Housing bailout benefits builders, offers “counseling” for homeowners
posted at 10:20 am on April 3, 2008 by Ed Morrissey
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Democrats and Republicans on Capitol Hill came together in a bipartisan effort to take action to support those hit hard by the housing slump and mortgage meltdown. They managed to rescue builders, lenders, and local governments — but for homeowners, they reserved just a fraction of the billions in the bill. Those facing foreclosure can compete for a slice of the $100 million Congress left for them to get “counseling”:
Senate Democratic and Republican leaders rushing to address the nation’s housing crisis reached agreement yesterday on a package that would provide billions of dollars in tax rebates to the slumping home-building industry while offering little to homeowners threatened with foreclosure.
After working through Tuesday night to flesh out a bipartisan agreement, lawmakers unveiled a bill that rejects the most ambitious plans for aiding distressed homeowners, including a Democratic proposal to permit bankruptcy judges to modify the mortgage on a person’s primary residence.
Instead, lawmakers settled on a sharply scaled-back array of measures that would provide $4 billion in grants for cities to buy foreclosed properties, temporary tax breaks worth up to $7,000 for home buyers who purchase foreclosed properties, and new tax deductions for almost every American who owns a home. The package, which would cost about $15 billion over the next 10 years, also would jump-start stalled legislation to streamline the Federal Housing Administration, one of the top priorities of the Bush administration.
Families who cannot afford to repay their home loans — the group at the heart of the mortgage meltdown — would benefit mainly from $100 million to expand foreclosure counseling services and greater latitude for local housing authorities to use tax-exempt bonds in refinancing subprime loans.
Color me underwhelmed. Congress has no business bailing out people who took foolish risks in the housing market anyway, and this looks like a bunch of politicians in an election year pandering for their incumbencies. They have taken tax money from people who didn’t take the foolish risks to subsidize the results of bad decision-making. That only produces more folly later, as speculators will come to expect DC to bail them out of the next crisis as well, rather than suffering the consequences of stupidity in the market.
However, if Congress wanted to help out those who needed it the most, they missed their target by a mile. They’re bailing out the lenders who made bad loans, the builders who overbuilt, and the local governments that can now snatch up more private property for public control. The one sympathetic group — marginally-qualified, non-speculating homeowners — got nothing from this bill. Oh, not literally nothing; they get counseling to remind them that they shouldn’t have bought property in the first place and not to rely on adjustable-rate mortgages that rely on unrealistic estimates of equity growth.
Of course, they know that now, but the humanitarians on the Hill left them $100 million to hear it officially.
And they have more bad news. Now that the two parties got together on this bailout bill, Democrats and Republicans plan to offer more bipartisan bailouts in the future. Eventually, they may even get to the people facing foreclosure, although by that time, it may have to be recast as a homelessness-abatement package.
Update: Why counseling? Michelle reminds us:
As I’ve pointed out several times over the past year, mortgage counseling is a thriving racket that benefits far Left groups ranging from the AARP to ACORN to La Raza and Legal Aid. The Department of Housing and Urban Development funds hundreds, if not thousands, of these groups across the country. In October, HUD announced more than $44 million in new housing counseling grants to over 400 state and local efforts. The White House has increased funding for housing counseling by 150 percent since taking office in 2001.
Here’s a list (PDF) of national, regional, state, and local housing counseling grantees for fiscal year 2007–all of whom presumably were in operation when subprime borrowers got into the current mess.
Michelle has much, much more. Just keep scrolling, and thank the Lord Glorious Hope that it got limited to $100 million.
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Hmm, is this an election year?
Think_b4_speaking on April 3, 2008 at 10:24 AM
So you are saying that the people who are in default, will still be unable to make the payments on their mortgage?
The rich get richer, and the poor are still poor?
“never saw that coming”
rockhauler on April 3, 2008 at 10:27 AM
Amazing how Congress can agree on this issue. ugh
becki51758 on April 3, 2008 at 10:31 AM
VETO. A girl can dream, right?
funky chicken on April 3, 2008 at 10:36 AM
I hate the Republican Party. This kind of garbage is why I hope the Dems keep Congress and McCain gets in the White House. That will hopefully stop Congress from doing anything.
Message to Washington: shut up and sit down. You are dragging down our whole country. Just stop.
indythinker on April 3, 2008 at 10:36 AM
I thank God on a pretty regular basis that I don’t have a mortgage. Poo-poo politics certainly does work by gravity and all us little folks are standing at the bottom of the hill. A comment was made recently that when someone rich and famous goes into a restaurant, they usually get their meal free even though they are the last one to need a comp. Same thing here- the last ones who need the mortgage help are the ones getting it.
LickyLicky on April 3, 2008 at 10:36 AM
If the H/O’s get any money at all they should use it to buy a Calculator to help with their next home purchase.
multiuseless on April 3, 2008 at 10:40 AM
Sorry.
