Protecting Neighborhoods - Obama's mortgage relief plan

[waitforufo]

Today the Treasury Department released an executive summary of the Obama's mortgage relief plan.

 

http://www.treas.gov/press/releases/tg33.htm

 

This executive summary, it seems to me, over uses the term "responsible homeowners." It seems to me that this term should be replaced with "irresponsible mortgage holders."

 

This plan also includes the following.

 

Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.

 

Is the purpose of the above quote to placate the dim witted?

 

So they are saying that yes they understand that real estate values are in correction but this plan could reduce that correction on the average home by $6,000? How do they prove such a thing? Well, I guess they did say "could."

 

Do they understand what a correction is? Do they appreciate that they strongly encouraged the real estate bubble and that no action they take now can un-pop it.

 

Why is it that the government can never be honest? They should just say "The government is going to help your neighbor pay for his home, which is nicer than yours, because we believe that irresponsibility should be rewarded. If responsible people like you had only spent all your earnings and savings, the government would not need to stimulate the economy by paying for your neighbor's house. I hope you have learned your lesson."

[ecoli]

astute observation, but the gov't isn't trying to unpop th bubble, they're trying to reinflate it (so all the investment banks and insurance groups get paid)

[bascule]

astute observation, but the gov't isn't trying to unpop th bubble, they're trying to reinflate it (so all the investment banks and insurance groups get paid)

 

They're not actively trying to reinflate it, although by virtue of what they're doing they'll prevent it from deflating as much as it as would happen otherwise. It's myopic to say that the bubble is doing anything besides bursting at this point.

 

Their intention is to prevent people who in better circumstances could make their mortgage payment from losing their homes.

[padren]

It was basically already said, but they aren't comparing the $6000 drop to the height of the bubble, therefore they are not trying to prevent the bubble from collapsing - it already did.

 

They want to lessen the degree to which values drop below norm during this market correction. When prices stabilize at the "natural" level they'll probably be higher than they are now without any bubble at all. Part of an unmanaged market correction is the overvalue drops to a huge undervalue, then yo-yos towards an equilibrium. The goal is to ease the undervalue drop, as it just adds to the damage during the correction.

[iNow]

Padren has nailed it.

 

The values of homes are dropping. We get that.

However, if there are foreclosures on your street, your home value will drop even more.

 

This is pretty simple stuff, people.

 

 

Foreclosures anchor the average value of the homes in your neighborhood relative to a neighborhood without foreclosures. It's the same reason I want my neighbors to clean up their yard and take care of their house. The value of my home is contingent on the value of comparable homes in the area ("comps").

 

Fewer foreclosures overall = decreased drop in aggregate value of homes.

[Pangloss]

Up to a point, at least. There is a lot of pressure from the left to turn this into a country where $350,000 homes are a right rather than a responsibility. It's not about equalizing the classes, it's about stimulating the economy, but if Maxine Waters and Michael Moore have too much influence on these decisions then we're going to see a very different economic outcome than the one we're being promised.

[iNow]

What do Maxine Waters and Michael Moore have to do with Obama's mortgage relief plan? I'm not sure why you worked those references into this particular topic.

[padren]

Up to a point, at least. There is a lot of pressure from the left to turn this into a country where $350,000 homes are a right rather than a responsibility. It's not about equalizing the classes, it's about stimulating the economy, but if Maxine Waters and Michael Moore have too much influence on these decisions then we're going to see a very different economic outcome than the one we're being promised.

 

Where is all this pressure coming from? I am not really familiar Congresswoman Waters seriously what is the likelihood Michael Moore having anything more than near-zero influence on anything? I've kind of thought of Moore as a less influential Rush, but if there are genuine sources of real pressure influencing the Bill in a manner that pushes $350,000 homes towards being a "right" I am definitely interested in seeing them.

[Pangloss]

What do Maxine Waters and Michael Moore have to do with Obama's mortgage relief plan? I'm not sure why you worked those references into this particular topic.

