Obama announces mortgage-bailout plan, market slides
posted at 1:30 pm on February 18, 2009 by Ed Morrissey
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At least this time Barack Obama actually had a plan. Unlike the bait-and-switch moment from Tim Geithner on TARP II, Obama rolled out an actual plan to have the government force refinancing and lower payments for mortgage holders under water. The markets reacted better than they did last week to Geithner’s epic fail, but that’s not saying much:
Wall Street extended its decline Wednesday after President Barack Obama released details of his $75 billion mortgage relief plan.
The plan is designed to help stabilize the housing market and reduce foreclosures. Sharp drops in housing prices and sales, coupled with rising foreclosures since the middle of 2007, have been a primary cause of the toughest recession in decades.
Mr. Obama’s announcement of the plan comes a day after he signed into law a $787 billion economic stimulus plan he hopes will help revive the economy.
In midmorning trading, the Dow Jones industrial average fell 25.40, or 0.34 percent, to 7,527.20.
Broader stock indicators also slid. The Standard & Poor’s 500 index fell 3.58, or 0.45 percent, to 785.59, and the Nasdaq composite index fell 4.80, or 0.33 percent, to 1,465.86.
Thus far, Wall Street has not exactly given Barack Obama a rousing show of confidence. Since his election, the market has dropped over 2,000 points, largely over issues out of his control. Since the inauguration, though, it has fallen about a third of that distance, mostly after Geithner showed up empty-handed following Obama’s promise of an actual plan to deal with the financial crisis.
Obama’s plan will provide a government backstop for homeowners who owe more than their houses are now worth. Obama will throw $75 billion in incentives and guarantees at this issue, trying to stop a massive wave of foreclosures that will destabilize the real-estate market and could send many more people under water. This was what Treasury and Henry Paulson originally pledged to do with TARP — buy up mortgage-backed securities to remove the threat of foreclosure and renegotiate mortgage terms as the primary lender. Had Treasury actually done this earlier, the market may have stabilized without much more intervention at all. Instead, they threw a lot of money at private enterprise bailouts before coming back to the actual problem.
The problem, of course, is that we have too much inventory on the market, and that requires a rational revaluation of assets. The indicators from the housing market show this very clearly; new starts fell almost 17%, the steepest decline on record. Why? No one’s buying, primarily because few people can afford to sell. Until we plumb the full extent of the bubble correction, no one will have a clear idea about the real value of their property. Government intervention in the housing market will almost certainly thwart that, postponing rather than canceling the pain.
Mary Katherine Ham notes one of the real problems in the housing market, and a class who shouldn’t get a bailout — flippers:
According to the Arizona Republic, housing prices soared more than 55 percent in 2005 alone, and one of four sales that year was to a speculator. Phoenix real estate bloggers argued with housing bubble bloggers, blithely dismissing those who foresaw the crash as paranoid doomsdayers. The city is home to Nouveau Riche University—not a joke—a real-estate speculation program whose course offerings read like a guidebook to creating the current crisis. Learn to “Fix ‘n’ Flip” or how to buy more property with “Creative Financing!”
But the time came when the sun set on the Valley of the Sun. Today, Phoenix is not only home to families down on their luck and behind on their home payments, but people who acted irresponsibly and may be underwater on several houses. The problem is such that there’s an entire blog devoted to “Phoenix Flippers in Trouble.” Eleven of the properties listed there are in Mesa, where Obama is giving his speech today.
So, one wonders what type of homeowners the American taxpayer will be bailing out under Obama’s plan. Will he try to save only people in danger of losing a primary residence, or will he consider saving flippers part of the collateral cost of propping up the housing market? Even if he intends to keep flippers off the dole, there’s no reason to have any confidence in oversight that would actually accomplish that.
We saw the same thing in the California housing bubble in the late 70s. People flipped houses without ever protecting themselves against even a small retraction in values, and when the inevitable happened, they went broke. People who took those kinds of risks should assume the burden of their own bad decisions.
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Seriously, it would be in your loan documentation, as the loan would have been through them.
Vashta.Nerada on February 18, 2009 at 2:13 PM
Who is Peggy Joseph?
technopeasant on February 18, 2009 at 2:14 PM
Rush said today that he thinks O’s main problem is rage. If that’s the case, then it would appear that his 20 years in Wright’s church and Michelle’s input may be fueling his would be renaissance. I suppose it’s sort of a given if you spend so much time with people filled wilth so much hate, that it’s going to rub off.
jeanie on February 18, 2009 at 2:15 PM
This “stimulus” sham panders to the most irresponsible people in the country . . . those that couldn’t afford a loan when they took it and knew they couldn’t pay their mortgage. Intelligent people will only take this treatment for a short time. Eventually they will get sick and tired of paying the way for Obama’s parasitic constituency. If there isn’t some adult supervision injected into this fiasco soon, this once great Republic will crumble under its own weight.
rplat on February 18, 2009 at 2:16 PM
France is one, and this is just another example proving that socialism doesn’t work in a free country.
BTW, where is the discussion on high gas prices when oil prices are down? Did I miss that?
DannoJyd on February 18, 2009 at 2:20 PM
Not necessarily. The loan could have been written by any bank, then re-sold directly to FNMA/FMAC, or purchased by another bank with a FNMA/FMAC gaurantee. Your copy of the original loan docs won’t show this chain. But it doesn’t matter anyway. No matter how often your mortgage is sold or traded, the terms cannot change unless you agree to the change.
