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1

exactly. any bailout for banks and people that made bad mortgages only prolongs the hurt for people that didn't make poor decisions.

1. bailout (rate freeze specifically) keeps prices artificially high
2. bailout costs all tax payers money but without a benefit for those not distressed.

Posted by Bellevue Ave | April 15, 2008 11:53 AM
2

Renters shouldn't be the only ones pissed off. What about people who bought a reasonable home and went with a 30 year fixed loan at a higher payment? They are going to be screwed over because they did the responsible thing, got the fixed loan, and now not only will be paying a larger monthly mortgage, but their taxes will go toward artificially lowering the mortgage payments of people who signed up for risky mortgages. I bet there will be plenty of folks on the 30 year loans that will wish they signed up for the ARM, then save $500 bucks a month, and get bailed out by the Feds and taxpayers.

Posted by Poll Watcher | April 15, 2008 11:55 AM
3

And the really sick thing is that all 3 presidential candidates support some form of bailout. Our country is one giant moral hazard.

Posted by Providence | April 15, 2008 12:08 PM
4

well, that bob is easy to hate. but some people who could barely afford a small home are in the same predicament. they are little easier to feel sympathy for.

i have more of a problem with us bailing out these corporations, where many of the decision makers made bank and got out, or will benefit from these funds.

Posted by infrequent | April 15, 2008 12:11 PM
5

Anytime I start thinking about this whole situation, my blood starts to boil. I have no pity for those people that didn't do their research and bought WAY beyond their means. Fuck them. Because of their poor decisions and those of the banks, responsible people such as myself are now priced out of the market, especially with the rise in difficulty of securing a loan these days.

I look forward to a return to sanity in the housing market, but a bailout will ensure that doesn't happen for at least a decade.

Posted by T | April 15, 2008 12:15 PM
6

Okay, I gotta tell you, yes, there are a huge number of idiots out there who don't deserve a bailout, but the other side of this is that mortgages have become so ridiculously complex that a Truth in Lending Act statement is worthless to anyone but the professional who drafted it.

Take the option ARM. You're given four options. One says it's interest only, another says it's also interest only, one includes some principal, and the fourth is the actual, real 30 year, amortized payment. The difference between the first two is that one is "interest only" paying only your teaser rate, and the second is the actual interest only, which is the 2% interest you were told about, plus the margin, which is 7-11% additional. Pay the first, and you're in negative amortization, meaning that your debt is actually increasing each month.

Your loan officer, who gets paid based on commission, knows that with your income, you can afford a $150,000 condo. Assuming he's taking 2 points, he's getting paid some portion of $3k. Now, he wants a home of his own (financed with a 30 year fixed, of course), so he plays with is fancy calculator, and suddenly, you can pay the first option of that option arm, and get a $600,000 house. Now he's making some portion of $12k.

I'm licensed. I understand what the hell I just said. But you're average Joe sure as hell does not. He's just been told, "Interest rates are low, and you can make payments of this size on a loan of this size."

If there were just 15 and 30 year fixed rate mortgages and people fucked up, no, there would be no justification for any bailout for anyone. But millions of people were outright lied to using products that require a special calculator to understand. They need some help, and finding a way of turning their mortgages into a fixed rate plan at a reasonable interest rate ain't a bad thing to do.

Posted by Gitai | April 15, 2008 12:15 PM
7

calculatedrisk.blogspot.com remains the most fabulous digest of housing and economics news and analysis e-verr. Their comments have the best signal-to-noise ratio on the whole internets.

Today's news includes this morning's DataQuick report that Southern California homes are now fetching April 2004 prices. Orange County prices are off 20% since just last year. In Riverside county, more than half of all sales of existing homes are foreclosures. In LA county it's almost 29%.

Posted by tomasyalba | April 15, 2008 12:19 PM
8

This is overly simplistic and completely ignores the confusion and deception involved in home loans.

Anyone who has bought a house or condo will tell you that the loan process is confusing and arduous. It isn't like getting a car loan. There are packaged mortgages of 2 or 3 bundled loans that essentially allow people to borrow 100% of the cost with virtually no money down; there are adjustable rate mortgages that can go up dramatically over time; interest-only mortgages that never actually pay off any of the loan amount; reverse mortgages that borrow money against an existing house, getting deeper and deeper in debt; home equity loans to buy other junk that put liens against your house; and so on.

