Democrats & Liberals Archives

Homeownership: now a liberal issue?

The Bush administration is a big fan of self-regulation. Oil companies? Let market forces dictate their profits! Utilities? Let market forces curb their pollution! Credit card predators? Let… well, you get the picture.

But by allowing mortgage companies and brokers free rein to cash in on the erstwhile housing boom without regard for the consequences, and by failing to anticipate that all would not be roses and petals forever, the Republicans may have made a fatal mistake.

Consider: RealtyTrac advises that 3.33% of all Colorado households, 54,747 in total, were in some stage of the foreclosure process during 2006. One family in every thirty-three, unable to pay their mortgage and about to lose their home. (If you live in Colorado, there's probably someone on your street who could use a plate of cookies right about now.)

According to the U.S. Census Bureau, 2.15 million Coloradans voted in the 2004 Presidential Election. 1,101,255 of those people voted for G.W.Bush, while 1,001,732 voted for John Kerry.

Traditionally home ownership is a strong indicator of whether an individual will vote or not. In 2004, once again according to the U.S. Census Bureau, 67.7% of homeowners voted, vs. 48.3% of renters.

Now, apply the political test: Howard R. Ernst of the University of Virginia wrote a fascinating report on Home Ownership and political affiliation ((Click Here)) which clearly demonstrates that 88% of US voters who vote Republican own their own homes, compared to just 76% of Democrats. Furthermore, only 17% of homeowners describe themselves as 'liberal' compared to 42% who describe themselves as 'conservative'.

'Self-regulation' of the mortgage industry has led to record foreclosure levels; homeowners tend to vote Republican; so what happens to voting in Colorado now that its people are losing their homes?

(Warning: assumptions ahead.)

Suppose there are 1.5 voters in each foreclosure, a reasonably well-educated guess. That's 82,120 voters, with a 67.7% likelihood of voting. Now suppose that 65% of them voted Republican in the last presidential election – but that their combined anguish and newly-found status as renters reverses that trend in 2008. That would be a swing of nearly 17,000 votes from 36,136 Republican votes to just 19,458, which, while not enough on its own to have given Kerry victory, would nevertheless have narrowed the margin of victory to just 80,000 votes or so. And of course, it doesn't take into account the people who simply watch in horror while their neighbors are forced to pack up and leave.

Now apply that rule to some of the tighter and more populous states, like Ohio, where foreclosures are also high. Suddenly you're seeing swings that could give the Democrat the edge.

Foreclosure is a liberal issue now, because it is taking votes away from the Republicans and reapportioning them to the Democrats. Mrs. Clinton and Mr. Obama need to look seriously at how this issue can affect their campaigns, and at how best to illustrate to angry and disillusioned voters that the Republicans' failed policies of self-regulation have led to this sad state of affairs.

Posted by Jon Rice at April 9, 2007 11:25 AM
Comments
Comment #215692

So, let’s see if I’m reading this correctly, thank goodness for foreclosures b/c that may result in people voting democrat?!

Posted by: rahdigly at April 9, 2007 12:40 PM
Comment #215694

Yeah, overextend yourself. live beyond your means and blame republicans if you can’t pay for it.

Jon, Posts like yours are what keep the two parties fighting instead of working together.

Posted by: tomd at April 9, 2007 12:46 PM
Comment #215695

That’s not exactly my point. It’s more that foreclosures, alongside other “self-regulatory” issues such as excessive oil profits and predatory lending by credit card companies are opening the eyes of voters to the misguided laissez-faire policies of the Republicans. Just one example of this litany of failures, in fact.

Posted by: Jon Rice at April 9, 2007 12:48 PM
Comment #215702

And the answer is what, have the government decide how much people should make and spend, what companies can charge, etc?

Good idea, giving more of our lives over to the politburo.

Posted by: Rhinehold at April 9, 2007 1:31 PM
Comment #215710

In any boom lenders make some bad loans. The people unable to pay are mostly those with poor credit ratings. It might have been better not to extend them credit at all. That is a different arguement.