BobMbx on February 18, 2009 at 2:20 PM
A government of the irresponsible, by the irresponsible and for the irresponsible.
fogw on February 18, 2009 at 2:21 PM
OH FOR GOD’S SAKE!!!!!!!!!!!!!!!!!!!!!!!
Ok, so now those of us that have devoted time, effort, hard work, long hours, lived by the rules, paid taxes, sacrificed, made our home payments on time, been persoanly responsible… WE GET TO PAY THE BILL OF THOSE WHO HAVE NOT!
So, as Rush said today, Group #1 that has done this pays for group #2 that should NEVER HAVE BEEN GIVEN THE LAON IN THE FIRST PLACE and now can’t pay for what they should never have been given… OUR TAX MONEY is going to bail out these bastards…
And I’m the nut??? Who the F voted for the Messiah here, I want ofind you and kick your ass!!! Up close and persoanl!!!
Mark Garnett on February 18, 2009 at 2:22 PM
You mean voting for Obama, right???
The markets, our system of capitalism, the very engine of our economic growth is under assault from the left. They say in public, we must get the economy moving. Nothing could be farther from the truth. The “stimulus” is designed to be the first pillar of “redistribution of wealth”, this mortgage plan is the 2nd pillar of “redistribution of wealth”. The 3rd pillar of “redistribution of wealth” will be the nationalzation of as many companies as Obama can get his hands on – starting with GM.
People have lost faith in the markets, retirement funds will be all but gone as people pull out of them and stop funding them for fear that the Feds will grab those as well.
I don’t think bullets & beans are the answer. The answer is how you fight in your neighorborhood, in your state to take back the power so that other people cannot take what is yours.
izoneguy on February 18, 2009 at 2:22 PM
Technopeasant,
I think she’s the supporter who said Obama would pay her bills for her.
Christien on February 18, 2009 at 2:22 PM
Ok… I’m not underwater…. but I’m up to my nose…. what’s to prevent me from takling advantange of this?
Ok… I’m doing fine with my old mortgage, but I want to “refinance” under the Obama give-a-way, do I qualify?
CynicalOptimist on February 18, 2009 at 2:22 PM
That would be my sister and her husband. They’ve got a 15 year mortgage with only 3 years left on it.
Oh yeah, she’s an idiot.
Knucklehead on February 18, 2009 at 2:23 PM
Yes, but don’t they have to send the mortgagee documentation to that effect?
Vashta.Nerada on February 18, 2009 at 2:23 PM
IF Da Bama EVER announces a REAL investigation into what caused the Housing Crisis [Democrats], and promises to correct the mistakes made [by Democrats] we will then see the economy start to rebound. As long as Da Bama, along with his fellow Socialists Democrats, continue to throw good money at bad debt we will slide into Da Bama’s Depression.
DannoJyd on February 18, 2009 at 2:23 PM
I completely agree, the “get rich quick speculators” should not get a dime! I bought my house (one I could afford) new in 2004 as my primary residence and not as a “get rich quick scheme” as many speculators in the AZ housing market did before it went bust.
While my value jumped considerably (I paid $196k and it went to $345k) it is now in the tank. Thank goodness I didn’t use the equity as my personal ATM because now the market is so bad where I live (Maricopa AZ) that my home is now worth less than what I paid for it and I have to thank the “get rich quick speculators” for artificially driving up home values to the point where it burst.
Don’t get me wrong I wouldn’t have complained had I sold my home prior to the housing bust (I wish I had) and made a cool $149k however it was never my intention to be a speculator, I purchased a home I could afford with the intention of living in it, which I still do. But God forbid I should lose my job or the company I work for relocates me as I would be in a world of hurt as the average market value for my home is now $145k, of which I still owe $179k, a $45k shortfall.
There was an article back in November (can’t remember where I read it) but it featured the housing collapse in Maricopa AZ as it is one of the worst in the nation due to the heavy purchasing done by speculators, in fact soon after I bought my home the new home builders were actually holding lotteries to see who would have the opportunity to buy!
The reason why Maricopa is so hard hit by the housing bust is Maricopa was just a small town when I first purchased (in fact it didn’t even have a grocery store or restaurant) and wasn’t even a city yet (it is now) but back then it was a new up and coming area, but now there is such a glut of existing homes and unsold new homes that builders are offering insane incentives ($50k in upgrades, etc) that existing home owners can’t even come close to competing with them, hell we probably couldn’t give our homes away right now!
Oh well, hopefully I won’t get laid off of my job or won’t get transferred any time soon so I can ride out this storm, it’s just unfortunate that people like the “get rich quick” speculators and the lenders that knew what was happening didn’t put a stop to it sooner, especially when they started seeing annual 50% increases in home values they knew the market couldn’t sustain.
Liberty or Death on February 18, 2009 at 2:25 PM
That is what a writer for the Canada Free Press wrote in an article over the weekend. I read it at Lucianne.com She outlines the “abandoned child” syndrome. What does a young man do w/all the bewilderment and rage at being abandoned by not just his father but his mother and step-father? She goes on w/all the radical affiliations, etc. It was a very good profile. I agree.
JAM on February 18, 2009 at 2:26 PM
I don’t like the idea of bailing out people that knew damn well they couldn’t afford what they were getting into when they ‘purchased’ a house that was beyond their means…they probably should have been renting or living with relatives.
There have to be better ways to fix this situation. Any ’solution’ that removes consequences isn’t any kind of solution at all.