Unless you have a degree in economics, most average home buyers don't understand the loan process at all, and completely rely on the lender to guide them. If the lender tells them they can afford a $400,000 house, most people will completely rely on that as truth, and buy a $400,000 house. Almost nobody will say "no thanks, that looks too risky, I think I'll stick with $300,000". Most who get an adjustable rate loan have no idea what the potential future payments might be. Sure, they know it can go up, but only in a vague nebulous way, and most figure their income will go up over time too, and they'll be fine. Multiple bundled loans are confusing even to savvy buyers.

The average home buyer assumes that the bank won't loan them money if they can't afford to pay off the loan, therefore if the bank gives them a loan, it must be safe.

Sure, there are buyers like "Bob" who knowingly buy more than they can afford, and take out highly risky loans. But there are a lot more people who simply do what the mortgage lender tells them, having little or no idea the financial risks involved.

First, we need much stricter regulation on the mortgage business, so that people aren't scammed by deceptive lenders and confusing loans. This whole problem would not have happened if more people had a better understanding of what they were borrowing.

Since the government failed to provide adequate regulation, I think people who have been duped by deceptive loan practices are owed some sort of help. No, we shouldn't simply pay them off. But providing some sort of method to refinance or restructure their loans in a way that they can afford to pay them off, as they initially thought they could, is not unreasonable.

Posted by Reverse Polarity | April 15, 2008 12:22 PM
9

The other thing that needs to be fixed is how people involved in real estate are paid. Everybody involved, from the lenders to the real estate agents, to the escrow companies, are all paid on commission. A percentage of the price of the home. The more you pay for a house/condo, the more they get paid. All of them have a financial incentive to get you to buy the most expensive house/condo they can.

There are certainly some ethical lenders and real estate agents out there. But this kind of pay structure just invites abuse by lenders and agents without any ethics.

Simply saying "fuck you" to buyers who are getting foreclosed on does not solve the problem.

Posted by Reverse Polarity | April 15, 2008 12:35 PM
10

Reverse Polarity, why doesn't saying "fuck you" solve the problem? The whole point of angry renter is that he's angry & justifiably so. He wants some other people to learn a hard lesson. The alternative is for him to learn the hard lesson: don't ever ignore a bubble, when it pops just try to be part of the "too big to fail" (whether because you're a huge bigshot like Bear Stearns or because you've collected enough like-minded jerks to be a collective big shot like the folks in default.)

So the renter hates these people. Then the next question is, what do the real Americans (aka home owners) think? They want to bail out these guys to prop up their home values.

But is that really going to work? We've got a financial perpetual motion machine. Somehow we can tax on the one hand issue stimulus on the other hand and the economy will just keep growing. I don't buy it.

Posted by daniel | April 15, 2008 12:46 PM
11

that AngryRenter site is run by FreedomWorks. not grassroots, astroturf.

Posted by ironymaiden | April 15, 2008 12:52 PM
12

I'd support some sort of method to let people walk away from these mistakes and not take permanent hits to their credit rating. But the fact of the matter is that many of these buyers bought homes that they simply could not afford. Sorry, but I live in a shitty 450-square-foot apartment, because I recognize that's the best I can afford. I sure as hell don't want the government enabling people who make the same income I do to live in homes that are way too big and too expensive for them.

Posted by keshmeshi | April 15, 2008 12:55 PM
13

Most of the people in Bob's situation need to think long and hard about just walking away. That's it. Just drop the keys in the mail, and be done with it. Credit score be damned.

If Bob feels that the banks lied to him, *forcing* him to sign on the dotted line, then fuck em. Walk away. Let *them* deal with a depreciating asset.

Maybe Bob can buy that same house back from the bank at 50% off. To me, that sounds much better than a bailout on the backs of SMART taxpayers who made PRUDENT financial decisions, or renegotiating into a 30yr-fixed, or busting your ass to make payments on a house that you paid *way* too much for and shouldn't have bought in the first place.

Gitai and Reverse Polarity make good points- the average person honestly believes that their REALTOR(R), mortgage broker, etc. has only the customer's best interests in mind. With their salary dependent on you buying the most expensive house you can (or can't!) afford AT ANY COST, then that common belief can't be further from the truth.

Posted by happy renter | April 15, 2008 1:00 PM
14

It's true. Oh lawdy, lawdy!! when homeowners lose their homes. When renters lose theirs, not a fucking belch do you hear. And don't even get me started on the tax breaks.