Do Dems want to make a law to prevent extending “risky” borrowers? Consider what sort of people are likely to be bad credit risks and how they might vote.

My guess is that Democrats are more likely to be poor credit risks and poor credit risks are the ones most likely not to be able to pay their debts. Your study would lend support to this. Republicans are more likely to own their own homes. I do not know how many people will change their votes.

Posted by: Jack at April 9, 2007 2:03 PM
Comment #215712

Jack, that’s an interesting point. (Not the part about Dems being poor credit risks, I’d like to see some details or facts before accepting that one.) But do we want to set laws against predatory lending? That would seem reasonable, no? I mean, my wife works for Habitat for Humanity and an unscrupulous mortgage broker recently managed to persuade the occupants of a new home that an ARM was better than the 0% finance they had! (Yes, I see that the homeowner wasn’t too smart, but here’s the rub - there was no comeback on the broker. No way to punish that behavior.) Isn’t that something we should legislate against? Alongside full disclosure of the terms, in a manner that people can actually understand? Surely our goal should be to keep people in their homes, rather than allow predatory companies to get away with foreclosing on them?

Posted by: Jon Rice at April 9, 2007 2:09 PM
Comment #215718

“my wife works for Habitat for Humanity and an unscrupulous mortgage broker recently managed to persuade the occupants of a new home that an ARM was better than the 0% finance they had! (Yes, I see that the homeowner wasn’t too smart, but here’s the rub - there was no comeback on the broker. No way to punish that behavior.) Isn’t that something we should legislate against?”

No.

Posted by: tomd at April 9, 2007 2:52 PM
Comment #215720

jon

The lenders make their money by the interest rates. They prefer not to foreclose.

You do have the problem of limiting lending. You have to limit choice and limit the freedom, especially of the poor. A reponsible lender would probably choose not to make loans to some people. The higher interest rate is the risk premium. Do you deprive the poor of credit?

It is very hard to protect the stupid from the predatory. Some people really cannot understand credit in any terms that adequately explain it. We have laws on the books that protect consumers. A consumer can back out of a loan within some days w/o penalty. Lenders have to explain terms. Why did your home owner even begin to talk to anybody when he already has a 0% mortgage? You cannot legislate against that kind of stupidity.

I refinance when it makes sense. I am interested in the interest rate. The payments and the points are not my big concern. BUT some people are willing to pay a higher total rate if they can get a lower monthly payment. Is it dishonest to sell a lower monthly payment at the expense of a higher rate? It depends. Both are valid goals depending on your circumstances. I poor person might choose a lower payment. He pays more for the total loan than I do. But we really cannot offer both. There is a choice ot be made.

Predatory lending is usually illegal. It is hard to figure out what it is, however. And if you tighten credit too much, it drives the poor into the arms of “informal lenders” i.e. loan sharks.

Returning to the foreclosures, it is often not the mortgage broker that forecloses. He does his best to sell the mortages as quick as he can. The investor who buys the debt is usually not enthusiastic about foreclosing. Especially in today’s market he is unlikely to get his money back after all the expenses.

The villians really are not so clear. Among the villians may be the poor homeowner himself, who got too good a deal and then ran out. Would you like to be the guy who holds a $200k mortgage on a house now worth only $150?

Posted by: Jack at April 9, 2007 3:05 PM
Comment #215721

Jon, why would somebody with an offer of 0% financing be shopping around for something else in the first place? What kind of legislation could possibly prevent somebody with that degree of stupidity from making bad choices?

The only thing that makes any sense is that the 0% loan was extremely short term with high monthly payments which the buyer had no way of paying, which probably means they were buying something they couldn’t afford to begin with. Sounds like they were being offered these gimmick loans because they didn’t qualify for something more traditional and were making incredibly stupid choices from the outset.

