Housing bailouts galore today
by Lori Barrett | July 30, 2008 at 10:17 am
Posted in politics, real estate
President Bush, Governor O’Malley, and even some county executives have recently lined up behind homeowners who are facing foreclosure.
This morning, Bush signed a housing bill that will save 400,000 homeowners from mortgages they can’t afford. In addition to bailouts for borrowers and lenders alike, the bill includes an extra added bonus: it increases the national debt’s statutory limit by $800 billion, to a whopping $10.6 trillion. (Really, at this point, why even have an upper limit at all?)
According to a White House spokesman, the bill is “intended to keep more deserving American families in their homes.” Under this program, homeowners who can’t afford their mortgage payments will be able to refinance into lower-rate government loans.
Here in Maryland, O’Malley and Prince George’s County officials have partnered to provide $4 million to PG County lenders in order to ease the county’s foreclosure crisis. Said O’Malley of the recent initiatives: “Congress is acting. States are acting. County governments are acting. Now the mortgage services have no excuse.”
Today, the Sun also provided us with an example of those affected by this housing crisis: in this case, a single mother of three children who is awaiting eviction from her $545,000 Columbia home, after defaulting on ARM mortgages of 8 1/4 and 11 1/4 percent. According to the article: “She said her mortgage broker inflated her income and asset value to put her into a mortgage she could not afford.”
Personally, I’m a little sensitive about the issue because a few years back, I chose to continue renting rather than buy a place, knowing that I wasn’t in a position to afford a mortgage. If I had only known that the government would be my knight in shining armor, I would have signed those papers without a second thought.
So my question to you this morning: Should the government be rescuing these homeowners from payments that are now out of their reach? Is this the new American way?
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July 30th, 2008 at 12:36 pm | Please log in to reply. | Log in to rate this comment | report this comment
Slippery slope.
The homeowners aren't completely at fault, especially the example given where the broker made up figures.
My fiancee, before I came into the picture, bought a house that is The Money Pit. She could afford it, but buying a house makes things tight in the wallet. After the purchase, the a/c broke (right after the warranty expired), the water heater broke and flooded the basement, the plumbing in the (horribly remodeled by previous owners) bathroom continues to back up... and the way they redid the pipes is ridiculous. Now that it's the two of us, things are still a bit tight (she took a lower paying job for better opportunity, I make less than her) and we have very seriously discussed getting out of the mortgage. I will definitely be looking at the government loans.
Although I do wish I had a buttload of money right about now. It's a 'buyers market' and, If I could afford to, I would buy several houses and rent them out. When the housing market rebounds (these things always do) it is a great investment to sell off. I've even looked at government auction sites and it's disgusting how cheap property (houses, cars, land, etc) can be bought for.
July 30th, 2008 at 2:27 pm | Please log in to reply. | Log in to rate this comment | report this comment
Boy do I feel bad for the lady in the half a million dollar McMansion. Its hard to sleep at night knowing the pain these people are in and their half million dollar homes.
I'm glad that i made responsible financial decisions and am able to bail them out with my tax dollars.
Its nice to know that my tax dollars are used to support welfare bums and those in the upper class who don't know how to balance their check books.
Between supporting these idiots, the increase in gas prices, the increase in food prices and on and on. It sure is great to be a responsible person.
Makes me wanna go out and max out my credit cards and tell everyone to kiss my ass. If everyone else gets to play around with funny money(including the government) then why shouldn't we. I'm getting tired of this crap.
July 30th, 2008 at 3:43 pm | Please log in to reply. | Log in to rate this comment | report this comment
Silly Rabbit - you can't buy a McMansion for $500k...
!
July 30th, 2008 at 4:00 pm | Please log in to reply. | Log in to rate this comment | report this comment
On a serious note - there has been a housing crisis in Baltimore City for 20 years - and the single moms getting kicked out of those houses didn't irresponsibly sign a mortgage contract for a $550 dollar home - they'd just like to keep their $40k rowhouse.
