Category: mortgages

Where’s my piece of the bailout pie?

Home sweet home
Home sweet home

So, let’s see … if I understand it correctly, I’m eligible for mortgage assistance under Obama’s new housing bailout. I bought this house two years ago and its value has been dropping ever since. That puts me “under water” on my mortgage, since almost nothing I’ve paid in these first two years has gone toward paying down the principal. Interest rates are lower now, but I can’t refinance because I still owe more on the house than it’s worth.

I guess I should be getting my stimulus money pretty soon, or a lower mortgage payment, or something. Sure I qualified for my loan and I can still make my payments, but the market keeps going down, so I’ll be glad to accept any help I can get. Never mind that you other taxpayers out there are going to end up paying for it. Of course, your home values have been dropping too, so we all may just be passing the money around in a circle.

As for the woman I saw on TV just now who was saying owning a home is a basic American right … wrong! Home ownership is not an entitlement. If you can’t afford the payments, if you can’t keep making the payment every month, and especially if you can’t qualify for a normal loan in the first place, you can’t buy a house. When you save enough money for a down payment, establish a decent credit rating, have a steady job so you can make your payment every month, and then qualify for a loan you can afford, then, maybe, you can buy a house. It’s not something you’re entitled to just because you want it, or just because you have a family, or just because you have a job. Nor is it something you’re entitled to keep just because you’ve lived there a few years. If you lose your job, if you fall behind on your payments, if your interest rate goes up and you can’t afford the higher payments — that will be sad. But it won’t entitle you to stay in the house.

moneypile1.jpgHome ownership is a privilege, a huge financial responsibility that not everyone can afford. It may be the American dream but it is not a right or an entitlement. I don’t pretend to understand the details of this latest mortgage bailout or whatever it is, but I firmly believe there are a lot of homeowners out there who had no business getting into their mortgages in the first place and who don’t deserve taxpayer-funded assistance to stay in their homes.

Maybe I’m hopelessly out of touch. I bought most of my homes in an era when you had to present all kinds of documentation and proof of income to qualify for a mortgage, and then lie awake for several nights while the mortgage company processed all the paperwork and checked out you, your docs, and your credit rating. I remember the celebration when the loan on “the perfect house” was approved; I remember the tears of disappointment and flowers of consolation from the hubby when a loan was denied.

I hope someone is minding the store, that someone understands what needs to be done to steady up our economy, and that whatever is done is more or less the right thing to do. I fear that no one understands what needs to be done and that whatever is done may well be the wrong thing.

Note: You can go here and tell the White House exactly how you feel about this or anything else.

The bailout boondoggle, GM, and me me me


The Great Bailout of 2008, ill-conceived and hastily enacted in early October, is continuing to implode. $700 billion, more money than most of us can imagine, is half gone, Treasury Secretary Hank Paulson has unilaterally changed the rules for its distribution, and the oversight committee has yet to be named. This, you’ll recall, is the bailout that we absolutely, positively had to have “this week” or the U.S. economy would go poof.

Originally the bailout was intended to help America’s financial institutions survive their own poor business decisions — all those subprime mortgages to home buyers who clearly could not afford them — and help those same buyers keep those homes. It became apparent in short order that the banks were not spending the money as intended. Not surprising, since there weren’t any rules in the bill. Oops. What they were doing instead was paying huge bonuses to their execs, dividends to their stockholders, and, in the case of AIG, footing the bill for execs and their underlings to continue going to lavish “business meetings” at fancy resorts.

Reports of foreclosures continue; reports of homeowners being bailed out have been non-existent. Yet now the discussion is swirling around a bailout for General Motors. GM, we’re told, employs one of every ten workers in the U.S.; GM must be saved.

Baloney. GM has been a bloated, failing corporation for decades. While Americans turned to high quality, fuel efficient, stylish foreign cars — and usually paid a premium for them — GM continued to produce giant, gas-guzzling road hogs of questionable quality. They were slow to react to public demand, slow to improve their quality, slow to produce more fuel-efficient cars. Sure, maybe their quality is better now, maybe up-to-date high-mileage cars are going to be rolling off the assembly lines next year. But it’s too little, too late. Businesses that don’t respond adequately to consumer demand and market conditions either fail outright or go into bankruptcy. It happened to the airlines, and the ones that scrambled fast enough are still in business. GM needs to do the same, or die trying. Like the dinosaur it is.

And no sooner had GM stuck out its corporate hand (“we’re a financial institution too; we finance cars”) than the cities of Philadelphia, Phoenix, and Atlanta followed suit. How a city qualifies as a financial institution in need of a bailout isn’t clear, but hey, free money is free money, right? Let’s all get in line for a bailout. We can all use some financial assistance, right? My mortgage still needs paying off and a fat annual government stipend would help ensure I don’t go bankrupt in the coming years. Grandmothers are vital to America’s future, after all. Where would you be without a grandmother? Everybody has one. Two, in fact. You wouldn’t exist at all without grandmothers. That makes grandmothers far more essential than GM.

Home ownership is a responsibility, not a right

These days we have politicians of all stripes promising help to homeowners who’ve gotten in over their heads. Can’t pay your mortgage? Just hold out your hand. The government is coming to the rescue.

Rescue? From your own irresponsibility in buying a home you couldn’t afford? From your own failure to plan for the escalating mortgage rate you signed up for? From your speculation in the housing market that you knew full well was a risky investment? (It’s called “speculation” for a reason.)

What makes you think you deserve that mortgage? What makes you think you deserve to keep that house? You have no basic right or entitlement to a home, to have one given to you by the government or by anyone else. You have no inherent right to a reduced, renegotiated, or forgiven loan. You paid your money and took your chances. Your loss is not the government’s responsibility and it certainly isn’t mine as a taxpayer.

Generations of American homeowners have scrimped and saved for down payments to buy homes they could afford. Down payments of up to 20%. Those same homeowners expected to pay off those loans, and did, at the terms agreed upon by both parties. If they had to sell the home, they knew their profit or loss might depend on the vagaries of the housing market. That’s the way it’s done, people. Purchasing a home is a big decision and a major financial commitment. If you can’t afford to do it, you don’t do it.

Jonathan Hoenig over at Smart Money called these homeowner bailouts immoral, and I agree with him. They are unfair to the responsible homeowners and taxpayers who have to pay for them. They encourage the irresponsible financial behavior of the bailout recipients and legitimize the idea that a contract is a meaningless piece of paper. They give substance to the notion that somehow every American is entitled to own a home. They foster the idea that the government (aka your fellow taxpayers) will bail you out if things don’t go your way. Those misconceptions imperil our economic future and need to be squelched — now.

Let’s reward bad decisions and predatory lending

President Bush announced the subprime mortgage rescue plan today. It will freeze those subprime rates for the next five years!

That means the guy who signed for that 3% loan is set for the next five years, while I continue paying 6.7%. I’m not the sharpest crayon in the box, but somehow that just doesn’t seem fair. Why can’t I have 3% for five years!?

Also saved from some expensive foreclosures are the predatory lending institutions that issued the subprime loans. (Presumably the sales reps who promoted the loans are long gone, fat commissions in hand.) So, in effect, the lenders are being rescued/rewarded too. Frankly, I think they deserve to lose their shirts for preying on unwary buyers.

Of course I’m glad I’m not embroiled in the whole mess, aside from watching my home’s value continue to sink while the nation’s economy slides toward the brink. I sleep a little better at night, knowing the sheriff won’t be pounding on my door tomorrow with an eviction notice. But I’m still angry.