Given your guarantee you might find this video interesting:
Lots of people should feel guilty. Here’s my short list, the full list is a lot longer. [ul][li]Mortgage brokers who lied to clients or failed to fully exercise their duties as facilitators of mutually beneficial financial relationships. []Realtors who sold homes they were pretty sure buyers couldn’t afford to keep, or worse, who directed clients to dishonest mortgage brokers.[]Buyers who didn’t bother to educate themselves or who lied to their mortgage brokers or realtors.[]Banks who wrote loans when all actuarial data showed they had a high probability of failing. []Banks who bought the loans, especially those intending to immediately re-sell the worst of them.[]Insurance companies who insured these re-packaged securities, knowing full well how toxic they were likely to become[]Credit agencies who rated those packages highly when they damn well should have known better.[]Regulators who loosened the rules for creating and packaging securities.[]Freddie Mac and Fannie Mae for lobbying Congress for even more latitude when creating creative mortgage packages.[]Congress for doing so.[]The Federal Reserve for keeping money rates so low for so long, even when it was clear a bubble was forming.[/ul]For my money the real question is, who should go to jail? Mortgage brokers who lied to clients, maybe. Realtors who lied to clients, maybe. Buyers who lied to their agent/broker, maybe. Executives who ok-ed the selling of securities backed by loans they were reasonably sure would fail, maybe.[/li]
Credit agencies? Probably not. Homebuyers? No, most of them are going through living hell already. Most of the rest should lose their jobs, but they’d be replaced by people who would do the exact same thing in their positions. It’s capitalism at work really. Cheap money is at the root of it all. Home prices wouldn’t have risen as fast if people couldn’t get cheap money to drive up demand. Greenspan probably kept our economy from collapsing after the dotcom bubble and 9/11, but the practices of the Fed under his watch largely created this situation. I’d say it’s a wash for him.
Beyond blame, I’d look for ways out. The financial sector is critical to the economy, but it’s only a portion of the overall picture. More companies need to fail, and unfortunately, more people need to be turned out of their overvalued homes. Caps should be put on executive Golden Parachutes(for PR value), LOTS of companies should end up owned in part or in toto by the state if the taxpayers are bailing them out. Once that’s done, more effort should be made to prevent further foreclosures. I don’t see the needed correction occurring without a lot more pain though.
How so?
Enjoy,
Steven
You won’t pay “many times more than 400 thou”. The interest would be not quite another $400,000 over 30 years, making your total payments $800,000. You haven’t lost any value until you sell, and 30 years is a long time. As long as you can continue making payments, you’ll still come out on top.
OTOH if you know you can’t or won’t be keeping the house more than 5 years, and you don’t mind the big brown skidmark on your credit report, then it might make sense to default.
Most people with 2 family incomes bought up a bit. Most did not go whole hog but they were now allowed to use both incomes . That of course puts the home in double jeopardy. If either one loses their job ,they are in hot water.
Years ago when the wife was at home, if the man lost his job ,the woman might be able to find a job to tide them over until he got re-employed. If a kid got sick, the wife was home to take care of him.
Now if either parent gets sick ,the family is in trouble. Kids get sick, you have to take time off to help them. maybe you lose your job if you have to take too much time off.
You need two cars for both to get to work. Extra expense. The safety valve is gone.
So, if housing prices were to fall dramatically (like 50-75%), think of the good that would happen!
People could live on much less, money would be available to maintain the houses, and people could actually save money!
I think the whole housing bubble was actually set to burst in the late 1980’s-but then ,the low interest rates and greedy mortgage bankers used it to get rich.
You make your choices, and you live with the consequences.
I believe this only makes sense if everyone’s salaries remain the same. Most likely home price deflation will cause job losses and a general slow down in the economy. If there is a true deflation (as in whole market deflation), then there’s a good chance that everyone’s salaries are going down.
But wouldn’t that reach a bottom where our exports are more attractive and American manufacturing is reborn? My crystal ball shows Detroit rising from the ashes, with X-Box masters and investment bankers being retrained and joining the assembly line.