Unfortunately, the government isn’t going to be able to outlaw stupidity, nor should we ask them to try.

Posted by: Loyal Opposition at April 9, 2007 3:08 PM
Comment #215722

Loyal - Habitat gets people into homes at 0% finance rates. Those rates are fixed. It’s a charity, so they don’t make money on the loan. The way the predatory lenders work is by using numbers to baffle the family who helped build their own home; in this case, legal immigrants who didn’t speak strong English. That’s just plain wrong.

Jack, you make a point about discriminatory lending against the poor. However, that’s exactly what we already have. Poor credit = higher interest rates. Of course it makes sense to temper the risk to the lender, and responsible companies have a perfect right to do so by charging higher interest. But that’s not the type of company I’m talking about - it’s the ones who get someone into a 3% mortgage without adequately disclosing the fact that in 3 years their payment will double (or more) when their ARM goes up to 8%.

Some might call it ‘protecting the stupid’ but that seems overly harsh to me. Others might call it ‘protecting the consumer’, which is sadly not a priority for this administration.

Posted by: Jon Rice at April 9, 2007 3:17 PM
Comment #215726

Jon

I still just cannot see a way to protect the really stupid from such deals. I have made some deals that were stupid and others that people just thought were stupid. The deal that gives me the most pleasure was buying my forestland. EVERYBODY told me it was a stupid idea. A couple of years ago it has turned out not to be so dumb. I am glad that regulations did not “protect” me.

The problem you currently have with lending is the decline in housing prices. A person who was able to buy with the “help” of a predatory lender in 2001 may be very much richer than someone who was protected by the government. If he sold that home to someone in exactly the same situation as he had been in 2005, the current owner may be in trouble.

So you would have to make laws re lending and laws re markets. It would be hard to make laws re protecting the poor w/o hurting many of them.

Posted by: Jack at April 9, 2007 3:36 PM
Comment #215732

W_H_O_O_P_E_E ! ! !

All these foreclosures are good for Democrats?

And Democrat politicians didn’t contribute to it?

Hmmmmm … never mind that most (if not all) of BOTH Democrat and Republican politicians are so fiscally irresponsible, it’s [expletive]ing ridiculous.

A lot (NOT all) of these foreclosures are due to ignorant home buyers that were doomed to learn the hard way anyway.

However, that does NOT diminish the fact that manifestations of unchecked greed exist:

  • such as the incessant inflation due to excessive money-printing and a dishonest fiat-funny-money-system.

  • the government, banks, and the federal reserve printing too much money, trying to loan it to everyone possible and their dog (literally; some peoples’ pets and children get credit applications in the mail)

  • predatory lending practices

  • banks wait for some to default, and then confiscating property … essentially turning money printed from thin air into real assets

  • inflation hammers the poor and those on fixed incomes; 77 million baby boomers are in for a rude awakening; especially with 13,175 becoming eligible daily for entitlement benefits from already troubled systems.

  • the $8.9 trillion National Debt is costing tax payers over $1 billion per day in interest alone!

  • Congress just rewarded itself for all of this by giving themselves another raise (the 9th raise in 10 years).

  • 24% interest is usury. Some states courts would not even enforce such a loan between individuals. Yet, banks are allowed to get away with it.

  • For most Americans, a 30 year home loan is crazy. If it takes that long, then those people are trying to live beyond their means. Yet banks LOVE those 30 year mortgages, where people pay for their house two or three times over … and they get their interest up front. Americans are miserably lacking in simple financial common-sense, and banks are all to eager to capitalize on it.

How Democrats are going to capitalize on this is a mystery to me, but voters are gullable, and likely to fall for it, just like a number of other things.

Voters would be wise to put aside this type of partisan spin and fueling the partisan warfare, and start holding politicians of BOTH parties responsible for the huge list of serious problems that Do-Nothing Congress continues to ignore, as they grow in number and severity.