Spiritk9 on February 18, 2009 at 2:28 PM
Fixed it for you:
We saw the same thing in the Arizona housing bubble in the late 90s – early 00’s. Irresponsible families bought houses without ever protecting themselves against even a small retraction in values, and when the inevitable happened, they went broke. People who took those kinds of risks should assume the burden of their own bad decisions.
I’m not a “flipper” (we used to call them investors, as I recall,) and don’t know anyone who is. But I’m getting a little tired of this meme that somehow people who live in the residence they couldn’t hope to afford are somehow morally superior or more worth saving than eeeeevil “flippers.”
You can’t pay the bill, you lose the house. Period. If we’re going to bail out those virtuous deadbeats who have the good luck to be incapable of paying their bills, why not bail out the “flippers?”
There well may be systemic/structural reasons. But please, spare me the sanctimony. “Flippers” are businesspeople, many of whom made the bad decision to buy at the top of the market. They failed to protect themselves “against the market,” true. But so did all the poor, downtrodden, common-or-garden deadbeats.
So stop beating up on the filthy capitalists. (not aimed specifically at anyone, just a rant against the general meme.)
jdub on February 18, 2009 at 2:30 PM
Don’t ask a question you don’t want to know the answer to.
Tom_Shipley on February 18, 2009 at 2:31 PM
Attention: Government, Lenders, those who don’t own a home and can’t afford one….
CREDIT IS NOT A CIVIL RIGHT
If one cannot afford a loan, then one should not have a loan.
Maxing out credit cards is not an uncontrollable impulse…It’s an irresponsible act.
I pay my mortgage, take care to look after my credit, and do not abuse my credit priviledges. My efforts to do all of that are NOT for YOU to suck off of.
It is not my job, nor the government’s job, to “learn ya’” about how important it is to make your payments on time, and not over-extend yourself. Just because you “gotta have it now”, that doesn’t mean you SHOULD “have it now”!
Our generation rides upon the successful borrowing and spending practices of those who lived decades ago. Credit was once something you didn’t use unless it was an emergency, or you ALREADY had the money in hand (or shortly would) to pay it off.
Pull yourself up by your own damn bootstraps!
As Michelle Malkin is fond of saying: SUCK. IT. UP.
Talismen on February 18, 2009 at 2:31 PM
Okay, I am mad!! The business I am in has been really slow for over a year now, and my income has been cut by half, but my husband has a decent job and so we cut back, started paying down debt, have not accrued any new. We need a new car, but are doing with the old, my house needs painting, my kitchen needs remodeling, but we are paying our mortgage and our bills! Why should I pay for these people?!!!! I am livid that we as middle class citizens, who struggle to make the best and to do what is right by paying our way are being ask to bail out house flippers, and people who own homes twice as big as mine. If you want to work hard and earn a big house, and a boat and a Lexis, fine, great, more power to ‘ya, but you pay for it! If you think you might lose your job, have a contingency plan, savings, something, but don’t ask for a handout from hardworking people who are just making it, and don’t buy a house that you cannot afford! And when you do, don’t blame it all on the lenders, you should know how much you can afford! Take responsibility for your own actions!!! ARGH, I AM MAD!!
Susanboo on February 18, 2009 at 2:32 PM
I’m up in the air on this bailout. On one hand, you shouldn’t reward flippers and people who bought way more house than they could afford. On the other hand, the sheer volume of distressed properties on the market causes serious externalities that hurt responsible homeowners. In Cleveland Ohio where I live, for example, there are like 20,000 active foreclosures. Virtually every property on the market right now is distressed — even in “good neighborhoods” and “wealthy areas.”
Why should we care? It hurts good people who paid fair market value for houses, kept them nice, and had reasonable mortgage products. NOBODY can sell a non-distressed property right now, because the volume of distressed properties is so huge it just craters their value. This means that if you wanted to sell your existing home and buy a new one, you can’t, because you can’t sell your existing home.
I’m actually trying to buy a first home right now, and can’t. Three months of looking around, and the only properties are distressed pieces of crap. And all of THAT hurts the economy. So, if the government can “soak up” the distressed properties and get them off the market, it may allow the regular real estate market to “reboot” and function again.
Outlander on February 18, 2009 at 2:33 PM
From the speech today:
WHAT IS THE KEY WORD IN THIS SENTENCE…COMMUNITIES..IN OTHER WORDS…ACORN!! THIS MONEY WILL BE GOING TO ACORN!
tdavisjr on February 18, 2009 at 2:35 PM
Throw in a government bailout and you’ve got improved (accidental?) “welfare housing.”
Sure beats the projects.
Otis B on February 18, 2009 at 2:35 PM
On the other hand, the sheer volume of distressed properties on the market causes serious externalities that hurt responsible homeowners.
See, I’m not evil. This is one of them-there legitimate structural reasons.
Don’t get me wrong I wouldn’t have complained had I sold my home prior to the housing bust (I wish I had) and made a cool $149k
Why didn’t you? I mean, you must have seen it coming, right?
jdub on February 18, 2009 at 2:38 PM
“Since his election, the market has dropped over 2,000 points, largely over issues out of his control.” But, the market is a very emotional institution and it is next to impossible to separate those issues from the emotion that comes from the feeling of…free-fall.
Mr. Wizard isn’t looking too happy being Prez; his creases are deeper after only one month in office. I should give up the rage and pray for him, but I think it’s too late.