Posted by Bauhaus | April 15, 2008 1:00 PM
15

daniel @10,

Saying "fuck you" to borrowers ignores the fact that many of these borrowers were deceived into these loans. They weren't being irresponsible. They sincerely thought they could afford the loans, based on the information the lenders gave them. It ignores the fact that this happens because of weak regulation. It ignores the fact that everyone involved in the process of buying a house or condo has a financial incentive for them to spend too much.

I've worked in this industry in the past. I can tell you that for every irresponsible "Bob" out there, there are 10 people in financial trouble because the lenders deceived them, and everyone around them pressured them to buy the most expensive property possible. Their foreclosures are completely enabled by the very people that gave them the loan in the first place, and our lax government regulation.

Posted by Reverse Polarity | April 15, 2008 1:05 PM
16

@15: These people were 'deceived' because they made NO effort to seek INDEPENDENT, UNBIASED information. That's like walking onto a used car lot and believing the dealer when he says that the cherry little 4-door in the corner was owned by a little old lady who only drove it to the grocery store once a week.

Posted by happy renter | April 15, 2008 1:13 PM
17

People who make a conscious decision to live beyond their means do not deserve to be bailed out. There are existing bankruptcy laws to help them out.

The banks that made the loans do not deserve to be bailed out. They made a conscious calculated risk by loaning money to people who can't really afford it.

There are many responsible homeowners, like myself, who don't put themselves in tenuous situations. We don't want to bail out the irresponsible people either.

Posted by Trouble | April 15, 2008 1:13 PM
18

reverse polarity; mortgage fraud on the part of realtors and lenders doesnt add up to a bailout for those deceived. not when it that money is taken from other tax payers not harmed by the actions of the two in a contractual obligation.

Posted by Bellevue Ave | April 15, 2008 1:15 PM
19

Mortgages are for grownups, m'kay?

You don't borrow six or seven times your yearly income without making damn sure you understand the terms and if and how you can pay it back. If it sounds too good to be true...

Even so, nobody's ignoring the fact that people may have been tricked by crooks in the real estate and mortgage industry. We're pointing that it's not the crooks who are being asked to pay, but the people who saw through and didn't get involved with the crooks!

Posted by Brad | April 15, 2008 1:28 PM
20

Bellevue Ave @18,

It wasn't fraud. Most of what was done was perfectly legal under the current regulatory environment. The lax government regulation is a large part of the problem.

I just think that since the government holds part of the blame for the problem, the government needs to be part of the solution. The lax government regulation is part of what allowed this to happen, and the government needs to be part of helping those people who were deceived.

It strikes me as unfair to just say fuck you to people who legitimately acted in good faith under the current government regulations.

Posted by Reverse Polarity | April 15, 2008 1:40 PM
21

I'm not opposed to bailouts, but they have to come with conditions: lenders who lied, manipulated, coerced, or otherwise fooled borrowers into taking bigger loans than they could really afford should go to prison. Until and unless we hear that people will be punished for their illegal and unethical behavior, there should not be any bailouts.

Posted by Greg | April 15, 2008 1:47 PM
22

@15 You keep talking about borrowers like they're not at fault in any way. The mortgage business is definitely confusing, which is why I'm taking the time to do my research and get educated so I don't fuck up what is likely to be the largest purchase of my life. The vast majority of the people in hot water at this point are in that situation because they didn't make the effort to know what they were signing. Instead, they took a complete stranger's word that they could afford a home that was well beyond their means, and now they're all in a shitty situation because of one simple reason: greed.

Posted by T | April 15, 2008 1:49 PM
23

so if no crime was committed and people can't afford their homes anymore, then why should they get compensation from other tax payers and citizens for entering into an agreement they a. didnt understand b. didnt try to understand?

i dont see how it's fair to raise compensatory funds from people that had no hand in the poor decision making of other people, and will only be hurt by a. raised taxes b. sustained high home prices.

Posted by Bellevue Ave | April 15, 2008 1:51 PM
24

and sometimes people that act in good faith but don't understand what they are acting upon should get fucked. serves as a lesson to other people to "read the fine print"

Posted by Bellevue Ave | April 15, 2008 1:53 PM
25

Its the BANKS that should be helping the schmucks they conned into these loans. Its in their interest, they don't want that house back at a loss.
I'm one of those dumb fucks that did the responsible thing and got a 30 yr. fixed, sitting here watching my equity evaporate, but still playing by the rules and paying my bills like a good Amurican should. Any bailout by the government better include parting gifts and bonuses for the ones who followed the rules or I'm going to be one PO'd motherfucker.
But really, the gov't should encourage (read- force) the banks to suck it up.
It's all their fault after all.

