Borrowers and Lenders Beware
Last night's last debate before the important Ohio primary is the largest-drawing story today, but I see nothing new in either the story or the comments that have attached themselves to it. Ttoday's article on the struggle between congressional Democrats and the White House on proposals to help homeowners threatened with foreclosure is another matter. It has generated a sometimes impassioned debate among our Readers Who Comment about personal responsibility, governmental accountability, lender greed and all the other vices and virtues that have gone into this troubling situation for real people and the economy.
There are those who want fairly aggressive governmental intervention to help troubled homeowners and those who think the markets should correct themselves. There are those who see no reason to help people who were foolish enough to buy beyond their means and some who don't understand why there's a problem, given the vacancy rate.
There are those who think the laws that made individual bankruptcy more difficult fed this problem and those who are furious with banks, especially those that jack up interest rates on credit cards. I'm always fascinated in these discussions by those who seem to assume that nothing bad could ever happen to them.
We'll start with rkerg, who expressed the views of many in writing, "...I just have a problem feeling sorry for anyone involved in this housing bubble fiasco. The banks, the mortgage brokers, the commercial banks, the hedge funds, the home buyers and those home owners who took more equity out of their homes than now currently exists, were all operating on the very flawed premise that house valuations would continue to rise indefinitely. It was nothing but a pyramid scheme... Congress should but out."
slim2 added, "Here's an idea. Let markets work. Any action on the part of either congress or the administration will only serve to validate the current obscene level of RE valuations. Something of benefit only to moneylenders and local tax collectors."
And infuse said, "Any politician who favors using taxpayer money to bail out greedy bankers, hedge fund managers, and greedy buyers needs to hear a protest from all of us. That Democrats are pushing this Republican idea just exemplifies why so many of us say there are few differences between the two parties."
briant8 had a different solution, suggesting, "...that banks can buy back the property and rent it to the mortgage owners for a low rate and this will fix the problem of homelessness thus, the people who lost their home can now stay in their house but pay rent to their bank who now owns their property..."
To which preich1 added, "...Yup lets put our heads together, how about this one, you destroy, I mean DESTROY! the usury market in the country and take away America's love of spending other people's money."
Be_Free sees the visible hand of politics in all this, writing that "The United States Senate should not be bailing out overextended homeowners... Allow judges to change, after the fact the terms of a loan!? What happened to the constitutional contracts clause? How is this not a taking (from the lenders) without just compensation? This ex post rule change smells of election-year rhetoric. It is shameful, if not corrupt for democrats to pray on the fears of a concentrated group of voters at the expense of everyone else."
dsrobins said, "Isn't it typical of the Bush administration to oppose helping homeowners in trouble? Isn't it strange that they had no problem helping the banks, mortgage lenders and credit card companies a couple of years ago when they proposed and signed into law draconian bankruptcy laws while easing controls on lenders?..."
shadocat also jumped the changes in bankruptcy law asking, "...did anyone else notice that the foreclosures didn't start piling up until AFTER the law was changed in 2005 to make it almost impossible for consumers to declare bankruptcy?... From the lender's point of view, there's always risk in giving a loan. When bankruptcy protection was taken away from the consumer, this risk was greatly reduced, hence the flood of loans to sub prime borrowers. The Democrats are on the right track looking into restoring protections for the consumer..."
But gene7 asked, "There is a lot to blame Bush on over the last seven years but how is he responsible for the housing crisis? Isn't it the people that took out larger loans than they could afford and the lenders who approved those loans that should be blamed?"
twocanpete said, "The upper middle class has been living high on the hog shipping all the labor overseas and impoverishing the working class in the process. Now the Democrats want to force those beaten down factory workers to not only buy overpriced health insurance but to bail out a bunch of arrogant, spoiled baby boomers as well. Enough is enough!"
But robert17 wrote, "If people entered into mortgages under fraudulent terms, prosecute the brokers and let the victims sue to recover their losses. Otherwise we have to let the markets work, which in this case means allowing the housing market to self-correct (deflate significantly), and letting those borrowers and lenders who got in over their heads pumping up that housing bubble to take their lumps. No one should get bailed out..."
LiberallySpeaking said, "While I normally take the side of Democrats, in this rare case I feel the Bush administration is dead on. It is absolutely irresponsible for the government to bailout lenders, flippers, and other so-called housing investors..."
cambel1 wrote, "...Look folks, if somebody got an adjustable rate, interest only mortgage, then went out and bought a huge home that they couldn't afford, why should they now get rewarded for their bad decisions. How about doing something about Credit Cards that raise interest rates for no reason? Now THAT would help much more of the nation."
jralger agreed, writing, "If both Congress and our Administration want to control something, I propose that we first start with federal agency control over the ridiculously high Credit Card rates. In this way, many hundreds of thousands of homeowners who refinance secured debt, in order to get a better deductible interest rate, wouldn't..."
harmonpaul observed that "...Bottom line; borrower knew they were living beyond their means. The loan agent wanted the "commision". Flush both of them down the toilet. Why should the taxpayer be liable for fraud????"
And for the least sympathetic comment of the day, we close with DocChuck, who cited an anecdote in the article about a New Jersey woman who had an adjustable rate $206,000 mortgage that she couldn't pay when the rates went up and she lost her job as a child-care worker. DocChuck asks, "What is a baby-sitter doing with a $206,000 mortgage???
If she wants to attempt to live beyond her means, that's HER problem . . . NOT the taxpaying public who ONLY buys a house they can afford." A church-based community development organization intervened and helped the woman.
All comments on the housing story are here.
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