I have very little sympathy for those who were so oblivious as to sign contracts worth hundreds of thousands of dollars not having thought through the consequences. Did some banks make risky loans? Of course. Were a tiny fraction “predatory?” I’m sure. But IMHO, the first bad act in this whole saga was done by people who signed. Mortgages. They couldn’t. Afford.
If those people could have kept their promises, we wouldn’t be in this mess. So to complain that they’re not being given enough of my money in order to stay in a home they shouldn’t have bought (and should be available on the market for me, at a rational price in a couple years when I’m ready to buy,) and driving up the prices of other homes,
Well, sorry. Not much sympathy.
jdub on April 3, 2008 at 10:40 AM
Term Limits. Wouldn’t it be nice…
eanax on April 3, 2008 at 10:42 AM
Home prices are far too high and need to be left to find their natural levels.
Propping up existing home prices is unfair to people who are trying to buy their first homes or upgrade to larger homes.
I bought in 2001 and still have substantial equity, but I want to buy something larger. I’m rooting for home prices to drop further and propping them up, will only help some people at the expense of other, more responsible people.
NoDonkey on April 3, 2008 at 10:46 AM
So you are saying that the people who are in default, will still be unable to make the payments on their mortgage?
The rich get richer, and the poor are still poor?
“never saw that coming”
Well, let’s see. The builders who face insolvency did nothing worse than overbuild before the bubble burst… those who might have prepared for the eventuality were taken legitimately by surprise, i think, at the speed and comprehensiveness of the burst… bad planning, certainly optimistic planning on their part, but not morally derelict.
Those banks which “knowingly” or predatorily took bad certainly were. Those banks which were victims here (and there are a great many), I think, bear less blame.
Keeping the building firms and banks in business (at least the latter type of banks) is a social good.
Buying houses for deadbeats, enh, not as convinced.
So rather than saying the rich get richer and the poor get poorer, I’d suggest that the businesses stay in business and the deadbeats get squat, at least in this case.
jdub on April 3, 2008 at 10:47 AM
I don’t understand how you sign off on a quarter million dollar loan without reading the fine print. Maybe not all fifty pages of fine print, but the details about rates and payments are right on the front page.
Tanya on April 3, 2008 at 10:48 AM
jdub yep. And the builders and banks made huge profits for a few years because of the crazy mortgages that were being approved. Houses doubled or tripled in value over a span of 7 years in some neighborhoods in Las Vegas and Phoenix, not for any good reason. Most middle class people couldn’t/still cant afford to purchase homes in decent parts of town in either place. If prices come down to rational levels, the middle class won’t be priced out of home ownership.
But congress is gonna line the big builders’ pockets and keep home prices inflated. Thanks fellas, great work yet again.
funky chicken on April 3, 2008 at 10:49 AM
Government of the special interests, by the …
Shawn92101 on April 3, 2008 at 10:50 AM
“I don’t understand how you sign off on a quarter million dollar loan without reading the fine print.”
Life’s tough and tougher when you’re stupid.
Bailing stupid people out of the consequences of their stupid decisions will only mean they will continue to “not read the fine print”.
What doesn’t work with child rearing, sure ain’t gonna work with adult governing.
NoDonkey on April 3, 2008 at 10:51 AM
I’d love to have a house, just a little house to live in but since I don’t make a lot of money and prices are high, I can’t afford it. Of course I could have jumped in, bought something that I couldn’t afford and then let all you taxpayers bail me out. But that would be wrong. (Curse you ethical upbringing).
Ellen on April 3, 2008 at 10:54 AM
Well the market is not impressed from the action today. When we need grand visionaries we get people that are afraid to do what needs done.
unseen on April 3, 2008 at 10:59 AM
“I don’t understand how you sign off on a quarter million dollar loan without reading the fine print.”
NoDonkey on April 3, 2008 at 10:51 AM
It’s called 30 years of liberal feel good education. I’m surprised that they can still write well enough to sign the paper and not just put an X on the line…
unseen on April 3, 2008 at 11:00 AM
This spending is madness. It’s going to end badly, IMO. Bailout after bailout after stimulus, all to the special interests, who are now the pets of both parties.
Republicans giving money to Laz Raza so they can protest against us and push Aztlan? Madness.
PattyJ on April 3, 2008 at 11:03 AM
Ellen, yeah, it’s a real bummer, isn’t it? I mean I get all the “checks” from my credit card companies too. I remember one really obnoxious come-on that came with those checks once … basically the whole thing was how to make my neighbors jealous that I could afford a swanky vacation or multi-thousand dollar home entertainment system, blah blah. All I had to do was use their handy dandy “checks!”
