Conservatives Assail Homeowners: Administration Says "Let Homeowners Go Under"

[Robbien]

http://www.americanprogress.org/issues/2008/02/homeowners.html

By David M. Abromowitz

February 28, 2008

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Imagine if President Bush, standing in New Orleans a few weeks after hurricane Katrina, had said to the nation: “It’s terrible that a disaster just washed away tens of thousands of homes, but my administration and economic advisers believe in the market and the market alone. Any direct government help is a bailout. Let’s just wait until the invisible hand of the market rebuilds this community.”

Most Americans would have found such rigid ideological indifference appalling in the face of the human tragedy caused by a natural disaster. Yet today—with millions of homes already lost to foreclosure and perhaps 2 million more families possibly being swept out of their homes in 2008—the Bush administration labels efforts to help communities drowning under a sudden deluge of foreclosed and abandoned property a “bailout.”

Treasury Secretary Henry Paulson says he is sticking to a Hoover-esque reliance on the marketplace to work itself out. President Bush threatens to veto any legislation that includes much-needed government action to help the housing market regain stability.

The foreclosure epidemic is a man-made disaster. Rapid unprecedented deflation in home prices in hundreds of communities around the country is not a natural result of benign market forces, but rather has it roots in a culture of underregulation that allowed largely unsupervised subprime mortgage brokers and lenders to take over the home finance market.

[morgan2]

1. I have to agree

the idiots who took bad loans and the companies that bought them failed, its not up to the rest of us to pay for their failures. Let the housing bubble completely burst and prices come back in line with what they should be. The people suckered into buying way over valued homes have to live with it.

[ixion]

2. it's tough love, but I have to agree

I looked at many houses during the bubble. I even went so far as to put an offer on a house. However, on looking at the fine print of the financing, I simply couldn't bring myself to pay 300,000 for a 150,000 house. Nope. That, and it was similar to buying a house with a credit card. I bought nothing, and I'm happier for it today.

[Robbien]

4. Many of the homes weren't out of the price range of the buyer

The predator brokers sold them mortgages which were over-priced.

The stories on the news are all about the McMansions being bought. That's bullshit.

Most of the subprime loans are taken out by good credit people who were suckered into bad credit loans by predators. Predators who were freely allowed to do business because the Bush Admin removed consumer protection laws from the books.

Even those buying McMansions were suckered by these predators into loans which were bad for them.

But go ahead, keep cheering for the predators. That will help get the consumer protection laws put back on the books.

[YankmeCrankme]

5. Except the lenders are being bailed out.

The government has infused bankers and lenders with enormous amounts of money to help them out. Without protection and help for individuals you're basically promoting economic darwinism. The large, powerful economic forces/businesses will eat up and spit out individuals. So, everyone is supposed to look for themselves only, dog eat dog, eh? Why even have government to watch for and try to correct predatory practices of business, you're on your own, right? Survival of the fittest, economically speaking.

[Warpy]

3. Relief is on the way via the courts

because there was a ruling just a few days ago that some of the ARMs, interest only, and other subprime loans were inherently unfair and should be rewritten.

Any loan that was 3% below the going rate for a prime, 30 year fixed mortgage or which reset within 3 years or less is presumed to be inherently unfair, the first for a bait and switch teaser rate and the second for too short a period for a large interest jump.

My best guess is that this ruling will stand. Homeowners who have stable employment should be able to convert their loans to a standard fixed rate mortgage at either the going rate now or the going rate when they were pushed into a subprime loan and at minimal cost to the mortgagee.

People who had no business trying to buy a house they could never realistically afford and people who were speculating on real estate will be hurt. I'm afraid little can be done about those. People who were sweet talked into assuming more risk than was necessary will come out OK.

[Extend a Hand]

6. well they might be able to keep

the house but it might not be in their best financial interest if they bought in a bubble market where values have declined sharply. I like Obama's plan that would allow bankruptcy courts to modify the AMOUNT of the original loan.

[Warpy]

7. That will eventually enter the negotiation, I'm sure

because with the mortgage resetting to 30 years after 3 years' worth of payments have been made, the lender will be capable of taking a small hit.

The only alternative is foreclosure and having another empty property to become attractive to vandals, vagrants and vermin.

[penguin7]

9. If the price of the home kept rising these would have been good terms

People were taking these loans not because they were hornswaggled. They were expecting(hoping) the price of the house would keep rising and then they could refinance on the increased equity with better terms.

I see any action to help homeowners causing a huge moral dilemna. The truly poor are not homeowners. And further the wealthy have more real estate yet. I do not see any way to help these homeowners without screwing everyone else.

[Warpy]

10. That was the bet they made, and it was a bad one

People in the red hot markets in California and some cities are going to get the shaft as house prices plummet. There is just no way around that. The prices have to drop and the people who bought during at least the last 5 years and probably the last 10 are going to feel it. The longer they've held a mortgage, the better off they'll be, as they've started to pay principal very slowly after the first 5 years.

The real problem will come with net worth. Even if people are keeping their houses and haven't used them as ATM machines, they're going to see their net worth and ability to leverage debt to buy cars or do repairs and renovation evaporate.

[Demeter]

8. Funny Thing Is, That's Exactly What Happened to NOLA

It's just that Boy George didn't come out as state it as policy. The market (with a little grease from developers) prevailed.