Posted by Daniel | April 15, 2008 2:01 PM
26

Toward the very peak of the bubble, we saw baristas, highschool dropouts, homemakers, and everyone inbetween jumping onto the 'real estate professional' bandwagon. They sold houses, wrote loans, and flipped homes. Why? Because there was a metric fuckton of money to be made. Most of these people were NOT actively deceiving people. But they bought into the notion that *must* be broken: real estate always goes up. When you have Uninformed Moron A (homebuyer) who believes every word that Uninformed Moron B (REALTOR(R)) says, the house of cards continues to build higher.

Posted by happy renter | April 15, 2008 2:05 PM
27

Purchasing a home is the single most important financial investment that a majority of individuals will ever make in their lifetimes. Anyone who goes into such a huge decision-making process half-assed, unprepared, and willing to "take it on faith" that what they're being told is accurate and reliable information is not only stupid, but stupid to the point of being a danger, both to themselves and to their community.

As our current situation would seem to bear out.

Jeebuz, most otherwise reasonably sensible people put more time and effort into researching the cost-benefits of purchasing a wide-screen TV than went into their decision as to which type of mortgage to take on. Sure, it's a complicated process, but that just provides all the more reason for DOING YOU HOMEWORK. The idea that most folks were "duped" by unscrupulous, fraudlent or otherwise illegal mortgage brokerage schemes is pure, unadulterated bat-guano; when the deal looks "too good to be true", when your broker tells you you can purchase a house that costs six or seven (or ten or twelve) times your annual income - and do so by paying "only the interest", it doesn't take a freaking Stephen Hawking to realize something in the math doesn't add up.

But apparently, any natural skepticism that should have entered the minds of most of these folks was simply brushed aside, based on false promises, unrealistic expectations, and sheer greed - there used to be a word for people like that, I believe it was "suckers", and at one time most folks thought they deserved exactly what they got as a consequence for their rampant stupidity and avarice.

Of course, that was before most folks became the suckers they themselves once derided.

Posted by COMTE | April 15, 2008 2:07 PM
28

What COMTE said!

damn i wish i could articulate my thoughts better.

Posted by happy renter | April 15, 2008 2:19 PM
29

Yeah, it really sucks when my tax dollars go to help out individuals who are in dire straights financially. I worked hard for my money and I don't want it going to people who aren't as smart as me. Screw them, and screw the poor people on welfare. That's why I voted for George Bush...... doh.

There are plenty of reasons not to support a bailout (moral hazard, for one), but if you buy into the argument in this video now, be prepared to hear progressives attacked loudly with the same themes later.

Posted by oops | April 15, 2008 2:21 PM
30
But providing some sort of method to refinance or restructure their loans in a way that they can afford to pay them off, as they initially thought they could, is not unreasonable.

And what about people who purchased a home that they cannot afford, no matter how the loan is restructured?

Posted by keshmeshi | April 15, 2008 2:33 PM
31

Oops @29 : A housing bailout is totally anti-progressive.

The transfer of wealth here (and it will be enormous!) will be from younger people and poorer people who haven't bought houses yet (and don't get the attendant tax breaks, of home ownership, either) to older and wealthier people who have.

A homeowner bailout isn't just about saving those at the margins who are getting foreclosed on; it's about locking in decades of premature appreciation for everyone who currently "owns" a home, bailing out wealthy investors and speculators along the way, and doing it all with the money of those who weren't in on the Ponzi scheme.

It will be the next generation, now in college and high school, that will pay the most for this, in addition to the double whammy of still finding housing totally unaffordable if it isn't allowed to adjust downward.

Posted by Brad | April 15, 2008 2:37 PM
32

Well put, COMTE. Maybe it's just in my nature to not trust anyone else when it comes to *my* money. Then again, maybe it's just common sense.

Posted by T | April 15, 2008 2:45 PM
33

@29, why not start a charity where people can give of their own volition to help these people?