I know how people ruin their credit, and I simply have chosen to live without the weeks at Club Med or the huge stereo systems. Believe it or not, my life is pretty good, and my credit score is excellent.
funky chicken on April 3, 2008 at 11:05 AM
Keeping the building firms and banks in business (at least the latter type of banks) is a social good.
jdub on April 3, 2008 at 10:47 AM
agreed. It will help some but as long as people have more incentive to walk away from the home than stay and pay the loan the problems will continue.
unseen on April 3, 2008 at 11:05 AM
First let me say I agree that giving any money to ACORN, which is little better than a criminal conspiracy, is an abuse of the public fisc.
The oft-repeated statistic at HUD (where I am a contractor), however, is that 94% of those who utilized counseling successfully avoided foreclosure. Abt are in the middle of an evaluation of the housing counseling program, and I’m sure it will be professionally conducted.
DrSteve on April 3, 2008 at 11:06 AM
Good on you for being ethical. Keep putting some money away each month - soon the prices should come back to a reasonable level, and you just may be able to get your house. You definitely have the right idea - a house is a place to live in, not a speculative investment.
Think_b4_speaking on April 3, 2008 at 11:06 AM
I get all the “checks” from my credit card companies too
funky chicken on April 3, 2008 at 11:05 AM
used one last week. Offering 1.99% fixed rate. Wrote one out for 4,000 funded my IRA with it. Not a bad return.
unseen on April 3, 2008 at 11:13 AM
Since my wife and I bought less house than we wanted to insure that we could afford the note no matter what, I have little sympathy for the people in default. Some people just can’t handle buying a house.
TooTall on April 3, 2008 at 11:14 AM
Explain to me again why we have to bail out borrowers and lenders who made stupid decisions?
(Cue sound of crickets chirping…)
Relevant McCain quote:
irishspy on April 3, 2008 at 11:14 AM
irishspy on April 3, 2008 at 11:14 AM
i could back a program that does all those things. I do not care about bailing people out. I care about systemic risk to the economy.
unseen on April 3, 2008 at 11:17 AM
DrSteve on April 3, 2008 at 11:06 AM
yes alot of the problem we face is simply people not knowing how to use money, how to budget. it is an education that most people never recieve. Yet another legacy from Pappy government of the 70’s
unseen on April 3, 2008 at 11:19 AM
Naturally. These people can’t contribute to the various campaigns and have a low rate of voting. Now, speculators… That’s different.
michaelo on April 3, 2008 at 11:25 AM
If we would have had Maverick elected in 2000, you probably wouldn’t have predatory lenders. His record on fiscal responsibility in impressive. He even said he doesn’t know economics very well, but one thing he has always understood and applied to his votes, is that if it seems to good to be true it probably is.
THE CHOSEN ONE on April 3, 2008 at 11:26 AM
No, negative, no bailout! I’m not subsidizing morons, thanks.
mojo on April 3, 2008 at 11:27 AM
Color me so not surprised that the mortgage crisis somehow becomes the liberals fault. Eeek. Let’s ignore the vapid culture of consumer self-gratification that’s promoted at all levels of society. Yes yes. Bad liberals, creating “deadbeats” and “stupid” people who deserve what they get anyway.
Grow Fins on April 3, 2008 at 11:28 AM
Giving tax breaks to buy foreclosed homes (which already sell at a discount) further devalues homes which have not been foreclosed on since they cannot compete with this unfair $7000 advantage.
If 2 similar houses are for sale in the same area - yours and the foreclosed home, guess which one will sell and which one won’t!
I have called my Senators and congressmen to voice my strenuous objections.
Buy Danish on April 3, 2008 at 11:28 AM
Basic financial literacy is something I’ve been interested in for a long long time. Would do a lot of people a lot of good. If we could only manage to find a way to work it into curricula better…
DrSteve on April 3, 2008 at 11:29 AM
I prefer the approach favored by Holman Jenkins at the WSJ - use taxpayer money to pay construction companies to demolish unoccupied, foreclosed or unfinished homes. Such a move would keep people working, decrease supply and increase the value of remaining homes.
Slublog on April 3, 2008 at 11:30 AM
Somebody needs more “counseling”.
freevillage on April 3, 2008 at 11:35 AM
Forgot the link - Holman Jenkins, “The Radical Solution.”
Slublog on April 3, 2008 at 11:35 AM
Are you a counselor? I’m all ears.
Buy Danish on April 3, 2008 at 11:36 AM
If 2 similar houses are for sale in the same area - yours and the foreclosed home, guess which one will sell and which one won’t!
I have called my Senators and congressmen to voice my strenuous objections.
Buy Danish on April 3, 2008 at 11:28 AM
good catch. amazing now the people have even more incentive to walk away form the home loan.
unseen on April 3, 2008 at 11:39 AM
as long as you stay on time that will be good. If you are one hour late or if the credit card companies just decide to up your interest rate (which they do all the time) you are gonna be in big trouble with that loan. I see them go up to 32% all the time just by being less than a day late on the payment and its super sad.
