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.
There is also nothing sacred about a 30-year, fixed-rate, 20% down mortgage, and it is ridiculous to say that anyone who can't afford one of those has no business buying a house. I congratulate anyone who has one, but if you put thousands of dollars into a house that could have gone into higher-yielding investments, you were stupid. You probably can't sell that house now and get that money out of it. If you missed the recent runup in home prices because you were too scared to buy into it with only 10% or 5% down, you were stupid. The only reason to put down big down payments on a house is to reduce the amount you have to borrow. That made little sense when you could borrow at 5 or 6 percent interest to buy a house that was appreciating at 9 percent. There are a lot of very smart people who made out like bandits buying homes with little money down and then selling them a few years later. Many of these homes were fixed up and flipped, which also improved neighborhoods. It's too bad the housing prices have stopped going up so this can't happen in many places anymore, but people who took advantage of easy credit and rising house prices were not greedy bastards, they were smart investors.
Markets can be cruel. What looks like the smartest financial decision today can look bad tomorrow. It's annoying to listen to some of the smugness from all the Monday morning quarterbacks.
Interest rate cuts are not the answer for everybody either. Such cuts hurt seniors who depend on interest income to augment their social security. And there are a lot of seniors out there, including me, who will not look kindly on having their income reduced through no fault of their own. In fact, if it were not for people who have scrupulously saved money, and banked it over the years, there would be less money to be loaned out to prospective home buyers.
See post # 62.
You know, just because someone didn't sell at the top of the market doesn't mean they are going to lose money in the deal. I bought some stock back when it was $30 per share. It touched $45 per share earlier this year, though I held on. If I were to sell it today at $41, I guess someone could claim I lost $4, yet I would really make $11.
Just because Notary Sojac perceives a price as a "bargain" doesn't mean he's cheating anyone.
“Sorry, but I know a lot of first time homebuyers who have struggled to buy a house in recent years”
I agree and have compassion for the first-time homebuyer that struggled to buy a house. If they purchased prudently and cautiously, they’ll be able to move up in a few years.
If they overbought and are now upside-down in a house they can’t afford, then they will learn a valuable lesson out of this.
Anyone who is adversely affected by the declining market, no matter how stupid or greedy or unlucky or naive they were to get themselves into this situation will be able to recover.
It will take time and delayed gratification, but everyone can recover if they are willing to take the effort.
We had our rate hikes last year, 17 in all. Rate cuts will follow and it will be the answer. The fed has made it clear that it will do everything in its power to prevent a financial crisis, and that will include rate cuts. You can't always just hike rates. You have to cut when necessary. It may be bad short term for those who live on interest, but it is the reality of our economy.
That can and will recover if the fed acts and minimizes the downturn. The vast majority will weather the storm if we only see the 1-2% drop we are currently seeing. But if we had a stupid fed, which it by all appearances we do not, they could shut down the housing market and we could see double digit declines which would cause millions to bail on their mortgages. I am glad Ben is in charge. He seems to be calming the seas.
Despite the waling and nashing of teeth from the markets and speculators I do not think a cut is needed right now. With an eye to inflation, I say wait and see what shakes out around November.
Kind of Gets it.
1) She’s right that a huge government bailout of mortgage holders will only encourage further reckless mortgage lending practices and set us up for yet another one of these disasters 10 to 15 years hence. If stupid doesn’t get penalized, it becomes the policy instead of the exception.
2) The reason people took these no down payment loans was because they wanted a short cut to home ownership. Saving up a 20% down payment on a $350K property isn’t beanbag. That’s a heck of a lot of most people’s paycheck that could be spent on the fun things in life instead. Some John Edwards of a mortgage banker figured out that if you promised them to let them have their cake and eat it to, he could then vicitimize the gullible.
3) But let one thing be clear, the gullible don’t deserve to weasal off the hook for having shown totally worthless judgement. More importantly, the financial institution that put the John Edwards in question up to these stupid ethics tricks deserves to have a ledger full of non-performing loans. It should sued, sc***ed, and painfully tatooed. Pain, in this case, would be both condign and educational. It’s the only way the postmodern ethical sleaze gets taught the fundamental difference between what’s wrong and what’s fun.
4) Where this woman lost me, was when she started taking joy in seeing these people go bust. No one should enjoy that. It’s one thing to let consequence take its course, it’s a whole different ball of wax to derive schaudenfraude from the fates of those truly rendered miserable. Karma keeps meticulous books and has a way of behaving like an assertive female, with coarse manners, and a vindictive streak that’s a mile wide.
Perhaps Mrs/Ms Garza should go check the holdings of her retirement fund when she gets home from work. Let’s see her dance in the streets over that one.
Actually, over 75% of the population has “prime” credit - over 620 FICO score. You just don’t hear about them.
That’s good to know. But they should still put about 10% down.
If you like sound financial markets and an economy that doesn’t swirl down the commode, the answer to that one is affirmative.
Take 50% of potential buyers out of the market and push the average age of first home purchase to 52?
Yeah...that’ll help.
/sarc
10% I would agree on as a rule of thumb, but I still think 0 down should be available to creditworthy people. At least if they have some assets.
Did you get those results from putting data into one of Michael Mann’s climate models. I ask because they seem hyperbolic and completely athwart reality.
But, what percentage of Mortgage loan officers were not prudent as you have been during the past 10 years, especially the past 5 years? I’d say, most mortgage brokers are out the make the bucks with loan programs offered to those that didn’t qualify the norm. The entire industry needs to be cleaned up.
I can’t say the numbers are perfect, but I can tell you based on 8 year in the business that’s probably not far off.
Lots of people have 10% down. Few have 20, and even if they do, probably shouldn’t.
Why spend every last dime you have for a down payment? Then you’re broke if something happens.
So it’s OK for people to take interest rate cuts in their stride, even though they had nothing to do with the reasons for it?
We seniors have to take the hit for people who couldn’t afford a house but had to have one anyway?
Gee, that’s fair.
You took the 17 rate hikes in stride. If the economy heats up, I can support hikes. But right now, it calls for rate cuts.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.