Sure I'd hate to see that family thrown out on the street - but Mom sure as HELL needs some parenting classes..perhaps focusing on finances. There's a thought. She knew the cost of that house when she signed up - and she knew that it was out of her price range. Yeah they probably offered her a variable interest loan...but use your head...this is the real world...you don't get something for nothing. The woman in the article is a single mother of three running a daycare service, yet she felt it was a responsible decision to purchase a $550k home? Not too bright. Maybe next time she'll buy a home that she can actually afford - instead of defaulting on a loan that was obviously out of her league and then bitching that "nobody cares."
!
July 30th, 2008 at 4:04 pm | Please log in to reply. | Log in to rate this comment | report this comment
didn't irresponsibly sign a mortgage contract for a $550 dollar home
---snip---
Obviously that should read "$500K" home
July 30th, 2008 at 9:18 pm | Please log in to reply. | Log in to rate this comment | report this comment
ycktr:
Your comment was one of the most level-headed you've written yet, and Bravo! It hit the nail on the head. My first thought on reading about the single mom, 3 kids in a half mil home was pretty much the same: What the hell was she thinking? Obviously not about what was realistic for her personal finance arrangements.
It is a tough call; determining who is truly deserving (predatory/criminal lending vs. personal stupidity?) is hard to do when the base criteria of being foreclosed upon is qualification enough.
Living within means and being careful seems to be beyond some folks.
July 31st, 2008 at 12:03 am | Please log in to reply. | Log in to rate this comment | report this comment
Thanks Kevvie - don't worry, I plan to return to my regularly scheduled assholism tomorrow. But for now:
I get pissed when I hear about people about something being "taken" from them - which suggests that they somehow EARNED it...or that it was rightfully theirs. Reality: If you signed a contract that you knew you couldn't make good on don't be shocked when the bank wants their money - and they always do eventually. I live in a condo that's worth a little more than her house, and you better believe that the mortgage is paid in full every month. The truth is (and maybe it sounds snotty) but my partner and I worked very hard to afford the life that we now enjoy - I have no sympathy for someone who tries to make it here without paying their way/dues. It's an insult to those of us that sacrificed our way to something better.
!
July 31st, 2008 at 9:24 am | Please log in to reply. | Log in to rate this comment | report this comment
Just to play devil's advocate here...
Don't you think the lender is to blame for the woman (with the $500k+ home) purchasing the home? I'm sure the mortgage broker and real estate agent saw her as a prime target. They saw that they could convince her to purchase the home so they could get paid a nice fat commission.
I'm sure they were like, "Just think of what a nice home you will be living in and what a great neighborhood for your kids. You'll be the envy of all your friends. You can entertain and be proud of your new nice home. Just look at this low payment, you can totally afford that."
And I'm sure she fell for this garbage hook, line & sinker as they appealed to her materialistic mentality.
Now I’m not saying she should not accept the responsibility of her decision to purchase but I'm sure she was made to believe that she could afford the home and for that the real estate agent and mortgage broker should be held responsible.
July 31st, 2008 at 11:32 am | Please log in to reply. | Log in to rate this comment | report this comment
A $5 dollar calculator would have solve this issue before it even started. Don't get me wrong...I think the mortgage broker really took her for ride...and intentionally so. But she must have known on some level that it was too good to be true. For that reason all of her "it's not fair" and "nobody cares" antics fall on deaf ears over here.
!
August 5th, 2008 at 8:51 am | Please log in to reply. | Log in to rate this comment | report this comment
I have a friend in the same situation. And until I've read this article I've done nothing but sympathized with her. Reading this article really brought things to light with how the consumer(homeowners) are equally resonsible for this crisis. She even made the statement that the mortgage company shouldnt have lent her that type of money knowing at the time she made 7x less than the value of the home. If, she knew this, why did she sign that contract? Many people battle with purchasing in a "good" neighborhood having a better environment to raise children. I too agree with this, however there is a such thing as purchasing starter homes until you can work your way to getting the dream home you deserve! At the same time I also have to realize that a lot of consumer arent educated with the homebuying process, and go into this process with no knowledge of types of loans, contracts, inspections, etc..... I thank God that I was armed with this homebuying education before I purchased. I also think the same should be done with EVERY consumer that receives assistance that benefits from the bill.