SoCalInfidel on April 3, 2008 at 11:39 AM
DrSteve on April 3, 2008 at 11:29 AM
yes it is something that needs to be included in the schools. maybe if we could throw out global warming myths and replace it with econ 101?
unseen on April 3, 2008 at 11:42 AM
SoCalInfidel on April 3, 2008 at 11:39 AM
use the internet to make payments. pay the same day I get the bill. Can not raise the rate its fixed unless i’m late. So not to worry, have the 4,000 in other investments making more than 1.99% so if something comes up I can pay it off immed. so i get the tax savings, plus the difference in my return on my investments minus the 1.99% cost of the money. For those that fund an IRA it is a deal worth looking into.
unseen on April 3, 2008 at 11:47 AM
Very interesting. Thanks!
I’d need assurances that the tearing down was done in such a way that it wasn’t a further blight to neighborhoods, particularly in subdivisions. Like - how clean would the empty lots be when they finished with the tear down?
Buy Danish on April 3, 2008 at 11:52 AM
ArmyWife is still looking for her answer about your dissing the missile defense system.
Glad to see you are still posting, now how about finishing your post, and respond to her challenge of your statements.
right2bright on April 3, 2008 at 11:52 AM
In my neighborhood, a $500,000 (sold last year) home (foreclosed) just sold for $315,000. In two years the home will be worth $700,000, I don’t think he needs another $50,000 in his pocket.
right2bright on April 3, 2008 at 11:55 AM
In other words, they gambled and lost. Its not the governments, and taxpayers job, to assume the risks inherent in business and to pay for bad business decisions, and risky speculation.
They speculated the bubble would continue, they overbuilt, and thats all their own fault. Anyone could see it coming, and the ones who made smart decisions are still around.
When its the governments job to assume corporate risk, we remove accountability from the private sector, and that is untenable. The lefts talking point of a corporate government, would be a reality unfortunately.
firepilot on April 3, 2008 at 11:55 AM
No wonder economists of diverse ideological stripe are lining up behind a taxpayer bailout of homeowners and lenders, fearing the alternative is a global inflation crisis from the article….
Slublog on April 3, 2008 at 11:35 AM
Well it is starting to dawn on people. that’s good.
unseen on April 3, 2008 at 11:58 AM
In two years the home will be worth $700,000, I don’t think he needs another $50,000 in his pocket.
right2bright on April 3, 2008 at 11:55 AM
could as easily be worth 150,000 in two years. nothing in the last two years suggest that housing will continue to go up. in fact the data suggest the opposite.
unseen on April 3, 2008 at 11:59 AM
Let’s complete that sentence, shall we?
“Fearing” is not believing.
Slublog on April 3, 2008 at 12:01 PM
Jenkins also says this:
Slublog on April 3, 2008 at 12:02 PM
Slublog on April 3, 2008 at 12:01 PM
I have no problem with selective demolition. companies dump inventory all the time. While fearing is not believing just getting people to see what is the worse that can happen takes the fear away. As long as the majority of people whistle along with their hands to their ears saying everything is all right we have a problem. Once people see the danger they can take steps it avoid it. It is not the open pit that causes problems on the trail. It is the covered pit that you crash into.
unseen on April 3, 2008 at 12:07 PM
AUGH! I feel like I’m taking Krugman pills!
The only good thing about bubbles bursting is that they’re deflationary. Until the gov’t starts pumping the money of intelligent, reliable evaluators of risk (responsible banks and borrowers) and shoving it into the pockets of horrible, stupid, BAD evaluators of risk.
I must be missing something here, but let’s look at this logically. Taking taxpayer money to destroy inventory to artificially increase prices is going to fight global inflation?
What diverse economists are these? Dewey, Cheatham and Howe?
jdub on April 3, 2008 at 12:08 PM
Slublog on April 3, 2008 at 12:02 PM
yes that is another problem that people fail or won’t see. i was for bush’s effort to get rid of SS and his attemps to make a tax credit for helath insurance.
unseen on April 3, 2008 at 12:09 PM
Turn to entertainment, two quotes come to mind. First from Flip Wilson as character “GERALDINE”. “Don’t write checks with your mouth your body can’t cash”. Second from Clint Eastwood as “DIRTY HARRY CALLAHAN”. “A mans got to know his limitations”. Counseling to home owner, DON’T GET IN OVER YOUR ASS!!!!
pueblo1032 on April 3, 2008 at 12:10 PM
What diverse economists are these? Dewey, Cheatham and Howe?
jdub on April 3, 2008 at 12:08 PM
If the demolition is on older outdated homes. In crime neighborhoods where the empty house can be used for drugs houses become a fire hazard etc. i would rather see homebuilders have short term fire sales to clear inventories of new homes. yes it will decrease prices but it will also give those that have saved a shot owning a home and the price declines will be short term. Not the steady drip of all homes going down. Once the inventory is cleared home prices should rebound some what.