Posted by Bellevue Ave | April 15, 2008 2:55 PM
34

People are looking at this wrong. It's not about whether individual borrowers or lenders should be helped out. It's about containing the financial damage of the bursting bubble before we're all screwed. I'm in favor of any bailout that balances the interests of lenders, borrowers, and the public.

Where possible, the government should mediate between lenders and buyers to keep people in their homes with fixed terms and affordable monthly payments. When that isn't possible, people need to sell their homes at market rates. We need new regulations to stop the lying by lenders, and to encourage a return to lending standards of the past.

But if we do nothing, then we might very well be staring down the barrel of the worst depression since the Great one.

Posted by Cascadian | April 15, 2008 3:03 PM
35

If you relied on faith-based math to convince yourself that you could magically afford a home that was far out of your reach a year before you bought it, then you're just plain stupid. Perhaps seven years of living within your means and paying back a bit of your debt will help you avoid making the same mistake again once your credit is restored.

Taking money from people who lived less high on the hog to reward those who spent money that did not belong to them would be disastrous social and economic policy. Not only would it give Americans even less incentive to save and manage money wisely, it would put home ownership far out of reach for many who made the right decisions during the bubble.

Posted by Kerry | April 15, 2008 3:22 PM
36

You know, we've really lost touch with the concept of being responsible for our own actions in this country. Sure there are heartbreaking cases out there, sure there are cases of people being deceived, but isn't a lot of the problem right now people who purchased way outside their price range and took out a second mortgage so they wouldn't have to make a downpayment.

The whole point of home ownership used to be building equity, with no equity in your home it is the exact same thing as renting from the bank. And assuming housing prices will go up so you can make money is a gamble, these people decided to gamble and guess what they lost.

Right now they are paying the consequences of their decision. But if the government has their way, all of us will be paying the consequences.

And, as a homeowner who read my mortgage documents, put my 20% down and am now dutifully paying my monthly mortgage payments, that just pisses me off.

Posted by PopTart | April 15, 2008 3:31 PM
37

Right on, COMTE. The basics of responsible home-buying aren't a big secret, and the least someone planning on probably the biggest purchase of their lives can do is read up on the subject. I mean, those "For Dummies" people have to have a book, right? That's what I did, and yeah, my home isn't as big, new, or flashy as some people I know, but I'm not staying up nights wondering how I'll pay for it now, either. As for trying to alleviate the damage... it's already done.

Posted by kuzibah | April 15, 2008 3:33 PM
38

cascadian, any proposal that prevents the reset of housing prices to conform with credit markets will not prevent damage from the economy. far from it actually. trying to prevent a price level from conforming to the demand only creates other problems in the market.

foreclosures arent going to cause a depression. a prevention of revaluation of housing prices and a lack of liquidity in credit markets will. this has been the case for centuries; a boom in an asset peters out ,credit markets seize up, and intervention to prevent the price levels from dropping arent only ineffective, they only prolong the problem by passing the expense on to other people.

Posted by Bellevue Ave | April 15, 2008 3:34 PM
39

Some thoughts:

1) Some kind of bailout may be needed since this affects far more than just the housing sector due to "securitization" of housing loans.

2) Americans are profoundly uneducated about financial decisions. I'd like to hear a politician or two demanding high school and college level courses aimed at educating people about this stuff. I listened to a money advice show the other day and a caller asked "Should I cash out my 401(k) in order to make a down payment on a house?" Um, no.

3) Living on a sailboat and biking everywhere is certainly comforting while watching everything go to shit. Suckers!

Posted by Bob | April 15, 2008 3:47 PM
40

short term loans are misleading, but an interest only arm isn't?

Posted by infrequent | April 15, 2008 4:03 PM
41
Posted by supergp | April 15, 2008 4:29 PM
42

@36,

It's sort of like the chickens coming home to roost. Conservatives have been using the "personal responsibility" against poor people for ages. Middle class voters ate that shit up. And, now the middle class is getting hit by their own irresponsibility.

Posted by keshmeshi | April 15, 2008 5:01 PM
43

Except it's not just the middle-class getting hit, keshmeshi, it's also some of the pillars of Capitalism, namely banks and investment brokerages, the same ones who for the past 130 years or so have been touting the sanctity of the "free market", and yet who have now, for some inexplicable reason (!) decided that a big, fat government bail-out is just what the doctor ordered. And amazingly, the government, by way of the Federal Reserve, is just handing it over to them, no questions asked.