With so much massive debt, borrowing, spending, waste, and excessive money printing, it’s hard to see how some painful consequences can be avoided.

Posted by: d.a.n at April 9, 2007 4:10 PM
Comment #215761

Of those 3.33% of Colorado homeowners in foreclosure, how many of them are actually there through no fault of their own? I’ll bet 4% or less.
One of my brothers-in-law buys foreclosures. He told me one time that around 96% of folks in foreclosure are there because they’ve either way over extended themselves with credit cards and can’t pay or they’re just deadbeats.
That leaves 4% that are actually in foreclosure through no fault of their own. When these numbers get turned around then come talk to me and I might be able to get concerned.
Don’t get me wrong, I do feel sorry for the 4% that are in foreclosure through no fault of their own. But don’t expect to see any tears from me for the other 96%.

Posted by: Ron Brown at April 9, 2007 7:10 PM
Comment #215856

Jack,

So you would have to make laws re lending and laws re markets. It would be hard to make laws re protecting the poor w/o hurting many of them.

[CLAPPING]

I’ve got to hand it to you Jack. According to you, there is no such thing as predatory lending and as a corollary, there is no responsibility to prevent the behaviour.

Even the massive, respectable banks who are trying desperately to distance themselves from the balloon ARMs stand against you. Not one has defended selling these highly sophisticated financial products to the general public.

But you say “sure!” People should know better.

When those mortgages were sold and rebundled, with the principal payments sold as high quality bonds and the interest only portion sold out of boiler rooms to unsuspecting/ignorant people, I guess that wasn’t predatory behaviour either.

Jack, my guess is you must made some significant gains at some point by taking advantage of people who were ignorant in some way.

Otherwise, even as an intellectual exercise, the vigor with which you defend this “fool and his money…” approach to society is untenable and rather unsettling.

Ron,

enough with the anecdotes. Half of all bankruptcies and the financial equivalent are caused by catastrophic illness, not because people are deadbeats. See here.

Ron, do you even know the primary causes of foreclosures? I’ll give you the list that these “deadbeats” use as excuses:

job loss
divorce
medical bills

Oh yeah, the deadbeats. Are you referring to the majority of mortgages held by African-Americans which were subprime loans? Or the 40% of Hispanics which have subprime mortgages?

Posted by: CPAdams at April 10, 2007 12:04 PM
Comment #215858
And the answer is what, have the government decide how much people should make and spend, what companies can charge, etc?

Yes. There used to be usury laws that were enforced. That ended in the 80s.

Before then, people just couldn’t borrow enough to go into perpetual debt and bankruptcy. If they wanted a house, they had to save for the downpaymemnt and have a good steady job.

Now, even an illegal immigrant can get a home loan — at 22% interest.

Variable-rate mortgages and all the other wacky loans should be regulated because it costs taxpayers money to save the financial institutions that make them when the loans fall through.

Here’s how these things work:

Loan companies get a fee for making the loan. It doesn’t matter whether it’s a good loan or not; they still get the fee.

The bank who holds the loan, knowing that the loan is risky, bundles it with other risky loans and auctions it off through bonds to investors and other institutions.

When the homeowner defaults on the loan — a loan everybody up and down the chain knew they couldn’t afford — the investors ask the government to cover their losses.

It’s a scam. It should be regulated.

Posted by: American Pundit at April 10, 2007 12:11 PM
Comment #215861

Am Pun,

nice post.

Nah, forget regulation. The poor and dumb deserve to be exploited. Just ask Jack and Ron et al.

Posted by: CPAdams at April 10, 2007 12:20 PM
Comment #215867

Mortgage fraud is just as serious, but nobody talks much about that here.
Guess the votes just aren’t there for people to care about that.

Posted by: kctim at April 10, 2007 12:39 PM
Comment #215893

CPAdams
Anyone can give any excuse as to why they’re not not paying their bills. I haven’t researched it, but I think I’ll take the word of someone that deals with foreclosures over some Govt study. *We all know how reliable Govt figures are*
And NO I’m not referring to any particular group of people. Unless it’s White people. My brother-in-law tells me that most the foreclosures he buys are from White people.