Add into this mix a policy that makes present homeowners walking away a bad decsion and you have the makings of a powerful policy.
unseen on April 3, 2008 at 12:13 PM
I agree, and i should have been clearer. I hate bailing the banks out too, but given the potential consequences (a bad bank run, a worse run on the dollar than we’re already in store for,) i’m willing to give the gov’t a pass to build a firewall. But i don’t like doing it, and I’m not opposed to cracking the whip pretty freaking hard on anyone who systemically, criminally foisted bad loans. Hell, make a condition of the bailout that the board of the recipient institution has to be replaced.
So is it better to be the head of a major investment house getting a bailout than the stupid schlep who bought a mercedes house on a kia salary and gets bupkis?
You bet.
Every day of the week.
No, it’s not “fair.”
I don’t care.
Not interested in fair.
I’m interested in
1) getting the markets off the ventilator and
2) making sure this never happens again; this may require
3) punishing the wicked. Evil bankers and fraudulent borrowers alike.
And if you didn’t know it was good to be an investment banker, you have now been officially informed.
jdub on April 3, 2008 at 12:15 PM
It’s called “I don’t give a sh*t!, now gimme my house!”
Many of these people that signed for these loans NEVER HAD ANY INTENTION of paying for them. In the past, they never would have been extended this kind of credit in the first place. Think about it: A $300,000 loan for somebody that makes $10/hour?!?!? For $1000 per month?!?! Ten years ago, you would have thought that was crazy. These people KNEW they wouldn’t be able to afford increased payments on a sub-prime loan. They just DIDN’T CARE. They just knew they’d have a nice place to “stay” for two years, and then get kicked out and move on, just like they had done for so long in apartments.
A good friend of mine recently financed a ($2500 used) car purchase to “help out” one of his “friend” that was down and out, and couldn’t get a conventional car loan due to horrendous credit. He wrote him a SWEET deal: No payments for 3 months, 9 months to pay it off, and 5% interest. The “friend” signed the papers, took possession of the vehicle, and promptly moved out of state, never to be heard from again. He now can’t be located. It’s apparent: He never intended on paying off the loan.
Many of these “poor homeowners” essentially did the same thing: This is why you shouldn’t loan money to people that have a history of not paying their bills.
mojojojo on April 3, 2008 at 12:16 PM
I’m interested in
1) getting the markets off the ventilator and
2) making sure this never happens again; this may require
3) punishing the wicked. Evil bankers and fraudulent borrowers alike
jdub on April 3, 2008 at 12:15 PM
Sounds like a plan. Handle the problem first whatever it takes then punish and make sure it doesn’t happen again. I’m in.
unseen on April 3, 2008 at 12:17 PM
I dunno.
If it means the former, foreclosed owner, still angry, might come back with a spare key and a grudge one night? I think they can keep the $7000.
(Yes, I know, and I always change the locks when I move into a new place, but most people don’t.)
Tanya on April 3, 2008 at 12:18 PM
From Michigan I would disagree about the foolish risk categorization of all homeowners. Rents are high not low here, and salaries are dropping while jobs are disappearing. If someone put $5000 down on a $150,000 house and got a balloon mortgage it was often because that was all the lenders would offer. The buyer was facing a rent equal to the mortgage payment but without the tax refund that is needed for debt backlog due to aging cars, uninsured medical bills etc. In Michigan, no car equals no job. The no-money-down deals usually cost several thousands in fees before the deal was signed.
So owners took what they could get to house their families. Then the job, or the medical disappears and the owner goes into credit card mode. The replacement job is not there, but the house will not sell. The house has devalued and they cannot get an offer to cover the mortgage. They cannot move out of state to get work because they are tied in.
It is tragic not greedy. The sad part is the banks would rather take the house and sell it for 20 percent of value than refinance with the owner for the new depreciated value.
I have seen the half million dollar houses in California and Nevada with granite countertops and 2 1/2 baths. That is not the bulk of the collapse here. It is families with disappearing wages and no place to turn. The mortgage brokers squeezed the last drop out of the lemon and left it to die.
entagor on April 3, 2008 at 12:20 PM
mojojojo on April 3, 2008 at 12:16 PM
yes alot of bad apples but also alot of divorces, alot of unemployed, alot of no overtime any longer, alot of food price hikes, alot of gas hikes etc….the upside is that the bad apples with the new rules should not be able to ever get a home again. Which is good.
unseen on April 3, 2008 at 12:21 PM
entagor on April 3, 2008 at 12:20 PM
It will only get worse if we do nothing…
unseen on April 3, 2008 at 12:23 PM
Read this WSJ story about what House Financial Services Chairman Barney Frank proposes. An excerpt:
Buy Danish on April 3, 2008 at 12:26 PM
The point is that if two equal properties are for sale, the foreclosed one with the $7000 tax break will sell before the home which was not foreclosed on.
