, but at what price? Is it helping people to keep them tied to abusive mortgages that only help the abusers profit? (C'mon, Hillary, it's the other guys who are supposed to be helping big business exploit consumers.)
To Clinton's credit, she's also proposing penalties on mortgage companies, though it's hard to see the sense of punishing with one hand and rewarding with the other. Better to support restructuring of the loan industry and government-sponsored mass refinancing for at-risk homeowners.
It's hard for Democrats not to rush to the aid of the victimized homeowners. It's a good instinct, but sometimes it's in everyone's interest to step aside and let faulty systems fall apart. This is one of those times when we ought to let it burn. I'll bring the marshmallows.
Yes it will, but sadly nothing will stop it now. Maybe if 2 years ago the lending standards would have been gradually tightened we could hav e avoided this train wrek, but no the questions are how bad will it be and for how long? And I guarantee you that if teh government tries any form of banker bail out the howls will be deafening.
Ouch!
It’s never a good idea to cheer the misfortune of others.
The only thing I am cheering is the return of some sanity in lending practices.
I’ve said that on a number of threads.
This isn’t about all that compassionate conservatism, it’s not even really about the economy.
It’s about protecting the banks, because the banks are the ones who cash the gummint checks. And the gummint checks are what buys the votes.
I am a mortgage loan officer. I never delved much into the “crazy” market - most of my clients verify income and have at least decent credit. While occasionally I come across a subprime scenario, I don’t seek them out, they’re usually referrals from another client. If the customer seems to be smart enough and astute enough to not let whatever made them subprime in the first place happen again, I work with them. Never will I do a loan I know someone can’t afford. Never have.
So far, I’m doing OK through this. Not great, but OK, actually better than last year because of moving to a better company and better market. I’m also still in a good enough position to not justify a career change, as I still make more money and enjoy my work more than I would a salaried Dilbert-style desk job somewhere.
However, wishing the entire industry collapse because of some unscrupulous parts of it is unfair and pisses me off. I understand how people feel, and would agree that a large part of the run-up in prices is due to financing terms that probably never should have occurred. Primarily using stated income loans for people that just honestly couldn’t afford them, not for their original purpose, which was to make it easier for self-employed people who write off expenses to qualify for loans.
Most of the problem was abuse of what in and of themselves were good loan programs, for the right borrower. Abuse by giving them to people that either shouldn’t have had ANY loan, or didn’t know how to use what they did get and/or didn’t truly understand it.
However, wishing for all realtors and mortgage brokers to be out of work, and housing values to plummet 50% is going to hurt EVERYONE.
What is the so-called 'speculative class'? Sounds like a bunch of class-envy BS. Most people who are hurt are the homeowners and the financial institutions stuck with the bad notes. The mortgage companies who wrote the questionable notes and fudged some of the numbers are going out of business and good riddance for the most part.
Let the market work it self out. And as for lowering rates inflation is still a key worry and said rate cut would be counter to teh goal of controling it.
If the fed plays it stupid, inflation will be the least of its worries. The fed needs to cut rates to avoid a more serious recession. Most these plans floated by Democrats are nothing but band aids that won't do squat.
The article is from the LA Daily News which tends to be more conservative than the LA Slimes.
I love mac and cheese. Usually have a side of Omaha Steak’s fillet though.
Which is why I don’t understand anyone’s glee in this.
The recession is now unaviodable, no reason to make it worse by driving up inflation.
When the economy is not booming and money is tight people who have it to rent can be very choosy about with whom they deal. But when there’s more money than sound investments then watch out!
The answer would be for everyone to take a bit of a hit. But the way it usually works is that a few take really big hits, starting with the homeowner who loses his or her home, then the lender who has to fire lots of people and go out of business and finally the people who fund the lenders. And, if history is any guide, the taxpayer will end up taking another big hit since after all, it’s not like it’s really money, it just tax revenues and they can always demand more of that.
I am not an economist and it’s been so long since I spent the night in a Holiday Inn Express that the room rate that night was $39, but it looks to my untrained eye like we are in for some rough sledding with the usual suspects ending up taking the beating.
Something has to give when credit card companies can raise your interest rate based not on their experience with you and how you’ve help up your end of the bargain, but rather on how deep you are in debt or for having been late paying another, completely unrelated, credit card company. Add to that the ability of insurance companies to raise your auto and homeowners premiums based on your credit rating and you’re in for some tough times.
I like it too!
But really, that’s not the point, when I bought my place in 91, I paid ALMOST A THIRD in down payment. It had taken me ten years of my life to save that cash.
And now, people with alot shorter work history than me can get a much nicer place just by - what - having a pulse?
When you think about it, it’s pretty aggravating what happened. The mortgage brokers and money managers were able to influence the prices upwards... then, they just kept passing properties and equities back and forth, around and around, each time taking their cuts. Kind of like that Time Bomb game we played when we were kids.
But the people involved, the actual folks trying to set up a life and take care of their families, were just like hamsters running around in that little wheel.
Think about it.
The recession can and will be avoided with smart fiscal policy. And even inflation will remain under control. Things are good right now for the most part, as long as fear and tightened do not win the argument of the day. the fed finally seems to have come around, so I think we are in good shape.
Can people sue Alan Greenspan for urging Americans to take out ARMs back in April 2004?
I do not feel any glee in this but a sense of foreboding.
I am not happy this is happening but believe like most everything it is cyclical.
Further comment in some relevance to the housing market and our economy.
I have argued repeatedly over the last few years that shipping all the hard manufacturing jobs overseas would some day come back and bite us in the financial butt so to speak.
I feel sorry for the thousands of people who worked in the industry processing loans.
Employees who must now try to find other service related jobs that may not pay as well or might not be available at all
It is a downward spiral for some and will affect more than just the housing industry.
If your financial situation is such that you cannot be confident that you'll be able to pay your mortgage, then you have no business getting a mortgage. You should instead either defer buying a house until you get into better shape, or buy a smaller house (or condo), build up equity, and then trade up.
The fed will do any and everything it can to avoid a rate cut. And even that if it comes will not solve the problem.
Home owners tend to be more conservative than renters. Part of it might come from having to write checks to governments to pay for school taxes, sewer taxes, local govt taxes, etc
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