Posted by: Ron Brown at April 10, 2007 2:18 PM
Comment #215895

CPAdams

The poor and dumb deserve to be exploited. Just ask Jack and Ron et al.

Just where did I say the poor and dumb deserve to be exploited?
If ya gotta put words in someones mouth to make your points ya aint got any.
It’s true there’s a lot of predatory lending going on. And it’s true that there are those dumb enough to fall for it. And not all of them are poor.
Can we take it by your statement that ya think all poor folks are dumb?
One of the best ways to stop predatory lending is outlaw ARMs. They can cause more trouble than a Congress full of Republocrats.

Posted by: Ron Brown at April 10, 2007 2:30 PM
Comment #215901

Ron,

I’m not going down that tunnel. You want to believe your brother-in-law instead of an uninterested party - OK, but the ridiculousness of that position speaks for itself.

Of course someone who goes into foreclosure is overextended - otherwise they’d make the stupid payment and avoid foreclosure!

The question is WHY are they overextended, ie, insolvent? You think people want to lose their houses?? Top 3 factors leading to foreclosure - job loss, divorce, illness.

I’m sure someone who buys foreclosures thinks it’s the defaulter’s own fault. Kind of massages the conscience. Otherwise, you are just another predator feeding on the pain of others.

I have no idea where you are going other than to be argumentative for the sake of it. You are against ARMs??? Great!! So am I.

But I’m confused…first you say people are deadbeats and then you say that we should stop predatory lending. If predatory lending is driving people into insolvency and foreclosure, where’s the deadbeat?1

Posted by: CPAdams at April 10, 2007 3:07 PM
Comment #215903

“The question is WHY are they overextended, ie, insolvent?”

Because they bought a home way over their limit and did not plan for an emergency.
Anybody who buys a home without thinking of the unspeakable IS an idiot and no amount of nanny govt oversight is going to keep them from being an idiot in the future.

There was an article on MSN.com about this that was interesting. It briefly stated how mortgage fraud is also a big problem and how “subprime” lenders started to flourish in the mid-90’s.
Funny how things that don’t make people feel like victims so as to get their vote and things which cannot be blamed on Bush are ignored.

ARMs are specialty loans which help many people who know how to use them. Do we follow the liberal agenda and punish all because of the stupidity of a few? No.

IF homeownership is now a liberal issue, it is only because more people now believe it is their right to get something for nothing and that govt should bail them out for their stupidity and lack of planning.
God forbid anybody assume responsibility for their own actions anymore.

Posted by: kctim at April 10, 2007 3:26 PM
Comment #215910

Perhaps we’re focusing on a narrow issue when we should be considering a wider one. The Bush administration makes no secret of the fact that it promotes corporate rights above those of the consumer.

We pay $3 at the pump now, and Big Oil makes $200 billion in profit. (That, incidentally, is simply a regressive tax - it places a far heavier burden on the poor than on the Hummer owner.)

Healthcare costs have soared, leaving children and seniors behind… while healthcare profits have exploded. United Healthcare soared by 100% from 2002-2004, announcing profits of $2.6 billion.

Minimum wage increase? Stagnant for years under Bush, to the detriment of the individual and the benefit of big business.

Do you see a pattern here? The same is true of financial institutions such as credit card companies and mortgage lenders. Protected by the Bush administration at the expense of the consumer.

Profit is king under Bush, profit for the big corporate donors to the Republican Party. Your rights as a consumer are worth virtually nothing.