If you have to move and sell your home, you won’t be able to sell unless you reduce the price enough to equal that tax break to buyers.
Buy Danish on April 3, 2008 at 12:30 PM
Basing this on historical cycles, when someone proves to me that those cycles will not be repeated (as they have in the past 50 years) then maybe you could be right. But, it has never proven to be that. It will be another 3 months of downturn, then steadying of price for several months, then the beginning of another upswing.
And in my locale, homes are selling pretty good compared to the rest of the country. Where the problem comes in, is that many moved here with the anticipation of selling their other homes, and they are stuck with two mortgages.
They took these “swing” loans, or interest only loans thinking their other home will sell in a few months.
right2bright on April 3, 2008 at 12:36 PM
That is the irony, banks would rather lose, more like 35%,of the value. But then everyone would flock to that bank and demand re-financing.
Obviously many are too young on this posting to remember the Houston oil patch during the 1980’s or Atlanta’s bust in the 1970’s or even the Northeast condo collapse around 1988. They all survived and recovered.
And the people with cash, who had saved for years, bought low and made a fortune. Ordinary people with good habits made money.
right2bright on April 3, 2008 at 12:47 PM
As Michelle, Ed, myself and several others have maintained, these are very bad ideas.
It seems that we have the esteemed Thomas Sowell to lend credulity to our position. As I expected.
LimeyGeek on April 3, 2008 at 12:49 PM
In this story will you find all you need to know about our broken, corrupt political system.
paul006 on April 3, 2008 at 12:59 PM
Actually, I’ve been trying to buy some foreclosed properties, and haven’t found that to be the case. The banks still have enough reserves to not slash prices on homes in decent shape in good school zones……just another reason why I know the chicken littles are full of nonsense.
The banks are holding out for the big gvmt payoff rather than liquidating homes at crazy prices, at least for now.
Dammit, I’m trying to build my slumlord empire here! LOL
funky chicken on April 3, 2008 at 1:05 PM
$7000 tax credit? Cha Ching! I would love that, except for the fact that it’s just basically another way for the feds to play 3 shell monty with money. The bank gets $7000 more for a property than I would otherwise have given them, because I know I will get it as a tax refund/credit thing.
And hell yes it will hurt responsible people who didn’t default on their loans but have to move and sell in the same neighborhood as foreclosures, because people like me will definitely ask them to drop their price accordingly.
funky chicken on April 3, 2008 at 1:11 PM
HUD already pays for demolition of blighted housing, BTW. HUD holds PHAs to similar standards — let too much of your bricks and mortar housing inventory sit vacant too long, and HUD tells you you have to convert it or rip it down. They check the numbers every single month.
And my home state of PA is looking to prevent anyone who owns long-term unoccupied or blighted housing from getting permits for basically any kind of business activity unless the units get demo-ed or dispo-ed.
There’s a public policy precedent, is all I’m saying, but I think the radical solution (razing foreclosed homes, most of which would meet inspection standards for e.g. Section 8) is a little too radical when the shortage of affordable housing is one of the leading factors related to family homelessness.
/soapbox
DrSteve on April 3, 2008 at 1:13 PM
Maybe we could teach real math in our schools, not the kind of crap that is currently being taught. When a “math” lesson consists of having kids answer questions like “If math were a color, it would be _______,” instead of having them learn how to calculate percentages, what do we expect?
AZCoyote on April 3, 2008 at 1:17 PM
Dr Steve, yes, the only reason to knock down decent houses is to cut supply and therefore keep home prices artificially inflated. Bad, bad idea.
funky chicken on April 3, 2008 at 1:25 PM
There are plenty of foreclosures going on in neighborhoods which are not blighted. Section 8 serves to blight unblighted neighborhooods.
Many builders who built homes on spec and can’t sell them are renting to Section 8 tenants, and they advertise all over the country to bring in tenants. Next thing you know you have gangs in your nice middle/upper middle class subdivision and (of course real estate values tank).
Once again compassion ends up screwing the middle and even upper middle class who invested their life savings in a down payment on a home, only to be slapped in the face by having Section 8 tenants move in right next door.
Buy Danish on April 3, 2008 at 1:41 PM
Buy Danish, really? The Section 8 thing?
Another way they keep the banks/builders from having to drop prices to a reasonable level that would be supported by the market.
funky chicken on April 3, 2008 at 1:45 PM
Agreed. Most of these people put no money down and had no paid anything in principal. They are basically leasing the home with he hope the market continued upward. Hope is not a sound strategy. Let the buyer beware. Sound familiar?
