Very true (and a point I didn’t think about) but home prices in these markets are artificially low anyways. Keeping the glut of foreclosures in the market and letting this hypothetical home drop to $80k or $60k would simply support a reverse bubble in the other direction as home prices will remain artificially low for a while longer.
Plus foreclosed properties are not being taken care of and driving down the value of other homes in the area. If I am a bank, I would rather refinance the current owner for $100k than have him trash it and get $60k at a foreclosure sale. Sure, I could go after a deficiency judgment, but good luck collecting on most of those.
I’m sure there are some areas that are artificially low. There are also some places that are still artificially high. However, it’s my understanding that on a national level housing prices are pretty much back to their inflation adjusted norms.
The issue is one of moral hazard. If the government bears the brunt of poor financial decisions, then it increases the incentives to take risky behavior.
If the government bails out people whose house value tanked, then future decisions about house purchases will factor that in. Which will make people more willing to buy houses (if the price goes up, they get rich, if it goes down, the government bails them out), which will drive the price up.
This is yet another case of privatizing gains and socializing losses. I didn’t like it when the big banks were bailed out, and I don’t like it now, either. I think that people supporting this sort of thing should think hard about the general case of the Broken Window fallacy, and particularly the difference between the seen and unseen economic effects of subsidies. It’s easy to see that people who are underwater on their houses are hurting, and to want to help them. It’s much harder to see the people who don’t have houses, and would buy one if prices dropped again, and how they’re harmed by this market distortion, or to know how much this particular plan will affect future bubbles and prices.
I don’t really see this issue as something the Republicans and Democrats split on.
Without considering whether it’s a good program on it’s merits or not, I’m going to say the government should be building roads and defending the country and prosecuting criminals, and has no business dabbling in home mortages.
Given the circumstances, I see said dabbling as essentially compensating the victims of criminal activity, myself. But I hold a low opinion of gamblers masquerading as bankers. =P
IANAC, but supported interventions earlier. Right-wing Dopers told me my plan was bad: stupid homebuyers need to pay for their mistakes, while causing banks to suffer for making bad loans would be unfair. :smack:
Please note that the homebuyers who suffered most were those so “underwater” they had strong incentive to go delinquent. The plan you describe does seem a form of triage: Help the people who are hurting a little, but not those who hurt a lot. (Not necessarily a bad plan, but do let’s be clear that that’s the plan.)
Unlike the unneedful irresponsible people that liberals want to help.
Perhaps it is. I’d like to rephrase this and hold it up to your mirror, but am afraid I’d end up sounding snarky.
I love the quantification thing. It’s always ridiculous when it comes up.
Yeah, it’s easy to say people should know better, but buying a home is a complicated process that requires the aid of experts, and the experts were selling them bullshit that looked like gold. Someone duly intelligent and perceptive enough could have spotted it for what it was, but it’s ridiculous to assume everyone is perfectly intelligent and informed of all facts (or else should never do anything ever).
I’m perfectly happy to label “the homeowner should have known better” as blaming the victim. They got used.
Why don’t we pro-rate the responsibility based on each actor’s experience in the market? Banker - thousands of transactions a year. Average Homeowner - under 10 transactions per lifetime.
Ok, strike that. How about we just drop the morality play that is all on the homeowner to be “honorable” and hold up his end of the contract?
So you know “The Man” somehow screwed these poor folks, but you won’t go out on a limb and hazard any guess as to any responsibility the buyer had?
Should the government assign a financial expert (at government expense of course) to every person that wants to buy a house?
I concur that this is a complicated process. I got that idea when I had to get just about all my financial documents together that I had better get my stuff in one sock. Did some research, asked around, got a lawyer. I learned that when I signed my name about twenty times when I purchased my first house.
But if one bears no responsibility for this, the biggest purchase most of us will ever make, where does the abdication of responsibility end?
I know you think this is a ridiculous exercise, but I’d be interested to know if you think they had any personal responsibility at all.
The homeowner should bear 100% of their decision, not sure why we keep going down this path that has zero relevance to the HARP plan.
All this plan would do is relax some qualifications, specifically the appraisal which is THE problem and allow homeowners with good credit who have not missed a payment to simply take advantage of the same rates as anyone else with good credit can get who are not underwater on the Loan to Value of their home.
We keep complicating this and talking about handouts, taxes and bailing people out, when none of this is even on the table. It seems to me that if a republican had sponsored this bill initially we would be having a different discussion and that speaks volumes for the very problem we see in congress today.
Does that apply to the banks too? I seem to recall some HARP like program signed by a recent non-socialist president that helped banks out when some of their business decisions didn’t turn out so well.
These are business who took their own money and wrote big fucking checks to buy up loans to people who couldn’t pay them back, who told them to stand tall and have a pair when those loans went to shit?
I’d be perfectly happy with a system that caused mortgage brokers and loan officers to be held to the same standards as the lawyers and real estate agents involved–that is, held to a duty to be honest, truthful, and generally on the side of the consumer whose agent they effectively are.
Personally, when I went in to buy a home (which I didn’t end up doing because I smelled fish, but I’ve taken college courses in finance and business too), my lawyer and real estate agent both told me the details of the mortgage were up to the bank and they were the experts. The banker told me how much he thought I could afford and what terms he thought were best, while presenting himself as a financial expert who had my interests at least partially in mind.
At that point, I believe that IS a level of personal responsibility, and if the banker then sells me a ARM balloon loan and soberly assures me I’ll be able to cover the payments, he’s got some responsibility for that.
They did. Most of them probably exercised their limits of their knowledge in trying to be cautious. And then they got suckered by the people with vastly more knowledge than they.
If it’ll make you feel better, I acknowledge they had some minimal responsibility that sits in the vast shadow of the bankers’ responsibility. Certainly they don’t bear enough responsibility to be left homeless when they could make a reasonable payment, just not the one the mortgage lenders tricked them into.
Bosstone - and I know this must amaze you - but no amount of the vaguely-defined “banker knowledge” can ever, in any universe, change what people can afford to pay. That’s entirely, always and everywhere, on the resources of the home purchaser, and nothing the banker does can change that.
At worst, and this is actually what happened, banks foolishly lent people more than they should have. But nothing they did or did not do magically persuaded people to make bad choices. They simply lent too much to people they shouldn’t have, and in that they were neither more or less guilty than the everyday fools who bought more than they could afford, or the government which was eagerly pumping the spigot into an-already inflated market.
Therre’s no mystery, no conspiracy - not convenient villain to identify. Just ordinary human greed writ large. The poeple who supposedly have so much trouble now - did they actually stop to think, even once, about what they could actually afford, or what might happen if they lost their job, or had some other difficulty? Because that can happen no matter what the economy is like. Houses are not investments; they tend to lose value over the long run, barring some unusual exceptions. If you’re counting on your house to increase in value to somehow break even, you’ve already gone far down the Road of Incredibly Stupid Financial Choices, which usually dead-ends at Bankruptcy Street.