Posted by: Jon Rice at April 10, 2007 3:47 PM
Comment #215914

kctim,

did not plan for an emergency???

they were buying a home IN an emergency!!

leveraged to the hilt, cost of property climbing at endless, unbelievable rates and suddenly, with these modern mortgages, people who previously couldn’t afford a home might just be able to.

these products were brand new in the mass markets. the wealthy knew that these ARMs made sense if you had BIG income increases coming and only short term. those with no financial sophistication (overwhelming majority of the population) knew nothing.

well…they actually knew less than nothing. if you count the disinformation by mortgage brokers combined with the assumption that banks wouldn’t lend them money they couldn’t afford to pay back (that’s how things had always been), people would have been better off knowing nothing.

kctim, everyone IS responsible for their own actions - but that includes everyone who knowingly deceived (or misled or misdirected or whatever terminology you are currently using to absolve predatory lenders) all these people. consumers are responsible.

so are the people who knowingly ripped them off.

Posted by: CPAdams at April 10, 2007 4:20 PM
Comment #215922

CP
“they were buying a home IN an emergency”

BS. They were buying a home which was more expensive than they could afford without special financing. That was the emergency.

“those with no financial sophistication (overwhelming majority of the population) knew nothing”

Then they did not take the time to read and understand what they were signing. An idiotic move in most peoples book.

How do you “knowingly rip off” somebody who signs a legal statement saying they understand?
Granted, a minority of those lenders fudged some paper work and should be held accountable, but that is not why we have a record number of foreclosures.
We have this number because people wanted to live outside their means and impress others.

This is not a “wider issue” as Jon says. And while its daily talking point material to blame everything on the President, Christians or on “evil” corporations, that holds no water on this issue.

It is a very narrow issue, one which would be nonexistent if people still believed in personal responsibility and quit relying on govt to live their life and provide for them.

Posted by: kctim at April 10, 2007 4:41 PM
Comment #215926
They were buying a home which was more expensive than they could afford without special financing.

All the while being told by people who are supposed to be financial experts that everything was fine, don’t worry about it.

Unfortunately, no one can be an expert at everything. When a doctor tells me to do something for my health, I generally do it. Same goes for families who really want a house. If someone who’s supposed to be an expert says they can afford it, the family will most likely believe it as well. It has nothing to do with stupidity and everything to do with trust.

Posted by: American Pundit at April 10, 2007 4:53 PM
Comment #215929

“If someone who’s supposed to be an expert says they can afford it, the family will most likely believe it as well”

Really AP?
I’m an expert at winning the lottery, everybody send me a $100 and I’ll win it for you.
Trust me, its not a stupid thing to do.

An “expert” can explain only what he knows and that is the loan.
It is not his job to explain what may happen to your health, your career or your marriage. There is no way he can tell if you waste money eating out every night or if you think you need new furnishings or a new car to go along with that new house.
He can tell you that you should have 6 mths worth of house payments saved up, just in case, but he cannot make you do it.

People are given an opportunity. Whether they take the right opportunity or not is entirely up to them.

Posted by: kctim at April 10, 2007 5:03 PM
Comment #215937

kctim,

why are you carrying water for the financial services industry?? especially since they won’t carry there own.

banks know that mass marketing ARMs was wrong. they knew that mortgage underwriting standards were non-existent during much of recent RE boom.

the rise of mortgage brokers gave banks deniability by delegating the verification of financial soundness of the lendee to the person in the process LEAST likely to police the process - the one paid on a loan by loan basis.

ultimately, it gave banks their fall guy. except, of course, that stories are starting to come out that banks paid a HIGHER commission to mortgage brokers for borrowers who took out these teaser ARMs.