I’ve heard so many times in the past years, your home is an investment. People just forgot to remember investments can lose value. No one worries about bailing out those who lost money in the stock market so why should bail out those who lost money on their home purchase.
Neil Cavuto on FOX had a great point on the housing market.
http://www.foxnews.com/story/0,2933,342508,00.html
I have no sympathy for those who brought on the razors edge. just like I have no sympathy for lenders who made risky loans. When you take a chance you can get burned. The market will correct itself and these REO properties will be sold to savvy investors as the market decreases.
VikingGoneWild on April 3, 2008 at 1:48 PM
Those freaking idiots; We need two new parties.
Johan Klaus on April 3, 2008 at 1:52 PM
counseling?
pshhhhhhhhhhhhh
Drunk Report on April 3, 2008 at 2:04 PM
Speculators also come in and buy up homes and then turn around and rent them out to Section 8 tenants. It’s a great deal because the government guarantees everything.
I believe that in this area they can get up to $1235 a month housing allowance. You can rent a really nice house for that (also add on the few hundred dollars the tenant has to fork up). It may not buy much in places like California, but that’s why they advertise out of state and bring people in, because in Georgia you can get a lot of bang for the buck and you can end up in an upscale subdivision.
I believe they also get a break on utility costs, which of course we all end up paying for.
Buy Danish on April 3, 2008 at 2:06 PM
whoa. shaking head. No wonder banks aren’t in a big hurry to sell their inventories of foreclosed houses at steep discounts. Some way or another they will get theirs…..
and the middle class and working class say priced out of owning a home in the good school districts. great.
funky chicken on April 3, 2008 at 2:43 PM
The biggest piece of crap in this legislation is 4 billion dollars in grants to state and local governments to buy up foreclosed properties. The money is to be distributed to the cities with the highest rates of foreclosures and subprime loans. These cities tend to be corrupt liberal satrapies like Detroit and Cleveland - cities that are simply not capable of managing, rehabbing, and selling thousands of homes.
Your tax dollars at work!
rockmom on April 3, 2008 at 2:54 PM
All homeowners are going to get an increased tax break. So they’re not getting “nothing.” Besides, they bid on their home. If they overpaid, it’s because they overbid and drove up the prices. The ones who are really getting screwed are the ones who are trying to buy their first home and opted not to because they’d be stretched too thin. After all, people had been predicting a housing bust a year before it actually happened, so anyone who was doing their homework should have none their was a chance prices would drop. Now the government is going to take the taxes from these people who are not homeowners because they were priced out of buying a home and acted responsibly, and use that money to further subsidize homeowners.
Spolitics on April 3, 2008 at 3:00 PM
“none” should be known. (How did that happen?)
Spolitics on April 3, 2008 at 3:01 PM
They can’t be economists…..They’re my attorneys!
VikingGoneWild on April 3, 2008 at 3:08 PM
Is this a joke?
Buy Danish on April 3, 2008 at 3:22 PM
http://therealrevo.com/blog/?p=675
I think I’ve found my new favorite blog.
funky chicken on April 3, 2008 at 3:24 PM
The problem there is the bank still loses money on the deal either way. If someone is upside down who’s going to take the hit? The bank? The customer?
If the bank refi’s them & waive tens of thousands of dollars for one customer then they’ll have to do it for everybody. So the responsible customer gets the high hard one for staying within their budget whareas someone who brought on
(Thanks jdub on April 3, 2008 at 12:15 PM) gets the bailout. By the way, if the home value goes up in the future does the bank get to add the waived amount back onto the title as a lien? Or should they be SOL?
The customer? Why not? It’s their possession. It’s their risk. If the value was up & bank decided they wanted a cut of the increase there’d hell to pay. You can’t have it both ways.
I do feel sorry for and have no problem helping out those that did everything right and are having some problems. Just don’t confuse a helping hand with a piggyback ride.
VikingGoneWild on April 3, 2008 at 3:26 PM
LOL
funky chicken on April 3, 2008 at 3:26 PM
Gonna stick my neck out here but that’s the way it is…
The consumer needs the help. No the government should not give away tax dollars, but my blue collar community is hurting. Between the rise in prices of food, gas, and utilities they are getting closer and closer to trouble.
Sorry, not everyone has the earning potential of 200k. If that was so there would be no workers, just CEOs. I know it is about adapting and overcoming, but folks Joe Public has their head in a vice that is slowly closing on them. All I want to see is some kind of negotiation process set up with the mortage holders and the borrowers to ease back payments for a short time to allow people to come to grips with the problem.
Ok….I guess I’m now officially out of the Red Club.
Limerick on April 3, 2008 at 3:35 PM
Yes, the price of gas and food is going through the roof. The energy bill is partly responsible for this disaster when, among other boneheaded moves, congress decided that using food for fuel (corn/ethanol) was the hope and change we’ve been waiting for.