 

You're joking, right? Here's a list of Financial Services subcommittees that Maxine "It wasn't a riot, it was a rebellion" Waters, who never met an industry she didn't think needed nationalizing, sits on:

 

* Subcommittee on Housing and Community Opportunity (Chair)

* Subcommittee on Financial Institutions and Consumer Credit

* Subcommittee on Oversight and Investigations

* Subcommittee on Domestic and International Monetary Policy, Trade, Technology

 

She's called for investigation into why the bailouts "did nothing for the poor" (as if that was ever their purpose to begin with), and lead the charge for investigation into why the banking bailouts did not "pay off all the toxic loans" (as if that would be a good thing to do).

 

As for Michael Moore, he's been a point man for that same fight. Like it or not, there is a push from the left to use these bailouts as social tools.

[Sisyphus]

They're not actually paying off loans, though, right? Just (somehow) offering a chance to refinance at lower interest? Or am I misunderstanding?

 

And yeah, just paying off toxic loans would really piss me off, as someone who has been responsible and actually paid off my own debt. But even that I'd be open to, despite its maddening unfairness, if a convincing pragmatic case could be made that it would significantly stabilize the economy. Just don't let me hear the phrase "social justice," or I may puke.

[jackson33]

Assuming the 'Home Mortgage Bubble' is a result of poor folks in general, IMO is a very poor premise. Urban areas traditionally have devalued, allowing poor folks to obtain housing, not the reverse...

 

Then as mentioned, California (Inland Valley Orange/LA Counties), Las Vegas Nevada, Arizona primarily Phoenix and Florida, top the current list for defaults or pending defaults. None are noted for high numbers of poor.

 

During the past 5 years, hunfreds of thousand of retired people have moved into these hot spots, buying homes, taking out mortgages for the entire estimated value to as much as 125% of that estimate, while on fixed incomes.

 

Taxes, Insurance, utility cost, cost of maintenance and other obligations involved with home ownership have risen, whether part of the mortgage payment or not. Said another way, all it cost to maintain a 2-3 or 400,000 $ home are then to maintain a home perceived to have half the value, in many cases. Since down payments have been very low (if any) the cost to simply vacate or default would seem to the average person, the best option.

 

IMO, regulation forced on Financial Institutions, has greatly increased the problem, for what poor is involved, then primarily immigrants, legal or not. Fannie/Freddy would accept loans made by regional banks, w/o SS numbers, mention of a job, any ability to make the payments or in fact whether the person was a US citizen.

 

http://www.judicialwatch.org/blog/2008/oct/illegal-immigrants-hold-5-million-fraudulent-mortgages

[ParanoiA]

The values of homes are dropping. We get that.

However' date=' if there are foreclosures on your street, your home value will drop even more.

 

This is pretty simple stuff, people.[/quote']

 

You're right, it is very simple stuff actually. We have rationalized government intervention to save the value of our capital - and the only reason we're doing it is because it is OUR capital taking the hit this time.

 

No one cares when market forces and events force prices down on a given product or service, when it's someone else's business. But now since it's the people's capital that is taking the hit by the same market forces, now we're going to cry foul and make believe it's sensible to rob everyone's paycheck to save ourselves.

 

Give me a break. We're rationalizing to take the easy way out. Disgusts the hell out of me. Watching us turn to each other and talk ourselves into this is like watching people invent a religion with a god to boot. Might as well say the lord wants us to save home prices. Then, you might get any remaining conservatives on board.

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Part of an unmanaged market correction is the overvalue drops to a huge undervalue, then yo-yos towards an equilibrium. The goal is to ease the undervalue drop, as it just adds to the damage during the correction.

 

This is not sufficient logic. This is good when we're talking about performace. Again, I can give you practically zero crime if you'll abandon the principles of civil liberty.

 

I fully understand what the "goal" is. I challenge the ethics of doing it with tax payer money - responsible tax payer's money. We can validate taking 100% of the people's money if we're going to examine every market that effects americans negatively to ease the dynamics of the correction. But that's not conducive for the capitalist, empowered free individual type economic and philosophical design of our republic.