Any half-way sane person who continues to buy the line that the "free market" should be allowed to roam unfettered across our economic landscape is even stupider than those poor saps who fell for the no-interest ARM line. And any Capitalist with a dime invested in these same faltering institutions who continues to spew such clap-trap should be smacked upside the head with a brick.

Repeatedly.

Until he bleeds all over his expensive Italian loafers.

Posted by COMTE | April 15, 2008 7:59 PM
44

To all the commenters who are explaining how its the banks' fault, or the brokers' fault, or using Barbie's "mortgages are hard" line: Even if we all bought your argument that the buyers have zero culpability for their predicament, you know who else has zero culpability for their predicament? All the people who didn't buy, or bought smaller houses and financed them conservatively -- in short, the people whom you are asking to pay for a bailout. To justify a bailout, you not only have to show that the buyers aren't responsible, you have to show that the rest of us owe it to them to make it all better.

Oh, wait, I guess all you have to show is that you have more votes. So why even bother arguing about moral culpability?

Posted by David Wright | April 15, 2008 9:20 PM
45

Can someone reconcile voting for Obama or Clinton with voting for housing bailouts?

Iraq is a joke, but I'll take a term-long pullout over a housing bailout. McCain and Paul seem to be my only choices to avoid paying for mortgages I didn't buy.

(I write this from a rented studio, chosen based on affordability. For others, denial and wishful thinking were powerful drugs.)

Posted by Troy | April 15, 2008 10:34 PM
46

Brad @ 31: Right On! Propressivism is about transfering wealth to society's worst off. There is nothing progressive about transfering wealth to someone who really, really wanted to live in a McMansion but "only" made $50K/year.

Posted by David Wright | April 15, 2008 11:16 PM
47

It really isn't going to matter all that much who's in the White House come January Troy, because the bail-out is already under way. The Federal Reserve has already kicked out $100B to prop up the mortgage packaging industry, and will no doubt kick out even more, so long as every major banking institution in the country pleads for a handout to maintain solvency.

Everyone has got it into their pointy little heads that, if Bear Stearns for example were to go under, it would drag many of the other investment banks down with it. What it would really do is make them piss their collective pants as they scramble all over each other like maggots on rotten meat to not become the next in line.

But, because they've got so much at stake, and because the Gordian knot of repackaged notes has become so intertwined into our national banking system and financial markets, every major bank, brokerage and mutual fund has got at least one or two fingers in the pie, and all of them stand to take major losses if the whole thing unravels - which they SHOULD by rights, but that means all us little folks with modest investments in anything but cash savings accounts are going to take it in the shorts as well, no matter what happens.

The system is so completely fucked up that we're all fucked no matter what happens; if financial institutions go belly-up we lose; if they stay afloat, but take on additional debt, we lose; if they have to cut down on loan eligibility in order to maintain solvency, we lose yet again; there's just no win-win scenario that I can envision.

The only thing those of us at the bottom of the shit-pile of a mess we've got, who weren't suckered into taking one of the zero-interest ARM's can do is try our best to stay out at the fringes of the shit-pile, and hope we can avoid some of the larger clumps as they come rolling down on top of us.

Posted by COMTE | April 15, 2008 11:26 PM
48

As someone who has a 30 year fixed townhouse, I'm in the "going to be screwed by the bailout" camp.

Effective ad.

That said, most people DID NOT ACTUALLY READ THE FULL DETAILS OF THE MORTGAGE CONTRACT.

I'm one of those people who actually reads the whole thing before I sign it ... most people never do, and they really got taken - by the brokers and the banks ... and PARTIALLY by their own greed.

Posted by Will in Seattle | April 15, 2008 11:58 PM
49

Well, good for those of us who didn't try to buy something we couldn't afford. Unfortunately this is only so much rhetoric. The "angry renter" schtick only goes as far as to support some knee-jerk free market worship. A true "angry renter" might be inclined to bring up the absolutely rapacious rent costs that have been steadily creeping up in the past few years (especially in Seattle proper) and the low vacancy rate, making apartment-hunting almost a full-time job.

I guess this is just wishful thinking on my part. Back to fucking fantasy-land for me. This did come from Andrew Sullivan, so I'm not surprised.

Posted by Wackistan | April 16, 2008 1:21 AM
50

I have no sympathy for idiots who took out risky loans to buy stuff they couldn't afford.