Christine on February 18, 2009 at 2:38 PM
Bob & Vashta,
Thanks for the hints where to look. I live in a suburb of Phx hit hard. Our original mtg was with the builder’s mtge co and then sold to Conutrywide. I will start checking it out. I think Obambi said it would all take place staring in 2 weeks.
See this is what happens. Everyone turns into “what can I get out of it” mode instead of “do the right thing” mode. I’m just jumping on the bandwagon!
Traffic Cop Timmy on February 18, 2009 at 2:38 PM
Can there be any greater example of how bad it has gotten than this? Responsible, live-within-their-means people are basically getting screwed to help irresponsible, live-outside-of-their-means people by a government that encouraged irresponsibility and for people to live outside of their means.
How much longer will the responsible people take this treatment?
BOHICA!
King of the Britons on February 18, 2009 at 2:41 PM
Oh, right. I forgot that the freaking fish-aliens from plant freaking neptune snuck in last night with their crab-ships and stole all the rental housing in the united states. silly of me.
jdub on February 18, 2009 at 2:43 PM
It’s been pointed out, but FNMA/FHLMC didn’t originate loans. They purchased them.
DrSteve on February 18, 2009 at 2:44 PM
First of all, the mortgagee is the bank; the borrower is called the mortgagor.
And no, if Fan/Fred ultimately buy your loan there is no obligation for anyone to notify you. As a matter of fact there is probably no relevance to you anyway. The only thing you must be notified about is when your loan servicer (the company that collects the monthly payments from you) changes. You have to know about that, otherwise you could not be sending your payments to the right address. Your loan servicer may or may not be the owner of your loan. Many servicers just do the servicing on loans owned by others for a fee.
factoid on February 18, 2009 at 2:44 PM
So now you’re asking that the government buy up the “distressed properties” so you can find something more suitable to your taste? And what exactly are they going to do with those properties, bulldoze them?
If say you’re looking for your first home, can afford it, have good credit, you my friend are missing a golden opportunity to buy something really cheap, or that piece of crap that you call it.
Ever heard of a paint brush? Soap and water? A little elbow grease? You’d be amazed what those 3 items can do to what you call “crap”. Maybe you need to “reboot” your thinking.
Knucklehead on February 18, 2009 at 2:45 PM
No. In the distant past before the internet and FNMA/FMAC, a bank would write and hold the note for the term. When it became profitable to sell or trade mortgages, the note-buyer would take over servicing the loan, and notification would be sent informing the homeowner of the new address and account numbers, blah blah blah….
Now, because of the rapid trading of MBSs, it is not feasible for a MBS trader to service mortgages. This is now accomplished mostly by the loan-originating bank, who gets a fee from the note holder for the service. Odds are the loan servicer doesn’t even know who owns the mortgage.
BobMbx on February 18, 2009 at 2:47 PM
they need to give short sellers access to this $70B pool of funds. this would allow the market to stablize in the fastest possible period of time and would allow many loans currently in trouble to be paid off instead of foreclosed upon. but i haven’t heard a peep about allowing this type of action.
it would be nice if they would ask someone in the real estate and mortgage industry how to fix the problem instead of villifying us. wall street goobers don’t understand the problem nor how to fix it.
DrW on February 18, 2009 at 2:47 PM
Rush just said (I may be off on a word or two):
“I wonder just how soon it will be before the peasants pick up the pitch forks”
…Indeed.
Talismen on February 18, 2009 at 2:47 PM
I wish I could say that I thought Bush would have acted much differently.
sublime on February 18, 2009 at 2:48 PM
jdub, the answer to your question is in my post had you read it, specifically:
That answewr your question?
Liberty or Death on February 18, 2009 at 2:49 PM
undoing 200 years of contract law will destroy all credit markets. why would any business be willing to loan money if they think the government will come in after the contracts and force you to renegotiate? If this happens say good bye to 80% mortgages and 5% interest rates. your going to be lucky to get 50% mortgages at a 18% interest rate. If you are thinking about buying or a refi you better get on it quick……
CaptainObvious on February 18, 2009 at 2:50 PM
Speaking of upside-down….
All of my stock investments are upside down…. I ‘financed” the purchase of my stock investments (traded on margin) and now I want to be made whole. This was due to no fault of my own (my stock broker promised me that GOOG was going to $1000/share!) Where is my bailout?
/sarc
BPD on February 18, 2009 at 2:51 PM
Ah, another Friend of Angelo! :-)
Timmy, it doesn’t matter who owns your loans (chances are it’s Fannie, that’s where Countrywide sold the majority of its loans). You will be dealing with your servicer, the company that currently collects your payments. (Chances are it’s Bank of America; they are the ones who bought out Countrywide last year.) They will probably be eager to help you because the Obama program provides monetary incentives to them.
factoid on February 18, 2009 at 2:51 PM
This whole situation with “The One” has me so depressed, I can’t believe that he is really doing some of the things that he is. I knew he would damage our Country, but wasn’t quite prepared for him actually ruining it.
Just looked at the congressional approval polls on the Real Clear Politics site, and cannot fathom how the Dems could be at their highest rating in a few years, and ahead of the Repubs. How can this be, with them passing that gosh-awful porkulus bill, and following right along with “the One” on some of these ideas? Are there that many people needing bailouts, or are they all just stupid? Who is doing this polling anyway?!! I think I am just gonna go home and cry!!
Susanboo on February 18, 2009 at 2:54 PM
I think he would have; he wouldn’t have talked down the economy the way Zerobama does and he wouldn’t keep yapping about a “crisis.”