 

I prefer we feel this correction or we will learn nothing from it. We need to stop acting like we can live asymmetrical to economic reality. We are credit pigs. We know no limits and will charge ourselves into thousands of years of debt as long as we insist on ignoring how absolutely irresponsible it is and keep enabling each other as we invent new reasons and exigencies to maintain more and more borrowing.

 

Again, more delusional thinking that would NEVER be acceptable in your personal financial life. It would never be acceptable to borrow and charge and consume more than you can produce in your lifetime. I don't know anyone that's received a loan with terms that extend and impart responsiblity onto their children and grand children.

 

Shameful. Absolutely shameful.

 

And I can talk, as I have to sell my house in the next few months. I have a subprime mortgage. I'll be lucky if I can clear any semblence of a profit. And that's my problem, not yours. It doesn't make it ok to justify using your money to help me on selling my house. I was well aware of market forces and the reality of how other's decisions can adversely effect me and I still made the decision to borrow money and buy a chunk of capital that would take 2 years of my salary to afford outright. Since that's the only credit I utilize, I'm not in too bad of shape. I can manage this market correction.

 

I wonder if there's some statistics on how many of these irresponsible mortgage holders in danger of foreclosure also carry maxxed out credit cards. I'll bet it's in the 90% range.

[iNow]

No one cares when market forces and events force prices down on a given product or service, when it's someone else's business. But now since it's the people's capital that is taking the hit by the same market forces, now we're going to cry foul and make believe it's sensible to rob everyone's paycheck to save ourselves.

 

Okay, I get that you're frustrated. That part came through, loud and clear. However, what part of the mortgage relief plan has you so worked up? Is it that judges can write down the principle when the home owner declares bankrupcy? Or, is it just that we continue giving money to failing banks and businesses?

 

If it's the second, I share your frustration. However, I'm trying to understand which piece of this specific action related to mortgage relief has you all in a tizzy.

 

Step outside of your ideological bent for a moment, and work with me to understand specifically what this action has that you find problematic. I ask because I don't know enough about it (yet) to relate to your post in any meaningful way.

Edited March 7, 2009 by iNow
fixed "you're" from "your"

[ParanoiA]

Okay, I get that you're frustrated. That part came through, loud and clear. However, what part of the mortgage relief plan has you so worked up? Is it that judges can write down the principle when the home owner declares bankrupcy? Or, is it just that we continue giving money to failing banks and businesses?

 

If it's the second, I share your frustration. However, I'm trying to understand which piece of this specific action related to mortgage relief has you all in a tizzy.

 

Step outside of your ideological bent for a moment, and work with me to understand specifically what this action has that you find problematic. I ask because I don't know enough about it (yet) to relate to your post in any meaningful way.

 

It's really all of that iNow. Rewarding irresponsibility is a slap in the face to the responsible. This is just nuts. Bankruptcy costs the consumer when prices go up to offset losses, including interest rates on loans. So writing down principle certainly isn't good for the rest of us. But that's just a small piece of the whole disgusting picture.

 

When you frame the entire situation...mortgage relief for the irresponsible, no relief for the responsible, bailouts for bad investments paid for by good investments and responsible people. What kind of system is that? That is antithetical to the entire nature of our economic design. We depend on fear of failure to motivate good decision and good investment - that's the bargain with self empowerment. We're violating the most basic forces that make all of this work.

 

And we're paying for this by diluting the money supply even further. Here's an observation: As a government, we're doing the EXACT thing the irresponsible have done - Credit beyond the capacity to maintain. Only we get to circumvent the rules a little, and pass our debt on to the next generation to pay.

 

Currently, I can't do that with my mortgage or credit cards. Otherwise, I could easily saturate my children's entire lives paying my debts - after all, it's not like they will have any exigencies to deal with in their time. It's only today that such money is needed for the Union. Posterity won't have any problems to deal with, like every other generation in human history, so they'll have no need for such funds, and will able to balance their budget with surpluses, year after year, plenty of downtime to pay off our debt...

 

There's just too much to bitch about. I'm trying to keep it short.

Edited March 7, 2009 by ParanoiA