I’ll say it. This is the fault of the government. These loans should not have been made or backed and were part of a HUD program to put low-income people in houses. I was looking through their site for information on Section 8 housing and it’s quite an eye opener what kind of programs are available.
I found it very disturbing to hear Maxine Waters sing the praises of how successful these programs were for getting minorities into homes. This was said during a financial crisis that was caused by defaults on home loans. HELLO
What I’m hearing from a local real estate agent who is a dyed in the wool Republican considering moving to Australia if Obama is elected is that the sub prime mortgages were going to richer people re-financing in shady ways. Who is more likely to be granted a loan on his own say-so? Joe Six-pack or Mr. Suit and Tie?
Can I ask exactly what it is he hopes to find in Australia that he’s not going to find here? A more conservative government? Fewer social programs? A stronger market? I’m curious.
On MSNBC on Morning Joe one of the pundits said it wasn’t because of the lower income programs; they were making their payments. He said what happened is that those ‘modified’ regulations were co-opted by the market in general and allowed the upper classes to purchase second and third homes and to try and ‘flip’ houses, many without any documentation or money down.
It was that group of people that walked away from the properties or purchased more than they could handle in hopes of a big payday.
I wish I could find the link, but there was a cite that showed that the majority of those first time, low income buyers that were given ‘modified’ lending, were those most stable of the group. They were purchasing homes, not investments and did what they could to keep them.
If I have a program that works well within the scope it was created for and someone decides to bastardize for their own personal gain, I fail to see why it’s the program fault or the fault of the group it was created for and not the fault of the people who abuse the system.
Your anecdotal story aside, where is the connection between the loan and the loan FAILURE? Common sense would tell you that poor people who cannot afford a house in the first place would be represent the lion’s share of defaults.
Common sense would tell me that someone who is buying a home, especially if they thought they’d never ever be in a position to, is more likely to sacrifice to pay for it.
Suit and tie guy is looking for an investment property or some extra cash to renovate the kitchen. Hardly the same perspective.
Why is that?. Common sense would be that a wealthier client would look at a loan that was now way over the value of the house and be able to make a financial decision to walk away. To the poor they are more connected to their homes, on an emotional level The wealthier would see the numbers and walk away. To them it would be a wise business decision.
Wrong, he can’t afford the downpayment and closing costs. That’s the biggest outlay of money. If the guy’s been paying rent for 3, 5 10 years, he can pay a mortgage, especially if the mortgage is less than his rent.
I don’t want to hijack the thread, but there are a lot of benefits to encouraging people that are renting or living in government housing, the ability to own their own property. I think if you ever walked through a ‘bad’ neighbourhood, you can tell the difference between the neighbours that had some form of home ownership and those that don’t.
No, a down payment is not the biggest outlay of money in the ownership of a house.
To start with, a down payment and closing costs are absolutely part of buying a house. Being able to make mortgage payments without paying these costs is a reduction in the cost of the house. What you’re saying is that a poor person can afford a Corvette if they only have to pay for a Sunbird. Well duh.
And legitimate mortgage payments are only part of home ownership. Upkeep is a serious financial burden. Normal maintenance such as re-shingling or furnace replacement represent the same kind of cash outlays found in a down payment. Add mandatory insurance (often ignored by renters) and you start to get an idea of the true expenses of a home owner.
All of these expenses are before a single coating of paint is made or a blade of grass mowed. Aside from the mandatory expenses there are million smaller costs associated with home ownership. It is so far removed from the financial responsibilities of renting that no comparison can be made.
I’m a Democrat, and a socialist, & I this is what I think–except for the implied, “because they’re Democrats.” Paulson’s plan, even with the number cut to a third, was way to much money spent in the wrong place with no real equity in place, & would have become another “entitlement.”
Actually, in this case, I trust the libertarians more than the well-meaning & easily led moderates. Shocking, I know.
Damn happy to be wrong. I’m off to a specialty cake maker to buy myself a butter cream hat to celebrate the market not going completely into the shitter. I will do so every day until the crisis is past. So much for the diet.
Suit and tie guy isn’t going to declare bankruptcy; he’s just going to default on the mortgage (giving the bank possession of the property in the process). Damage to suit and tie guy: loss of a few thousand dollars (assuming he put anything down at all when he purchased the property - some of these loans were 0% down deals), plus a black mark on his credit rating (which can be repaired over a few years’ time if suit and tie guy is otherwise fiscally prudent). Damage to bank: well, they now possess a house worth 25-30% less than the mortgage they issued on it. And in most states, the bank can’t legally go after suit and tie guy’s other assets to make up that difference.
The folks upthread are right; you can’t just blame this on “poor people buying too much house.” A lot of the problem is occurring because well-to-do people who bought houses as an investment don’t have much of their own money at stake - and they are financially savvy enough to know when it’s time to stop throwing good money after bad. They’re not going to keep paying a $400,000 mortgage on a house now worth only $300,000 that they only invested $20,000 of their own money in. Losing $20,000 is far more palatable than losing $100,000.
Heh. Not in my town it isn’t. Our median sale price is still $400 K, which is unnaturally low because of the number of low price ($200K) condos on the foreclosure list.
During the bubble, there were tons of ads on the radio station I listen to - the news station, with a fairly upscale demographic - for teaser rates. Those with bad credit were welcomed explicitly. My county, which includes Oakland, doesn’t have a particularly high foreclosure rate, especially as compared to some further from Silicon Valley areas where prices had dropped more.
I don’t have numbers, but from articles in the paper many people who took home equity loans are now in trouble. Do you have numbers to match those cited, or is this more conservative common sense?