Now some of these geniuses want to hit us with a 50 cent a gallon “carbon” tax and rescind tax breaks for the eeeevil oil companies. What will that do to the price of food and other necessities, I wonder?
Time to drill in ANWR and offshore, for starters. Indeed, I think those truckers who had mini protests about gas prices should do something that might actually work - have great big banners saying Drill in ANWR Now! plastered on the sides of the trucks.
Buy Danish on April 3, 2008 at 3:44 PM
Limerick on April 3, 2008 at 3:35 PM
i agree. the only way for this to get fixed is if both sides take a hit. the bankers have to refi the homes that are underwater. the buyer has to come up with some higher payments.
unseen on April 3, 2008 at 4:01 PM
Would someone pay my gambling debts for me? I was confused and didn’t understand that the house has an unfair advantage. That should be posted somewhere in the bar, before you hit the casino.
2Tru2Tru on April 3, 2008 at 4:13 PM
Counseling for home owners in the housing crisis? How about a math class instead.
Geronimo on April 3, 2008 at 4:18 PM
2Tru2Tru on April 3, 2008 at 4:13 PM
why its posted on every stock market page you can find yet people still do not understand that the market is legalized gambling…and get upset when their “investments” lose money….
But if you and another 10 million people’s gambling debt had the potential to cause the entire nation to be on verge of financial ruin I would be in favor of bailing you out and then locking you up so you couln’t do it again
unseen on April 3, 2008 at 4:28 PM
Counseling for home owners in the housing crisis? How about a math class instead.
Geronimo on April 3, 2008 at 4:18 PM
From my understand, and i could be wrong about this, that is basically what it is. Showing people how to budget, fiund the money needed to pay their bills, cut back etc.
unseen on April 3, 2008 at 4:29 PM
It’s days like this I want to run for the hills screaming.
Mike Honcho on April 3, 2008 at 4:48 PM
This rampant speculation (increased demand) is one of the factors that ran up housing values. It went artificially up, then corrected. Its still high enough to have made a good investment over time, but people bought at the peak and then are mad it went down.
The housing market has has ups and downs before. It will be fine, just needs time to get rid of the speculators and let values return to a natural market level, whatever that may be.
Its not the governments job to use taxpayer money to rescue risky investments. Backing up savings accounts is one thing , but trying to help out someone who thought a 600,000 Vegas dollar condo (that is now worth half that) was a good buy, is not.
firepilot on April 3, 2008 at 5:06 PM
I use to own a home in California that was valued at $380,000 with a mortgage of $289,000. Watched as one after the other the “illegals with 100% mortgages” in my city simply disappeared and left their homes to foreclosure. My company was bought out by an International conglomerate that closed its local office so I had to move to find work in my field. I had to sell the house in order to afford housing in the new location some 1800 miles away. Meanwhile I watched as my home’s value sunk drastically.
I worked with the bank to short sell the home to get from under the mortgage. They knew I was trying to sell or rent the property. Unfortunately, rents in the area decreased also as other homeowners were competing to find renters to pay their mortgages. Finally the home was sold for $250,000 to another bank, which was actually $25,000 above the assessed value. This equaled a loss of about $42,000 with interest and closing costs. Now I received a tax bill for that $42,000 that the bank wrote off that will place me in a financial bind for the remainder of 2008.
If I had made the move a year earlier, I wouldn’t be in this situation. But I was unable to do so as my wife had pneumonia that winter followed by my daughter having brain surgery that fall. So the money saved for the move had to go toward their medical bills.
But the final insult; I just received a letter from the IRS stating that my income level is such that I may not receive the celebrated stimulus check of $1200. Why, because they calculated that $42,000 as income which pushed me above the income limits.
Am I angry? Not at all, the house just resold to a family for $150,000. God bless them. That’s how I was able to afford the same home 16 years earlier. The previous owner had to short sell because of a job transfer coinciding with the California recession of ’89. I’m now able to rent a bigger home where I live now for about ¾ my California mortgage. My family is healthy and happy.
Zaire67 on April 3, 2008 at 5:12 PM
Unconstitutional.
Johan Klaus on April 3, 2008 at 5:25 PM
Meanwhile the same socialist idiots in Congress ignore how development of domestic oil supplies could leverage against the commodities brokers whom are keeping oil prices inflated.
I guess if I want to buy a Rolls Royce and have the Congressional pinheads buy it for me then I should hang a mailbox on it, default on the payments then plead my case in “counseling.”
More of the same government dependence wrought by the Great Society. Expect plenty of strings attached not only for those irresponsible with their mortgages but for those within their means expected to bear the burden of the careless.
viking01 on April 3, 2008 at 6:25 PM
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