How do you “knowingly rip off” somebody who signs a legal statement saying they understand?

are you kidding me?? what are you, a bad defense lawyer??

you can’t make people waive their rights when signing a patently unfair contract - especially one written in such a way as to hide the true terms.

kctim,

again, what’s with your defense of banks? especially since it has been ackowledged, repeatedly, that there was widespread disinformation about ARMs and, in many cases, outright fraud. it may not have been a giant conspiracy, but EVERYONE made sure they were looking the other way and had prayed that ponzi scheme lasted a little longer.

kctim,

do you know what a fiduciary duty is?

by LAW, it demands a higher standard of conduct (loyalty) because of the trust that is inherent in the relationship. it requires that a fiduciary avoid any conflicts of interest and demands a higher standard of conduct. fiduciaries have privileged relationships which they profit from. the standard of conduct is higher because of the benefit they gain combined with the risk to the one who puts their trust in a fiduciary.

mortgage brokers, holding themselves out as agents for borrowers, have a fiduciary duty.

in all this buyer beware BS you keep defending, your cynicism denies that a trust was betrayed. that’s just not so.

Posted by: CPAdams at April 10, 2007 6:08 PM
Comment #215942

Leave it to Repubs to point out that the free market reigns. So, if the majority of citizens want to vote to regulate the lending market more strenuously, why is that not fair? Too bad for lenders. In fact, if you take a buyer beware attitude for a free market, then that might apply to stock purchasers also. It is fair for business to apply monetary leverage to gain market advantage thus it is fair for consumers to apply leverage through boycotts or votes. C’est la vie!

Posted by: LibRick at April 10, 2007 7:14 PM
Comment #215946

Why should free market conservatives worry over lenders who get stiffed by poor credit risks? Are the lenders not sufficiently aware of the risks when they lend the money? Perhaps we should institute debtor’s prisons again. I get credit card and mortgage loan offers in my mail each and every business day. Perhaps the lenders should have to incur great losses to prevent their overreaching marketing programs. I hope they get burned… big and often. They CREATE the terrible net savings deficits that we currently experience.

Posted by: LibRick at April 10, 2007 7:23 PM
Comment #215962

Librick

No government has been able to repeal the law of supply & demand. Lenders will lose money. I do not care very much if lenders lose money. As you say, they estimated the risk.

But if the people vote to regulate lending, it will mean that they lose some of their options. If you make it so that even the most stupid person is protected from his own bad decisions, you make it impossible for the smarter people to get good deals. By creeating a general climate of regulation, you can decrease total well-being, but increase equality.

It is a choice the people can make. However, if they are properly informed they probably will not. You have a couple % of borrowing defaulting. Most people do just fine. Frankly, I do not want to pay hundreds more on my mortgage in order to protect the stupid. Few people would be as upfront as I am in saying this, but that is the decision they will also make.

Posted by: Jack at April 10, 2007 9:47 PM
Comment #215966

But Jack… you are subsidizing both lenders and borrowers who get to write off THEIR bad investments or loans as tax write offs or as bankruptcies. There is no free lunch. The lenders bad loans and the defaulting borrowers get taxpayers to subsidize their decisions. Let’s don’t allow special real estate deductions for borrowers or lenders who make poor decisions. If you allow special tax deductions for either, you are in effect regulating the economy of the real estate market.

Posted by: LibRick at April 10, 2007 10:08 PM
Comment #215977
Lenders will lose money.

And are already asking for a bailout from the government in the form of tax breaks and outright taxpayer-money bailouts. LibRick is right. It’s the average Joe getting screwed both ways.

But if the people vote to regulate lending, it will mean that they lose some of their options.

Jack, I thought you were the guy who said laws should promote good values. Why wouldn’t you want regulations that promote saving?

Posted by: American Pundit at April 10, 2007 11:46 PM
Comment #215986

It is more than just lenders, everyone from the appraisers to the real estate agents to the news papers and the lenders helped cause the bubble. I live in san diego where I’ve laughed at what people bought houses for. Now, I am offering 50K less than the defaulted note for these houses. The lender eats it. I don’t feel bad for them.

Basically, yes families got screwed over by making bad choices, but so did lenders and I am here to take advantage of them. And if I make stupid choices there will be somebody behind me to reap the rewards.

We do want home ownership, but we also want financially responsible people and companies who have the knowledge (and that is where the real problem is) to make good financial decisions.