I also think he would have called for more tax cuts rather than calling for yet more government programs.
He only supported the passage of TARP because Paulson said that the entire economy would freeze if we didn’t pass it.
Jenfidel on February 18, 2009 at 2:55 PM
I should of bought a house we can’t afford. So someone else could make the payments for us. Geeze I thought I was smart and I didn’t even think about buying me a house so the government would pay for it. UGH. Sucks to be a Smart American.
Brat4life on February 18, 2009 at 2:57 PM
I agree.
In fact, it this comes to pass, what is going to happen to mortages in general?
This will crater the entire banking/investment/finance system because it renders all contracts, but especially mortgages, meaningless if they can be renegotiated/cancelled at any time in the future by goverment fiat.
Jenfidel on February 18, 2009 at 2:59 PM
This assumes that the bank is intent on being the good guy. However, the reason we’re in this mess is because the banks figured out how to make money by lending to folks who couldn’t pay back the loan. Sounds crazy, but that’s what happened.
So now we’ve given the banks a wad of free money to loan out, as fast as they can.
If I were a bank, I’d be doing nothing but writing loans to whoever walked in the door. Why? It ain’t my money! There is no risk to me, as a bank, to write billions in bad loans today. Why? I’m not spending my money. The US Government would have to answer why the money was wasted, not me. Secondly, I wouldn’t care less about the real asset or the folks borrowing the money. I’d be interested in one thing: the closing cost $$$. For every loan I close, I can put $10k in my pocket (cash), hand the risk of the loan to the US Treasury, and laugh all the way to Bermuda beaches.
BobMbx on February 18, 2009 at 2:59 PM
College Prof on February 18, 2009 at 3:07 PM
actually no that isnt what happened. If the situation was only the loans the banks could have weathered it. only about 20% of mortgages are in foreclosure. The problem was derivatives where mortgages were bundled and sold then re bundled and sold etc etc. This was in the dozens if not houndreds of trillions of dollars of asset allocations. Then with mark to market any bundled assets sold below value marked all assets with the same grade as the new value.
To use the whole in the boat bail out analogy, Stopping forclosures isnt even bailing out the water from the boat its putting paint on it while the whole stays.
This is why Bernanke changed his plan from buying bad assets to just putting money on the banks books. The asset buyup would have costed trillions where they could just pad the books to keep them afloat.
CaptainObvious on February 18, 2009 at 3:09 PM
I don’t disagree that the stimulus would have looked a lot different, but I don’t think that a housing bailout would have. Knowing Bush, there certainly would have been one.
sublime on February 18, 2009 at 3:10 PM
whole = hole.
CaptainObvious on February 18, 2009 at 3:10 PM
Did I hear Obama in Mesa correctly?
At least the plan has been tested.
WashJeff on February 18, 2009 at 3:13 PM
I hear what you’re saying jdub, I don’t begrudge anyone making money nor do I bemoan capitalism, but if I have to sell my home due to circumstances beyond my control (layoff, job relocation, etc.) then people like myself whom didn’t buy homes as speculators to make money but bought them to live in and didn’t borrow against their equity when prices were high (thank goodness I didn’t) we are now caught between a rock and a hard place as we cannot sell our homes for what we owe the bank.
As I mentioned, I still live in my home and I purchased a home I could afford based on my income and debt back in 2004, however if something unexpected comes up as I mentioned previously then I will suffer the consequences of a situation that was not of my doing, so forgive me and others if we aren’t exactly falling all over ourselves to feel sympathy for the “get rich quick flippers” that did have a part in creating an over inflated housing market bubble that would not be able to sustain itself.
Had I “seen it coming” as you stated, yes I would have sold my home and would have been able to pay cash for the same home and not have a mortgage, but alas I’m not psyhic, furthermore I purchased my home to live in not as a speculator, however most people’s homes are their main source of long term wealth, unfortunately that long term investment in wealth just became much longer as many in my position will not see equity in our homes again for a long, long time.
Liberty or Death on February 18, 2009 at 3:14 PM
Time will tell how long this bailout will extend this financial mess. It’s an illusion that the damage can be stopped or prevented. The damage is done. We are encouraging, even rewarding, bad practices, risky decisions and bad business with these many bailouts. The pain from these bad behaviors is affecting us all – responsible and irresponsible alike. Meanwhile we are being raked over the coals in addition to that pain with loads of debt being piled on high and threats to our capitalist ways with exponentially increasing fed oversights and dictations into private sectors, and maybe with the mortgage bailout, individual homes. We keep arguing about how we should bail ourselves out of this mess. I say take the hit and ride it out so it will pass quickly. Rip off the bandaid! But it appears we will just continue to pick at the scab.
jusgottabeme on February 18, 2009 at 3:19 PM
They tried this last year. Didnt work
They had a program to refinance about 500,000 homeowners and only a few 100 applied.
The problem is that in states like CA where you’re really seeing homeprices drop, there are also laws passed after the Depression that make it easy to walk away from mortgages. So easy in fact that at worst you’re looking at only 5 years in the woods before you can buy again.
Some people even get new mortgages on new homes at much lower prices then walk away from first one.
People don’t give a crap about 1pt lower rates- its the idea of paying money to the bank they wont get back if they sell because they’re 200k underwater.
Who wouldn’t walk away?
One seemingly good liberal idea ramming into another one.
Chuck Schick on February 18, 2009 at 3:21 PM
The inmates are truly running the asylum.
