Bad Mortgage Planning Doesn’t Make A Crisis
Until recently, I’d completely stopped listening to television news. I get my news via RSS feeds and the occasional visit to Google News, the beauty of which means that I’ve only had to endure the news that interests me. Has Hillary said something stupid lately? I couldn’t tell you — I don’t pay attention to her if I can help it. Did Obama do something idiotic? I’d never know it — I don’t read much about him these days. For all I know, Libya could become part of Russia and I’d be the last one to find out… if I cared.
Then I bought my new treadmill with the thought of using it while getting a better butt blogging — something I’m determined to do by high summer — and suddenly I’m finding myself listening to television news nearly non-stop.
I remember now why I stopped.
When the media isn’t talking about the number of defaulted home loans they’re talking about the number of number of defaulted credit cards. The housing market is going to hell in a hand-basket. I got that. Didn’t you, oh, about five months ago?
Thing is, until recently I’d thought the problems were limited to the U.S. After all, isn’t that what the media’s preaching: that foreclosures and the “mortgage crisis” are all the result of bad federal regulation? After all, even John McCain is saying calling for legislation designed to help homeowners struggling to make payments to their home loan lenders. Isn’t that proof there’s a problem in our country?
Not so fast.
The housing market is cooling in Canada. Ditto with Scotland and England, too. Heck, even China’s housing market is struggling. I don’t know about you, but to me that’s seeming more of a pandemic — rather than a domestic — issue.
Granted, I’m not an economist. I get bored with numbers (heck, I just got bored typing the word “numbers”), so I can’t profess to understand the intricacies of worldwide financial dependencies. But I do know this: about four years ago VH and I were able to obtain a 4.3% home loan on the nicest house we could afford following the old rule that mortgage payments or rent should be equal to one-fourth of your monthly income. Then we made a 25% down-payment using the funds from the sale of our previous home.
We locked our new mortgage in with fixed payments on a 15-year note and rearranged the rest of our budget accordingly: the mortgage gets paid first, and everything else (aside from my internet connection and hosting fees) goes into the “hope we have enough” pile. Every single month we pay at least $200 extra toward our principle, because we figured that once our home is paid off we’ll have that much more to pay other bills, none of which will pull the roof from over our head simply because we didn’t pay more than the minimum monthly payment.
As a result, we’ve now paid off half of our initial mortgage. That equity, we’ve always figured, is our rainy-day savings: it’s something we can draw on — even if we don’t want to — should life run amok and we really need extra cash.
So, ultimately, I guess I’m saying that I’m having a hard time understanding thinking of the foreclosure crisis as a crisis in the system, as a paradigm for voting, or as something that requires yet more federal involvement. If it’s not limited to our country, and it’s something that people who took the “safe” path of investing in their own homes have managed to avoid, then is it really a crisis?
Or is it just a lack of poor planning on the part of too many people who wanted to live large without having the patience to wait until they could afford to do so?
UPDATE: Meanwhile, as Truthful Lending explains, the feds response to the poor planning entails authorizing the “the quasi-governmental agencies, Fannie Mae and Freddie Mac, to lessen their qualification requirements and allow more homeowners to refinance into conforming loans”, with the result that these agencies take on higher-risk notes so that the gub’ment benefits when those higher-risk borrowers do default. Can you say, “All your houses will belong to Them?” No??? Well, bend over and grab your ankles and see if that doesn’t help your pronunciation, folks.
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Heck. Wanna talk bitter (thanks Obama for opening that door!)?
We were duped by a scam when we bought our house. It’s not a fancy house by any stretch of the imagination and the guy is now in federal prison on fraud charges. Even in the middle of our stupidity we got into a fixed rate mortgage on a house that was within our budget.
Despite the fact that the man is now serving a prison term, we have no recourse on what he would owe to us because the case took so long to prosecute. Statue of limitations is up. So here the government is now willing to bail out people whose eyes were bigger than their pocketbook and made stupid decisions accordingly.
I’m so to freaking death of people who do the right thing getting screwed over while idiots get a free pass.
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The government encourages risky behavior so that more of its citizens have to depend upon the government to save it? Why on earth would elected and appointed officials want more citizen dependence upon their largesse for survival?
By the way, VK for President (when she gets old enough).
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Although I’m past the legal age limit, I will not seek nor shall I accept nomination for the presidency… mostly because I don’t like getting up early in the morning.
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Now wait a minute, there are people in our country who have crappy jobs and can’t afford responsibility, but dream to live in a house instead of a slum anyway. It wouldn’t be fair to deny them their dream. Especially, if they might vote. Oh, definitely unfair, if they might vote. Not fair, not fair!
Your original post in this thread pretty much says it all. Fannie Mae and Freddie Mac are disasters waiting to happen, as the WSJ has observed many times.
I am not an economist, although I do subscribe to The Economist Newspaper from the UK. It is a better weekly magazine than Time or Newsweek here (left-wing rags, both of them.) And I read at least the editorial page of the WSJ each day.
It doesn’t take much intelligence to handle a mortgage (although I’m waiting for a CD to come due before I pay mine off.) And, as a board member of my townhome association, I see nearly every month the results of people buying too much house. It costs us because the government allows a six-month period before the bankruptcy court takes the home. And, then, it will be sold as a HUD house, which doesn’t bring as much money.
(But we will get some of our owed dues. Not all, by any means, but some.)
Your report shows that you are very intelligent (which actually surprises me, because I normally would not say that about an attorney. I tend to think of attorneys as I do about Dickie Scrubbs (or whatever his name is), who pleaded guilty to fraud. Not what he did to ordinary men and women, but what he did to other lawyers.
(The fact that you did not keep up your license is a very good thing. Being a member of a bar which allows bottom sucking scum scrubbers like the aforementioned attorney, and another one in Texas who was sanctioned for abuse in the various lawsuits about silicosis, is not something a mother should do.)
You and your personal responsibility ruin it for everyone else, doncha know?
hln
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Your post is quite insightful and accurate. I think that it is quite ridiculous that the politicians are presenting an idea to solve the “home crisis!” that will only exacerbate it. Not only will the “solution” make things worse, the responsible people who manage their lives properly will end up paying for the irresponsible people who INTENTIONALLY buy houses they cannot afford.
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I know I am late jumping in here. Honestly, I haven’t heard too many folks say that this sub-prime mortgage crisis stuff is dumb. It’s nice to read it here. Seriously. These folks need to pay their own stupid tax and take some responsibility.
The housing market is 4% of the entire economy. And then sub-prime mortgages are like 15% of that 4%. There isn’t a problem people. Wal-Mart’s parking lot is still full.
Why can’t the government go after the snakes that allow these people to get loans in the first place? Oh wait. The lobbyists are paying them too much. Blergh.
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