Posted by: rob at April 11, 2007 1:46 AM
Comment #216008

CP
“again, what’s with your defense of banks? especially since it has been ackowledged, repeatedly, that there was widespread disinformation about ARMs and, in many cases, outright fraud”

Three reasons for that CP.
1- It is a minority of bad companies which dupe people. The majority of the industry does the job right but you all lump everybody together as being crooks. More of the “rich” taking advantage of the “poor” crap.
2- There is no easy answer to ensuring people are protected from predatory lending without taking away the rights of the majority of honest banks and people.
If more laws are put in place to limit who a bank lends to, then discrimination lawsuits are going to become even more common and it won’t be the govt who is blamed, it will be the banks.
3- You guys totally refuse to see the entire picture. You see that some stupid people were taken advantage of and you want more laws to protect people from themselves.
You fail to acknowledge that banks themselves have also been victims to fraud.
You also fail to acknowledge that a great many people were able to buy a home because of some of these programs and are not in financial trouble.

In your alls quest to “protect” the people from the “evil corporations,” you fail to see any good that has occurred.
And, as always with big govt ideology, it is better to “protect” the minority at the expense of the majority.

Posted by: kctim at April 11, 2007 9:27 AM
Comment #216012

And a lot of people in CA lost (or will lose) a home because they bought a bigger home than they could afford. Some people may have been taken advantage of maybe, but there are also a lot of greedy people that are defaulting. The mantra was, The market will only go up! Worry about the principle later!

Lets not forget about these people.

Posted by: rob at April 11, 2007 10:14 AM
Comment #216022

Jack,

If you make it so that even the most stupid person is protected from his own bad decisions, you make it impossible for the smarter people to get good deals. By creeating a general climate of regulation, you can decrease total well-being, but increase equality.

that was my point earlier - you believe in the right to be predatory. I think there are some ways that it should be illegal to take advantage of people. So does the government, generally.

In this case, everyone in the financial industry was so interested in making next quarter’s numbers for wall street that they decided to make a profit at all costs. The gamble didn’t work. Big banks are taking big losses. And, to add insult to injury, banks want taxpayer money, my money, to cover their unethical behaviour.

kctim,

the banking industry was being criticized for relaxing its own underwriting standards as far back as 2004. Here are a couple of citations dragged their feet on tighter underwriting in 2006. Or here.

Posted by: CPAdams at April 11, 2007 11:15 AM
Comment #216380

you know people, here in Ireland we have a very simple solution to the problem. Someone selling a financial product to the public has to complete a a very detailed “fact find” or financial needs analysis, the purpose of which is to determine clearly what the needs and circumstances of the particular client are. Both client and vendor have to sign this form.

Furthermore, when a product is selected as a solution to the identified need, the vendor has to complete a “reasons why” letter. This again is a very detailed letter, showing what product has been recommended and how it particularly ties in to the needs of the purchasing client, not least in how it relates to the clients appetite for risk. You will clearly infer from this that the level of risk and how such risks could arise must be spelled out to the client. The client has to sign this which is evidence of their level of awareness of the risk inherent in any particular contract. This reasons why letter and the fact finding document are triplicate documents, with the top copy going to the client, the next to the financial product provider, and the third copy going to the broker for their records. In the case of any later claims arising from the contract, the first thing the Regulator will look for is these documents. The penalties for failing to follow these requirements are severe, in addition to civil liability to the client for any losses sustained.

Now from the point of view of the vendor, this process is a pain in the proverbial from an administration point of view, but it arose because of abuses in the past, and it protects the honest vendor and the client. I don’t really get why people would have such a problem with such a regime in your country. It is not prohibitively expensive for the regulator to administer. True, it does add to the costs of the product providers and vendors, but that would not have been necessary if these entities had been scrupulous with their clients in the past. It is the cost of staying honest. That’s human nature for you!

Posted by: Paul in Euroland at April 13, 2007 9:35 AM
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