I watched the obamanation for longer than I thought I could. I counted about 15-17 times he used the word ‘crisis.’ Does anybody have an overall total on his useage of that word?
I got to tell you that this is a sure way to install confidence in the people. FEAR, FEAR!!!!
jukin on February 18, 2009 at 3:21 PM
This from a piece by Kathleen Parker, the queen of cognitive dissonance:
We’re a long way from making any judgments on what will or won’t work. It’s pretty clear that no one has a clue. Our current crisis is a great spaghetti-against-the-wall experiment. But it’s nice to know that the president is a non-ideologically driven, free-market capitalist, who doesn’t want to expand government.
Here are the relevant excerpts from Friday’s interview:
The president: “I’m going to keep on making the case that government action in these circumstances is entirely appropriate and not at all inconsistent with the primacy of the free market and capitalism. I have no interest in expanding government, contrary to what some critics might say –”
Impudent columnist: “Now there’s a quote of the day.”
The president: “I don’t. I have an interest in fixing the problem. In fact, keep in mind that one of the exercises that I’m going through right now is how do we set up a long-term budget that is sustainable.
“I inherited a trillion-dollar-plus budget. That’s a structural budget that was engineered by some of the very critics of this package. Now, I would love nothing more than to be able to walk into the presidency, roll up my sleeves and just start paring away at that budget because everything had been taken care of.(I would love it if) We didn’t have deteriorating infrastructure. (If) Families had health care at affordable prices. (If) The schools were working and we had enough teachers, and the banks were fat and happy and lending money and people had jobs, and we didn’t have two wars going on. And then I could — I would say, you know what, give me just one of these problem, I’ll take them. Unfortunately, what they handed off was all of these problems simultaneously.
“So what we’re going to do is to work with anybody who wants to work with us constructively to solve the short-term problem of putting people back to work, and the recovery package was part of that. We’re going to get a financial system that gets credit flowing again. We’re going to put forward some regulatory architecture that ensures that we don’t see these kinds of systemic risks again. We are going to put forward a housing plan as part of the overall financial approach that we’re taking that just provides some immediate relief to people who are on the brink of losing their homes but have been doing everything right. And some of this is going to cost money short term and we are going to try to pull off the hat trick of, at the same time, starting to chip away at our enormous long-term budget deficit.”
College Prof on February 18, 2009 at 3:24 PM
We have nothing to fear but…
..everything at this point.
pastorjim67 on February 18, 2009 at 3:25 PM
The Irish have cut spending and taxes in response to their downturn.
Who wants to bet that they are doing better, faster, than us?
Martin on February 18, 2009 at 3:34 PM
You might if you have lost a job and your mortgage payment is now over 50% of your monthly gross income. It appears that there will not be any help for high-dollar mortgages though.
At the margins this is going to produce longer average unemployment. The more we pay people to be unemployed the less incentive they have to get a job and the higher the salary has to be to get them to take another job. If you combine the mortgage subsidy with the extension of unemployment compensation and the COBRA subsidy and S-CHIP or the kids you could end up with a lot of people who are able to live pretty comfortably without a job. But they will still be part of the unemployment rate. So the rate will stay high and Democrats will keep crying for more stimulus spending.
rockmom on February 18, 2009 at 3:34 PM
http://www.ask.com/bar?q=Blame+for+Burris+mess+isn%27t+Blagojevich%27s+alone&page=1&qsrc=0&zoom=&ab=1&u=http%3A%2F%2Fwww.chicagotribune.com%2Fnews%2Fcolumnists%2Fchi-kass-18-feb18%2C0%2C4327749.column
OT, but I just want to post this latest John Kass article on Ill. Senator Burris in which Kass actually blames Obama for the Burris mess. Kass is an honest and smart man. He knows Illinois politics better than anyone and he certainly has BIG BALLS. Everyone knows you don’t say bad things about Obama.
Angry Dumbo on February 18, 2009 at 3:35 PM
I’m looking at all the documents about the plan. Seems clear that help will not be available for non-owner-occupied properties – i.e. the flippers. The sooner those properties get foreclosed and resold the sooner we can hit bottom with prices and start stabilizing everything else. If this plan reduces the foreclosure pipeline of homeowners and allowscouple of servicers to concentrate more on taking and selling off the flippers’ properties, it will be helpful.
There is actually some pretty good thinking in this plan. I know a couple of people who have been working on it and they are smart and sincere. I do hate the bankruptcy cramdown part of it; but I think that might be massaged so as to minimize the number of people eligible for it.
rockmom on February 18, 2009 at 3:41 PM
Even though we’ve always worked our own way out of our messes (we are 1 & 4 years from retiring), and we shouldn’t feel bad, I feel guilty calling because I know you guys are all helping pay for it with your taxes. But I guess it’s coming out of our taxes, too. I just want to have some options should the circumstances worsen and we have to sell. And a mtg balance close to the selling price would be nice.
Traffic Cop Timmy on February 18, 2009 at 3:44 PM
And I’m the nut??? Who the F voted for the Messiah here, I want ofind you and kick your ass!!! Up close and persoanl!!!
Mark Garnett on February 18, 2009 at 2:22 PM
It took me about an hour of “quiet time” to talk myself out of sending out a blanket, (over 600) e-mails addressing this very idea to all the loons who voted for Obama. In the short term it would have been hugely gratifying, long term, messy and probably not worth the losses. But trust- on an individual basis, I can’t wait to say, “I told you so”.
anniekc on February 18, 2009 at 3:49 PM
Yes, Peggy the Moocher, you were almost right when you squealed about how Obama was going to pay your mortgage. It’ll get paid alright, but not by Obama. That job now falls to responsible taxpaying citizens (and their kids and grandkids).
