Letters to the Editor
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You're kidding, right?
"the question that puzzles me is why anyone is listening to the mortgage industry's herd of lobbyists. These are the people who said the industry didn't need regulation, that high-risk mortgages could be turned into low-risk bonds, and that everything was perfectly safe "
The answer is simple enough. Polititions, and particularly Republican polititions, don't listen to rational arguments. They listen to campaign contributions.
A list needs to be kept and published of every Senator who either votes against cloture or against this bill when it does come up for a vote and published in each of their home district daily newspapers.
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Not the only solution
Professor Warren knows her bankruptcy law, but she's just wrong on this one--the proposed amendment is not the only way and may well not be the best way. Even if the bankruptcy amendment were the best solution, for it to work, everyone who (a) would be inclined to walk away from their house, AND (b) might be willing to continue paying if the loan were cramdown, would be forced to go through a bankruptcy. That will not happen voluntarily.
There is no reason that the same goal couldn't be accomplished outside of bankruptcy court through some sort of quasi-judicial process. Pass a law requiring the lenders to agree to a requested cramdown, make it known to people as an option, restrict the negative credit reporting in some fashion and you have a plausible solution. Why we would want to impose the additional costs of the bankruptcy process on underwater homeowners escapes me.
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oooo isn't this fun?
And again, another byproduct of the "owernship" society so touted by our Republican business-leaders. People don't understand that as much as you can buy and sell a home as an investment, you don't technically "own" the home until the mortgage is paid off. Until then, the home is still owned by the bank. So your money is just as safe in a home as it is in any other type of investment vehicle that is subject to the whims of the free market. The danger in a home is that there is such an emotional attachment to it. And unfortunately, when the banks repossess all the homes that are in default, of COURSE the equity in Americans' goes down. Because there's a load of empty places on the market the banks are willing to unload cheaper than the market value because while they are empty, the banks are losing money on the property at a pretty astounding rate.
It's a system that was great when people were clamoring for homes, but now, well, just look at Countrywide.
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As someone who has just suffered through a 75% property tax increase
The first change in 6 years, in a market mind you, that's increased in price value MAYBE 5%/year, if you're really screwing those rose colored glasses on, I have to laugh a little bit at the torrent of revaluations that are going to cascade down on those bastards heads. For more than a decade we've had 8% compound population growth and the sprawl of new development in the $300-500K has been enormous. This had twofold effect. 1) it depresses the value of existing stock and 2) places most of the tax burden on new homeowners.
But the city got just a little bit greedy this time around and decided at the beginning of the year right when new housing permits plummeted and values started to fall, to double or triple dip by jacking up everyone's assessment 75%, to pay for who knows what, solid gold cop cars probably. The school board passed back to back billion dollar bonds last year so the growth in population should be sufficient to cover that debt service.
In any case it will be hysterically funny to watch the endless line of people going into revaluation negotiations with the city based on values that are dropping monthly and, based on defaults. Of course if you can't afford your mortgage you can't afford your tax escrow either so the city is going to pay through the nose to process all those liens.
So let's review:
Falling values: check
School construction continuing unabated and out of control: check
City services, e.g. police continues to be an actual profit center: check
Stage 3 water restrictions, 100+ year drought in force: check
City and county budget shortfalls on paper: check
If we're lucky it will end in a riot with the city council members heads on pikes in front of a screaming mob. Couldn't happen to a nicer bunch of crooks.
BTW if you're ever in Raleigh, NC, please note that our Mayor, Charles Meeker once defended predatory towing practices that fee split between illegal towing and the city, on TELEVISION, openly.
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Andrew Leonard, do you remember our e-mail correspondence about Adjustable Principal Mortgages?
About six months ago? Then, nobody believed it really would come to this. But now, you and I could have a product up and running in time to take over all Angelo's cast-offs.
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Why is this necessary?
A mortgage is a contract between a lender and a borrower. If the lender decides it's in the lender's best interest to renegotiate rather than foreclose, the lender should do so, but I don't see why we should be _forcing_ the lender to renegotiate. If the lender would prefer to get the house back (and then sell it off), rather than a reduced payment stream, shouldn't that be the lender's call? It might be a dumb call, but it's their call.
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@cestmoi123
I generally agree with the points you have made, but I think there's an important one you may have overlooked: The lending industry helped to create this mess by pushing easy loans that inflated house prices beyond reason.
You might argue that buyers should have known what they were getting into, but I've heard the pitches that lenders made to prospective buyers and IMO they tended to paint rosy pictures that were intended to deceive. I think lenders should take a fair share of the blame and the loss.
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@Alkaline
I fully agree that lenders should take a fair share of the loss, and they certainly will, if the homes on which they foreclose can't be sold for enough to cover the mortgage (which is clearly the case for all these homes where the equity is less than zero). I think the lender should have the CHOICE, however, whether to cut a deal with the borrower or take its chances reselling the house.