BUT, the thing is, when they lose their houses, entire neighborhoods suffer. Their neighbors' homes lose value because of the many houses on the market. Empty houses attract squatters and create a crime risk. The local tax base is decimated and there isn't enough money to pay teachers, police, etc. Then, the damage spreads to other parts of the economy.

I'm like Sally. I wanted to buy a house but simply could not. But, I think there has to be some bailout to protect everyone.

Posted by miss_m | April 16, 2008 8:34 AM
51

Wow, I am not even going to read the comments above, for fear of what ignorance lies there.

JESUS FUCK YOU ASSHATS WHO MADE THAT MOVIE. FUCK YOU.

I am a renter and a responsible person, so I would not have gotten an ARM mortgage, and I worked in residential housing for a long time so I know people in mortgage, good people. SMART PEOPLE.

Most of the people who were taken advantage of, and YES THEY WERE!, were low income people with limited education. People who were bambozzled by Loan sharks.

If a doctor tells you something, you believe him right? He has your trust because it is his field of work. Some smart and rich people might get a second opinion, but many poor uneducated people dont know any better. Same goes for loans.

These hardworking blue collar people were mostly first time home buyers. People who never thought they could own a home, and they got suckered because of the lack of smart people regulating the industry (HELLOOOOO GREENSPAN YOU FUCK)

So yes, we should help these people out. We bailed out other countries in the 1997 Asian Crisis as I have pointed out earlier. If you want more destitute people, and more layoffs at banks, and many people losing their jobs, and the global market to suffer for years and year, then bitch about this.

But if you actually understand economics, then you understand the necessity of this, and how much less people will have to suffer.

And it has already fueled more regulation, so we are getting there.

But god fuck you assholes, who can't be bothered to help people who got LIED TO. You want to help the homeless, but you don't want to prevent it?????? Look at Ohio and you'll see how many new slums have popped up.

Posted by Original Monique | April 16, 2008 8:53 AM
52

you people sound like republicans: don't want to lose your welfare check? get a job!

yes, i don't have much sympathy for those who bought a mcmansion. but what about those who bought their first home for under $200,000? and wanted to live there for years?

who -- if they understood -- would take out a no-interest arm? who would do that? i say that if your primary home is less than, say $300, and you plan on living there, say at least 5 years, maybe you should be qualified for a bailout. because no one in their right mind would take out such a loan.

and this as i see the bailout: a fixed-rate loan to cover the entire cost of the house spread out over the time necessary to pay it off, even it it extends longer than 30 years. in other words, don't give them money, give them the opportunity to keep the house. or give them them the opportunity to sell for less (but more than a foreclosure) without taking a negative credit hit.

or are we not progressive???

Posted by infrequent | April 16, 2008 9:35 AM
53

Monique, I understand your frustration, but look at it from the perspective of those of us who DIDN'T fall for the scam - and that's all an interest-free ARM is - we knew it was unsustainable, and that people who didn't get out before the bubble burst would take it in the shorts. I've been telling tax clients for the past TWO YEARS to get the hell out of their ARM: sell the condo, renegotiate the mortgage, do ANYTHING to avoid the inevitable, because the people I knew in this situation were NOT going to be able to afford to pay their mortgages when the new rates kicked in after three years. They KNEW what they were up against from day one, and a couple of them actually listened to my advice, and got out while they still could.

The others were simply too smitten with the idea of home ownership to pay heed to the obvious warning signs. Now they're locked into unsustainable monthly payments, and several are probably just going to walk away from their dream, taking a huge loss as a result, because they continued to maintain some pie-eyed hope that somehow things would work out in the end.

The point is, this wasn't something that just snuck up on us - sensible investors, and expert economists have been screaming warnings to bloody blank walls for more than three years now, but few, including presumably smart investment bankers, paid them any heed. Everyone was too busy playing the margin, trying to squeeze out just a little bit more profit, or, increase their equity by just a small fraction of a percentage point more, before bailing out. And when it became obvious that we were already on the downhill slope as it were, EVERYBODY began bailing at more-or-less the same time, leaving us with the result we have currently.

And now, after missing the train, after pushing their luck, and with the inevitable crash not only looming, but actually happening before their very eyes, the FIRST THING people start doing, at every level of this debacle, is demand a bail-out to save them from their own mistakes.

Yes, it sucks that some folks got snookered by poor advice, shoddy mortgage brokers, or sheer greed and stupidity, but you know what? They had plenty of warning, AND a lot of time to minimize their losses, to change direction, to get out from under their onerous mortgages, or, sell off their dicey bundled mortgage packages, but they refused, despite all the clear warnings of what would happen to them if they didn't.