Reparations and “social justice” are turning out to be awfully expensive, aren’t they?
AZCoyote on February 18, 2009 at 3:52 PM
The new administration is a mess
Streecar on February 18, 2009 at 4:00 PM
Am I losing something here? What’s all the hostility towards ‘flippers’? I bought a townhouse and rented it out. I have a solid affordable mortgage on my primary and got a decent affordable mortgage on my townhouse. It was not a bad idea for an investment. I figured I could sell it one day when the little one was ready for college. Or maybe I could sell it to supplement my retirement. Anyone see their 401ks recently? Investments are good. Taking high-risk loans out to make an investment is bad. I can’t be the only one who invested in real-estate in a stable manner. Not all ‘flippers’ made stupid choices. I’m upside down on both properties just like so many others. I will continue to be responsible and pay both of those mortgages just like I always thought I would.
Or maybe ‘flippers’ now stands for those investors who made really stupid risky choices?
jusgottabeme on February 18, 2009 at 4:03 PM
I forgot you can then itemize the interest you paid to yourself on your taxes.
Bunsin on February 18, 2009 at 4:04 PM
There is NOTHING good about this plan, just more for those of us with “means” to bail out more of the people who had no damn business buying a house in the first place.
anniekc on February 18, 2009 at 4:06 PM
Why are house-flippers automatically considered the enemy? This is not necessarily so.
Those who buy a run-down house, fix it up and make it nice, and in so doing improve the neighborhood and make a better domicile for those who come next — such “flippers” deserve a profit. They are performing a service.
There are many such people and many such deals. Why should they be demonized?
Edouard on February 18, 2009 at 4:16 PM
I feel like I’m in an alternate universe! It is irresponsible to bail out businesses or private individuals who default on their loans. I was against any intervention in this whole thing! Can I ask….has anyone seriously considered moving overseas? I don’t mean just a fleeting thought, but serious consideration.
donnak on February 18, 2009 at 4:19 PM
Who is John Galt?
Kalifornia Kafir on February 18, 2009 at 4:24 PM
I don’t demonize them nor do I want to assume the costs associated with their risk.
PackerBronco on February 18, 2009 at 4:51 PM
This morning I laid in bed wondering what would be the best process for several states to peacefully break away and form their own country, a country actually based upon the US Constitution. Texas, Alaska, the southeast, some of the southwest etc. Virginia should divide into two sections and leave the DC suburbs behind. What would be the process for getting this movement started?
How would we build the political groundswell in the states that want to regain their freedom? How would we divide up the national debt, who would own what nukes, etc.
We would be for free people and limited government, like the founding fathers wanted.
No question that a vibrant “Consitutional States of America” could quickly leave the moribund liberal states in the dust in terms of quality of life and economic growth. Perhaps more of the blue states would choose to join us over time as the old US proceeds down its path.
Anyone working on this already?
ksm on February 18, 2009 at 5:11 PM
rockmom, do you have a link to the actual plan, I’d be interested in reading it.
Thanks!
Liberty or Death on February 18, 2009 at 5:16 PM
OUTRAGED!!! I AM SO PISSED OFF I’M SHAKING.
So lets see if I’ve got this correct:
My wife and I have skimped and saved, ( living below our means rather than above it ) since 2001 when we noticed that housing prices were rising at unreasonable rate. We lived like it was a depression; drove 25 year old economy cars, kept the house at 61 degrees in the winter, seldom dined out, and did most of our shopping at Costco. We were saving just as our parents and grand parents had done for the inevitable correction in the housing market.
Now our government is going to reward those that have lived beyond their means, those who purchased new cars, boats, motorcycles, or jet-skies from capital through refinanced mortgages. Slow the correction until inflation ruins the value of our savings. And on top of it all it is my tax dollars that will enable it! OUTRAGEOUS!
Will the irresponsible home purchasers pay a price for their actions? Is the government going to:
require these people to divest themselves of these assets purchased through the refinancing…Nope!
require that these folks declare bankruptcy? Doesn’t look like it!
Will we the tax payers get a piece of the appreciation of the sale of a “crammed down” house? Nope! In fact, according to the Obama administration’s Christina Romer says, we will all be repaid by getting an improved economy…….
OUTRAGED!
JeffVader on February 18, 2009 at 5:37 PM
Should they? Not according to our president. So what happens if the price of these homes go back up, we’re paying for people to make a killing on real estate?
scalleywag on February 18, 2009 at 6:03 PM
Ed, is this some kind of liberal creep showing up again in your writing? Don’t most conservatives believe that the market is not under anyone’s control?
bryanmyrick on February 18, 2009 at 6:05 PM
Not overseas but I’m seriously thinking of taking my retirement dollars to Mexico where I can actually live on them.
scalleywag on February 18, 2009 at 6:08 PM
Well, of course, these folks will immediately remunerate the federal government for any and all profits made as a result of the federal government enabling them to make that killing, right?
Any monies received in excess of the actual initial cost to the government for that bailout would thus be returned to the federal treasury, right?
It’s only fair, right?