I think GM’s only profits are coming from sales in Africa already. They have a small diesel coming in 2010 that looks to be perfect for many emerging markets, providing 25-30 mpg in a full sized pickup. Their existing larger Duramax is of very high quality, as are the trucks they put them in. Every bit as good as their Japanese competition.
Exactly. Why should my wife and I, who were responsible and specifically bought a house which we could afford on a single income (thankfully, in retrospect), be additionally responsible for others who were totally and completely irresponsible?
It’s just so damn frustrating, because there really is blame to be laid at pretty much everyone’s feet, and as usual, the hard-working, law-abiding, middle class will end up paying for everyone else.
BOHICA.
Agree completely. Where the idea that everyone deserved a home still baffles me.
BOHICA indeed…
Unless you envision American workers in sweatshops a la early 20th century, then manufacturing requires large intensive capital investment, not to mention a learning curve, regardless. The capital can only come from banks, unless you expect some form of socialism to show up in America. If you think this economy is bad (which hasn’t affected the fundamentals yet (possible? perhaps), it would be much, much worse to an inflexible and rigid and supply conscious manufacturing economy.
I’d like to point out that we are/were a dual income family. My husband recently lost his job. We live in the same house we did 8 years ago. We bought a house significantly less than we were approved for. We could afford the payment in 2000. The problem is NOT just the mortgage payment. My insurance premiums have tripled since 2000. We have not made one claim on our homeowners insurance. The reason I can barely afford my house NOW is not because of my mortgage, it is because of my insurance. (If I had zero mortgage, my payment would still be higher than it was in 2000 due to the increases in insurance costs)
Another interesting wrinkle is I’ve heard a lot of folk complaining that if their house has decreased in value so much, why isn’t their assessment racheted down for tax purposes. Makes sense to me.
Of course gas prices never seem to go down as quickly as the go up either …
Auntbeast, sorry to hear about both things, that does indeed suck.
If I remember correctly, you live in FL, right (I’m a long-time lurker)? So the insurance costs started going up a couple of years ago when you all got nailed a few times.
I’ll bet dollars to donuts that a significant measure of that insurance increase can be traced to the housing boom and associated greater cost of replacement/renovation in the event of a catastrophe. Hopefully, when all this has shaken out, perhaps the premiums will decrease some as a result?
I hold out hope for you that that is the case.
Without knowing her and the situation I can’t say. She was either dishonest, stupid, or naive, or all three. But the guy who took her loan application was greedy and dishonest, no other possibility.
I am in Florida. I don’t think that it is an accident that we are one of the states hardest hit by the foreclosures. The State has made some steps to try to control the insurance companies here and recently denied a companies request for a 70ish percent rate increase and instead, slapped with a $5mil fine and required them to write 100k new polices.
My mortgage company, Countrywide, is charging me an additional $100 a month to cover the possibility that my homeowners insurance might go over $4000 a year and therefore, cause an escrow deficit. I can breathe easily, (sarcasm) I’m only paying $3600 a year for a house currently valued at $200k.
We did have a rough hurricane year a few years ago, but at the rates I’m paying (and I don’t have it as bad as some, I’m certain) we should be able to fill those insurance companies coffers up pretty damned fast. Especially when they happily incorporate Florida as a separate company so they can limit their risk and thus their payout ability.
You better believe I’ll be contesting my taxes this year. If my home value has gone down I’m not paying taxes for a high-value home.
Enjoy,
Steven
I wouldn’t be so sure that Republicans have more fingers in the pie than Democrats. Take a look at the top 3 recipients of Fannie and Freddie contributions.
Lenders didn’t care about saving people from themselves because they WANTED people to default on these loans. They assumed the value of the homes were going to go up, and if the current buyer defaults they just get back a property that was worth more than they paid for it, plus whatever interest the person had already paid. Subprime lending was a racket. Everyone knew it and nobody stopped it.
And the next 3 are repubs. Half the top 10 are repubs. But does that mean they own them?. Does that mean they will get all their votes?
Two players in McCains campaign were lobbyists for Fannie and Freddie. Lobbyists actually paid to work to influence politicians. How much tighter can you get.