It's sad on many levels, yes, and it means a lot of otherwise good, nice, naive people are going to take serious financial losses, losses from which some may never completely recover. But, they're the ones who took the chance, who risked it all on the throw of the mortgage dice, and they are the ones who need to take responsibility for making their own bad decisions.

I truly do feel compassion for some of them, particularly those who were too young, too naive, too trusting or whatever to really know what they were getting themselves into, but, at the same time rewarding poor judgement, greed, or stupidity isn't the way to teach them how to make better choices next time around.

And furthermore, if we're just going to bail out everybody who ever makes such stupid errors, it just teaches those of us who DID play by the rules, who didn't engage in risky behavior, that WE'RE the suckers, because what's the point of making good decisions, if it means we still end up paying out of our collective pockets to prop up all those who made bad ones?

Posted by COMTE | April 16, 2008 10:45 AM
54

Interest-only loans are not the evil that everyone makes them out to be - if and when they are used properly.

First, interest-only maximizes tax deductions for people with other debt (such as student loans) that isn't tax-advantaged (because your family income exceeds the cap, which isn't all that high - low $100k for a couple).

Second, interest-only enables younger professional buyers (who have a reasonable expectation of higher income later on) to buy bigger earlier. The transaction costs of buying once, selling, then buying again, mean that buying something that will work for you and your family over the course of many years makes more sense.

Third, interest-only ARMs can be a good option for people with small children in daycare - the daycare expense is expected to disappear after children begin going to school, and that income stream can be reallocated to repaying principal.

All of that assumes at least a modicum of sophistication on the part of the buyer, and a willingness to accept three risks: that income won't go up (or be available to be reallocated), that house prices won't go down, and that interest rates won't spike at the end of the interest-only period of the loan.

That said, the lenders don't deserve a bailout because they were at the very least negligent in conducting valuations of properties, they exposed themselves to too much risk (zero-down or extremely low-equity loans), and they were the ones with sophisticated legal counsel, bankers and economists, so they can fairly be said to have understood the risks.

Many homeowners did not understand the risks, but somehow the media doesn't point out that the bankers - who were providing non-recourse loans with zero down, meaning the banks were on the hook for the entire amount of the loan if the buyer defaulted - were the ones taking the risks. The lenders' shareholders are the ones who are really taking the hit, and who are they?

The only reason to bail out the banks has nothing to do with who made the dumb investments - it's the fear of a contagion in the markets that will spread and caused a liquidity crisis that will spill over into the real economy. Whether that's true or not is debatable.

Homeowners could be fairly bailed out by forcing fair market value revaluations of homes and offering new government-backed loans at 100% of new independent and unbiased FMV appraisals of the homes. This would actually be a relatively good deal for banks, because it would get the assets off of the banks' balance sheets (at a loss, of course) without having to spend even more on foreclosure and the risk that the asset will decline even further in value, and it's a good deal for the homeowners because, even though they have zero equity, they wouldn't have the costs involved in getting out of the house and into a new apartment or home.

But that's just one opinion. What will happen is that the banks will get bailed out again (a Bush family tradition - remember S&Ls from the 1980s?) and the poor guy shafted (a Republican tradition). Yet again.

Posted by Ivan | April 16, 2008 11:09 AM
55

comte - what do you think about transferring arms to a fixed-rate loan to cover the entire cost of the house and arm spread out over the time necessary to pay it off -- even it it extends longer than 30 years -- for those who have an arm on their primary home if it's value is less than $300K and they live there at least 5 years? if a bank or lender was going down because of a lack of revenue resulting from this, they could qualify for a bailout loan from the gov?

Posted by infrequent | April 16, 2008 11:34 AM
56

i like the idea @54 as well... clean up this mess by helping. if the property forecloses the former owner and the bank both lose out when the property is resold. instead of giving the bank money, why not issue a new loan. even if it came from the gov it would be better than a bail out. the bank could take less of a hit, but they aren't getting charity from those who didn't fall for the scam.

Posted by infrequent | April 16, 2008 11:51 AM
57
progressive: making use of or interested in new ideas, findings, or opportunities

No mention of communal asset pools, nor of rewriting wishful thinking.

Posted by Troy | April 16, 2008 11:34 PM

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