Or am I wrong…and these folks will scream to high heaven till the cows come home about how unfair it will be that they’d have to pay back anyone, let alone the federal government, just because they made money for free?
coldwarrior on February 18, 2009 at 6:10 PM
I seriously doubt you’re the only person who thinks this is a great idea. People are getting more and more fed up every day.
scalleywag on February 18, 2009 at 6:11 PM
Right. Just another program where there’s no way to hold anyone accountable to do the right thing. What’s he going to do, appoint a “don’t rip off the taxpayers with your mortgage bailout money czar”. How’s that going with the automakers? Geez.
I’m no economist but I’m getting tired of dropping my jaw at all these hair brained schemes our new government is throwing at us. And is the money in addition to the “shoveitatus” bill, or is that part of the great plan?
scalleywag on February 18, 2009 at 6:15 PM
I wonder if the medical community has ever done a study on politics as to how it affects people’s blood pressure? haha. I know stuff like this can’t be good for the heart because it makes mine boil.
scalleywag on February 18, 2009 at 6:20 PM
Spent all of last week and then some down in DC…and there IS another “stimulus package” being put together in Congress, and it looks like even another being drafted in the White House for submission to Congress. Heard at least a dozen times, if not more, that the “stimulus” Obama signed into law (yesterday) was not enough and merely a first step or initial step toward “full economic recovery.”
What I heard from the Republicans I encountered was that there is no way to stop this juggernaut…at least not in the near term.
coldwarrior on February 18, 2009 at 6:23 PM
Obama is beyond dangerous. He is completely out of his mind. He just wasted 800B and the next day he wants to spend about 250B bailing out deadbeats (OK only 80% deadbeats). He seems to think that money grows on trees. Didn’t these people ever hear about do nothing will work better than total stupidity?
duff65 on February 18, 2009 at 6:39 PM
On average, the cost to rehab the houses I was looking at was $30,000. I can’t make a 20% down payment and outlay $30k in cash to fix a place up. (And I’m not talking replacing wallpaper; I’m talking replacing damaged plumbing, foundation repair work, holes in wall, gutted kitchens, etc.) It’s incredibly depressing. And you haven’t answered my point.
Outlander on February 18, 2009 at 7:00 PM
One part of this plan is to give $1000 per year for 5 years to these bail-out home owners if they pay their mortgages on time every year.
Wow, what an idiot I am for paying my bills on time…and my taxes for that matter!
TN Mom on February 18, 2009 at 7:11 PM
Isn’t it just a slap in the face? I am a single mother with a son in college, and was unemployed for a year just a few years ago. At the time, I had a first AND second mortgage on our home, but never was even LATE, let alone ever missed a payment.
I’ll be damned if I am going to pay for the lazy deadbeats of Obama’s “victim” class that he is so anxious to pay for everything little thing fcr them.
No one has ever helped me and I never expected anyone to. I am a RESPONSIBLE person.
We need to go after the heads of ANYONE who votes for this crap.
I am PISSED!!
imfedup on February 18, 2009 at 8:28 PM
Put a rule on it that if you have any criminal record you can’t qualitfy for the money. That should stop the lazy dope dealer down the street from scoring our hard earned tax money while we work our ass off to pay for the sh*t they stole out of our sheds and houses to support their habit.
Looks like they are getting the free gas and housing they voted for huh? Un f’n real.
johnnyU on February 18, 2009 at 9:32 PM
No one gets to vote for this. It is all by Presidential decree or his plan on how to spend the second half of the TARP. No one else has any input. Many have opposed the mortgage cramdown in the past. He just implemented it, again without any debate, just like the stimulus. I am truly worried about my 401 K, what’s left, and any money I have in the bank. They just may Nationalize the banks by Executive Order!!!
mhrepub on February 18, 2009 at 10:27 PM
The government should do nothing and let home values fall. The free market needs to work. We can start by getting rid of the FDIC and letting banks fail.
Libertarian Joseph on February 18, 2009 at 10:51 PM
So, if you get one of these loan modifications and you stay current on the loan (which you are supposed to do), you can get $1,000 annually for 5 years to apply to the principal of the loan. And, of course, the money comes from us, the taxpayers.
But, what if I stayed current on all my payments since I bought my house 4 years ago? I’ve never been late or missed a payment. Can I get $5,000 to apply to the principal of my loan?
The honest, hardworking guy who does things the right way keeps getting the shaft.
Also, by government intervening and artificially propping up home prices there are unintended consequences. Think of all of the young families who are trying to buy their first house. For the last several years home prices were way too high for them. So, they waited and probably saved money. And, just when the bubble bursts and those homes start to come down into their price range the government steps in and props up home prices. And decent people are kept out of the market so we can save the homes of people who were irresponsible.
JohnInCA on February 19, 2009 at 12:14 AM
Yea and rigth now they are about to have a stock market version of the boston tea party..
Its BS why should i be forced to pay higher taxes when i am trying to find a second job to pay the rest of bills off..
but obama wants to GIVE every illegal mexican and poor person a new FREE deal refinanced and paid for by the us government..
let me ask this
why should i even bother to report my income now..
Since the IRS is run by a tax cheating scumbag
Sicne the IRS is so screwed up they still have never been able to send me the 1200 dollars from last years stimulis..
Probably was sent overseas to buy condoms for the kennedys playmates or barney franks..
the irs is so screwed up they offered to send me 6 dollars for my trouble (i waited 8 months)..
I actually called the MORONS back and told them to
a keep it ..
b. do they need help re-writing their database system>?
c. just like social security if and i mean IF
any of it ever shows up in the next 10 years..
I might be able to pay my electric bill..
Morons..
jcila on February 19, 2009 at 3:35 PM
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